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The purpose of this article is to provide an overview of the various industry-specific and investment related tax incentives provided under the Singapore Income Tax Act and its subsidiary legislations.
Industry Specific Tax Incentives in Singapore - Tax Incentives for Financial Services Industry
Some of the key tax incentives include:
Trading Income. Capital gains and income made by financial service companies trading investments for and on behalf of their non-resident clients are often tax exempt both in the hands of the financial services company and in the hands of the non-resident client. The effect of this incentive is to make Singapore an attractive location for foreigners to base their investments.
Fee Income. Concessionary tax rates are levied on profits earned by financial services companies in respect of income earned billing clients for investment services rendered.
Withholding tax exemption for Over-The-Counter (OTC) financial derivatives payments: Qualifying financial institutions enjoy withholding tax exemption on all payments made on qualifying OTC financial derivatives to persons who are neither Singapore residents nor are permanent establishments in Singapore. The withholding tax exemption is set to expire in March 2021.
Industry Specific Tax Incentives in Singapore - Tax Incentives for Banks
Liberalization of the Withholding Tax Exemption Regime for Banks: With effect from April 1 2011, interest and other qualifying payments that are made to all non-resident persons in relation to their trade or business will be granted a withholding tax exemption. The withholding tax exemption will be applicable to payments liable to be made between 1 April 2011 and 31 March 2021, for contracts which take effect before 1 April 2011; and payments liable to be made on contracts which take effect on or after 1 April 2011 to 31 March 2021. According to Budget 2012, the withholding tax exemption (which was previously not extended to permanent establishments) will also apply to permanent establishments in Singapore. This change will take effect for payments to be made from 17 Feb 2012 to 31 Mar 2021 (for contracts already in force before 17 Feb 2012); and all payments arising from contracts effective on or after 17 Feb 2012 to 31 Mar 2021. This exemption is applicable to:
1. All banks licensed under the Banking Act or approved under the MAS Act,
2. Finance companies licensed under the Finance Companies Act, and
3. Approved financial institutions licensed under the Securities and Futures Act that engage in lending as part of their regulated activity of dealing in securities in Singapore
Industry Specific Tax Incentives in Singapore - Tax Incentives for Tourism Industry
Tax deduction for Inbound Tourism Promotion: Approved companies, subject to satisfying certain eligibility criteria, can deduct twice the amount of qualifying expenditure incurred in participating in overseas fairs or missions, from their taxable income.
Tax deduction for Participation in Local Trade Exhibitions: Approved companies, subject to satisfying certain eligibility criteria, can deduct from their taxable income, twice the amount of qualifying expenditure incurred in participating in international trade-oriented exhibitions that are held in Singapore.
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