Singapore Tax Incentives Guide

SINGAPORE TAX INCENTIVES

Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014

OVERVIEW OF SINGAPORE TAX INCENTIVES

What tax incentives are available in Singapore?

The Singapore Government provides tax incentives for business activities that enhance the country’s economic or technological development. Tax incentives are available to a wide range of industries, including manufacturing, shipping, trading, investment and financial services sectors.

How are tax incentives offered to companies?

Tax incentives are either in the form of an exemption from taxation or a reduction in the tax rates.

The Singapore Government provides tax incentives for business activities that enhance the country’s economic or technological development.


MANUFACTURING & SERVICES INDUSTRY

What are the tax incentives offered to the manufacturing and services industry?

MANUFACTURING AND SERVICES

Scheme Description Tax Incentive

Pioneer Enterprise Enterprises which incur significant capital expenditure in Singapore or introduce leading edge technology and manufacturing skills to Singapore may be approved as pioneer enterprises. Tax exemption depends on a few key factors include nature of product, technology involved and amount invested in Singapore.

Full tax exemption for periods 5 to 15 years.

Development & Expansion Incentive

Enterprises engaging in projects which bring significant economic benefit to Singapore in terms of overall business spending and nature of activities in Singapore

Concessionary tax rate of 5% for up to 10 years.

Pioneer Service Company

A company engaged in qualifying services, including engineering or technical services, computer or information based services, industrial or production based services and other services as may be prescriber, may be approved as a pioneer service company.

Full tax exemption for periods 5 to 15 years.

Regional HQ Program

Company should provide corporate support and headquarters-related services and business expertise on regional basis; must meet stipulated requirements.

Concessionary tax rate of 15% for up to 5 years.

International HQ Program

Company should provide corporate support and headquarters-related services and business expertise on global basis; must exceed stipulated requirements.

Concessionary tax rate as low as 0% for up to 5 years.


MARITIME INDUSTRY

What are the tax incentives offered to the maritime industry?

MARITIME INDUSTRY


International Shipping Operations

Singapore Flagged Ships The exemption applies to the income derived from the carriage in international waters of passengers, mail, livestock or goods by seagoing Singapore vessels and includes the income derived from the charter of such vessels.

Foreign Flagged Ships The income which qualifies for exemption is from the carriage of passengers, mails, livestock or goods shipped in Singapore but excludes such carriage arising solely from transhipment from Singapore.

Tax exemption is granted on certain income derived.

Approved International Shipping Enterprise (MSI-AIS)

The AIS incentive was introduced to increase the competiveness of shipping companies operating from Singapore. Targeting established international ship operators with established worldwide networks, the scheme seeks to encourage international ship owners and ship operators to establish their commercial shipping operations in Singapore.


Maritime (Ship or Container) Leasing (MSI-ML (Ship) or MSI-ML (Container)

Approved Shipping Investment Enterprise Income from chartering or leasing of sea-going ship (foreign & Singapore) outside Singapore port limits, exchange and risk management activities which are carried out in connection with and incidental to the above operations.

Approved Shipping Investment Manager Managing a portfolio of an approved shipping enterprise. Expiry of incentive is till 31 May 2016.

Approved Container Investment Enterprise (ACIE) Leasing of containers to onshore/offshore leassess. Expiry of incentive is till 31 May 2016.

Approved Container Investment Manager (ACIM) Strategic control and management of ACIEs can qualift. Expiry of incentive is till 31 May 2016.


Concessionary tax rate of up to 10%

Shipping-related Support Services (MSI-SSS)

Approved Shipping and Logistics Scheme (ASL) ASL scheme is targeted at companies with an established track record in the provision of freight and logistics services. Qualified income from approved ship agencies, ship management companies, freight forwarders and logistics operators may be subject to tax exemption.

Ship Broking and Forward Freight Agreement Trading Incentive Companies carrying on ship broking activities and / or forward freight agreement trading that are approved may be subject to tax exemption.

