Doing Business in Singapore - Nexia TS€¦ · They are characterised by people who have an ... The Republic is amongst the top most competitive two countries in the world according

Doing Business in Singapore


© 2018 Nexia TS. All rights reserved. 1

Contents Foreword ......................................................................................................................... 4

Nexia International ............................................................................................................................. 5 Chapter 1 - Introducing Singapore ..................................................................................... 6

Geography and Climate ...................................................................................................................... 6 Political System ................................................................................................................................... 6 Legal System ....................................................................................................................................... 6 Population ........................................................................................................................................... 6 Language ............................................................................................................................................. 6 Economy.............................................................................................................................................. 7 Currency .............................................................................................................................................. 8 Business Hours .................................................................................................................................... 9 Public Holidays .................................................................................................................................... 9 Additional Information: Singapore’s History ...................................................................................... 9 Additional Information: Infrastructure ............................................................................................... 9

Chapter 2 - Government Policies and Business Regulatory Environment .......................... 11 Introduction ...................................................................................................................................... 11 Business Regulations ......................................................................................................................... 11 Bank Accounts ................................................................................................................................... 12 Copyright and Intellectual property (IP) ........................................................................................... 13 Privacy ............................................................................................................................................... 13 Mergers and Monopolies .................................................................................................................. 13 Import and Export Controls .............................................................................................................. 13 Consumer Protection ........................................................................................................................ 14 Environment, Pollution and Waste Management ............................................................................ 14

Chapter 3 - Banking and Finance ..................................................................................... 15 Introduction ...................................................................................................................................... 15 The Banking System .......................................................................................................................... 15 Sources of Funds for Businesses ....................................................................................................... 16 Currency Exchange Control ............................................................................................................... 16 Other Financial and Investment Institutions .................................................................................... 16 Singapore Exchange Limited (SGX) ................................................................................................... 17 Additional Information: Asian Dollar Market ................................................................................... 18

Chapter 4 - Business Entities ........................................................................................... 19 Introduction ...................................................................................................................................... 19 Companies ........................................................................................................................................ 20 Business Trusts .................................................................................................................................. 20

Chapter 5 - Company Formations and Administration ..................................................... 21 Forming a Company .......................................................................................................................... 21 Directors ............................................................................................................................................ 21



Type of Directors ............................................................................................................................... 21 Duties of Directors ............................................................................................................................ 22 Shareholders’ Meetings .................................................................................................................... 23 Striking Off ........................................................................................................................................ 23 Liquidations ....................................................................................................................................... 23 Administrative Receivership ............................................................................................................. 24

Chapter 6 - Financial Reporting and Audit Requirements................................................. 25 Reporting and Audit Requirements .................................................................................................. 25 Statutory Requirements .................................................................................................................... 26

Chapter 7 - Company Taxation ........................................................................................ 28 Introduction ...................................................................................................................................... 28 Company Taxation ............................................................................................................................ 28 Resident Companies ......................................................................................................................... 29 Non-Resident Companies ................................................................................................................. 30 Tax Returns and Assessment ............................................................................................................ 30 Profits Subject to Tax ........................................................................................................................ 31 Employee Taxes ................................................................................................................................ 31 Calculating Trading Profits ................................................................................................................ 31 Interest Deduction ............................................................................................................................ 32 Capital Assets .................................................................................................................................... 33 Double Taxation Relief ...................................................................................................................... 34 Withholding Tax ................................................................................................................................ 34 Capital Gains Tax (CGT) ..................................................................................................................... 35 Use of Tax Losses .............................................................................................................................. 35 General Anti-Avoidance Provision .................................................................................................... 36 Transfer Pricing ................................................................................................................................. 36 Planning Points for Foreign Investors ............................................................................................... 36

Chapter 8 - Personal Taxation ......................................................................................... 38 Residents and Non-Residents ........................................................................................................... 38 Income Tax ........................................................................................................................................ 38 Capital Gains Tax (CGT) ..................................................................................................................... 39 Personal Tax Rates ............................................................................................................................ 39 Temporary Residents ........................................................................................................................ 40 Other Rates ....................................................................................................................................... 40 Calculating Taxable Income .............................................................................................................. 41 Employee Share Scheme ................................................................................................................... 41 Deductions ........................................................................................................................................ 42 Additional Information: Income Tax Administration ........................................................................ 43

