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.
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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.
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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.
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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%
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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?
Copyright © 2014 Rikvin Pte LtdLast updated on 3 March 2014
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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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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