§ 37N — Deduction for qualifying investments in qualifying start‑up companies

37N.—(1) Where an individual proposes to make one or more qualifying investments that complies with subsection (4) in a qualifying start‑up company or companies, the individual may apply to the Minister, or such person as the Minister may appoint, between 1 July 2010 and 31 March 2020 (both dates inclusive) to be approved as a qualifying person for the purposes of claiming a deduction under this section in respect of the expenditure incurred by the individual in making the investments.[2/2016]

(2) Where the Minister or the person appointed by the Minister is satisfied that the individual possesses the necessary experience, skills or expertise to nurture and grow a qualifying start‑up company, the Minister or appointed person may approve, by written notice, the individual as a qualifying person, subject to such conditions as the Minister or appointed person may impose.

(2A) No approval may be granted under subsection (2) after 31 March 2020, and any approval granted to a qualifying person must commence between 1 July 2010 and 31 March 2020 (both dates inclusive).[41/2020]

(3) Where a qualifying person —(a)

has incurred expenditure in making a qualifying investment that complies with subsection (4) in a qualifying start‑up company or companies; and

(b)

has directly and beneficially held the shares or convertible loans which are the subject of the qualifying investment for a continuous period of 2 years from the relevant date,

the qualifying person is to be allowed on due claim, for the year of assessment relating to the basis period in which the last day of the 2‑year period falls, a deduction, computed in accordance with subsection (5), against the remainder of the qualifying person’s statutory income (excluding specified income) after making the deduction (if any) under section 37(3)(a).

(4) For the purposes of subsection (3), the qualifying investment must be made —(a)

either —(i)

during the period that is specified to the qualifying person; or

(ii)

if the Minister or such person as the Minister may appoint so approves, during the period between 1 March 2010 and 30 June 2010 (both dates inclusive);

(b)

if it is the first qualifying investment made by the qualifying person in the qualifying start‑up company since the qualifying person is approved as such under subsection (2) and paragraph (d) does not apply, on the date of such approval or within one year from that date;

(c)

if it is not the first qualifying investment made by the qualifying person in the qualifying start‑up company since the qualifying person is approved as such under subsection (2) and paragraph (d) does not apply, within one year from the date of the first qualifying investment referred to in paragraph (b) that complies with that paragraph; and

(d)

if approval has been obtained under paragraph (a)(ii) and the qualifying person has made at least one qualifying investment in the qualifying start‑up company during the period between 1 March 2010 and 30 June 2010 (both dates inclusive), within one year from the date such qualifying investment or the first of such qualifying investments was made.[37/2014; 2/2016; 41/2020]

(5) The amount of deduction allowable to a qualifying person under subsection (3) is ascertained by the formula

where A

is the aggregate amount of expenditure incurred by the qualifying person on the qualifying investment in a qualifying start‑up company or companies or $500,000, whichever is less.

(6) For the purpose of computing the aggregate amount of expenditure incurred by a qualifying person in respect of a qualifying investment in a qualifying start‑up company or companies under subsection (5), no expenditure incurred by the qualifying person in respect of qualifying investment in any one qualifying start‑up company is to be included —(a)

if the total amount of any such expenditure that is incurred on the date of first investment and within one year from that date (but excluding any expenditure incurred on qualifying investment that is disposed of during the relevant holding period) is less than $100,000;

(b)

to the extent that the expenditure, being expenditure incurred before 24 February 2015, is matched by any investment in the company by the company known as SPRING SEEDS Capital Pte Ltd under the SPRING Start‑up Enterprise Development Scheme administered by the second‑mentioned company or any other scheme designated by the Minister or such person as the Minister may appoint;

(c)

if all the shares which are the subject of the qualifying investment are disposed of during the relevant holding period;

(d)

where the loan which is the subject of the qualifying investment is partially or fully repaid during the relevant holding period;

(e)

if all the share capital of the qualifying start‑up company is acquired by a person or partnership other than the qualifying person, or the qualifying start‑up company merges with or is consolidated with another company or is wound up, at any time during a period of 2 years from the relevant date;

(f)

[Deleted by Act 22 of 2011]

(g)

if the qualifying start‑up company is not resident in Singapore for the years of assessment relating to the basis periods falling within the relevant holding period; or

(h)

the qualifying person has acquired more than 50% of the issued share capital, or has provided more than 50% of the debt capital, of the qualifying start‑up company at any time during the relevant holding period.[2/2016]

(7) For the purpose of computing the aggregate amount of expenditure incurred by a qualifying person in respect of a qualifying investment under subsection (5), where any of the shares which are the subject of the qualifying investment are disposed of during the relevant holding period, no account is to be taken of such expenditure incurred by the qualifying person in relation to the shares that are disposed.