Chapter 9 Labour Regulations, Welfare and Social Security ............................................. 44 Introduction: ..................................................................................................................................... 44 Employment and Labour Standards.................................................................................................. 44 Other Employment and Industrial Relations Information ................................................................ 45 Statutory Board Contributions - Central Provident Fund (CPF) ........................................................ 46 Work Injury Compensation Act (WICA) ............................................................................................ 47



Chapter 10 - Indirect Taxes ............................................................................................. 48 Introduction ...................................................................................................................................... 48 GST Registration ................................................................................................................................ 48 Types of Supplies .............................................................................................................................. 49 Charging GST on the Supply of Goods and Services in Singapore .................................................... 49 Charging GST on the Importation of Goods into Singapore ............................................................. 50 Claiming of Input Tax ........................................................................................................................ 50 Accounting for Indirect Taxes ........................................................................................................... 50 Other Taxes ....................................................................................................................................... 51 Additional Information...................................................................................................................... 51

Contact Details ............................................................................................................... 52


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Foreword About Nexia TS Nexia TS is recognised as an established mid-tier local accounting firm. We have grown significantly in size over the years. Being an independent member firm of Nexia International, we are affiliated to accounting firms in many parts of the world. This means that our clients will get to enjoy personalised, comprehensive and good services at competitive rates in Singapore and globally. Our desire for quality has been recognised by clients and the accounting profession. As testimony to this, we are among the first local accounting firms to be accredited by the Institute of Chartered Accountants in Australia, Institute of Chartered Accountants in England & Wales and Singapore Accountancy Commission – Singapore Qualification Programmes (Singapore QP) to provide the supervision of professionals undergoing traineeship to qualify as Chartered Accountants. The Nexia TS group of companies comprises mainly Nexia TS Pte Ltd, Nexia TS Public Accounting Corporation, Nexia TS Tax Services Pte Ltd, Nexia TS Risk Advisory Pte Ltd, Nexia TS Advisory Pte Ltd, Nexia TS Technology Pte Ltd, Nexia TS (Shanghai) Co. Ltd., NTS Asia Advisory Sdn Bhd (“NTS Malaysia”) and NTS Myanmar Co. Ltd (“NTS Myanmar”). Our Service Portfolio We believe that we must continually evolve and augment our skills to protect your business interests. We are continually expanding our range of services in tune with your changing business needs. We serve you with:

Tax Compliance & Advisory Services Assurance & IPO Reporting Auditors Services Risk Advisory Services Valuation & Transaction Services M&A Advisory Financial Advisory, Insolvency & Restructuring Accounting, Outsourcing & Corporate Services Forensic & Litigation Support Services Cybersecurity & Technology Advisory Services Data Analytics Services Sustainability Reporting Business Advisory in China, Iskandar Malaysia & Myanmar

Disclaimer We have taken great care to ensure the accuracy of this publication. However, Professional advice should be obtained before acting or refraining from acting on the contents of this publication. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Readers are advised to seek professional advice before acting on any of the above. All rights reserved. No part of this work may be reproduced or copied in any form or by any means without the written permission of Nexia TS. © Nexia TS Singapore 2018


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Nexia International

Nexia TS is a member of the “Nexia International” network (Nexia). Nexia is a leading global network of independent accounting and consulting firms. When you choose a Nexia firm, you get a more responsive, more personal, partner-led service, across the world. Nexia is a highly active network that drives quality and facilitates collaboration to enable its member firms to provide effective local and global solutions. Nexia member firms deliver a partner-led service to clients which ensures continuity, expertise and a deep understanding of the client’s business. They are characterised by people who have an entrepreneurial spirit and who can relate closely to the SME and owner-managed businesses. Nexia firms are focused on supporting local businesses as they grow and through the Nexia network, they can also help their clients confidently venture into new international markets. Nexia International Limited, a company registered in the Isle of Man which operates the Nexia International network, does not deliver services in its own name or otherwise. Nexia International Limited and the member firms of the Nexia International network (including those members which trade under a name which includes the word NEXIA) are not part of a worldwide partnership. Nexia International Limited does not accept any responsibility for the commission of any act, or omission to act by, or the liabilities of, any of its members. Each member firm within the Nexia International network is a separate legal entity. The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited and used under licence. References to Nexia or Nexia International are to Nexia International Limited or to the “Nexia International” network of firms, as the context may dictate. For more information, visit www.nexia.com.

http://www.nexia.com/


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Chapter 1 - Introducing Singapore

Geography and Climate

The Republic of Singapore consists of one main island and 63 offshore islands. It has a total land area of 719.9 square kilometers. Singapore is located in the heart of South East Asia and at the crossroads of main international trade routes. Being approximately 137 kilometers north of the equator, Singapore’s climate throughout the year is warm and humid, moderated by sea breezes. The temperature ranges between 25°C and 31°C. The cooler months are December and January during the Northeast Monsoon season. This period records the heaviest rainfall.

