Tax Incentives for Specific Industries in Singapore

The tax system is one of the important factors making Singapore retain its attraction toward many foreign businesses. Indeed, in addition to a low corporate rate of 17%, businesses can gain great benefits from a significant number of tax incentives in the city-state.

These incentives mean lighter and lower tax rates or even tax exemptions for companies, especially small and medium ones, operating in some specific fields. Therefore, in this blog, BBCIncorp will introduce to you some of the useful tax incentives in a considerable number of the most common industries in Singapore. Stay tuned!

Some Common and Useful Tax Incentives Demonstrated by Specific Industries

Below is general information on some of the most popular schemes in some specific industries. Please also take note that we cannot cover all the grants and tax incentives in Singapore since the number is huge, not to mention the fact that the industries in the city-state are significantly large as well.

And for in-depth details of each scheme, we highly recommend you contact directly to the government body that takes responsibility for it.

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1. Manufacturing and Services Industry

Pioneer Certificate Incentive (PC) and Development and Expansion Incentive (DEI)

By Singapore Economic Development Board (EDB)

• Target: companies growing capabilities and conducting new or expanded activities in Singapore
• Benefit: Tax exemption or concessionary tax rate of 5% for PC or 10% for DEI
• Limit: 5 years, which can be extended depending on the expansion plan of the company

For further information, click here.

2. Financial Industry and Treasuries Activities

Finance and Treasury Centre (FTC) Incentive

by EDB

• Target: companies growing treasury management capabilities and using Singapore as a base for conducting treasury management activities for the region
• Benefit: Reduced tax rate of 8% on income derived from qualifying FTC services and Withholding tax exemption on interest payments
• Limit: 5 years, which can be extended depending on expansion plans of the company on FTC services

For further information, click here.

Financial Sector Incentive Scheme

By Monetary Authority of Singapore (MAS)

• Target: Licensed financial institutions (banks, fund managers, etc), which perform a good mix of business and corporate functions
• Benefit: Several concessionary tax rates for trading in loans, headquarter services (like risk management, business planning, etc.) and for fund management

For further information, click here.

Insurance Business Development Scheme

By MAS

• Target: Licensed insurers providing quality services
• Benefit: Concessionary rate of up to 10%

For further information, click here.

3. Research, Development, Innovation

Intellectual Property (IP) Development Incentive (IDI)

By EBD

• Target: IP developers who have a good track record, conduct expansionary projects and meet the required economic commitments
• Benefit: A reduced corporate tax rate of either 5% or 10% on a percentage of qualifying IP income derived by it during the incentive period, which shall be no earlier than 1 July 2018

For further information, click here.

4. Trading Industry

Global Trader Programme

By Enterprise Singapore

• Target: companies which are well-established players engaged in international physical trading on a principal basis to establish their trading base in Singapore
• Benefit: A reduced corporate tax rate of 5% or 10% on qualifying trading income, including income from physical trading, brokering of physical trades and derivative trading income
• Limit: 3 to 5 years

For further information, click here.

5. Shipping and Maritime Industry

Approved International Shipping Enterprise Award

By Maritime and Port Authority of Singapore (MPA)

• Target: International ship owners and ship operators wishing to establish their commercial shipping operations in Singapore
• Benefit: Tax exemption on qualifying shipping income
• Limit: a 10-year renewable period; or a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period

For further information, click here.

Maritime Leasing Award

By MPA

• Target: Companies with a business plan showing that they will contribute to Singapore’s economic growth through their ship or container financing operations
• Benefit: A concessionary tax rate of 10% on qualifying management income
• Limit: Up to 5 years

For further information, click here.

Shipping-related Support Services Award

By MPA

• Target: Ancillary shipping service providers and shipping conglomerates which set up their corporate services functions in Singapore.
• Benefit: A concessionary tax rate of 10% on the incremental income derived from the provision of the qualifying approved shipping-related support services
• Limit: 5-year renewable period

For further information, click here.

6. Aircraft

Aircraft Leasing Scheme

By EDB

• Target: companies to develop aircraft leasing capabilities and grow the aircraft leasing industry in Singapore
• Benefit: A concessionary tax rate of 8% on income derived from the leasing of aircraft or aircraft engine and qualifying ancillary activities; and withholding tax exemption on interest and qualifying related payments
• Limit: 5 years, which can be extended depending on expansion plans of the company on aircraft leasing activities

For further information, click here.

7. Tourism

Double Tax Deduction for Inbound Tourism Promotion

By Singapore Tourism Board (STB)

• Target: Companies wishing to promote the provision of services for inbound tourism to Singapore through participation in STB supported overseas trade fairs/missions
• Benefit: Automatically claiming 200% tax deduction on the first $150,000 of qualifying expenditure incurred on STB supported overseas fairs/missions per Year of Assessment (YA), without obtaining prior support from STB. Expenditure exceeding $150,000 per YA requires further application

For further information, click here.

Double Tax Deduction for Approved International Fair

By STB

• Target: Companies wanting to expand their markets by participating in international trade-oriented exhibitions held in Singapore
• Benefit: Automatically claiming 200% tax deduction on the first $150,000 of qualifying expenditure incurred on Approved International Fair events held in Singapore per Year of Assessment (YA), without obtaining prior support from STB. Expenditure exceeding $150,000 per YA requires further application

For further information, click here.

8. Other Incentives

International Growing Scheme (ISG)

By Enterprise Singapore

• Target: high potential companies growing overseas, while anchoring key functions in Singapore
• Benefit: a concessionary tax rate of 10% for on incremental income from qualifying activities
• Limit: 5 year period

Status: Expired.

Regional and International Headquarters Awards

By EDB

• Target: Companies that plan to move their regional or international headquarters to Singapore
• Benefit: Regional Headquarters Award provides a concessionary corporate tax rate of 15%. While International Headquarters Award offers a concessionary corporate tax rate of 5 to 10%

Mergers & Acquisitions (M&A) Scheme

By IRAS

• Target: SMEs planning to grow through mergers and acquisitions by acquiring shares only.
• Benefit: Tax allowance of 25% per YA over 5-year period will be granted for up to $40m of consideration paid for qualifying M&A deals from 1 Apr 2016 to 31 Mar 2020; and Stamp duty relief will be granted for up to $80,000 of consideration paid for qualifying M&A deals per financial year. M&A scheme also provides 200% tax deduction for transaction costs with a cap of $100,000 per YA.

For further information, click here.

Process of Application

The application process is different from one incentive to another. However, in general, it can be described as the followings:

• Meeting the relevant authority: If you think you are qualified for an incentive, you will then have to meet and present your business plan to the relevant authority
• Applying: After the presentation, you will continue to complete and submit application forms as well as supportive documents
• Negotiation: The authority will give you an offer of the incentive based on the application. You then can review the terms and conditions and negotiate with them
• Final approval: Letter of Offer will be issued and given to you.

Please remember that you still have to report the activities regarding the incentive to the government, and they have the right to stop the program anytime if you are considered as not being qualified for it anymore.

Conclusion

There are many tax incentives available in Singapore for many businesses in different industries to gain significant benefits. It is no doubt that making use of these incentives will surely give you more advantages to be ahead of your competitors. However, it is better for you to consult an expert on the application and compliance since you have to do some reports to the government afterward.