(8) The Minister or an authorised body may, subject to such conditions as the Minister or authorised body may impose in a particular case, waive the requirement in subsection (6)(c), (d) or (e).[Act 41 of 2020 wef 12/04/2024]

(9) Any amount of deduction for any year of assessment computed for a qualifying person in accordance with subsection (5) which is in excess of the remainder of the qualifying person’s statutory income (excluding specified income) after making the deduction (if any) under section 37(3)(a) is not available as a deduction against the qualifying person’s income for any subsequent year of assessment and is disregarded.

(10) Where —(a)

a person disposes of, after 2 years from the relevant date, the shares which are the subject of a qualifying investment in respect of which a deduction has been allowed to the person in any year of assessment under this section; and

(b)

the gains or profits from the disposal of those shares is chargeable to tax under this Act,

the amount of expenditure for which a deduction is allowed to the person under this section in respect of those shares in any year of assessment does not form part of the person’s costs of investment deductible under section 14 in computing the person’s gains or profits from the disposal which is chargeable to tax.

(11) A qualifying person must maintain and deliver to the Minister or an authorised body, in such form and manner and within such reasonable time as the Minister or authorised body may determine, the relevant records of the qualifying investment made by the qualifying person in any qualifying start‑up company and such other particulars as may be required for the purposes of this section.[Act 41 of 2020 wef 12/04/2024]

(12) In this section —“date of first investment”, in relation to a qualifying investment by a qualifying person in a qualifying start‑up company, means —(a)

unless paragraph (b) applies, the date on which a qualifying investment is first made by the qualifying person in the qualifying start‑up company since the qualifying person was approved as such under subsection (2); or

(b)

if approval has been obtained under subsection (4)(a)(ii) and the qualifying person has made at least one qualifying investment in the qualifying start‑up company during the period between 1 March 2010 and 30 June 2010 (both dates inclusive), the date of that qualifying investment or the first of such qualifying investments;

“qualifying investment”, in relation to a qualifying start‑up company, means —(a)

the acquisition using cash of —(i)

new shares not being of a preferential nature, issued by the company;

(ii)

new shares of a preferential nature issued by the company which do not fall within sub‑paragraph (iii) and which do not provide for payment of a fixed or guaranteed dividend for the relevant holding period; or

(iii)

new redeemable shares of a preferential nature issued by the company which do not carry a right to redemption during the relevant holding period and which do not provide for payment of a fixed or guaranteed dividend for the relevant holding period,

other than shares which are issued pursuant to a stock option or share award scheme or any conversion of any loan or debt securities; or

(b)

the provision of convertible loans of cash to the company where there is no provision for interest payment for the relevant holding period or loan repayment during the relevant holding period;

“qualifying start‑up company” means a company which is not one limited by guarantee and which —(a)

on the date of first investment, was incorporated in Singapore for 3 years or less and whose shares are not listed on any stock exchange in Singapore or elsewhere;

(b)

on the date of first investment, does not have any shareholder who is a relative of the qualifying person, except that this requirement may be waived for the company by the Minister or an authorised body;[Act 41 of 2020 wef 12/04/2024]

(c)

on the date of first investment, has more than 50% of its total issued share capital beneficially held by no more than 20 individual shareholders (excluding any qualifying person);

(d)

has no more than 25% of its issued share capital or 25% of its debt capital beneficially held by the qualifying person (including any of the qualifying person’s relatives) at any time within a period of 2 years prior to the date of first investment; and

(e)

throughout the relevant holding period, does not engage in any activity specified by the Minister or an authorised body for the purposes of this section;[Act 41 of 2020 wef 12/04/2024]

“relative”, in relation to any individual, means —(a)

his or her spouse;

(b)

his or her children, stepchildren, grandchildren, stepgrandchildren and their spouses;

(c)

his or her parents, including step‑parents;

(d)

his or her grandparents, including stepgrandparents;

