§ 34K — Net tonnage basis of taxation

34K.—(1) Despite any other provision of this Act, an MSI recipient may elect for all of its qualifying income derived during its incentive period for the year of assessment 2024 or any subsequent year of assessment to be taxed in accordance with this section.(2) Where an election is made by an MSI recipient for a year of assessment that falls within its incentive period —(a)

its qualifying income for that year of assessment is not exempt from tax under section 13A, 13E or 13P (whichever is applicable) and is also not included in its statutory income for that year of assessment; and

(b)

instead, an amount based on the net tonnage of qualifying ships used by the MSI recipient to derive qualifying income in the basis period, as determined by the Twelfth Schedule (called in this section the deemed income), is added to and treated as part of the assessable income of the MSI recipient for that year of assessment.

(3) However, no deduction may be made under section 37B or 37D against an amount treated as part of the assessable income of an MSI recipient under subsection (2)(b).

(4) Despite section 43(6), (6B), (6C) and (6D), tax is levied at the rate prescribed in section 43(1)(a) on every dollar of the deemed income, and (accordingly) the deemed income does not form part of the chargeable income of the MSI recipient in section 43(6B) and (6D).

(5) Despite subsection (2)(a), expenses mentioned in section 13A(2A) of an MSI recipient that is a shipping enterprise that would otherwise be allocated in accordance with section 13A(2A) in ascertaining its qualifying income, are treated as having been so allocated; and the balance of those expenses is to be applied towards ascertaining any other income of the MSI recipient for the purposes of this Act.

(6) An MSI recipient may make an election to adopt the tax treatment under this section by providing a written notice to one or more authorities prescribed by regulations made under subsection (13) (each called an authority), in the form and manner specified by the authority —(a)

at or before the time it is required to lodge its return of income for any year of assessment (called in this section YA1); or

(b)

within such further time as the authority may allow.

(7) An election, once made, is for all of the MSI recipient’s qualifying income derived in its incentive period, and is irrevocable.

(8) An MSI recipient may, upon the expiry of its incentive period, make another election for all of its qualifying income within another incentive period to be taxed in accordance with this section, and subsections (6) and (7) apply accordingly.

(9) In subsections (7) and (8), “incentive period” means —(a)

if the MSI recipient is a shipping enterprise and is not an approved international shipping enterprise or approved shipping investment enterprise — the continuous period (not exceeding 10 years) that it owns or operates a qualifying ship, starting on the first day of the basis period for YA1 (day X) or, if it first owns or operates a qualifying ship on any day (day Y) after day X, starting on day Y;

(b)

if the MSI recipient is an approved international shipping enterprise whether or not it also earns any income falling within the meaning of paragraph (a) of the definition of “qualifying income” in subsection (14) during the same period —(i)

the period of its exemption in section 13E(2) starting on the first day of the basis period for YA1 (day X) or, if the period of exemption starts on any day (day Y) after day X, starting on day Y, but excluding in both cases any period of extension of such period of exemption; or

(ii)

any period of extension of the period of its exemption in section 13E(2) starting on the first day of the basis period for YA1 (day X) or, if the period of extension starts on any day (day Y) after day X, starting on day Y; or

(c)

if the MSI recipient is an approved shipping investment enterprise whether or not it also earns any income falling within the meaning of paragraph (a) of the definition of “qualifying income” in subsection (14) during the same period —(i)

the period of its approval mentioned in section 13P(3) starting on the first day of the basis period for YA1 (day X) or, if the period of approval starts on any day (day Y) after day X, starting on day Y, but in both cases —(A)

excluding any period of extension of the approval; and

(B)

including any period after the period of approval where section 13P(1) continues to apply to its income as described in section 13P(1A) or (1B) after it ceases to be so approved; or

(ii)

any period of extension of its approval under section 13P(3) starting on the first day of the basis period for YA1 (day X) or, if the period of extension starts on any day (day Y) after day X, starting on day Y, and including any period after the period of extension where section 13P(1) continues to apply to its income as described in section 13P(1A) or (1B) after it ceases to be so approved.

