Singapore Tax Incentives 2013

SINGAPORE TAX INCENTIVES - 2013

OVERVIEW OF SINGAPORE TAX INCENTIVES

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

Last updated on 18 February 2013 Copyright © 2013 Rikvin Pte Ltd

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 Full tax exemption for
in Singapore or introduce leading edge technology and periods 5 to 15 years.
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.

Development & Enterprises engaging in projects which bring significant Concessionary tax rate of
Expansion Incentive economic benefit to Singapore in terms of overall business 5% for up to 10 years.
spending and nature of activities in Singapore
Pioneer Service A company engaged in qualifying services, including Full tax exemption for
Company engineering or technical services, computer or information periods 5 to 15 years.
based services, industrial or production based services and
other services as may be prescriber, may be approved as a
pioneer service company.
Regional HQ Company should provide corporate support and Concessionary tax rate of
Program headquarters-related services and business expertise on 15% for up to 5 years.
regional basis; must meet stipulated requirements.
International HQ Company should provide corporate support and Concessionary tax rate
Program headquarters-related services and business expertise on as low as 0% for up to 5
global basis; must exceed stipulated requirements. years.


MARITIME INDUSTRY
What are the tax incentives offered to the maritime industry?

MARITIME INDUSTRY


International Singapore Flagged Ships Tax exemption is
Shipping Operations The exemption applies to the income derived from the carriage in granted on certain
international waters of passengers, mail, livestock or goods by seagoing income derived.
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.

Approved The AIS incentive was introduced to increase the competiveness of shipping Tax exemption is
International companies operating from Singapore. Targeting established international granted on certain
Shipping Enterprise ship operators with established worldwide networks, the scheme seeks to income derived.
(MSI-AIS) encourage international ship owners and ship operators to establish their
commercial shipping operations in Singapore.

Maritime (Ship or Approved Shipping Investment Enterprise Tax exemption is
Container) Leasing Income from chartering or leasing of sea-going ship (foreign & Singapore) granted on certain
(MSI-ML (Ship) or outside Singapore port limits, exchange and risk management activities income derived.
MSI-ML (Container) 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) Concessionary tax
Leasing of containers to onshore/offshore leassess. Expiry of incentive is till rate of up to 10%
31 May 2016.

Approved Container Investment Manager (ACIM)
Strategic control and management of ACIEs can qualift. Expiry of incentive is
till 31 May 2016.
Shipping-related Approved Shipping and Logistics Scheme (ASL) Concessionary tax
Support Services ASL scheme is targeted at companies with an established track record in the rate of up to 10%,
(MSI-SSS) provision of freight and logistics services. Qualified income from approved applications must be
ship agencies, ship management companies, freight forwarders and logistics made before 31 May
operators may be subject to tax exemption. 2016.

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.


TRADING & INVESTMENT SECTORS

What are the tax incentives offered to the trading sector?

TRADING


Global Trader Companies that are carrying on the business of international Concessionary
Program trading of commodities, future, derivative instruments with tax rate of up to
good track record may benefit from the incentive. 10%

Approved Cyber A company that is well established and uses the internet to Concessionary
Trader conduct its international trading and marketing activities, hosts tax rate of up to
its website and contents in Singapore and bases a minimum 10%
number of personnel in Singapore.

What are the tax incentives offered to the investment sector?

INVESTMENT


Enterprise Start-up companies engaged in innovative and high-growth Deductions of
Investment activities with substantial R&D content in relation to a specific losses incurred
Incentive product, process or service. Overseas start-ups may also be on disposal
approved on a case-by-case basis. of shares or
liquidation
Overseas This incentive is designed to encourage companies to invest in Tax exemption
Enterprise approved overseas investments and projects. on qualifying
Incentive 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. 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: Qualifying Activities:

• Bond Market (FSI-BM) • Lending and Related Activities

• Derivatives Market (FSI-DM) • Debt Capital Market

• Equity Market (FSI-EM) • Equity Capital Market

• Credit Facilities Syndication (FSI-CFS) • Treasury

• Project Finance (FSI-PF) • Fund Management, Trust Administration,
Custodian and Other Advisory Services
• Islamic Finance (FSI-IF)
• Headquarter Services and Qualifying
Processing Services Company (FSI-HQ)





Real Estate A REIT is established as a unit trust and is regulated by the MAS. The Tax exemption
Investment Trust REIT is managed by an asset manager and administered by a trustee. on qualifying
(REITs) A number of tax concessions, subject to the meeting of conditions, instruments
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%

