2. Singapore
Jurisdiction Status – Independent Sovereign State
Population –
Official Language(s) – Mandarin; English; Malay; Tamil
Legal System – Anglo Saxon
4. Singapore
Singapore’s aim is to become a major financial hub in the Asia-Pacific
region, and judging by its recent performance in the wake of the global
recession it appears to be achieving this goal.
Singapore achieved economic growth of 14.5% for 2010
Excellent telecommunications and good transport links
The Port of Singapore
5. Singapore
Singapore ranked fifth on 2013 Financial Secrecy Index.
Singapore is arguably the world’s fastest-growing centre for private
wealth management.
A WeathInsight report in April 2013 expects it to overtake Switzerland
by 2020 as the world’s largest offshore wealth centre.
6. Percent of Fortune 500 Companies with 2013
Subsidiaries in Twenty Top Tax Havens
8. Forms Of Operation
Foreign business entities can use the following forms:
Limited liability company
Branch, subsidiary or representative office
Partnership (whether general, limited or limited liability)
Holding company
Bank
Investment fund
Offshore insurance company
Shipping company
9. Tax Treatment Of Operations Of
Foreign Business Entities
Domestic Corporate Taxation for the general principles of Singapore corporate
taxation, which also generally apply to foreign business entities.
Note that branches located in Singapore do not qualify for tax and other incentives
available to Singapore businesses.
International and regional headquarters located in Singapore can benefit from
reduced corporate income tax rates of 10% and 15% respectively, compared to the
standard tax rate of 17% .
Qualifying foreign investment funds that are managed by a Singapore-based fund
manager are tax exempt on gains, dividends, profits and interest from designated
investments such as stocks, shares and bonds.
10. Exchange Control
There are no foreign exchange controls in Singapore. Payments, capital
transfers and remittances can be made in any currency and to any
country without prior approval.
12. Trust Law
Trust law in Singapore is governed by the Trust Companies Act of 2005,
which was revised in 2006.
Singapore reformed its trust laws in 2004, and since then has increased the
number of trust licences issued from around 15 (before the reform) to 40 (as
of March 2010).
The Singapore Trustees Association represents trust companies in Singapore,
also promotes Singapore as a location for trustee services and trust
administration abroad.
14. Banking Law
Banking secrecy is key to Singapore’s success as a financial centre.
Tax Information Exchange Agreements (TIEAs)
Information regarding a customer’s bank account can only be disclosed
under a court order.
Any disclosure that fails to meet Singapore’s banking secrecy rules can
result in a SGD78,000 fine or three years’ imprisonment.
15. Banking Law
A foreign offshore bank must maintain eligible assets of not less than SGD5m
in Singapore at all times.
Foreign wholesale banks operating in Singapore are required at all times to
maintain in Singapore the higher of an asset maintenance ratio of not less
than 0.15 or eligible assets of SGD5m.
Banking law in Singapore has also allowed for the fast development of
Islamic finance in the jurisdiction
Singapore has set up a financial intelligence unit to combat money
laundering and the financing of terrorism.
17. Scope Of Corporation Tax
A company is resident in Singapore if its central management and control of
the business is exercised there.
Singapore-resident companies are generally taxed on their worldwide
income;
Non-resident companies are taxed on their Singapore-source income only,
which can prove attractive to international holding and trading companies.
Non-resident companies do not benefit from double tax treaties signed by
the Singapore government.
18. Corporation Tax Rates
The corporate income tax rate is 17% (decreased from 18% prior to
2010).
There is a partial tax exemption on normal chargeable income of up to
SGD300,000, as follows:
75% on the first SGD 10,000 of income; then
50% on the next SGD 290,000,
which gives a total exemption of SGD 152,500.
19. Corporation Tax Rates
New start-up companies benefit from full tax exemption on the first
SGD 100,000 of normal chargeable income for the first three
consecutive years of assessment,
plus a further 50% exemption (from tax year 2008) on the next SGD
200,000 of normal chargeable income.
Therefore, a new start-up company can qualify for a total exemption of
up to SGD 200,000 in each of the first three years of business
20. Corporation Tax Rates
International and regional headquarters can benefit from reduced
corporate income tax rates of 10% and 15% respectively.
There are also reduced corporate income tax rates and exemptions
available to companies involved in shipping and maritime activities.
21. Branch Or Subsidiary
A Subsidiary must be registered as a private company limited by shares, with
the parent company as the majority or sole shareholder.
This means the Subsidiary operates as a legal entity in its own right.
Subsidiary can benefit from the same tax exemptions and incentives as exist
for other local businesses.
Branch, on the other hand, the parent is liable for the debts and obligations
of the Branch, and the Branch cannot qualify for local tax exemptions and
incentives.
