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Financial Sector Incentives
Fund Management Industry Incentives
1. Two tax changes will give a boost to the fund
management industry in Singapore. Firstly, qualifying
investment income of foreign investors from funds
managed by all fund managers in Singapore
will be exempt from tax.
2. The second change is the merger of the Approved
Fund Manager and Approved Boutique Fund Manager
schemes into a single Approved Fund Manager scheme.
Under the new scheme, the concessionary tax rate
of 10% on fee income previously enjoyed only by
fund managers under the existing Approved Fund
Manager scheme will be extended to qualifying
boutique fund managers. The new scheme will also
cover more types of investments.
3. The changes will apply from YA 2003. MAS will
administer the scheme and announce more details
in 2 months.
Enhanced Approved Trustee Company Scheme
4. To encourage further the development of world-class
trustee and custodian services in Singapore, the
Approved Trustee Company (ATC) Scheme will be
enhanced by the following changes:
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i.
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The concessionary tax rate of 10% for the
provision of trustee and custodian services
will be extended to the custodian services
that ATCs provide to mutual fund corporations;
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ii.
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The tax exemption granted on income from
foreign trusts administered by an ATC will
be extended to income derived through an
eligible investment holding company; and
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iii.
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The concessionary tax rate of 10% will
be extended to an ATC that provides substantial
trust management or administrative services
to a foreign trust of which it is not the
trustee. Such foreign trusts will also be
granted tax exemption on their qualifying
income.
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5. The changes will take effect from YA 2003.
MAS will administer the scheme and announce more
details in 2 months.
Concessionary Tax Rates for Equity Capital
Market
6. To encourage further development of the equity
capital market in Singapore, the following measures
will be introduced:
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i.
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Subject to certain conditions, Approved
Securities Companies will be taxed at the
concessionary rate of 10% on the income
derived during the period YA 2003 to YA
2007 from the provision of financial advisory
services to persons outside Singapore.
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ii.
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From YA 2003 to YA 2007, income derived
by Asian Currency Units and Approved Securities
Companies from managing the Initial Public
Offering of securities of foreign companies
for listing on the Singapore Exchange (SGX)
will be taxed at a concessionary rate of
5%. The securities can be placed with any
investor and denominated in any currency.
This rate will also apply to the income
derived by Asian Currency Units and Approved
Securities Companies from the sale of such
foreign securities and related services
such as brokerage and custodian services.
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iii.
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Currently, qualifying corporate futures
SGX members enjoy a concessionary tax rate
of 5% on the incremental income from designated
transactions in new futures contracts denominated
in any foreign currency in the futures market.
This incentive will be replaced. Corporate
SGX members who are ranked amongst the top
20 in terms of annual trading volume generated
for each approved new derivative product
denominated in any foreign currency will
enjoy the same rate on total income
derived from transactions in each product.
This will apply to new products that commence
trade on SGX during the period from 1 Jan
2002 to 31 Dec 2006.
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7. MAS will administer the above incentives and
release further details in 2 months.
Treasury Industry Incentives
8. Asian Currency Units or Approved Securities
Companies with substantial commitments will enjoy
a concessionary tax rate of 5% for 5 years on
the income derived from transacting with qualifying
parties in over-the-counter financial derivatives
denominated in any foreign currency. Payments
to non-residents on such derivative transactions
will be exempted from withholding tax for this
period. This scheme will take effect from 20 May
02 and will last for 5 years. MAS will administer
this scheme and announce the details before 20
May 2002.
Financial Sector Incentive Scheme
9. Several of the eleven existing incentives
will be merged into a single umbrella Financial
Sector Incentive (FSI) scheme, which offers simpler
administrative procedures and more flexible qualifying
criteria. The FSI scheme will offer a concessionary
tax rate of 5% for qualifying high growth and
high value-added activities and 10% for mature
but tax-sensitive activities. As this involves
a major revamp of the many existing incentives,
the FSI scheme will only be implemented from YA
2004. MAS will announce more details in 6 months.
Extension of Concessionary Rate for Interest
Income from Qualifying Debt Securities
10. Interest income from qualifying debt securities
is currently subject to tax at a concessionary
rate of 10% if it is received by a company or
financial institution. With effect from YA 2003,
this incentive will be extended to bodies of persons,
such as management corporations, town councils,
trade and industry associations, and clubs.
Tax Deduction for Special Reserves of General
Insurance Companies
11. Under this scheme, general insurance companies
can claim tax deduction on special reserves set
aside for certain offshore risks. This scheme
will take effect from YA 2003. MAS will release
further details.
