Statute Details
- Title: Income Tax (Concessionary Rate of Tax on Dividends — Aircraft Leasing Company) Order 2020
- Act Code: ITA1947-S673-2020
- Type: Subsidiary Legislation (SL)
- Authorising Act: Income Tax Act (Chapter 134)
- Enacting power: Section 13(12) of the Income Tax Act
- Citation: No. S 673
- Made date: 4 August 2020
- Deemed commencement: Deemed to have come into operation on 5 February 2014
- Status: Current version as at 27 Mar 2026
- Key provisions: Section 2 (definitions); Section 3 (approval of “approved company”); Section 4 (concessionary tax rate on dividends received in Singapore); Section 5 (revocation)
- Related instruments: Income Tax Act; Income Tax (Concessionary Rate of Tax for Aircraft Leasing Company) (Prescribed Activities) Regulations 2008 (G.N. No. S 566/2008)
What Is This Legislation About?
The Income Tax (Concessionary Rate of Tax on Dividends — Aircraft Leasing Company) Order 2020 (“the Order”) is a Singapore tax measure that supports the aircraft leasing industry by providing a concessionary tax treatment for certain dividends received by an approved aircraft leasing company (“AALC”). In practical terms, it sets the rules for when and how a concessionary rate applies to dividends paid by an offshore company that is linked to the AALC’s aircraft leasing business.
The concession is not automatic for all dividends. The Order operates within the broader framework of the Income Tax Act, particularly section 43N, which governs the approval and tax treatment of aircraft leasing companies. The Order specifies the type of income (dividends) and the conditions under which those dividends are taxed at the concessionary rate. It also establishes a structured approval regime for the offshore “approved company” that pays the dividends to the AALC.
In essence, the Order ensures that the concessionary tax rate is available only where the AALC has real operational control and economic exposure to the offshore leasing activities—such as controlling and managing the aircraft or aircraft engine used outside Singapore, and maintaining a minimum equity interest in the offshore company.
What Are the Key Provisions?
1. Citation, commencement, and definitions (Sections 1 and 2)
Section 1 provides the formal citation and states that the Order is deemed to have come into operation on 5 February 2014. This is important for practitioners because it may affect the tax treatment of relevant dividends received during the period from that date, subject to the operation of the underlying approval framework under section 43N.
Section 2 defines key terms. The most significant definitions include:
- “approved aircraft leasing company” (AALC): an aircraft leasing company defined in section 43N and approved under that section. The definition also includes a partnership approved by the Minister or an authorised body, as applied by section 36(1A) of the Act.
- “approved company” (in relation to an AALC): a company approved under paragraph 3 of the Order.
- “equity interest”: an issued share that is not a treasury share.
- “leasing of aircraft or aircraft engine”: leasing of any aircraft or aircraft engine other than under a finance lease that is treated as a sale under regulations made under section 10C(1) of the Act.
These definitions matter because they delimit the scope of the concession. For example, the exclusion of finance leases treated as sales prevents the concession from being claimed for arrangements that are economically treated as disposals under the Act’s sale treatment rules.
2. Approval of the offshore “approved company” (Section 3)
Section 3 is the gatekeeping provision. It allows the Minister or an authorised body to approve a company of an AALC for the purposes of the Order. However, approval is conditional and requires satisfaction of specific criteria.
Under Section 3(2), approval may only be granted if all of the following conditions are met:
- Incorporation outside Singapore: the company must be incorporated outside Singapore.
- Offshore leasing business: the company carries on (or intends to carry on) the business of leasing aircraft or aircraft engine outside Singapore.
- Dividend intention and use: the company intends to pay dividends derived from its offshore leasing income to the AALC, and those payments will be used by the AALC for its own aircraft leasing business.
- Control and management by the AALC: the AALC controls and manages the aircraft or aircraft engine that the company uses for its offshore leasing business.
- Minimum equity ownership: the AALC beneficially owns at least 25% of the equity interests of the company.
From a legal and structuring perspective, these conditions are designed to ensure that the AALC is not merely a passive shareholder. The AALC must have both governance/control over the assets and a meaningful economic stake (at least 25%) in the offshore leasing vehicle.
3. Loss of approval if conditions cease (Section 3(3))
Section 3(3) provides a compliance mechanism. If, after approval, any of the following events occurs, the AALC must inform the Minister or authorised body, and the approved company ceases to be approved beginning on the date of the occurrence:
- the company ceases to be incorporated outside Singapore;
- the company does not or ceases to carry on offshore leasing;
- the AALC does not or ceases to use the dividends for its own leasing business;
- the AALC ceases to control or manage the aircraft/engine used by the company; or
- the AALC ceases to beneficially own at least 25% of the equity interests.