22. Tax rate
Nature of income
15%
•Interest, commission, fee or other payment in connection with any loan or indebtedness;
•Rent or other payments for use of movable properties
•Proceeds from sale of any real property by a non-resident property trader
10%
•Royalty or other lump sum payments for use of movable properties
•Payment for use of or right to use scientific, technical, industrial or commercial knowledge or
information
•Distribution made by REIT to unitholder who is a non-resident other than an individual
17% (standard corporate
income tax rate)
•Technical assistance and service fees
•Management fees
0% - 3%
•Time charter and voyage charter fees
•Bareboat charter fees
Withholding Tax
In the case of payments to non-residents or non-resident companies, tax
must generally be withheld as follows:
Withholding taxes may be reduced or eliminated where a double tax treaty is
in place.
23. Goods And Services Tax
Companies must register for goods and services tax (GST) if their turnover for
the previous 12 months exceeds SGD 1m.
Voluntary registration is permitted.
The standard rate of GST is 7%, and applies to most sales of goods and
services made in Singapore.
Exports and related international services are zero-rated. Financial services
and the sale or lease of residential properties are exempt from GST.
25. Residence And Liability For
Taxation
A person is tax resident in Singapore if he or she spends at least 183
days in a year or straddling two years in Singapore.
A foreign person who has become a Singapore Permanent Resident and
has established his or her home in Singapore is resident for tax
purposes.
All individuals pay tax on income earned or received in Singapore.
26. Personal Income Tax Rates
The income tax rate for non-
residents’ employment income is
either 15% or the relevant resident
tax rate, whichever produces the
highest sum.
Director's fees, consultation fees
and most other income are taxed
at 20%, which is generally withheld
at source.
Chargeable income Rate (%) Gross tax payable
(SGD)
First SGD20,000
Next SGD10,000
0
2
0
200
First SGD30,000
Next SGD10,000
3.5
200
350
First SGD40,000
Next SGD40,000 7
550
2,800
First SGD80,000
Next SGD40,000
Next SGD40,000
11.5
15
3,350
4,600
6,000
First SGD160,000
Next SGD40,000
Next SGD120,000
17
18
13,950
6,800
21,600
First SGD320,000
Next SGD320,000 20
42,350
27. Capital Gains Tax
Generally, capital gains realised from the sale of property in Singapore,
or derived from buying and selling shares or other financial
instruments, are not subject to tax.
If, however, such sale of property or buying and selling of shares and
other financial instruments are regarded as a trade, the gain may be
regarded as taxable income.
28. Estate Duty And Estate/Trust
Income
There is no estate duty in Singapore.
However, assets that continue to produce income during the period
one day after death until the end of the administration period are
deemed to be either estate or trust income;
such income is therefore subject to income tax until the assets are sold
or transferred.
29. Stamp Duty
Stamp duty is payable on certain executed documents relating to properties
and shares, or interest in properties and shares.
Such documents include a lease, sale, purchase, gift or mortgage of property.
Liability arises once the document is executed, even if the transaction itself
has been aborted.
The amount of duty payable varies according to the transaction.
For example, in the case of a mortgage, the duty is SGD4 for every SGD1,000
or part thereof, subject to a maximum duty payable of SGD500.
30. Real Estate Taxes
Property tax is charged on immovable property,
including a house, building and land.
Until December 31, 2010, the amount of tax due
was calculated based on a percentage (tax rate) of
the annual value of a property. The tax rate was
10%, or 4% where the property was granted an
owner-occupier concession.
From January 1, 2011, the 4% tax rate was
replaced by a three-tier tax rate based on the
annual value, as follows:
Annual value
Tax rate
First SGD6,000 0%
Next SGD59,000 4%
Above SGD65,000 6%
32. Introduction
A double tax treaty allows that tax paid can be offset in one of two
countries against tax payable in the other, thus avoiding double
taxation.
Singapore is a signatory to double tax treaties with many countries
throughout the world.
Some forms of income are exempt from tax or qualify for reduced
rates. These include royalties, dividends and capital gains.
33. Latest Singapore Treaty Updates
Treaty Update: Singapore – Various 21 January, 2015
Singapore signed DTAs with France and Uruguay on January 16, 2015, and
January 15, 2015, respectively.
Treaty Update: Singapore - United Arab Emirates 04 November, 2014
Singapore signed a protocol amending its DTA with the United Arab Emirates
on October 31, 2014.
Treaty Update: Singapore – Various 17 September, 2014
DTA protocols signed by Singapore with the Czech Republic and Kazakhstan
entered into force on September 12, 2014.