(e)

his or her parents‑in‑law, including stepparents‑in‑law;

(f)

his or her brother, stepbrother, sister, stepsister and their spouses;

(g)

his or her spouse’s grandparents, including stepgrandparents;

(h)

his or her spouse’s brother, stepbrother, sister, stepsister and their spouses;

(i)

his or her parent’s brother, stepbrother, sister, stepsister and their spouses;

(j)

his or her parent‑in‑law’s brother, stepbrother, sister, stepsister and their spouses;

(k)

the children of the brother, stepbrother, sister or stepsister of his or her parent or step‑parent, including stepchildren, and their spouses;

(l)

the children of the brother, stepbrother, sister or stepsister of his or her parent‑in‑law or stepparent‑in‑law, including stepchildren, and their spouses;

(m)

the children of his or her brother, stepbrother, sister or stepsister, including stepchildren, and their spouses; and

(n)

the children of his or her spouse’s brother, stepbrother, sister or stepsister, including stepchildren, and their spouses;

“relevant date”, in relation to a qualifying person making a qualifying investment in a qualifying start‑up company, means —(a)

where only one qualifying investment in the company is made by the qualifying person in accordance with subsection (4) — the date of first investment; or

(b)

where more than one qualifying investment in the company is made by the qualifying person in accordance with subsection (4) — the date on which the last qualifying investment is made by the qualifying person in that company within one year after the date of first investment;

“relevant holding period”, in relation to a qualifying person making a qualifying investment in a qualifying start‑up company, means the period commencing from the date of first investment in the qualifying start‑up company to the end of the 2‑year period from the relevant date;

“specified income” means any income of the qualifying person not resident in Singapore which is subject to tax at the rate specified in section 43(3), (3A) or (4)(a).[37/2014; 41/2020]

(13) In the definition of “relative” in subsection (12), 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.

(14) In this section, a qualifying investment is made when —(a)

in the case of an acquisition of shares in paragraph (a) of the definition of “qualifying investment” in subsection (12), the consideration for the shares is paid; or

(b)

in the case of a provision of a convertible loan in paragraph (b) of the definition of “qualifying investment” in subsection (12), the loan is disbursed.[37K

—(1) Where an individual proposes to make one or more qualifying investments that complies with subsection (4) in a qualifying start‑up company or companies, the individual may apply to the Minister, or such person as the Minister may appoint, between 1 July 2010 and 31 March 2020 (both dates inclusive) to be approved as a qualifying person for the purposes of claiming a deduction under this section in respect of the expenditure incurred by the individual in making the investments.[2/2016]

(2) Where the Minister or the person appointed by the Minister is satisfied that the individual possesses the necessary experience, skills or expertise to nurture and grow a qualifying start‑up company, the Minister or appointed person may approve, by written notice, the individual as a qualifying person, subject to such conditions as the Minister or appointed person may impose.

(2A) No approval may be granted under subsection (2) after 31 March 2020, and any approval granted to a qualifying person must commence between 1 July 2010 and 31 March 2020 (both dates inclusive).[41/2020]

(3) Where a qualifying person —(a)

has incurred expenditure in making a qualifying investment that complies with subsection (4) in a qualifying start‑up company or companies; and

(b)

has directly and beneficially held the shares or convertible loans which are the subject of the qualifying investment for a continuous period of 2 years from the relevant date,

the qualifying person is to be allowed on due claim, for the year of assessment relating to the basis period in which the last day of the 2‑year period falls, a deduction, computed in accordance with subsection (5), against the remainder of the qualifying person’s statutory income (excluding specified income) after making the deduction (if any) under section 37(3)(a).

(4) For the purposes of subsection (3), the qualifying investment must be made —(a)

either —(i)

during the period that is specified to the qualifying person; or

(ii)

if the Minister or such person as the Minister may appoint so approves, during the period between 1 March 2010 and 30 June 2010 (both dates inclusive);

(b)

if it is the first qualifying investment made by the qualifying person in the qualifying start‑up company since the qualifying person is approved as such under subsection (2) and paragraph (d) does not apply, on the date of such approval or within one year from that date;

(c)

if it is not the first qualifying investment made by the qualifying person in the qualifying start‑up company since the qualifying person is approved as such under subsection (2) and paragraph (d) does not apply, within one year from the date of the first qualifying investment referred to in paragraph (b) that complies with that paragraph; and

