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International trading companies which trade with non-residents and other "approved" traders in "approved" commodities (e.g. agricultural commodities, bulk edible products, building and industrial materials, minerals, machinery components, consumer products and industrial products) are entitled to the following fiscal benefits:
An
indefinite 10% concessionary tax rate on corporate
profits. The current corporate income tax rate is
17% (18% in 2009).
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the standard
rate, with a tax credit being given for any corporate
tax levied on the profits out of which dividends are
paid. Where there is a shortfall between the tax credit
and the standard rate charge levied on dividends the
shortfall must be made up by the company paying the
dividend and not by the shareholder receiving it.
Companies which hold "approved international
trader" status are exempt from any further taxation
on the shortfall in so far as that shortfall is caused
by approved international trader status.
With a view to facilitating and expanding oil trading activities in Singapore, established oil traders with good worldwide networks, strong track records and who conduct a considerable volume of physical trade on a principal basis are entitled to the following fiscal benefits:
A concessionary
corporate income tax rate of 10% on profits instead
of the current 17% rate. The concession is available
for a 5 year period (renewable thereafter for another
5 years). The profits must relate to income derived
from international trading activities with non-residents
or other "approved" traders in "approved"
oil products.
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the
standard rate, with a tax credit being given for
any corporate tax levied on the profits out of which
dividends are paid. Where there is a shortfall between
the tax credit and the standard rate charge levied
on dividends the shortfall must be made up by the
company paying the dividend and not by the shareholder
receiving it. Companies which hold "approved
oil trader" status are exempt from any further
taxation on the shortfall in so far as that shortfall
is caused by the approved international trader status.
The aim of this incentive is to attract aircraft leasing companies to Singapore. The leasing activities must be offshore if the favorable fiscal concessions are to apply. An international aircraft leasing company is entitled to the following fiscal concessions:
A concessionary
corporate income tax rate of 10% on profits instead
of the current 17% rate. The concession is available
for a 5 year period (renewable thereafter for another
5 years). The profits must relate to income derived
from "qualifying" activities which generally
speaking means offshore aircraft leasing activities.
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the
standard rate, with a tax credit being given for
any corporate tax levied on the profits out of which
dividends are paid. Where there is a shortfall between
the tax credit and the standard rate charge levied
on dividends the shortfall must be made up by the
company paying the dividend and not by the shareholder
receiving it. Companies engaged in international
aircraft leasing are exempt from any further taxation
on the shortfall in so far as that shortfall is
caused by the concessionary status granted to the
company.
15% withholding
taxes are deducted in Singapore on loan interest repayments
made to non-resident entities. This percentage may be
reduced or eliminated altogether under a double taxation
treaty. By way of an exception, aircraft leasing companies
resident in Singapore are exempted from the withholding
taxes levy on interest repayments provided the interest
repayments refer to foreign loans made for the purposes
of financing aircraft purchases.
Resident companies which own foreign registered ships are entitled to the following fiscal benefits:
Exemption from corporate income tax for an indefinite period on all income earned by ships registered in Singapore or abroad in respect of all shipping activities conducted from or outside Singapore
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the
standard rate, with a tax credit being given for
any corporate tax levied on the profits out of which
dividends are paid. Where there is a shortfall between
the tax credit and the standard rate charge levied
on dividends the shortfall must be made up by the
company paying the dividend and not by the shareholder
receiving it. Companies engaged in shipping activities
are exempt from any further taxation on the shortfall
in so far as that shortfall is caused by the concessionary
status granted to the company.
In
September, 2004, Singapore's Transport Minister, Yeo
Cheow Tong announced that proceeds from the sale of
ships by firms on the country's shipping registry would
be tax-exempt from 2005.
In
a speech to the International Maritime Awards 2004,
the Minister announced that this exemption would be
in place for the following five years, and would allow
firms to sell vessels and book the sales in Singapore
“without worrying whether they will be taxed for such
gains.”
“This will help them to better plan and manage their fleet,” he noted. Under Singapore's Approved International Shipping Enterprise (AIS) regime, introduced in 1991, approved companies are also provided with a tax exemption on qualifying income. “The AIS scheme has served Singapore well,” observed Mr Yeow. “However, the changing market conditions and business needs of shipping companies mean that we must continually adapt our policies and enhance our initiatives to ensure that we remain an attractive maritime hub,” he added.
In
February, 2005, the Singapore government announced fresh
tax incentives for the shipping sector as part of its
policy to maintain the city-state as a major maritime
and trading hub. Under the changes announced by the
Transport Minister at the Singapore Maritime Foundation,
owners of ships registered in Singapore and certain
transport firms with regional headquarters in the city
would receive tax breaks on foreign exchange and derivative
gains.
Prior to this change, shipping firms were required to apply for these tax breaks on an individual basis. The government is hopeful that the move will encourage shipping firms to undertake risk management activities in Singapore.
Measures to boost the maritime and logistics industries in the 2006 budget included a new Maritime Finance Incentive offering tax exemption for qualifying income of ship investment vehicles and a 10% concessionary tax rate for qualifying income of ship investment managers. Shipping companies will be allowed to renew their Approved International Shipping incentive for a third period of 10 years, lengthening the maximum period of incentive from 20 years to 30 years.
Companies qualifying for this concession are entitled to the following fiscal benefits:
Up to 50% of "qualifying" income derived from overseas activities is exempt from corporate income tax for a period of 5 years.
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the standard
rate, with a tax credit being given for any corporate
tax levied on the profits out of which dividends are
paid. Where there is a shortfall between the tax credit
and the standard rate charge levied on dividends the
shortfall must be made up by the company paying the
dividend and not by the shareholder receiving it.
Companies engaged in international consultancy services
are exempt from any further taxation on the shortfall
in so far as that shortfall is caused by the concessionary
status granted to the company.
In
April, 2004, the Singaporean government extended the
50% of 'qualifying income' tax break to partnerships,
in an attempt to encourage more accounting, audit, and
law firms to locate their headquarters in the country.
Under
the Expansion Incentive for Partnerships scheme, firms
which are able to prove that they intend to expand their
Singapore-based operations would be able to receive
a 50% tax exemption on qualifying overseas income over
a certain amount (determined by the average of the partnership's
profits for the provision of services in the region
over the three years prior to the application).
Baker & McKenzie tax partner, Edmund Leow welcomed the move, observing that: "Traditionally Singapore has always tried to attract foreign investment from multinational corporations with tax incentives. They have now realized that professional services firms are very important to the economy as well."
Companies qualifying for this concession are entitled to the following fiscal benefits:
A concessionary
corporate income tax rate of 10% on profits in so
far as profits relate to offshore plant and machinery
leasing income. The concession is granted for an
indefinite period.
Dividends:
In Singapore there are no withholding taxes levied
on dividends. Instead dividends are taxed at the
standard rate, with a tax credit being given for
any corporate tax levied on the profits out of which
dividends are paid. Where there is a shortfall between
the tax credit and the standard rate charge levied
on dividends the shortfall must be made up by the
company paying the dividend and not by the shareholder
receiving it. Companies engaged in the offshore
leasing of plant and machinery are exempt from any
further taxation on the shortfall in so far as that
shortfall is caused by the concessionary status
granted to the company.
Further
information on assistance programmes and incentives
for companies can be found on the Economic
Development Board website.
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