34. Table Of Treaty Rates
Jurisdiction Status Dividends Interest Royalties
Defaults 0% (1) 15% 10%
Albania Effective January 1,
2013
0% 0% when paid to the government or the
central bank 5%
5%
Australia Effective January 1,
1970
0% 10% 10%
Austria Effective January 1,
2003
0% 0% when paid to the government, the central
bank or between banks, or on a loan or credit
financed, guaranteed or insured by an
institution to promote exports 5%
5%
Bahrain Effective January 1,
2006
0% 0% when paid to the government or the
central bank 5%
5%
35. Other International Agreements
Singapore has entered into a number of tax information exchange
agreements, and has met the OECD's "white list" requirements.
The jurisdiction has also entered into international free trade
agreements with Australia, Brunei, Chile, the European Free Trade
Association, India, Japan, Jordan, New Zealand, Peru, South Korea and
the USA.
37. The Wealth Management Industry
Singapore is reputed to have the highest density of millionaires in the
world.
A comparison with Switzerland is particularly apt.
Assets under management in Singapore are thought to total about
US$1 trillion, as against US$3 trillion in Switzerland, but the gap is
closing fast.
Shorex wealth management forum
Singapore lies just north of the Equator, between Malaysia and Indonesia. The country consists of one large island and around 60 islets. The main island comprises low, rounded hills and water reservoirs in its centre, low ridges to the west and south-west, and is flat to the east and south-east. Short, narrow streams flow from the central hills and onward to the sea through mangrove swamps.
The highest point is Bukit Timah at 545 feet (166 metres); the lowest point is the Singapore Strait, at 0 feet. Total land area is 269 sq miles (697 sq km), of which only 3.9 sq miles (10 sq km) is water. Singapore’s only natural resources are deepwater ports and fish.
The climate is hot and very humid, with two monsoon periods: from December to March (north-eastern monsoon), and from June to September (the south-western monsoon). Between the monsoon periods, there are frequent afternoon and evening thunderstorms.
Singapore’s aim is to become a major financial hub in the Asia-Pacific region, and judging by its recent performance in the wake of the global recession it appears to be achieving this goal. The city state is striving to encourage international finance and other businesses to locate there, and offers generous tax incentives to companies that locate their global or Asia-Pacific regional headquarters there. Indeed, while many countries are struggling out of recession, Singapore achieved economic growth of 14.5% for 2010, according to the Monetary Authority of Singapore (MAS). The MAS says that the immediate economic outlook is clouded by uncertainty arising from the spike in oil prices and the natural disasters in Japan, and Singapore's economy by a more modest 4.9% in 2012
The island has excellent telecommunications and good transport links. The Port of Singapore is the world’s largest in terms of total shipping tonnage, transhipment and containers. It is also the world’s third largest petrochemical refiner, and operates South-East Asia’s most technically advanced and efficient shipbuilding and ship-repair facilities. The Singapore Registry of Ships has over 3,000 registered vessels totalling more than 29 million gross tonnes, and offers tax advantages and financial incentives to Singapore-registered vessels under various schemes and funds..
See Domestic Corporate Taxation for the general principles of Singapore corporate taxation, which also generally apply to foreign business entities.
Note that branches located in Singapore do not qualify for tax and other incentives available to Singapore businesses; moreover, the parent company remains liable for a branch’s debts or losses. However, registering a subsidiary as a limited liability company enables the subsidiary to have access to the same tax and other incentives as are available to Singaporean companies, as well as removing any obligation on the parent as regards a subsidiary’s debts and losses.
International and regional headquarters located in Singapore can benefit from reduced corporate income tax rates of 10% and 15% respectively, compared to the standard tax rate of 17% (see Singapore Investments by Foreigners). There are also reduced corporate income tax rates and exemptions available to companies involved in shipping and maritime activities (see Singapore Ship Management and Maritime Operations).
Qualifying foreign investment funds that are managed by a Singapore-based fund manager are tax exempt on gains, dividends, profits and interest from designated investments such as stocks, shares and bonds. For these purposes, a qualifying foreign investment fund is one that does not have a presence in Singapore; is in the form of companies, trusts or individual accounts; and is not 100% beneficially owned by Singapore-resident investors (whether individuals or companies) or by non-residents’ Singapore-based permanent establishments.
Singapore reformed its trust laws in 2004, and since then has increased the number of trust licences issued from around 15 (before the reform) to 40 (as of March 2010). In addition, 32 entities that carry on trust business in Singapore have been granted exemption. The reforms have greatly enhanced Singapore as a centre for trust business in Asia, with Hong Kong now looking to follow the jurisdiction’s lead.
The Singapore Trustees Association represents trust companies in Singapore, and liaises and corresponds with the Singapore government, statutory boards, other government and non-government bodies, and the media. The Association also promotes Singapore as a location for trustee services and trust administration abroad.
