February 2013 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.
February 2013 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.
February 2013 MARITIME INDUSTRY What are the tax incentives offered to the maritime industry? MARITIME INDUSTRY Scheme Description Tax Incentive 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. Tax exemption is granted on certain income derived. 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. Tax exemption is granted on certain income derived. 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.
February 2013 TRADING & INVESTMENT SECTORS What are the tax incentives offered to the trading sector? TRADING Scheme Description Tax Incentive 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. Concessionary tax rate of up to 10% 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. Concessionary tax rate of up to 10% What are the tax incentives offered to the investment sector? INVESTMENT Scheme Description Tax Incentive 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
February 2013 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. Initial award periods may vary from 5 to 10 years based on headcount and scope of activities undertaken. Any subsequent renewal of these incentives would depend on the incremental commitments to Singapore. Under FSI scheme, qualifying activities can generally be categorized as follows: ENHANCED TIER STANDARD TIER High growth, high value-added activities Broad range of financial activities Qualifying Activities: • Bond Market (FSI-BM) • Derivatives Market (FSI-DM) • Equity Market (FSI-EM) • Credit Facilities Syndication (FSI-CFS) • Project Finance (FSI-PF) • Islamic Finance (FSI-IF) Qualifying Activities: • Lending and Related Activities • Debt Capital Market • Equity Capital Market • Treasury • Fund Management, Trust Administration, Custodian and Other Advisory Services • Headquarter Services and Qualifying Processing Services Company (FSI-HQ)
February 2013 FINANCIAL SERVICES INDUSTRY FINANCIAL SERVICES INDUSTRY Scheme Description Tax Incentive 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
February 2013 FINANCIAL SERVICES INDUSTRY FINANCIAL SERVICES INDUSTRY (continued) Scheme Description Tax Incentive 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
February 2013 FINANCIAL SERVICES INDUSTRY FINANCIAL SERVICES INDUSTRY (continued) Scheme Description Tax Incentive 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. Concessionary tax rate of up to 10% 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. Concessionary tax rate of up to 10% 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) Concessionary tax rate of up to 10% 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. Concessionary tax rate of up to 10%
February 2013 RESEARCH AND DEVELOPMENT (R&D) INDUSTRY RESEARCH AND DEVELOPMENT (R&D) INDUSTRY Scheme Description Tax Incentive 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?
February 2013 PRODUCTIVITY & INNOVATION CREDIT (PIC) SCHEME PRODUCTIVITY AND INNOVATION CREDIT (PIC) SCHEME Scheme Description Tax Incentive 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
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