ACC v Comptroller of Income Tax: Withholding Tax on Payments to Overseas Subsidiaries
In ACC v Comptroller of Income Tax, the Singapore High Court heard an application by ACC to quash the Comptroller of Income Tax's determination that withholding tax applied to payments made by ACC to its overseas subsidiaries. The court, delivered by Andrew Ang J, granted the application, finding that the payments were not in connection with any loan or indebtedness and therefore not subject to withholding tax.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application for an order to quash the Determination is granted in terms.
1.3 Case Type
Tax
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The High Court quashed the Comptroller of Income Tax's determination that withholding tax applied to payments made by ACC to its overseas subsidiaries.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| ACC | Applicant | Corporation | Application Granted | Won | Leung Yew Kwong, Tan Shao Tong |
| Comptroller of Income Tax | Respondent | Government Agency | Application Denied | Lost | Jimmy Oei, Usha Chandradas |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Andrew Ang | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Leung Yew Kwong | WongPartnership LLP |
| Tan Shao Tong | WongPartnership LLP |
| Jimmy Oei | Inland Revenue Authority of Singapore |
| Usha Chandradas | Inland Revenue Authority of Singapore |
4. Facts
- ACC is a Singapore-incorporated company engaged in aircraft leasing.
- ACC's subsidiaries (SPCs) are incorporated in the Cayman Islands and are not resident in Singapore.
- Each SPC owns one aircraft and finances its purchase through offshore bank loans.
- SPCs lease their aircraft to airline companies, with rentals being either floating or fixed rate.
- To minimize risk exposure, the SPCs hedge the interest rate exposure on their floating interest rate loans by entering into interest rate swap agreements.
- ACC entered into swap arrangements with Singapore banks or Singapore branches of foreign banks (Onshore Banks).
- The SPC Payments were payments made pursuant to the interest rate swap agreement between each SPC and the Applicant.
5. Formal Citations
- ACC v Comptroller of Income Tax, Originating Summons No 510 of 2009 (Summons No 3885 of 2009), [2010] SGHC 316
6. Timeline
| Date | Event |
|---|---|
| Applicant and each SPC entered into a swap arrangement mirroring the swap agreements that the Applicant has entered into with the Onshore Banks. | |
| Applicant wrote to the Respondent to confirm that withholding tax was not applicable to the payments made by the Applicant to the SPCs for the period October 2006 to March 2008. | |
| The Respondent indicated its determination that withholding tax applied to the SPC Payments. | |
| Leave to apply was granted. | |
| Decision was upheld by the Court of Appeal. | |
| Judgment reserved. |
7. Legal Issues
- Applicability of Withholding Tax to Interest Rate Swap Payments
- Outcome: The court held that the SPC Payments were not payments in connection with any loan or indebtedness borne by the resident Applicant to the non-resident SPCs and therefore the requirement to withhold tax under s 45 does not apply.
- Category: Substantive
- Interpretation of 'any other payment' under s 12(6)(a) of the Income Tax Act
- Outcome: The court found that 'any other payment' should be construed in the context of the preceding terms and the overall purpose of the statute, and does not extend to interest rate swap payments in this case.
- Category: Substantive
- Purposive Interpretation of Tax Statutes
- Outcome: The court emphasized the importance of purposive interpretation of tax statutes, while also cautioning against interpretations that go against the literal wording of the provision.