(d)

if approval has been obtained under paragraph (a)(ii) and the qualifying person has made at least one qualifying investment in the qualifying start‑up company during the period between 1 March 2010 and 30 June 2010 (both dates inclusive), within one year from the date such qualifying investment or the first of such qualifying investments was made.[37/2014; 2/2016; 41/2020]

(5) The amount of deduction allowable to a qualifying person under subsection (3) is ascertained by the formula

where A

is the aggregate amount of expenditure incurred by the qualifying person on the qualifying investment in a qualifying start‑up company or companies or $500,000, whichever is less.

(6) For the purpose of computing the aggregate amount of expenditure incurred by a qualifying person in respect of a qualifying investment in a qualifying start‑up company or companies under subsection (5), no expenditure incurred by the qualifying person in respect of qualifying investment in any one qualifying start‑up company is to be included —(a)

if the total amount of any such expenditure that is incurred on the date of first investment and within one year from that date (but excluding any expenditure incurred on qualifying investment that is disposed of during the relevant holding period) is less than $100,000;

(b)

to the extent that the expenditure, being expenditure incurred before 24 February 2015, is matched by any investment in the company by the company known as SPRING SEEDS Capital Pte Ltd under the SPRING Start‑up Enterprise Development Scheme administered by the second‑mentioned company or any other scheme designated by the Minister or such person as the Minister may appoint;

(c)

if all the shares which are the subject of the qualifying investment are disposed of during the relevant holding period;

(d)

where the loan which is the subject of the qualifying investment is partially or fully repaid during the relevant holding period;

(e)

if all the share capital of the qualifying start‑up company is acquired by a person or partnership other than the qualifying person, or the qualifying start‑up company merges with or is consolidated with another company or is wound up, at any time during a period of 2 years from the relevant date;

(f)

[Deleted by Act 22 of 2011]

(g)

if the qualifying start‑up company is not resident in Singapore for the years of assessment relating to the basis periods falling within the relevant holding period; or

(h)

the qualifying person has acquired more than 50% of the issued share capital, or has provided more than 50% of the debt capital, of the qualifying start‑up company at any time during the relevant holding period.[2/2016]

(7) For the purpose of computing the aggregate amount of expenditure incurred by a qualifying person in respect of a qualifying investment under subsection (5), where any of the shares which are the subject of the qualifying investment are disposed of during the relevant holding period, no account is to be taken of such expenditure incurred by the qualifying person in relation to the shares that are disposed.

(8) The Minister or an authorised body may, subject to such conditions as the Minister or authorised body may impose in a particular case, waive the requirement in subsection (6)(c), (d) or (e).[Act 41 of 2020 wef 12/04/2024]

(9) Any amount of deduction for any year of assessment computed for a qualifying person in accordance with subsection (5) which is in excess of the remainder of the qualifying person’s statutory income (excluding specified income) after making the deduction (if any) under section 37(3)(a) is not available as a deduction against the qualifying person’s income for any subsequent year of assessment and is disregarded.

(10) Where —(a)

a person disposes of, after 2 years from the relevant date, the shares which are the subject of a qualifying investment in respect of which a deduction has been allowed to the person in any year of assessment under this section; and

(b)

the gains or profits from the disposal of those shares is chargeable to tax under this Act,

the amount of expenditure for which a deduction is allowed to the person under this section in respect of those shares in any year of assessment does not form part of the person’s costs of investment deductible under section 14 in computing the person’s gains or profits from the disposal which is chargeable to tax.

(11) A qualifying person must maintain and deliver to the Minister or an authorised body, in such form and manner and within such reasonable time as the Minister or authorised body may determine, the relevant records of the qualifying investment made by the qualifying person in any qualifying start‑up company and such other particulars as may be required for the purposes of this section.[Act 41 of 2020 wef 12/04/2024]

(12) In this section —“date of first investment”, in relation to a qualifying investment by a qualifying person in a qualifying start‑up company, means —(a)

unless paragraph (b) applies, the date on which a qualifying investment is first made by the qualifying person in the qualifying start‑up company since the qualifying person was approved as such under subsection (2); or