(10) However, if —(a)

at the time an MSI recipient that is a shipping enterprise makes an election under subsection (7) or (8), it is not an approved international shipping enterprise or approved shipping investment enterprise; and

(b)

at any time during its incentive period as defined in subsection (9)(a), the MSI recipient becomes an approved international shipping enterprise or approved shipping investment enterprise (as the case may be),

the end date (but not the start date) of the incentive period of the MSI recipient is to be determined in accordance with subsection (9)(b) or (c), as the case may be.

(11) Where the incentive period of an MSI recipient covered by an election under this section lapses during a basis period for a year of assessment (called in this section the last YA), the capital allowances that are to be taken into account in determining its income that is exempt from tax under section 13A, 13E or 13P (as the case may be) for the last YA, or that is available as a deduction against any of its income for the last YA, are —(a)

to be computed on the residue of the capital expenditure or reducing value of the asset concerned (as the case may be) after deducting all such allowances (including initial and annual allowances) that have or would (but for subsection (2)(a)) have been taken into account in determining its exempt income under section 13A, 13E or 13P, as the case may be; and

(b)

reduced by an amount computed by the formula

where —

(i)

A is the number of days between the first day of the basis period and the day the incentive period ends; and

(ii)

B is the amount of capital allowances computed in paragraph (a).

(12) For each year of assessment after the last YA, the capital allowances that are to be taken into account in determining the income of the MSI recipient that is exempt from tax under section 13A, 13E or 13P (as the case may be), or that is available as a deduction against any of its income, are to be computed on the residue of the capital expenditure or reducing value of the asset concerned, after deducting —(a)

all such allowances (including initial and annual allowances) that have or would (but for subsection (2)(a)) have been taken into account in determining its exempt income under section 13A, 13E or 13P, as the case may be; and

(b)

the total amount of such allowances that would have been taken into account in determining its exempt income under section 13A, 13E or 13P (as the case may be), or that would have been available as a deduction against any of its income, for the last YA, but without the reduction in subsection (11)(b).

(13) The Minister may make regulations —(a)

to modify the application of any provision in Part 14 in relation to any credit to be allowed against any tax payable in respect of the deemed income of an MSI recipient; and

(b)

to prescribe any matter required or permitted to be prescribed under this section.

(14) In this section —“approved international shipping enterprise” means an international shipping enterprise as defined in section 13E and approved under that section;

“approved shipping investment enterprise” means a shipping investment enterprise as defined in section 13P and approved under that section;

“Maritime Sector Incentive recipient” or “MSI recipient” means —(a)

a shipping enterprise, but only if it owns or operates a qualifying ship;

(b)

an approved international shipping enterprise; or

(c)

an approved shipping investment enterprise, including one the approval of which has expired or been withdrawn but to which section 13P(1) continues to apply by virtue of section 13P(1A) or (1B),

but excludes an entity that only operates one or more ships where only a part of each ship was chartered to it;

“net tonnage”, in relation to a qualifying ship, means the measure of the useful capacity of the ship stated in a valid certificate of registry, Singapore Tonnage Certificate or International Tonnage Certificate (1969);

“provisionally registered ship”, “shipping enterprise” and “Singapore ship” have the meanings given by section 13A(16);

“qualifying income”, in relation to an MSI recipient for any year of assessment, means all of the following income (whichever is applicable) of the MSI recipient: (a)

any income that would have been exempt from tax under section 13A but for this section;

(b)

any income that would have been exempt from tax under section 13E but for this section;

(c)

any income that would have been exempt from tax under section 13P but for this section;

“qualifying ship”, in relation to an MSI recipient for any year of assessment, means —(a)

in the case of an MSI recipient that is a shipping enterprise but not an approved international shipping enterprise or an approved shipping investment enterprise, any Singapore ship or provisionally registered ship; or

(b)

in the case of an MSI recipient that is an approved international shipping enterprise or an approved shipping investment enterprise, any ship,

owned or operated by the MSI recipient at any time in the basis period for that year of assessment;

“ship” has the meaning given by section 2(1) of the Merchant Shipping Act 1995.[Act 35 of 2024 wef 27/11/2024]

—(1) Despite any other provision of this Act, an MSI recipient may elect for all of its qualifying income derived during its incentive period for the year of assessment 2024 or any subsequent year of assessment to be taxed in accordance with this section.