Qualifying Corporate Services Approved entities which have a strong record and are able to show their commitment to expanding their ancillary shipping activities in Singapore would be able to enjoy a concessionary tax rate arising from providing qualifying corporate service to qualifying approved related parties who are carrying on business of shipping - related activities.

Concessionary tax rate of up to 10%, applications must be made before 31 May 2016.


TRADING & INVESTMENT SECTORS

What are the tax incentives offered to the trading sector?

TRADING


Global Trader Program

Companies that are carrying on the business of international trading of commodities, future, derivative instruments with good track record may benefit from the incentive.


Approved Cyber Trader

A company that is well established and uses the internet to conduct its international trading and marketing activities, hosts its website and contents in Singapore and bases a minimum number of personnel in Singapore.


What are the tax incentives offered to the investment sector?

INVESTMENT


Enterprise Investment Incentive

Start-up companies engaged in innovative and high-growth activities with substantial R&D content in relation to a specific product, process or service. Overseas start-ups may also be approved on a case-by-case basis.

Deductions of losses incurred on disposal of shares or liquidation

Overseas Enterprise Incentive

This incentive is designed to encourage companies to invest in approved overseas investments and projects.

Tax exemption on qualifying instruments


FINANCIAL SERVICES INDUSTRY

What are the tax incentives offered to the financial services industry?

The Financial Sector Incentive (FSI) scheme aims to promote and encourage the development of Singapore’s financial services sector. The FSI Scheme awards concessionary tax rates of 5, 10 and 12% on income derived from qualifying financial activities conducted in Singapore.

Initial award periods may vary from 5 to 10 years based on headcount and scope of activities undertaken.

The application period for the FSI Scheme – apart from the FSI-Islamic Finance (FSI-IF) scheme – will be extended to 31 December 2018.

With effect from 1 January 2014, several FSI sub-schemes have merged. For example, the range of incentivised activities and financial instruments will be broadened for the FSI-ST, FSI-CM and FSI-CFS awards. The categories are as follows:

Scheme New treatment Concessionary tax rate (%)

FSI-Standard Tier (FSI-ST)

The FSI-Islamic Finance (FSI-IF) award has expired on 31 March 2013. The existing qualifying Islamic Finance activities will be incentivised under the FSI-ST award.

12

FSI-Headquarter Services (FSI-HQ)

Withholding tax exemption will be granted automatically to FSI-HQ award recipients on interest payments made during the period of their FSI-HQ award for qualifying loans. Effective 25 Feb 2013.

10

FSI-Fund Management (FSI-FM)

New applicants will have to satisfy an additional Asset under Management (AUM) requirement of at least S$250m.

10

FSI-Capital Market (FSI-CM)

A merger of the FSI Bond Market (FSI-BM) and FSI-Equity Market (FSI-EM). Effective 1 Jan 2014.

5

FSI-Credit facilities Syndication (FSI-CFS)

TBC 5

FSI-Derivative Market (FSI-DM)

All five separate FSI-DM sub-schemes will merge into this scheme.

5





Real Estate

Investment Trust

(REITs)

A REIT is established as a unit trust and is regulated by the MAS. The

REIT is managed by an asset manager and administered by a trustee.

A number of tax concessions, subject to the meeting of conditions,

may be granted to listed REITs and they include:

• Tax transparency treatment at the trustee level were the trustee is not assessed to tax on the REIT’s taxable income that is distributed to the unitholders in the same financial year that the income is earned.

• Tax exemption of individuals regardless of their nationality or residence status are granted tax exemption.

• Transfer of Singapore properties into listed REITs would be granted remission of stamp duties

• Foreign-sourced income may be exempted from tax in Singapore

• Withholding tax rate of non-resident non-individual investors is at the reduced rate of 10%

Tax exemption

on qualifying

instruments

Designated Unit

Trust (DUT)

Under the DUT, specified income derived from designated

investments are exempt from Singapore income tax at the trust level.

