Statute Details
- Title: Income Tax (Related Party of Approved Shipping Investment Enterprise under Section 13P) Rules 2021
- Act Code: ITA1947-S874-2021
- Type: Subsidiary Legislation (SL)
- Authorising Act: Income Tax Act (Cap. 134), section 7(1)
- Enacting Formula: Made by the Minister for Finance under section 7(1) of the Income Tax Act
- Deemed Commencement: 12 December 2018
- Key Provisions:
- Rule 1: Citation and commencement
- Rule 2: Definitions (including “approved shipping investment enterprise” and “approved shipping investment manager”)
- Rule 3: “Related party” determination for purposes of section 13P
- Current Version: Current version as at 27 Mar 2026 (with amendments reflected through later effective dates)
- Noted Amendments (from timeline):
- S 39/2023 (effective 31/12/2021)
- S 311/2024 (effective 12/04/2024)
- SL 874/2021 (original)
What Is This Legislation About?
The Income Tax (Related Party of Approved Shipping Investment Enterprise under Section 13P) Rules 2021 (“the Rules”) are subsidiary legislation made under the Income Tax Act. Their central purpose is to define when entities are “related parties” of an approved shipping investment enterprise for the specific tax regime in section 13P of the Income Tax Act.
In plain terms, section 13P provides a targeted tax framework for approved shipping investment structures. However, tax incentives and related computations often depend on whether transactions or relationships are with “related parties” (for example, to prevent inappropriate shifting of income, to ensure integrity of the incentive regime, and to apply specific rules to connected structures). The Rules therefore create a clear, legally enforceable test for identifying related parties in this context.
The Rules do not themselves grant tax benefits. Instead, they supply the definitional machinery that section 13P relies on. For practitioners, the practical value lies in the fact that “related party” status can affect how income is characterised, how conditions are satisfied, and how compliance is documented for approved shipping investment enterprises and their connected entities.
What Are the Key Provisions?
Rule 1 (Citation and commencement) establishes the formal title of the Rules and, importantly, provides that they are deemed to have come into operation on 12 December 2018. This retrospective (or deemed) commencement matters for compliance and for determining which relationships must be assessed under the Rules for periods beginning on or after that date.
Rule 2 (Definitions) defines two core terms used in the related party test:
- “approved shipping investment enterprise” means an enterprise mentioned in section 13P of the Income Tax Act. It also expressly includes a partnership approved by the Minister (or an authorised body) under section 13P as applied by section 36 of the Act. This ensures that the related party analysis is not limited to companies; it extends to approved partnerships where the tax regime applies.
- “approved shipping investment manager” means an approved shipping investment manager mentioned in section 43L of the Income Tax Act. This is significant because the Rules use the manager’s role and ownership to capture certain connected structures even where direct shareholding thresholds might not be met.
Rule 3 (Related party) is the operative provision. It sets out a structured test for identifying related parties of an approved shipping investment enterprise (“the approved enterprise”) for purposes of section 13P.
Rule 3(1): Categories of related parties identifies three main categories:
- Another approved shipping investment enterprise that is related to the approved enterprise:
- Where the approved enterprise is a company, the relationship is determined under Rule 3(2) or Rule 3(3).
- Where the approved enterprise is a registered business trust or partnership, the relationship is determined under Rule 3(3).
- A company that meets both an incorporation/residency condition and a 25% beneficial ownership condition:
- It must be incorporated and resident in Singapore, or incorporated outside Singapore; and
- At least 25% of the total number of issued ordinary shares must be beneficially owned (directly or indirectly) by either:
- the approved enterprise; or
- another approved shipping investment enterprise that is already a related party under Rule 3(1)(a).
- A partnership registered or formed outside Singapore that is treated as a related party if either:
- the approved enterprise is entitled (directly or indirectly) to at least 25% of the partnership’s income; or
- one of the partners is another approved shipping investment enterprise that is a related party under Rule 3(1)(a), and that partner is entitled to at least 25% of the partnership’s income.
