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Exemption of tax on gains or profits from equity remuneration incentive scheme (SMEs)

Income Tax Act 1947

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—(1) Where a qualifying employee derives any gains or profits in any year of assessment, after the expiry of the minimum holding period, from any stock option granted during the period from 1 June 2000 to 31 December 2013 (both dates inclusive), or any right or benefit under any share acquisition scheme (other than a stock option scheme) granted during the period from 1 January 2002 to 31 December 2013 (both dates inclusive), to acquire shares in any qualifying company or in its holding company, there is, subject to this section, exempt from tax 50% of an amount of such gains or profits as determined under subsection (2).(2) The amount of gains or profits referred to in subsection (1) is —(a)where the price to be paid for the shares under the right or benefit is equal to or exceeds the market value or, if it is not possible to determine such value, the net asset value of the shares at the time of the grant of the right or benefit, the amount as determined under section 10(6); or(b)where the price to be paid for the shares under the right or benefit is at a discount to the market value or, if it is not possible to determine such value, the net asset value of the shares at the time of the grant of the right or benefit, the amount as determined under section 10(6) less the amount of the discount.(3) The exemption under this section does not apply to any amount of gains or profits to which section 10(6) applies —(a)to the extent that the amount, when aggregated with the amount of such gains or profits previously derived by the qualifying employee and which qualifies for exemption under this section, exceeds $10 million;(b)which is derived by the qualifying employee on or after 1 January of the 10th year following the year in which he or she first derived such gains or profits which qualified for exemption under this section; or(c)which is derived by the qualifying employee for the release of his or her right or benefit to acquire shares in any qualifying company or in its holding company by reason of his or her resignation or termination of his or her employment with the qualifying company due to his or her misconduct.(4) The exemption under this section applies to gains or profits derived by an employee from any right or benefit to acquire shares in a holding company of the company in which the employee is employed only if the following conditions are satisfied:(a)both the company and the holding company are incorporated in Singapore;(b)the holding company grants the right or benefit to acquire its shares to its employees or the employees of companies within its group of companies; and(c)at the time of the grant by the holding company of the right or benefit to acquire its shares —(i)both the company and the holding company are carrying on business in Singapore;(ii)the market value of the gross assets of the company does not exceed $100 million;(iii)the market value of the gross assets of the holding company and companies within its group of companies does not exceed in the aggregate $100 million; and(iv)the company in which the employee is employed has not granted any right or benefit to any of its employees to acquire its shares.(5) The Minister may make regulations to provide generally for giving full effect to or for carrying out the purposes of this section.(6) For the purposes of this section and section 13I, where a company grants —(a)any stock option during the period from 1 April 2001 to 31 December 2013 (both dates inclusive); or(b)any right or benefit under any share acquisition scheme (other than a stock option scheme) during the period from 1 January 2002 to 31 December 2013 (both dates inclusive),to acquire shares under a tranche of the share acquisition scheme and any gains or profits derived by a qualifying employee from any right or benefit granted under that tranche qualifies for tax exemption under this section as well as section 13I, the company must opt for the tax exemption under this section or section 13I to apply in respect of the gains or profits relating to that tranche but not under both sections.(7) Where a company has opted under subsection (6) for tax exemption under this section to apply to the gains or profits in respect of a tranche of a share acquisition scheme, tax exemption under section 13I —(a)is, subject to paragraph (b), not available in respect of any right or benefit to acquire shares granted by the company under any tranche subsequent to that tranche under the share acquisition scheme; and(b)is available in respect of any right or benefit to acquire shares granted subsequent to the option by the company under any tranche under the share acquisition scheme only where the conditions for tax exemption under this section are not satisfied in respect of any such subsequent tranche granted.(8) Where a company has opted under subsection (6) for tax exemption under section 13I to apply to the gains or profits in respect of a tranche of a share acquisition scheme, tax exemption under this section is not available in respect of any right or benefit to acquire shares granted by the company under any tranche subsequent to that tranche under the share acquisition scheme.(9) Any option by a company under subsection (6) is irrevocable.(9A) Despite anything in this section, the exemption under this section does not apply to any gains or profits derived by a qualifying employee on or after 1 January 2024.(10) In this section, unless the context otherwise requires —“holding company” has the meaning given by section 5 of the Companies Act 1967;“minimum holding period” —(a)in relation to a right or benefit to acquire shares in a qualifying company or holding company under any stock option scheme, means the period prescribed by the Singapore Exchange during which no option may be exercised under a stock option scheme implemented by any company listed on that Exchange, which would have been applicable to the stock option granted by the qualifying company or holding company (as the case may be) if it were a company listed on that Exchange; and(b)in relation to a right or benefit to acquire shares in a qualifying company or holding company under any share acquisition scheme (other than a stock option scheme), means —(i)a period of at least one year after the grant of the right or benefit, during which the shares so acquired may not be sold, if the price to be paid for the shares under the right or benefit is at a discount to the market value or, if it is not possible to determine such value, the net asset value of the shares at the time of the grant of the right or benefit; or(ii)a period of at least 6 months after the grant of the right or benefit, during which the shares so acquired may not be sold, if the price to be paid for the shares under the right or benefit is equal to or exceeds the market value or, if it is not possible to determine such value, the net asset value of the shares at the time of the grant of the right or benefit;“qualifying company” means a company incorporated in Singapore which at the time of the grant to its employees of any right or benefit to acquire its shares —(a)carries on business in Singapore; and(b)has gross assets the market value of which does not exceed $100 million;“qualifying employee” means an employee (other than any non‑executive director) of a company who, at the time of the grant to him or her of any right or benefit to acquire the shares of the company or the shares of its holding company, as the case may be —(a)is committed to work —(i)where the time of the grant is before 1 January 2010 —(A)at least 30 hours per week for the company; or(B)where the employee is committed to work less than that number of hours, at least 75% of his or her total working time per week for the company; and(ii)where the time of the grant is on or after 1 January 2010 —(A)at least the number of hours per week referred to in section 66A(1) of the Employment Act 1968 for the company; or(B)where the employee is committed to work less than that number of hours, at least 75% of his or her total working time per week for the company; and(b)does not beneficially own, directly or indirectly, voting shares that confer the right to exercise or control the exercise of not less than 25% of the voting power in the company which grants the right or benefit to acquire its shares;“share acquisition scheme” means a scheme which imposes a minimum holding period requirement and allows an employee of a company to own or purchase shares in a qualifying company or that of its holding company, including stock options, share awards and other similar forms of employee share purchase plans but excluding phantom shares rights, share appreciation rights and any other similar rights;“shares” includes stocks but does not include redeemable or convertible shares or shares of a preferential nature;“total working time”, in relation to a qualifying employee, means the total period of time spent by him or her as an employee for all his or her employers plus, if applicable, the total period of time, which is deemed to be 10 hours per week, spent by him or her on remunerative work as a self‑employed person.[13J

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