Promoting Enterprise Development
Development and Expansion Incentive
12. The minimum tax rate under the DEI will be
reduced from 10% to 5% with effect from today.
Companies that currently qualify for both the
Pioneer Incentive on some activities and DEI on
other activities can apply to EDB for a flat rate
DEI to be applied for all qualifying activities.
This will obviate the need for such companies
to keep separate accounting books for different
incentives awarded for each qualifying activity
and reduce compliance costs for businesses. It
will also provide such companies with greater
certainty of the benefits when they invest in
Singapore.
Enhanced Deduction for Research and Development
Expenses
13. Currently, tax deductions are only granted
for expenses incurred for R&D conducted in-house
or outsourced to approved R&D organisations
that conduct their research activities in Singapore.
With effect from YA 2003, single tax deduction
for expenses incurred for R&D that leads to
the ownership of intellectual property in Singapore
will be liberalised to include R&D outsourced
to any R&D organisation, whether local or
overseas. The scope of further tax deduction for
R&D expenses will also be extended to all
service companies.
14. Further details will be released by EDB within
1 month.
Approved International Shipping Enterprise
Scheme
15. In the face of intensified competition and
the changing shipping landscape, the AIS scheme
will be extended and enhanced. Key enhancements
to the AIS scheme are as follows:
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i.
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Scope of 'qualifying ships'
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To exploit new opportunities in the whole
arena of shipping and build diversity within
our maritime cluster, the AIS scheme will
be expanded to include towage vessels, salvage
ships, dredgers, seismic vessels and semi-submersible
oil rigs as 'qualifying ships' under the
AIS scheme with effect from Year of Assessment
2003.
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ii.
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AIS eligibility criteria
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The qualifying criteria under the AIS scheme
will also be harmonised to make the scheme
more user-friendly and help ship operators
to expand their operations in Singapore.
The manpower requirement for operators of
Floating Production Storage Offloading vessels
and Floating Storage Offloading vessels
under the AIS scheme will be lifted with
effect from YA 2003.
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16. The AIS scheme currently requires qualifying
ship operators to register at least 10% of their
companies fleet under the Singapore flag. This
requirement will be lifted with immediate effect
to give companies greater operating flexibility.
17. Details of the changes will be available
from IE Singapore.
Other incentives
Extended Unilateral Tax Credit Scheme for
Services Income
18. The unilateral tax credit scheme was first
introduced in 1985 to encourage our firms and
professionals to export their expertise and services.
The scheme was meant to help the development of
Singapore's external economy by eliminating double
taxation on income from specified professional
and consultancy services remitted from certain
non-treaty countries.
19. The unilateral tax credit scheme currently
covers income from 13 categories of services remitted
from 19 non-treaty countries. To further support
regionalisation, the unilateral tax credit scheme
will be extended to cover all services income
remitted from all non-treaty countries with effect
from YA 2003.
Unlimited flow-through of exempt dividends
20. Currently, companies whose income is tax-exempt
or taxed at a concessionary rate are allowed to
flow such exempt dividends to their own shareholders.
Subsequent dividends to further tiers of shareholders
are exempt provided the shareholding requirement
in the company from which the exempt dividends
are received is satisfied. This effectively limits
the flow-through of exempt dividends to 2-tiers
of shareholders.
21. As our economy matures, corporate structures
have become more complex. Joint ventures have
also become prevalent as a means of spreading
risks in new undertakings.
22. In recognition of these, with effect from
1 Jan 2003, dividends distributed by companies
out of income that has been exempt from tax under
tax incentive schemes will be allowed to flow
tax-free to all tiers of shareholders, regardless
of shareholding level. This will apply to all
credit balances in the exempt dividend income
accounts of companies as at this date.
Withholding Tax Exemption for Arbitrators
23. International arbitrators are currently subject
to withholding tax at the prevailing non-resident
income tax rate of 24.5%. To promote the international
arbitration industry in Singapore, payments to
international arbitrators will be exempt from
withholding tax with immediate effect.
Final Income Tax for Non-resident Professionals
in Singapore
24. The income received by non-resident professionals
is currently subject to withholding tax of 24.5%
net of expenses. In order to reduce the compliance
cost, a final income tax of 15% will be levied
on the gross income of non-resident professionals.
This change will take immediate effect.
Estate Duty Exemption for Movable Assets of
Non-Domiciles
25. To improve Singapore's attractiveness as
a private banking centre and encourage more expatriates
to hold Singapore Dollar-denominated assets, the
movable assets of non-domiciles will be exempt
from estate duty.
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