Political System

Singapore political system takes the form of a parliamentary representative democratic republic where the President of Singapore is the head of state, the Prime Minister is the head of government and of a multi-party system. Executive power is exercised by the cabinet from the parliament, and to a lesser extent, the President. The Cabinet has the general direction and control of the Government and is accountable to the Parliament. There are three separate branches of government: the legislature/parliament, executive and judiciary.

Legal System

Singapore is a republic with a parliamentary system of Government. Singapore sources of law are derived from their Constitution, Legislation and subsidiary legislation and judge-made law1. The Constitution lays down the basic framework for the three organs of state, namely, the Executive, the Legislature, and the Judiciary. The Executive includes the Elected President, the Cabinet and the Attorney General. The Legislature consists of the President and Parliament while the Judiciary comprises of the Supreme Court and the State of Courts.

Population

Singapore’s multi-racial population of approximately 5.6 million people comprises of four major ethnic groups - Chinese (74.3%), Malays (13.4%), Indians (9.1%) and Others (3.2%). As people are its richest resource, Singapore invests heavily on education. The Singapore government allocates more than 20% of its annual expenditure to education. Singapore’s literacy rate is among the highest in Asia. The general literacy rate of the population aged 15 years and above is 97% as of 2016.

Language

Singapore’s four official languages are Malay, Chinese (Mandarin), Tamil and English. English is the language of administration and commerce while Malay is the national language. 1 https://www.mlaw.gov.sg/our-legal-system.html


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Economy

Singapore has a highly developed free-market economy. In 2017, Singapore recorded a Gross Domestic Profit (GDP) of S$422,679 million. Singapore’s GDP growth, at an average of 7.7%, has been amongst the world’s highest. Singapore’s strong economic success can be attributed to the corruption-free business environment, prudent monetary and fiscal policies and transparent legal framework. Trade plays an important role to the Singapore economy. The Republic is amongst the top two most competitive countries in the world according to The Global Competitiveness Report 2016-2017, World Economic Forum. Singapore’s Gross Domestic Profits, At 2010 Market Prices, By Industry

Variables (in millions of dollars)

2012 2013 2014 2015 2016 2017

Gross Domestic Product (GDP) 356,832.1 375,070.1 389,637.4 398,369.4 407,918.4 422,679.1 Goods Producing Industries 92,162.5 93,965.9 97,308.8 94,671.8 97,717.7 103,312 Manufacturing 70,342.3 71,517.4 73,436.8 69,671.2 72,249.4 79,525.9 Construction 16,655.2 17,162.7 18,462.2 19,536.5 19,914.5 18,241.7 Utilities 5,039.7 5,154.9 5,269.4 5,333.5 5,425.1 5,426.5 Other Goods Industries 125.3 130.9 140.4 130.6 128.7 117.9 Services Producing Industries 234,729.1 251,965.4 262,770.8 272,029.5 275,973.4 283,683.9 Wholesale & Retail Trade 66,402.3 70,998.4 73,112.6 75,775.9 76,514.3 78,288.5 Transportation & Storage 28,016.2 29,156.6 30,058.9 30,627.1 31,022.9 32,498.3 Accommodation & Food Services 6,722.8 6,949.3 7,141.8 7,151.4 7,423.4 7,513.8 Information & Communications 12,987.7 14,027.5 15,087.6 14,906 15,444.9 15,961.7 Finance & Insurance 38,209.3 44,934.3 49,124.1 51,735.4 52,557.1 55,053.9 Business Services 47,491.8 50,245 51,230.6 54,019.2 53,861.4 54,203.7 Other Services Industries 34,899 35,654.3 37,015.2 37,814.5 39,149.4 40,164 Ownership Of Dwellings 11,928.5 12,229.9 12,680 13,300.7 14,009.6 14,683.9 Gross Value Added At Basic Prices 338,820.1 358,161.2 372,759.6 380,002 387,700.7 401,679.8 Add: Taxes On Products 18,012 16,908.9 16,877.8 18,367.4 20,217.7 20,999.3


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Singapore’s GDP Composition by Industry Singapore’s core industries Singapore’s core industries lie in electronics, chemicals, financial services, oil drilling equipment, petroleum refining, rubber processing and products, processed food and beverages, ship repair, offshore platform construction, life sciences, and entrepôt trade. Free trade and other agreements Singapore has extensive trade links, providing companies with greater market connectivity. Singapore currently has the most extensive network of free trade agreements (FTAs) in Asia. FTAs have been signed with key economies such as the United States of America, Japan, Australia, New Zealand, members of the European Free Trade Association, Jordan, China, Chile, South Korea, India and Panama. In addition, Singapore has signed 36 investment guarantee agreements (IGAs), designed to help protect investments made by Singapore-based companies in other countries against non-commercial risks.