Banking secrecy is key to Singapore’s success as a financial centre. However, pressures from the US and Europe resulted in Singapore negotiating tax information exchange agreements (TIEAs) to remove the jurisdiction from the OECD’s “grey” list. This was achieved in November 2009, when Singapore signed its twelfth TIEA with France.
The TIEAs do, though, allow Singapore to reject requests for information that are spurious or frivolous, or are mere “fishing expeditions”. Information regarding a customer’s bank account can only be disclosed under a court order. Any disclosure that fails to meet Singapore’s banking secrecy rules can result in a SGD78,000 fine or three years’ imprisonment.
A foreign offshore bank must maintain eligible assets of not less than SGD5m in Singapore at all times. Foreign wholesale banks operating in Singapore are required at all times to maintain in Singapore the higher of an asset maintenance ratio of not less than 0.15 or eligible assets of SGD5m. Foreign full banks operating in Singapore must at all times maintain in Singapore the higher of an asset maintenance ratio of not less than 0.35 or eligible assets of SGD5m.
Banking law in Singapore has also allowed for the fast development of Islamic finance in the jurisdiction despite the economic downturn, driven by incentives offered by the Monetary Authority of Singapore (MAS) that mainly cater to the wholesale banking sector.
Singapore has set up a financial intelligence unit to combat money laundering and the financing of terrorism. The Financial Action Task Force reported in 2008 that Singapore’s initiatives to address weaknesses found on a previous investigation in 1998-99 had significantly strengthened the jurisdiction’s legal, institutional and supervisory framework.
There are distinct tax and other advantages to establishing a Subsidiary in Singapore, compared to a Branch.
A Subsidiary must be registered as a private company limited by shares, with the parent company as the majority or sole shareholder. This means the Subsidiary operates as a legal entity in its own right, and that the parent as shareholder is not liable for the debts and obligations of the Subsidiary. Moreover, as a Singapore-registered business, the Subsidiary can benefit from the same tax exemptions and incentives as exist for other local businesses.
In the case of a Branch, on the other hand, the parent is liable for the debts and obligations of the Branch, and the Branch cannot qualify for local tax exemptions and incentives.
Companies must register for goods and services tax (GST) if their turnover for the previous 12 months exceeds SGD1m, or if the business reasonably expects its turnover will exceed SGD1m over the following 12 months. Voluntary registration is permitted, for example where the company intends to make taxable supplies, only supplies goods outside Singapore, or makes exempt supplies of financial services that are also deemed to be international services. A foreign company registering for GST must appoint a Singapore agent to act on its behalf on all its GST matters, including the accounting and payment of GST.
The standard rate of GST is 7%, and applies to most sales of goods and services made in Singapore. Exports and related international services are zero-rated. Financial services and the sale or lease of residential properties are exempt from GST.
A person is tax resident in Singapore if he or she spends at least 183 days in a year or straddling two years in Singapore, or if the average number of days spent in
Singapore over a three-year period equates to at least 183 days per year. Note that the 183-day rule generally does not apply to a director of a company. A foreign person who has become a Singapore Permanent Resident and has established his or her home in Singapore is resident for tax purposes.
All individuals pay tax on income earned or received in Singapore; overseas income received in Singapore after January 1, 2004, including income paid into a Singapore bank account (but excluding overseas income received through a partnership in Singapore), is not taxable.
Income tax is assessed based on a preceding year basis.
Singapore is reputed to have the highest density of millionaires in the world, and along with Hong Kong, which might want to dispute that assertion, is riding high in the global wealth management stakes, as the wealthy, or at least their assets, decamp from traditional havens in Europe and the Americas.
A comparison with Switzerland is particularly apt, as that country comes under unremitting pressure from the EU and the USA to weaken traditional banking secrecy. No such pressure is being exerted on Singapore, although the city-state has agreed to incorporate the OECD's standard wording for exchange of information in a number of its tax treaties and TIEAs. Assets under management in Singapore are thought to total about US$1 trillion, as against US$3 trillion in Switzerland, but the gap is closing fast. The central bank says that about half of these assets come from outside the Asia-Pacific region.
Of course, Singapore, like Hong Kong, will have no truck with the EU's Savings Tax Directive.
The result of the flood of money coming Singapore's way in recent years has been a doubling in the number of major banks offering wealth management services in the city-state to more than 40.
For the third time, the world's leading Shorex wealth management forum is moving to Singapore to address the growing need of the Asian market for private banking, asset management and international tax planning solutions and services. The event is an exhibition and conference offering a unique platform where professionals can network to explore new services, products and ideas in wealth management.
The Shorex Wealth Management Forum in Singapore in 2011 is expected to attract over 50 exhibitors and 1400 delegates.