ECONOMIC EXPANSION INCENTIVES (RELIEF FROM INCOME TAX) (AMENDMENT) BILL

Order for Second Reading read.

The Minister for Trade and Industry (Mr Lee Yock Suan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Bill will amend the Economic Expansion Incentives (Relief from Income Tax) Act, which I will refer to as the Incentives Act in short.

Firstly, the Bill extends the Investment Allowance incentive to approved space satellite projects.

Secondly, it enhances the Overseas Enterprise Incentive by allowing the flow-through of tax-exempt dividends to the ultimate shareholders of an overseas enterprise.

These changes were announced in the 1997 Budget Statement and shall take retrospective effect from 11th July 1997.

I will now describe the proposed amendments in turn.

Extension of Investment Allowance Incentive to space satellite projects

Satellites play an increasingly important role in today's telecommunications and broadcast industries. There exists a huge market for wireless transmission of voice, video and other multimedia content that satellite operators in Singapore can exploit.

Clause 3 of the Bill extends investment allowance to cover space satellite projects. This will encourage companies to launch satellites, and operate them out of Singapore. To qualify for the incentive, companies will be required to undertake high value-added services in Singapore, such as setting up a Tracking & Telemetry Control Centre or a Network Operations Centre.

The Bill will make two consequential amendments to the Investment Allowance incentive.

Firstly, the definition of "fixed capital expenditure" will be amended to include productive equipment used outside Singapore as opposed to only in Singapore.

Secondly, fixed capital expenditure will be deemed incurred so long as the productive equipment is delivered to the company.

Enhancement to Overseas Enterprise Incentive

The Overseas Enterprise Incentive was introduced in 1993 as part of the Government's efforts to encourage the development of an external economy. Income derived from approved overseas projects is exempt from tax for up to 10 years. Tax-exempt dividends can be paid up to two tiers of shareholders, subject to a 100% shareholding requirement at the first tier.

In 1995, changes were made to the Income Tax Act to allow the flow-through of tax exempt dividends to more than two levels of shareholders, provided that a 50% shareholding requirement is met at each level paying the dividends. The 50% shareholding requirement may be waived with Ministerial approval on a case-by-case basis.

Clause 4 of the Bill makes similar amendments to the Incentives Act relating to the Overseas Enterprise Incentive.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Lee Yock Suan].

Bill considered in Committee; reported without amendment; read a Third time and passed.