This is a critical provision for practitioners advising on corporate governance, dividend policy, and asset management. It creates a continuing obligation to monitor and report changes that could jeopardise the concessionary tax outcome.
4. Concessionary tax rate on dividends received in Singapore (Section 4)
Section 4 is the operative tax provision. It states that tax at the rate specified for any income of an AALC under section 43N(1) of the Act is levied and must be paid on the relevant income described in Section 4(2).
Key elements of Section 4 include:
- Income type: the income is dividends paid by an approved company to the AALC.
- Source and use: the dividends must be paid out of the approved company’s income from:
- (a) leasing of aircraft or aircraft engine from a place outside Singapore; or
- (b) any activity prescribed in the Schedule to the Prescribed Activities Regulations, where such activity is ancillary to the offshore leasing activity.
- Timing: the dividends must be received in Singapore during the period of the AALC’s approval under section 43N.
- Exclusion: the concession does not apply to income exempt under section 13(8) of the Act.
Practically, Section 4 links the concessionary tax treatment to both (i) the approved status of the paying company and (ii) the approved status of the AALC during the relevant period. It also ties the dividend source to offshore leasing and ancillary prescribed activities, preventing the concession from being extended to unrelated income streams.
5. Revocation (Section 5)
Section 5 revokes the earlier Income Tax (Concessionary Rate of Tax on Dividends — Aircraft Leasing Company) Order 2008 (G.N. No. S 567/2008). This means the 2020 Order replaces the 2008 framework, while maintaining continuity through the deemed commencement date.
How Is This Legislation Structured?
The Order is concise and structured around five provisions:
- Section 1: citation and deemed commencement (5 February 2014).
- Section 2: definitions of AALC, approved company, equity interest, and the meaning of aircraft/engine leasing for the Order.
- Section 3: approval process for an “approved company” of an AALC, including approval conditions and loss of approval triggers.
- Section 4: the concessionary tax rate mechanism for dividends received in Singapore by an AALC, including the required source of dividends and timing during the AALC’s approval period.
- Section 5: revocation of the 2008 Order.
Who Does This Legislation Apply To?
The Order applies to approved aircraft leasing companies under section 43N of the Income Tax Act. It also applies indirectly to the offshore companies that pay dividends to those AALCs, because those paying companies must be approved as “approved companies” under Section 3.
In scope are dividends paid by an approved company to an AALC during the AALC’s approval period, where the approved company’s income derives from offshore aircraft/engine leasing (or ancillary prescribed activities) and where the AALC meets the structural and control requirements (including beneficial ownership of at least 25% and control/management of the aircraft/engine used outside Singapore).
Why Is This Legislation Important?
This Order is important because it operationalises a key element of Singapore’s aircraft leasing tax incentive regime: the concessionary taxation of dividends received by an AALC. For lawyers advising on aircraft leasing structures, it provides the legal conditions that must be satisfied to ensure that dividend flows can benefit from the concessionary rate under section 43N(1).
From an enforcement and risk perspective, the approval conditions in Section 3 and the loss-of-approval triggers in Section 3(3) create ongoing compliance obligations. Corporate changes—such as restructuring ownership below the 25% threshold, changing who controls and manages the aircraft, or altering dividend usage—can cause the approved company to cease being approved, potentially affecting the tax treatment of subsequent dividends.
For tax planning, the Order also clarifies the permitted income base for the offshore company: dividends must be paid out of offshore leasing income or ancillary prescribed activities. This is a practical constraint that should be reflected in business plans, accounting segregation, and documentation of the offshore company’s revenue streams.
Related Legislation
- Income Tax Act (Chapter 134) — particularly section 43N (AALC approval and concessionary rate framework) and section 13(8) (exempt income) and section 13(12) (authorising power).
- Income Tax (Concessionary Rate of Tax for Aircraft Leasing Company) (Prescribed Activities) Regulations 2008 (G.N. No. S 566/2008) — defines prescribed ancillary activities relevant to the dividend source.
- Income Tax (Concessionary Rate of Tax on Dividends — Aircraft Leasing Company) Order 2008 (G.N. No. S 567/2008) — revoked by Section 5 of this Order.
Source Documents
This article provides an overview of the Income Tax (Concessionary Rate of Tax on Dividends — Aircraft Leasing Company) Order 2020 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.