In
Singapore's 2004 budget it was announced that the first
$100,000 of normal chargeable income for new companies
(with less than 20 shareholders) would be exempt from
tax in each of their first three years of assessment,
beginning YA 2005. From YA 2008, a 50% deduction was
introduced on the next $200,000 of normal chargeable
income for such companies in addition.
In
2010, 75% of the first SGD10,000 of income and 50% of
the next SGD290,000 are exempt from tax.
The
Technopreneur Investment Incentive has been expanded
in scope and renamed the Enterprise Investment Incentive
(EII). Investors in start-ups awarded the EII will enjoy
tax deductions for any losses they incur in these start-ups.
To help SMEs make greater use of intellectual property,
the withholding tax on royalty payments was reduced
from 15% to 10%.
Regional/International
Headquarters Awards (HQ Awards)
To qualify for this scheme
the company must have a sizeable network of overseas
companies in the south-east Asian region and be well
established both in its home country and in its industry.
The HQ must provide "qualifying" management,
treasury or other approved headquarter related services
to its subsidiaries, associated or related companies
in other jurisdictions. In order to be eligible to apply
for incentives under the Headquarters Programme, the
applicant company should meet the general criteria below:
- The applicant should
be, or belong to a group that is, well established
in its respective business sector or industry and
has attained a critical size in terms of equity, assets,
employees and business share.
- The applicant should
be the nerve centre in terms of organisation reporting
structure at senior management levels for its principal
activities with clear-cut management and control for
the activities.
- The applicant should
have a substantial level of headquarters activities
in Singapore that may include:
- Strategic Business
Planning and Development
- General Management
and Administration
- Marketing Control,
Planning and Brand Management
- Intellectual Property
Management
- Corporate Training
and Personnel Management
- Research, Development
and Test Bedding of New Concepts
- Shared Services
- Economic or Investment
Research and Analysis
- Technical Support
Services
- Sourcing, Procurement
and Distribution
- Corporate Finance
Advisory Services
- The personnel employed
by the applicant for its headquarters operations should
be based in Singapore, and would include management,
professionals, technical personnel and other supporting
staff.
Currently
(2010), the Regional Headquarters Award offers a concessionary
tax rate of 15% for up to 5 years on incremental qualifying
income from abroad. If applicant company satisfies all
the minimum requirements by Year 3 of the incentive
period, it will enjoy the 15% concessionary tax rate
for an additional 2 years on qualifying income.
The
applicant company must satisfy all of the following
minimum requirements by the milestone indicated and
maintain till the end of the incentive period:
-
paid-up capital of SGD0.2 million and SGD0.5 million
by the end of Year 1 and Year 3 of the incentive period
respectively.
-
3 he adquarters services to network entities in 3
countries outside Singapore by the end of Year 1.
Network entities refer to any entity within the group,
including subsidiaries, sister companies, branches,
joint ventures and representative offices as well
as franchises.
-
75% skilled staff throughout the incentive period.
Skilled employment refers to at least an NTC2 Certificate
qualification.
-
additional 10 professionals in Singapore by the end
of Year 3. Professionals refer to at least a diploma
qualification.
-
average remuneration per worker of SGD100,000 per
annum for the top 5 executive designations by the
end of Year 3.
-
additional SGD2 million in annual total business spending
in Singapore by the end of Year 3. Total business
spending refers to total operating costs minus the
costs of work subcontracted outside Singapore, royalties
and know-how fees paid overseas, raw materials, components
and packaging.
-
additional SGD3 million in total business spending
cumulatively for the first 3 years of the incentive
period.
- The
level at Year 3 – Year 0
-
The level at (Year 3 + Year 2 + Year 1) –
3 x (Year 0)
Finance
And Treasury Centres (FTC)
The
Tax Incentive Scheme for Finance and Treasury Centres,
introduced in 2004, was designed to encourage multi-national
corporations to use Singapore as a base for conducting
treasury management activities.
The
scheme provides a concessionary tax rate (10% at the
time of writing) on all fee income received by the FTC
from its subsidiaries, related companies and associates
outside Singapore (approved network companies) for the
provision of qualifying FTC services and qualifying
activities conducted on own account, and on
interest, dividend and gains from transactions in foreign
currency denominated stocks and bonds, foreign exchange
trading, interest rate swaps, financial futures and
options.
There is exemption from withholding tax on interest
payments on foreign currency denominated borrowings
by the FTC from overseas banks and approved network
companies, provided the funds raised are used for the
conduct of qualifying FTC activities. Borrowings from
network companies exclude funds borrowed by network
companies from sources other than banks.
The
FTC must meet the following minimum criteria: Annual
total business spending (TBS) of SGD750,000; 3 professional
staff employed by the FTC; and 3 qualifying FTC services
to 3 or more network companies.
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Approved Royalties
Incentives
In certain circumstances
full or partial exemption can be obtained from the payment
of withholding taxes on royalties, technical assistance
fees and contributions to research and development costs.
For the exemption to apply the payments must be made
to non-residents and there must be no resultant increase
in the liability to tax by the non-resident person in
his country of residence. In default of this exemption
the standard rate of withholding taxes levied on such
activities is imposed, which generally speaking can
only be reduced by the provisions of double taxation
treaties.
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Accelerated Depreciation
Allowances
Accelerated depreciation
allowances enable a company to reduce its taxable profits,
strengthen its asset base and improve its cash flow.
The normal rate of annual depreciation for capital expenditure
at the time of writing is an initial 20% allowance with
the balance being written off at the rate of between
5-20% per annum.
However in certain circumstances
accelerated depreciation allowances are available which
allow companies to set off 33% per annum of the cost
of all plant and machinery for each of 3 years subsequent
to purchase. In the case of prescribed automation equipment,
robots and certain environmental related equipment (e.g.
energy saving equipment) 100% of the assets cost can
be set off in the first year.
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Interest Payments
to Non-Residents
The general rule is that
withholding tax (15% at the time of writing) is deducted
from interest repayments made to non-residents without
Singapore activities. Interest repayments may be reduced
in the following circumstances:
-
Double Taxation Treaty:
Where the non-resident resides in a jurisdiction
with which Singapore has signed a double taxation
treaty jurisdiction.
-
Approved Loans: Interest
payments on approved loans made by foreign institutions
may be exempt from withholding taxes. Approved loans
are assessed on a case by case basis and the exemption
or reduction depends on the amount, terms, purpose
and use of the loan in Singapore.
-
Qualifying Debt Securities:
Interest payments on such instruments may also be
exempted from withholding taxes.
-
"Approved"
Asia Dollar Bond Deposits: So long as these bonds
are held by approved banks and paid to non resident
holders who do not carry on business in Singapore
and have no permanent establishment there they are
exempt from withholding taxes.
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