Enhance our status as an international financial centre

2.15 The financial services industry has been transformed over the last decade. We have taken major steps to open up the industry to greater competition, adopt a risk-focused regulatory regime, deepen the talent pool, strengthen the market infrastructure, and encourage leading financial players to hub their regional operations here. These efforts are bearing fruit. We have enhanced and consolidated our position as an international financial centre, with a sound and dynamic banking system, a quiet reputation for wealth management, and liquid and efficient capital markets.

2.16 My measures will focus on promoting wealth management, and deepening and broadening our capital markets. I will just highlight the key changes; MAS will announce the details shortly.

2.17 First, we aim to be a premier wealth management centre. Singapore already has a thriving asset management industry, with over 230 firms employing about 1,000 professionals and managing over S$450 billion of assets. To further grow this industry, we will provide new incentives for specific areas like start-up fund managers and philanthropic trusts.

• A thriving wealth management centre is characterised by a vibrant mix of more established players and start-up fund managers specialising in niche products. To encourage more start-up fund managers to locate in Singapore, I will make it easier for them to qualify for tax exemption under our incentive scheme. Start-up fund managers will have a 12-month grace period before they have to meet the requirement that 80% of the value of their funds must come from foreign investors.

• Organised philanthropic giving is another promising activity to broaden Singapore’s wealth management offerings. With rising affluence in Asia, our reputation for stability and our good infrastructure, we are well placed to attract philanthropic trusts to locate here. I will therefore create a new tax incentive to exempt all qualifying foreign charitable trusts from tax on specified income. This will be similar to the treatment under the Scheme for Exemption of Income of Foreign Trusts, but without the restrictions on expenditure levels or where the funds may be spent.

2.18 The second focus is to deepen and broaden our capital markets. To deepen our capital markets, we must enhance secondary market liquidity.

• We will encourage more institutions to participate in securities borrowing and lending activities, by conferring a 10% tax rate on the income earned by approved companies, including intermediaries, in securities borrowing and lending arrangements. This 10% tax rate will also apply to income from borrowing and lending local securities.

2.19 To broaden our capital markets, we will continue to encourage the development of Real Estate Investment Trusts (REITs), Islamic financial products, and exchange-traded commodity derivative trading.

• We will strengthen Singapore as the preferred location in Asia for listing REITs. Promoting REITs will help enlarge our capital market, grow our local fund management business, and benefit other areas of the financial sector. While we have made good progress, Australia, Malaysia and Hong Kong are all actively developing their REITs markets. We therefore need to do more.

  1. To attract more REITs listings, I will waive stamp duty on the instruments of transfer of Singapore properties into REITs to be listed, or already listed on the SGX, for a five-year period. Most of the qualifying conditions for tax transparency will also be removed.
     
     
  2. To attract foreign non-individual investors to participate in our REITs market, I will lower the withholding tax on REIT distributions from 20% to 10% for a five-year period.
     
     

• Secondly, there has been a surge in demand globally for Islamic financial products in recent years, with global Islamic finance growing by 10-20% annually. To make our tax system more conducive to Islamic financial products, I will remove the double imposition of stamp duties incurred in Islamic transactions which involve real estate. I will also accord payouts from "Islamic" bonds the same concessionary tax treatment that is currently granted to interest arising from conventional financing.

• Lastly, in recent years, exchanges have increasingly been used as platforms for derivatives trading, because they provide greater price transparency and better risk management. To encourage exchange-traded commodity derivative trading, I will enhance the Commodity Derivative Trading incentive by conferring a 5% concessionary tax rate on qualifying income from exchange-traded commodity derivatives.