HY v Comptroller of Income Tax

• Jurisdiction: Singapore
• Judge: Choo Han Teck J
• Judgment Date: 02 August 2005
• Neutral Citation: [2005] SGHC 137
• Date: 02 August 2005
• Subject Matter: Whether gains from exercise of stock options taxable in Singapore,Appellant signing notices of exercise of options in Singapore,Appellant receiving stock options from employer company in London,Whether material connection between appellant's exercise of stock options and Singapore existing,Sections 10(1)(g), 10(5) Income Tax Act (Cap 134, 1996 Rev Ed),Appellant delivering notices to company in London,Revenue Law,Appeals,Income taxation,Whether constituting exercise of stock options
• Docket Number: District Court Appeal No 27 of
• Published date: 17 August 2005
• Defendant Counsel: Liu Hern Kuan and Joyce Chee (Inland Revenue Authority of Singapore)
• Court: High Court (Singapore)
• Plaintiff Counsel: Leon Kwong Wing, Chua Yee Hoong and Sharma Sundareswara (Khattar Wong)

2 August 2005 Judgment reserved.

Choo Han Teck J:

1 This was an appeal against the decision of the Income Tax Board of Review (“the Board”) affirming the additional assessment of tax by the Comptroller of Income Tax (“Comptroller”) on the appellant for the year of assessment 1998. The appellant was employed by Standard Chartered PLC in London from 26 April 1990. By March 1994, he received a total of seven options to acquire shares in his employer company. Some months later, in October 1994, the appellant was sent to work in the Singapore branch of the Standard Chartered PLC. The appellant’s wife is from Mauritius. They purchased a house in Mauritius in March 1997, and while holidaying in Phuket, Thailand in April 1997, the appellant made the decision to exercise his share options and used the proceeds for the house in Mauritius.

2 On 28 April 1997 the appellant signed the notices of exercise of options. This was done in Singapore and the notices were delivered to Standard Chartered PLC’s private banking branch in Park Lane, London. The bank then gave the appellant an overdraft to pay for the shares. On 30 April 1997 the appellant exercised the options by delivering the notices of exercise to the Standard Chartered PLC’s registered office at 1 Aldermanbury Square, London. The appellant sold the shares and invested the gains from the sale. No money from the sale was remitted into Singapore. The total gains from the sale of the shares was £2,054,370 (or S$5,044,710). The Comptroller levied an additional assessment of tax on the sum of $5,044,710, against which the appellant appealed to the Board, and against the Board’s dismissal of his appeal, to me.

3 Mr Leon Kwong Wing, counsel for the appellant, submitted that the gains from the share options were not taxable in Singapore. The relevant provisions of the Income Tax Act (Cap 134, 1996 Rev Ed) at the material time, were ss 10(1) and 10(5), which provide as follows:

10.—(1) Income tax shall, subject to the provisions of this Act, be payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of —

(a) gains or profits from any trade, business, profession or vocation, for whatever period of time such trade, business, profession or vocation may have been carried on or exercised;

(b) gains or profits from any employment;

(c) (Deleted by Act 29/65).

(d) dividends, interest or discounts;

(e) any pension, charge or annuity;

(f) rents, royalties, premiums and any other profits arising from property; and

(g) any gains or profits of an income nature not falling within any of the preceding paragraphs.

…

(5) Any gains or profits directly or indirectly derived by any person by the exercise, assignment or release of a right or benefit whether granted in his name or in the name of his nominee or agent to acquire shares in a company shall, where the right or benefit is obtained by that person by reason of any office or employment held by him, be deemed to be income …

4 The Comptroller’s case, argued by Mr Liu Hern Kuan, was based on ss 10(1)(g) and 10(5). It is relevant and convenient, at this point, to refer to s 10(5) after the amendment by the Legislature in 2003. The amended s 10(5) reads as follows:

Any gains or profits, directly or indirectly, derived by any person from a right or benefit granted on or after 1st January 2003, whether granted in his name or in the name of his nominee or agent, to acquire shares in any company shall, where the right or benefit is obtained by that person by reason of any office...