(b)

if approval has been obtained under subsection (4)(a)(ii) and the qualifying person has made at least one qualifying investment in the qualifying start‑up company during the period between 1 March 2010 and 30 June 2010 (both dates inclusive), the date of that qualifying investment or the first of such qualifying investments;

“qualifying investment”, in relation to a qualifying start‑up company, means —(a)

the acquisition using cash of —(i)

new shares not being of a preferential nature, issued by the company;

(ii)

new shares of a preferential nature issued by the company which do not fall within sub‑paragraph (iii) and which do not provide for payment of a fixed or guaranteed dividend for the relevant holding period; or

(iii)

new redeemable shares of a preferential nature issued by the company which do not carry a right to redemption during the relevant holding period and which do not provide for payment of a fixed or guaranteed dividend for the relevant holding period,

other than shares which are issued pursuant to a stock option or share award scheme or any conversion of any loan or debt securities; or

(b)

the provision of convertible loans of cash to the company where there is no provision for interest payment for the relevant holding period or loan repayment during the relevant holding period;

“qualifying start‑up company” means a company which is not one limited by guarantee and which —(a)

on the date of first investment, was incorporated in Singapore for 3 years or less and whose shares are not listed on any stock exchange in Singapore or elsewhere;

(b)

on the date of first investment, does not have any shareholder who is a relative of the qualifying person, except that this requirement may be waived for the company by the Minister or an authorised body;[Act 41 of 2020 wef 12/04/2024]

(c)

on the date of first investment, has more than 50% of its total issued share capital beneficially held by no more than 20 individual shareholders (excluding any qualifying person);

(d)

has no more than 25% of its issued share capital or 25% of its debt capital beneficially held by the qualifying person (including any of the qualifying person’s relatives) at any time within a period of 2 years prior to the date of first investment; and

(e)

throughout the relevant holding period, does not engage in any activity specified by the Minister or an authorised body for the purposes of this section;[Act 41 of 2020 wef 12/04/2024]

“relative”, in relation to any individual, means —(a)

his or her spouse;

(b)

his or her children, stepchildren, grandchildren, stepgrandchildren and their spouses;

(c)

his or her parents, including step‑parents;

(d)

his or her grandparents, including stepgrandparents;

(e)

his or her parents‑in‑law, including stepparents‑in‑law;

(f)

his or her brother, stepbrother, sister, stepsister and their spouses;

(g)

his or her spouse’s grandparents, including stepgrandparents;

(h)

his or her spouse’s brother, stepbrother, sister, stepsister and their spouses;

(i)

his or her parent’s brother, stepbrother, sister, stepsister and their spouses;

(j)

his or her parent‑in‑law’s brother, stepbrother, sister, stepsister and their spouses;

(k)

the children of the brother, stepbrother, sister or stepsister of his or her parent or step‑parent, including stepchildren, and their spouses;

(l)

the children of the brother, stepbrother, sister or stepsister of his or her parent‑in‑law or stepparent‑in‑law, including stepchildren, and their spouses;

(m)

the children of his or her brother, stepbrother, sister or stepsister, including stepchildren, and their spouses; and

(n)

the children of his or her spouse’s brother, stepbrother, sister or stepsister, including stepchildren, and their spouses;

“relevant date”, in relation to a qualifying person making a qualifying investment in a qualifying start‑up company, means —(a)

where only one qualifying investment in the company is made by the qualifying person in accordance with subsection (4) — the date of first investment; or

(b)

where more than one qualifying investment in the company is made by the qualifying person in accordance with subsection (4) — the date on which the last qualifying investment is made by the qualifying person in that company within one year after the date of first investment;

“relevant holding period”, in relation to a qualifying person making a qualifying investment in a qualifying start‑up company, means the period commencing from the date of first investment in the qualifying start‑up company to the end of the 2‑year period from the relevant date;

“specified income” means any income of the qualifying person not resident in Singapore which is subject to tax at the rate specified in section 43(3), (3A) or (4)(a).[37/2014; 41/2020]

(13) In the definition of “relative” in subsection (12), 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.

(14) In this section, a qualifying investment is made when —(a)

in the case of an acquisition of shares in paragraph (a) of the definition of “qualifying investment” in subsection (12), the consideration for the shares is paid; or

(b)

in the case of a provision of a convertible loan in paragraph (b) of the definition of “qualifying investment” in subsection (12), the loan is disbursed.[37K