(2) Where an election is made by an MSI recipient for a year of assessment that falls within its incentive period —(a)

its qualifying income for that year of assessment is not exempt from tax under section 13A, 13E or 13P (whichever is applicable) and is also not included in its statutory income for that year of assessment; and

(b)

instead, an amount based on the net tonnage of qualifying ships used by the MSI recipient to derive qualifying income in the basis period, as determined by the Twelfth Schedule (called in this section the deemed income), is added to and treated as part of the assessable income of the MSI recipient for that year of assessment.

(3) However, no deduction may be made under section 37B or 37D against an amount treated as part of the assessable income of an MSI recipient under subsection (2)(b).

(4) Despite section 43(6), (6B), (6C) and (6D), tax is levied at the rate prescribed in section 43(1)(a) on every dollar of the deemed income, and (accordingly) the deemed income does not form part of the chargeable income of the MSI recipient in section 43(6B) and (6D).

(5) Despite subsection (2)(a), expenses mentioned in section 13A(2A) of an MSI recipient that is a shipping enterprise that would otherwise be allocated in accordance with section 13A(2A) in ascertaining its qualifying income, are treated as having been so allocated; and the balance of those expenses is to be applied towards ascertaining any other income of the MSI recipient for the purposes of this Act.

(6) An MSI recipient may make an election to adopt the tax treatment under this section by providing a written notice to one or more authorities prescribed by regulations made under subsection (13) (each called an authority), in the form and manner specified by the authority —(a)

at or before the time it is required to lodge its return of income for any year of assessment (called in this section YA1); or

(b)

within such further time as the authority may allow.

(7) An election, once made, is for all of the MSI recipient’s qualifying income derived in its incentive period, and is irrevocable.

(8) An MSI recipient may, upon the expiry of its incentive period, make another election for all of its qualifying income within another incentive period to be taxed in accordance with this section, and subsections (6) and (7) apply accordingly.

(9) In subsections (7) and (8), “incentive period” means —(a)

if the MSI recipient is a shipping enterprise and is not an approved international shipping enterprise or approved shipping investment enterprise — the continuous period (not exceeding 10 years) that it owns or operates a qualifying ship, starting on the first day of the basis period for YA1 (day X) or, if it first owns or operates a qualifying ship on any day (day Y) after day X, starting on day Y;

(b)

if the MSI recipient is an approved international shipping enterprise whether or not it also earns any income falling within the meaning of paragraph (a) of the definition of “qualifying income” in subsection (14) during the same period —(i)

the period of its exemption in section 13E(2) starting on the first day of the basis period for YA1 (day X) or, if the period of exemption starts on any day (day Y) after day X, starting on day Y, but excluding in both cases any period of extension of such period of exemption; or

(ii)

any period of extension of the period of its exemption in section 13E(2) starting on the first day of the basis period for YA1 (day X) or, if the period of extension starts on any day (day Y) after day X, starting on day Y; or

(c)

if the MSI recipient is an approved shipping investment enterprise whether or not it also earns any income falling within the meaning of paragraph (a) of the definition of “qualifying income” in subsection (14) during the same period —(i)

the period of its approval mentioned in section 13P(3) starting on the first day of the basis period for YA1 (day X) or, if the period of approval starts on any day (day Y) after day X, starting on day Y, but in both cases —(A)

excluding any period of extension of the approval; and

(B)

including any period after the period of approval where section 13P(1) continues to apply to its income as described in section 13P(1A) or (1B) after it ceases to be so approved; or

(ii)

any period of extension of its approval under section 13P(3) starting on the first day of the basis period for YA1 (day X) or, if the period of extension starts on any day (day Y) after day X, starting on day Y, and including any period after the period of extension where section 13P(1) continues to apply to its income as described in section 13P(1A) or (1B) after it ceases to be so approved.

