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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%.
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.
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.
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.
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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