DUTs are taxed only on interest income.

Tax exemption

on qualifying

instruments

CPF Approved Unit

Trust (CPF Unit

Trust)

Under the CPF Unit Trust scheme, specified income derived from

designated investments are exempt from Singapore income tax at the

trust level. CPF Unit Trusts are taxed only on interest income

Tax exemption

on qualifying

instruments

Approved Unit

Trusts (AUTs)

AUTs are subject to Singapore income tax in respect of their

investment income and on one-tenth of the gains realised from the

sale of their investments.

Tax exemption

on qualifying

instruments

Foreign Trusts Subject to conditions, specified income earned by a foreign trust or

an eligible holding company from designated investments would be

exempt from Singapore income tax.

Tax exemption

on qualifying

instruments

Philanthropic

Purpose Trusts

Any fund or asset in any foreign account of a philanthropic purpose

trust constituted and administered by a trustee company in

Singapore; and income derived from any fund or assets of an eligible

holding company established for the purposes of that philanthropic

purpose trust which are held for the foreign account of that trust may

be exempted from tax.

May be subject to

full tax exemption



FINANCIAL SERVICES INDUSTRY (continued)


Prescribed Locally

Administered

Trusts (LATs)

Specified Singapore-sourced investment income and foreign-sourced

income derived by LATs may be exempted from tax. To qualify as

a LAT, settlors must be individuals and the beneficiaries must be

individuals, charitable institutions, trusts or bodies of persons

established for charitable purposes only.

Tax exemption

on qualifying

investment income

Non-Resident Fund

Incentive

Income derived by a qualifying fund managed or advised by any fund

manager in Singapore in respect of designated investments would

be exempted. This is applicable to funds constituted as trusts and

companies outside Singapore provided that the funds are not wholly

owned by investors in Singapore. The funds or its trustees should also

not have a permanent establishment in Singapore and should not

carry on a business in Singapore.

Tax exemption

on qualifying

investment income

Resident Fund

Incentive

Specified income derived by an approved company incorporated and

resident in Singapore from designated investments arising from funds

managed in Singapore by a fund manage in Singapore can benefit

from tax incentives as long as the company is not wholly owned by

investors in Singapore. Approval for this incentive has to be obtained

by 31 March 2014.

Tax exemption

on qualifying

investment income

Enhanced Tier

Fund Incentive

This incentive is available for funds with a minimum fund size of

SGD 50 million at the point of application. Under this scheme, tax

incentives under the Qualifying Fund and Resident Fund Exemption

Schemes would be enhanced as follows:

• no restriction on the residence status of the fund vehicles and investors

• extended to funds constituted as limited partnerships

• lifting of the investment limit imposed on resident non-individual investors

Enhanced tax

exemption

on qualifying

investment income

Finance and

Treasury Centre

Approved companies which provide finance and treasury services

to related and associated companies outside Singapore enjoy

concessionary tax rates from provision of qualifying services.

Approval for this incentive has to be obtained by 31 March 2016.

Concessionary tax

rate of up to 10%

on provision of

qualifying services



FINANCIAL SERVICES INDUSTRY (continued)


Approved Trustee Company

Income derived from specified trust and custodian services to non-residents in respect of non-Singapore dollar investments, specified person such as foreign companies and foreign mutual fund corporations.


Offshore Leasing Income of a leasing company derived from Singapore in offshore leasing of machinery or plant may be subject to tax exemption. Offshore leasing defined for the purpose of Singapore taxation as the leasing of machinery or plant where:

• the leased asset is used outside Singapore

• Leased payments are denominated in currencies other than the Singapore Dollar and are not deductible against any income derived from Singapore.


Insurance An approved insurance company engaging in the business of insuring and reinsuring offshore risks will taxed at concessionary rates on:

• Income arising from the business of insuring and reinsuring offshore risks

• Dividends and interest derived from outside Singapore, gains or profits from the sale of offshore investments and interest from Asian Currency Unit (ACU)


Islamic Bonds Payouts earned by companies and bodies of persons in Singapore from Islamic debt securities substantially arranged by financial institutions will be taxed at concessionary rates.