(10) However, if —(a)

at the time an MSI recipient that is a shipping enterprise makes an election under subsection (7) or (8), it is not an approved international shipping enterprise or approved shipping investment enterprise; and

(b)

at any time during its incentive period as defined in subsection (9)(a), the MSI recipient becomes an approved international shipping enterprise or approved shipping investment enterprise (as the case may be),

the end date (but not the start date) of the incentive period of the MSI recipient is to be determined in accordance with subsection (9)(b) or (c), as the case may be.

(11) Where the incentive period of an MSI recipient covered by an election under this section lapses during a basis period for a year of assessment (called in this section the last YA), the capital allowances that are to be taken into account in determining its income that is exempt from tax under section 13A, 13E or 13P (as the case may be) for the last YA, or that is available as a deduction against any of its income for the last YA, are —(a)

to be computed on the residue of the capital expenditure or reducing value of the asset concerned (as the case may be) after deducting all such allowances (including initial and annual allowances) that have or would (but for subsection (2)(a)) have been taken into account in determining its exempt income under section 13A, 13E or 13P, as the case may be; and

(b)

reduced by an amount computed by the formula

where —

(i)

A is the number of days between the first day of the basis period and the day the incentive period ends; and

(ii)

B is the amount of capital allowances computed in paragraph (a).

(12) For each year of assessment after the last YA, the capital allowances that are to be taken into account in determining the income of the MSI recipient that is exempt from tax under section 13A, 13E or 13P (as the case may be), or that is available as a deduction against any of its income, are to be computed on the residue of the capital expenditure or reducing value of the asset concerned, after deducting —(a)

all such allowances (including initial and annual allowances) that have or would (but for subsection (2)(a)) have been taken into account in determining its exempt income under section 13A, 13E or 13P, as the case may be; and

(b)

the total amount of such allowances that would have been taken into account in determining its exempt income under section 13A, 13E or 13P (as the case may be), or that would have been available as a deduction against any of its income, for the last YA, but without the reduction in subsection (11)(b).

(13) The Minister may make regulations —(a)

to modify the application of any provision in Part 14 in relation to any credit to be allowed against any tax payable in respect of the deemed income of an MSI recipient; and

(b)

to prescribe any matter required or permitted to be prescribed under this section.

(14) In this section —“approved international shipping enterprise” means an international shipping enterprise as defined in section 13E and approved under that section;

“approved shipping investment enterprise” means a shipping investment enterprise as defined in section 13P and approved under that section;

“Maritime Sector Incentive recipient” or “MSI recipient” means —(a)

a shipping enterprise, but only if it owns or operates a qualifying ship;

(b)

an approved international shipping enterprise; or

(c)

an approved shipping investment enterprise, including one the approval of which has expired or been withdrawn but to which section 13P(1) continues to apply by virtue of section 13P(1A) or (1B),

but excludes an entity that only operates one or more ships where only a part of each ship was chartered to it;

“net tonnage”, in relation to a qualifying ship, means the measure of the useful capacity of the ship stated in a valid certificate of registry, Singapore Tonnage Certificate or International Tonnage Certificate (1969);

“provisionally registered ship”, “shipping enterprise” and “Singapore ship” have the meanings given by section 13A(16);

“qualifying income”, in relation to an MSI recipient for any year of assessment, means all of the following income (whichever is applicable) of the MSI recipient: (a)

any income that would have been exempt from tax under section 13A but for this section;

(b)

any income that would have been exempt from tax under section 13E but for this section;

(c)

any income that would have been exempt from tax under section 13P but for this section;

“qualifying ship”, in relation to an MSI recipient for any year of assessment, means —(a)

in the case of an MSI recipient that is a shipping enterprise but not an approved international shipping enterprise or an approved shipping investment enterprise, any Singapore ship or provisionally registered ship; or

(b)

in the case of an MSI recipient that is an approved international shipping enterprise or an approved shipping investment enterprise, any ship,

owned or operated by the MSI recipient at any time in the basis period for that year of assessment;

“ship” has the meaning given by section 2(1) of the Merchant Shipping Act 1995.[Act 35 of 2024 wef 27/11/2024]