- Category: Procedural
- Related Cases:
- [2010] 2 SLR 837
- [2007] 4 SLR(R) 183
8. Remedies Sought
- Quashing Order
9. Cause of Actions
- Judicial Review
10. Practice Areas
- Tax Litigation
11. Industries
- Aviation
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| ACC v CIT | High Court | Yes | [2010] 1 SLR 273 | Singapore | Cited for the granting of leave to apply for an order quashing the determination issued by the Comptroller of Income Tax. |
| Comptroller of Income Tax v ACC | Court of Appeal | Yes | [2010] 2 SLR 1189 | Singapore | Cited for the upholding of the High Court's decision to grant leave to apply for an order quashing the determination issued by the Comptroller of Income Tax. |
| Hazell v Hammersmith and Fulham London Borough Council | Queen's Bench | Yes | [1990] 2 QB 697 | England and Wales | Cited to explain the nature of interest rate swaps. |
| ABB v Comptroller of Income Tax | Court of Appeal | Yes | [2010] 2 SLR 837 | Singapore | Cited for the principle that s 9A(1) of the Interpretation Act applies to all written law and effectively displaces the common law principle that tax statutes should be interpreted strictly in favour of the taxpayer. |
| Public Prosecutor v Low Kok Heng | High Court | Yes | [2007] 4 SLR(R) 183 | Singapore | Cited for the principle that s 9A(1) of the Interpretation Act requires the construction of written law to promote the purpose or object underlying the statute. |
| Chng Gim Huat v Public Prosecutor | High Court | Yes | [2000] 2 SLR(R) 360 | Singapore | Cited for the guiding principles in determining whether a particular payment constitutes 'interest'. |
| Revenue and Customs Commissioners v Barclays Bank plc | Court of Appeal | Yes | [2008] STC 476 | England and Wales | Cited for the principle that the expression 'in connection with' could describe a range of links, but the court must look closely at the surrounding words and the context of the legislative scheme. |
| Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co, Ltd | High Court | Yes | [2006] 4 SLR(R) 451 | Singapore | Cited for rejecting a broad construction of the words 'in connection with' in the context of impugning financial assistance in connection with the purchase of a company’s shares under s 76(1)(a) of the Companies Act. |
| AAG v Estate of AAH, deceased | High Court | Yes | [2010] 1 SLR 769 | Singapore | Cited for the principle that a statutory provision should be construed in a manner which will take into account new situations which may arise and which were not within contemplation at the time of its enactment. |
| Comptroller of Income Tax v GE Pacific Pte Ltd | High Court | Yes | [1994] 2 SLR(R) 948 | Singapore | Cited for the principle that the practice of the Comptroller does not in any way illuminate the question of whether this should be the practice of the Comptroller since practice is not law. |
| Maco Door and Window Hardware (UK) Ltd v Revenue and Customs Commissioners | House of Lords | Yes | [2008] 1 WLR 1790 | United Kingdom | Cited for the principle that the fact that, for a substantial period, the commissioners interpreted a particular provision in a taxing statute in a certain way is normally of limited assistance as to the provision’s meaning. |
| Federal Commissioner of Taxation v Comber | Federal Court of Australia | Yes | (1986) 64 ALR 451 | Australia | Cited for the principle that deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to. |
| Russell (Inspector of Taxes) v Scott | House of Lords | Yes | [1948] 1 AC 422 | United Kingdom | Cited for the maxim of revenue law which states that the taxpayer is not to be taxed unless the taxing statute unambiguously imposes the tax on him. |
| Greenwood v FL Smidth & Company | House of Lords | Yes | [1922] 1 AC 417 | United Kingdom | Cited for the rule that, where it is desired to impose a new burden by way of taxation, it is essential that this intention should be stated in plain terms. |
13. Applicable Rules
| Rule Name |
|---|
| O 53 r 5 of the Rules of Court (Cap 322, R5, 2006 Rev Ed) |
| O 53 r 1 of the Rules of Court |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Income Tax Act (Cap 134, 2008 Rev Ed) | Singapore |
| s 2(1) of the Income Tax Act (Cap 134, 2008 Rev Ed) | Singapore |
| s 45(1) of the Income Tax Act | Singapore |
| s 10(1)(d) of the Income Tax Act | Singapore |
| s 12(6)(a)(i) of the Income Tax Act | Singapore |
| Income Tax (Amendment) Act 1973 (Act 26 of 1973) | Singapore |
| Income Tax (Amendment) Act 1977 (Act 5 of 1977) | Singapore |
| Interpretation Act (Cap 1, 2002 Rev Ed) | Singapore |
| s 9A(1) of the Interpretation Act (Cap 1, 2002 Rev Ed) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| s 76(1)(a) of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Withholding Tax
- Interest Rate Swap
- Special Purpose Company
- Aircraft Leasing
- Deeming Provision
- Purposive Interpretation
- Indebtedness
- Legislative Intent
15.2 Keywords
- Withholding Tax
- Interest Rate Swap
- Aircraft Leasing
- Singapore
- Taxation
- Income Tax Act
16. Subjects
- Taxation
- Income Tax
- Financial Law
17. Areas of Law
- Tax Law
- Income Tax
- Withholding Tax
- Interpretation of Statutes
- Financial Derivatives