Payouts of income derived by resident and non-resident individuals from Islamic debt securities are exempt from tax.



RESEARCH AND DEVELOPMENT (R&D) INDUSTRY

RESEARCH AND DEVELOPMENT (R&D) INDUSTRY


Enhanced R&D Deductions

The enhanced deductions for R&D are not limited to businesses whose core activity is research but also for any businesses that demonstrate projects meeting the R&D definitions as follows:

• conduct of a study in a systematic, investigative and experimental manner.

• Involves novelty or technical risks in the field of science or technology.

• Object of study includes production or improvement of materials, devices, products, produce or processes.

Companies with projects meeting the R&D definition are allowed enhanced deductions as follows:

• 400% tax deduction for the first $400,000 of qualifying expenditure incurred on R&D done in Singapore, or overseas R&D which is related to an existing trade or business.

• 150% tax deduction for the balance qualifying expenditure incurred on R&D done in Singapore.

• 100% tax deduction for the balance of all other R&D expenditure, including expenditure incurred on overseas R&D which is related to an existing business.

400% tax deduction on first $400,000 for R&D done in Singapore

___

150% tax deductions on balance qualifying expenditure for R&D done in Singapore

___

100% tax deductions on balance for R&D expenditure

What are the tax incentives offered to the R&D Industry?


PRODUCTIVITY & INNOVATION CREDIT (PIC) SCHEME

PRODUCTIVITY AND INNOVATION CREDIT (PIC) SCHEME


Productivity and Innovation Credit

The PIC Scheme provides enhanced deduction or allowance for qualifying expenditure incurred on each of the six activities:

1. Research and Development (R&D)

• Please refer to the above.

2. Investments in Approved Design

• 400% tax deduction for the first $400,000 of qualifying expenditure incurred on eligible design activities done in Singapore on year of assessment.

• 100% tax deduction for the balance of expenditure.• Tax incentive is must be applied through and is administered by the

DesignSingapore Council. 3. Acquisition of Intellectual Property

• 400% allowance for the first $400,000 of qualifying expenditure.• 100% allowance for the balance expenditure.

4. Registration of Intellectual Property

• 400% allowance for the first $400,000 of qualifying expenditure incurred on the registration of patents, trademarks, designs and plant varieties.

• 100% allowance for the balance expenditure. 5. Investments in Automation Equipment

• 400% allowance or tax deduction for the first $400,000 of expenditure incurred on qualifying investments in automation.

• 100% allowance or tax deduction for the balance of expenditure.• Qualifying investments in automation is based on the list of automation

equipment as prescribed in the “PIC Automation Equipment List” published by the IRAS.

6. Training

• 400% deduction for the first $400,000 of qualifying training expenditure incurred on all external training courses, and in-house training courses approved by the Workforce Development Agency (WDA) and the Institute of Technical Education (ITE).

• 100% tax deduction for the balance of expenditure. For each qualifying activity, the following combined expenditure cap would apply:

• $800,000 for years of assessment 2011 and 2012• $1,200,000 for years of assessment 2013 to 2015

For more information, please proceed to: http://www.rikvin.com/taxation/productivity-innovation-credit/

400% tax deduction on first $400,000 on qualifying expenditure

___

100% tax deductions on balance qualifying expenditure

http://www.rikvin.com/taxation/productivity-innovation-credit/

Copyright © 2015 Rikvin Pte Ltd

RIKVIN PTE LTD

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Main Line : (+65) 6320 1888 Fax : (+65) 6438 2436 Email : [email protected] Website : www.rikvin.com

Reg No 200100602K EA License No 11C3030

The information contained herein is intended for general information purposes only and shall not be regarded as professional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors.

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Singapore Tax Incentives Guide

Business

Transcript of Singapore Tax Incentives Guide