Rule 3(2): The “same shareholder” test for companies addresses the relationship between two approved shipping investment enterprises where the approved enterprise is a company. It provides that the “related enterprise” is related to the approved enterprise if at least 25% of the total number of issued ordinary shares of both enterprises are beneficially owned (directly or indirectly) by the same shareholder(s). This is a classic connected-ownership threshold: it focuses on beneficial ownership and requires a common controlling or significant shareholder group.
Rule 3(3): Two alternative pathways to relatedness applies for the relevant scenarios under Rule 3(1)(a)(i) and (ii). It provides two ways an approved shipping investment enterprise can be related to another:
- Managed by the same approved shipping investment manager: If both enterprises are managed by the same approved shipping investment manager, they are treated as related. This captures relationships where management alignment may create economic integration even without direct shareholding overlap.
- Common beneficial ownership of the managers: If all issued ordinary shares of both approved shipping investment managers (the one managing the approved enterprise and the one managing the related enterprise) are beneficially owned (directly or indirectly) by the same shareholder(s), then the enterprises are related. This is a higher threshold than the 25% tests elsewhere: it requires all issued ordinary shares of each manager to be beneficially owned by the same shareholder group.
Practitioner note: The Rules use both beneficial ownership and entitlement to income concepts. Beneficial ownership is not necessarily identical to legal title; it can be indirect and can be held through intermediaries. Similarly, entitlement to partnership income can arise through contractual or structural arrangements. Therefore, compliance typically requires tracing economic interests rather than relying solely on share registers or partnership agreements.
How Is This Legislation Structured?
The Rules are short and tightly drafted, consisting of an enacting formula and three substantive rules:
- Rule 1 sets out the citation and deemed commencement date.
- Rule 2 provides definitions for key terms used in the related party test.
- Rule 3 contains the full “related party” determination framework for purposes of section 13P, including thresholds (notably 25%), management-based linkage, and the common beneficial ownership tests.
There are no additional parts or schedules in the extract provided; the legislative design is to keep the related party test self-contained and directly usable for tax computations and compliance checks under section 13P.
Who Does This Legislation Apply To?
The Rules apply to the determination of “related party” status for purposes of section 13P of the Income Tax Act. In practice, this means they affect:
- Approved shipping investment enterprises (including approved partnerships, as defined), and
- Other entities that may be connected to them through shareholding, management, or income entitlement relationships—specifically other approved shipping investment enterprises, certain companies, and certain non-Singapore partnerships.
The Rules are not a general “related party” regime for all tax purposes. They are purpose-built for the section 13P framework. Accordingly, practitioners should avoid assuming that the same definition applies to other provisions of the Income Tax Act or to other tax regimes; the scope is anchored to section 13P.
Why Is This Legislation Important?
For lawyers advising in the shipping investment sector, the Rules are important because they operationalise a key compliance concept—related party—within the approved shipping investment incentive regime. Many tax regimes are sensitive to connected-party relationships, and the existence of a related party can trigger additional conditions, reporting expectations, or restrictions on how transactions and income are treated.
From an enforcement and audit perspective, the Rules provide a clear threshold-based framework. The use of specific quantitative markers (such as 25% beneficial ownership and 25% entitlement to partnership income) reduces ambiguity and supports consistent application by both taxpayers and the tax authority. At the same time, the Rules include management-based tests, recognising that economic integration may occur through shared approved managers even where shareholding is not aligned.
Practically, the Rules require careful structuring and documentation. Where entities are expected to qualify under section 13P, counsel should assess whether any connected entities fall within the related party definition. This can influence structuring decisions (for example, whether to use a single approved manager across multiple enterprises, or how to allocate beneficial ownership interests) and can affect ongoing compliance, including maintaining evidence of beneficial ownership and income entitlements.
Related Legislation
- Income Tax Act (Cap. 134) — in particular:
- Section 13P (approved shipping investment enterprise regime)
- Section 36 (partnership application as referenced in the definition)
- Section 43L (approved shipping investment manager)
- Section 7(1) and 7(2) (making of subsidiary legislation and presentation to Parliament)
Source Documents
This article provides an overview of the Income Tax (Related Party of Approved Shipping Investment Enterprise under Section 13P) Rules 2021 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.