Income Tax (Exemption of Relevant Income of Eligible Family-owned Investment Holding Company) Regulations 2009

No. S 223

Income Tax Act

(Chapter 134)

Income Tax (Exemption of Relevant Income of Eligible Family-owned Investment Holding Company) Regulations 2009

In exercise of the powers conferred by section 13W of the Income Tax Act, the Minister for Finance hereby makes the following Regulations:

Citation and commencement

1.  These Regulations may be cited as the Income Tax (Exemption of Relevant Income of Eligible Family-owned Investment Holding Company) Regulations 2009 and shall be deemed to have come into operation on 1st April 2008.

Definitions

2.—(1)  In these Regulations —

“connected persons”, in relation to any individual, means —

(a) his spouse;

(b) his lineal descendants and their spouses;

(c) his parents, including step-parents;

(d) his grandparents;

(e) his parents-in-law, including step-parents-in-law;

(f) his brother, step-brother, sister, step-sister and their spouses;

(g) his spouse’s grandparents;

(h) his spouse’s brother, step-brother, sister, step-sister and their spouses and children;

(i) his parent’s brother, step-brother, sister, step-sister and their spouses;

(j) children of the brother, step-brother, sister or step-sister of his parents, both present and future, including step-children, and their spouses; and

(k) children of his brother, step-brother, sister or step-sister, both present and future, including step-children, and their spouses;

“financial institution” means an institution licensed or approved by the Monetary Authority of Singapore, or exempted from such licensing or approval, under any written law administered by the Monetary Authority of Singapore;

“Monetary Authority of Singapore” means the Monetary Authority of Singapore established under section 3 of the Monetary Authority of Singapore Act (Cap. 186);

“nominee company” means a company formed by a bank or other fiduciary organisation to hold and administer securities or other assets as a custodian (being the registered owner) on behalf of another person (who is the beneficial owner) under a custodial agreement;

“related party” has the same meaning as in section 13(16) of the Act.

(2)  In the definition of “connected persons” in paragraph (1) —

(a) relationships that may be established by blood may also be established by adoption in accordance with any written law relating to the adoption of children;

(b) “lineal descendants” of an individual means his children, the children of his children, the children of those children and so on; and

(c) “children” in the definition of “lineal descendants” in sub-paragraph (b) includes step-children.

Conditions for exemption

3.—(1)  The prescribed conditions for the purpose of the definition of “eligible family-owned investment holding company” in section 13W of the Act, which shall be satisfied throughout the basis period for the year of assessment in question, are as follows:

(a) subject to sub-paragraph (b), all the issued shares of the company are beneficially owned by one or more individuals;

(b) where all the issued shares are beneficially owned by more than one individual, all the individuals are connected persons by reference to any one of them;

(c) a financial institution in Singapore is engaged to —

(i) administer the company;

(ii) manage the financial assets of the company; or

(iii) provide advice on the management of the financial assets of the company;

(d) the company’s transactions with related parties are carried out on an arm’s length basis; and

(e) unless made under an arm’s length transaction —

(i) no assets are transferred directly or indirectly to the company by any person who carried on a business in Singapore and whose income in relation to those assets was not or would not be (as the case may be), exempted from tax; and

(ii) no shares in the company are transferred where such transfer would result in sub-paragraphs (a) and (b) being satisfied if, at any time prior to the transfer, the company was carrying on a business in Singapore which generated income that was not or would not be (as the case may be) exempted from tax.

(2)  For the purposes of paragraph (1)(a) and (b), where —

(a) an individual beneficially owns (including by virtue of one or more applications of this paragraph) equity interests of a nominee company or another eligible family-owned investment holding company (referred to in this paragraph as a first level entity); and

(b) the first level entity beneficially owns equity interests of another nominee company or another eligible family-owned investment holding company (referred to in this paragraph as a second level entity),

then the individual is taken to beneficially own equity interests of the second level entity.

Deduction of certain losses not allowed

4.  Any expenses in excess of the relevant income of an eligible family-owned investment holding company shall not be set-off against or be allowable as a loss against any income of the company that is chargeable to tax and shall be disregarded.

Annual declaration

5.—(1)  An eligible family-owned investment holding company shall submit an annual declaration in accordance with paragraph (2) that the conditions for exemption under section 13W of the Act are satisfied.

(2)  The declaration shall be made to the Comptroller and the Monetary Authority of Singapore in respect of each basis period relating to any year of assessment and shall be made in such form and within such time as the Comptroller or the Monetary Authority of Singapore may specify.

Made this 20th day of May 2009.

TEO MING KIAN

Permanent Secretary,
Ministry of Finance,
Singapore.

[R32.7.2615 V.1; AG/LEG/SL/134/2005/44 Vol. 1]