Designated Unit Under the DUT, specified income derived from designated Tax exemption
Trust (DUT) investments are exempt from Singapore income tax at the trust level. on qualifying
DUTs are taxed only on interest income. instruments
CPF Approved Unit Under the CPF Unit Trust scheme, specified income derived from Tax exemption
Trust (CPF Unit designated investments are exempt from Singapore income tax at the on qualifying
Trust) trust level. CPF Unit Trusts are taxed only on interest income instruments
Approved Unit AUTs are subject to Singapore income tax in respect of their Tax exemption
Trusts (AUTs) investment income and on one-tenth of the gains realised from the on qualifying
sale of their investments. instruments
Foreign Trusts Subject to conditions, specified income earned by a foreign trust or Tax exemption
an eligible holding company from designated investments would be on qualifying
exempt from Singapore income tax. instruments
Philanthropic Any fund or asset in any foreign account of a philanthropic purpose May be subject to
Purpose Trusts trust constituted and administered by a trustee company in full tax exemption
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.



FINANCIAL SERVICES INDUSTRY (continued)


Prescribed Locally Specified Singapore-sourced investment income and foreign-sourced Tax exemption
Administered income derived by LATs may be exempted from tax. To qualify as on qualifying
Trusts (LATs) a LAT, settlors must be individuals and the beneficiaries must be investment income
individuals, charitable institutions, trusts or bodies of persons
established for charitable purposes only.

Non-Resident Fund Income derived by a qualifying fund managed or advised by any fund Tax exemption
Incentive manager in Singapore in respect of designated investments would on qualifying
be exempted. This is applicable to funds constituted as trusts and investment income
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.
Resident Fund Specified income derived by an approved company incorporated and Tax exemption
Incentive resident in Singapore from designated investments arising from funds on qualifying
managed in Singapore by a fund manage in Singapore can benefit investment income
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.

Enhanced Tier This incentive is available for funds with a minimum fund size of Enhanced tax
Fund Incentive SGD 50 million at the point of application. Under this scheme, tax exemption
incentives under the Qualifying Fund and Resident Fund Exemption on qualifying
Schemes would be enhanced as follows: investment income

• 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
Finance and Approved companies which provide finance and treasury services Concessionary tax
Treasury Centre to related and associated companies outside Singapore enjoy rate of up to 10%
concessionary tax rates from provision of qualifying services. on provision of
Approval for this incentive has to be obtained by 31 March 2016. qualifying services



FINANCIAL SERVICES INDUSTRY (continued)


Approved Trustee Income derived from specified trust and custodian services to Concessionary
Company non-residents in respect of non-Singapore dollar investments, tax rate of up to
specified person such as foreign companies and foreign mutual 10%
fund corporations.

Offshore Leasing Income of a leasing company derived from Singapore in Concessionary
offshore leasing of machinery or plant may be subject to tax rate of up to
tax exemption. Offshore leasing defined for the purpose of 10%
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 Concessionary
of insuring and reinsuring offshore risks will taxed at tax rate of up to
concessionary rates on: 10%

• 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 Concessionary
from Islamic debt securities substantially arranged by financial tax rate of up to
institutions will be taxed at concessionary rates. 10%
Payouts of income derived by resident and non-resident individuals
from Islamic debt securities are exempt from tax.


RESEARCH AND DEVELOPMENT (R&D) INDUSTRY

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

RESEARCH AND DEVELOPMENT (R&D) INDUSTRY


Enhanced R&D The enhanced deductions for R&D are not limited to businesses 400% tax
Deductions whose core activity is research but also for any businesses that deduction on
demonstrate projects meeting the R&D definitions as follows: first $400,000
for R&D done in
• conduct of a study in a systematic, investigative and Singapore
experimental manner.
___
• Involves novelty or technical risks in the field of science or
technology. 150% tax
deductions
• Object of study includes production or improvement of on balance
materials, devices, products, produce or processes. qualifying
expenditure for
R&D done in
Companies with projects meeting the R&D definition are Singapore
allowed enhanced deductions as follows:
___
• 400% tax deduction for the first $400,000 of qualifying
expenditure incurred on R&D done in Singapore, or 100% tax
overseas R&D which is related to an existing trade or deductions on
business. balance for R&D
expenditure
• 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.


PRODUCTIVITY & INNOVATION CREDIT (PIC) SCHEME

PRODUCTIVITY AND INNOVATION CREDIT (PIC) SCHEME


Productivity and The PIC Scheme provides enhanced deduction or allowance for qualifying 400% tax deduction
Innovation Credit expenditure incurred on each of the six activities: on first $400,000
on qualifying
1. Research and Development (R&D) expenditure

• Please refer to the above. ___

2. Investments in Approved Design
100% tax deductions
• 400% tax deduction for the first $400,000 of qualifying expenditure on balance qualifying
incurred on eligible design activities done in Singapore on year of expenditure
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/


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Singapore Tax Incentives 2013

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