Currency

The official currency of Singapore is the Singapore Dollar (S$). The Central Bank of Singapore, Monetary Authority of Singapore (MAS) issues all Singapore dollar notes and coins. All notes and coins are backed


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by MAS’ assets.2 As of 2017, the Singapore dollar traded at S$1.3467 against the US dollar. To find out how the Singapore Dollar stacks up against major international and regional currencies, please visit MAS website.

Business Hours

Business hours are generally between 8.30am and 6.00pm. Most major retail banks in Singapore operate from 9.30am to 3.00pm on Mondays to Fridays and up to 1.00pm on Saturdays.

Public Holidays

According to the Ministry of Manpower (MOM), there are 11 gazetted holidays including New Year’s Day, Chinese New Year, National Day, Hari Raya Haji, Deepavali and Christmas Day etc3. For a full list of public holidays, please visit MOM’s website.

Additional Information: Singapore’s History

Singapore was founded in 1819 by Sir Stamford Raffles. In 1826, Singapore, Malacca and Penang combined to form the Straits Settlements which subsequently became a British colony in 1867. In 1946, the Straits Settlements was dissolved and Singapore became a separate Crown Colony. Self-government was granted in 1959. Four years later, Singapore joined Malaysia and two states of Borneo to form the Federation of Malaysia, with virtual freedom from colonial rule. On 9 August 1965, Singapore separated from Malaysia by mutual agreement and became a republic. With her independence in 1965, Singapore assumed full sovereignty over her territory with complete political, administrative and financial responsibility for public affairs.

Additional Information: Infrastructure

Through careful planning and an emphasis on excellence, Singapore has grown from small trading post to an international hub. The country’s top-class airport, port, roads and telecommunications networks are among the best in the region. From its strategic location, the Republic offers market access to 4 billion people within a 7 hour flight radius. Airport Connecting people since its maiden flight took off 36 years ago, the Changi International Airport has grown to become a major global air hub welcoming over 70 million passengers a year. Its robust infrastructure serves over 100 airlines connecting Singapore to 400 cities in 100 countries and territories. It has won many awards over the years and been consistently voted one of the best airports in the world.

2 http://www.mas.gov.sg/Currency/Circulation-Currency.aspx 3 http://www.mom.gov.sg/newsroom/press-releases/2017/0405-singapore-public-holidays-2018

https://secure.mas.gov.sg/msb/ExchangeRates.aspx

https://secure.mas.gov.sg/msb/ExchangeRates.aspx

http://www.mom.gov.sg/employment-practices/public-holidays


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The Changi Airfreight Centre, located at the northern end of the airport, is operating as a Free Trade Zone. It handled 2.13 million tonnes of cargo in 2017. Port In terms of services, Singapore’s port, comparable to the world’s best, is highly efficient and competitive. It has ample modern facilities to handle all types of vessels. The Republic also possesses one of the most advance port attracting 130,000 vessel calls annually. More than 626 million tonnes of sea cargo were handled in 2017. Roads Singapore has an extensive network of paved roads. Six-lane expressways link the public housing estates with the Central Business District, relieving traffic congestion on other roads and reducing travelling time for commuters. Singapore’s efficient public transport network of the Mass Rapid Transit (MRT) and Light Rapid Transit (LRT) systems and bus and taxi services provides a relatively inexpensive means of moving around the country. Telecommunications Singapore offers a world-class telecommunications infrastructure and according to the World Economic Forum’s Global Information Technology Report 2014, Singapore is Asia’s most “network ready” country. Mobile penetration rate is high standing at 151%. Households with internet access are at 91% and internet users at 85% as of 2017. International and regional connectivity now stands at 27.6 Tbps to more than 100 countries.


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Chapter 2 - Government Policies and Business Regulatory Environment

Introduction

With its political stability, a modern infrastructure, strong legal and regulatory framework and favourable tax conditions, Singapore is an attractive place for doing business. Singapore’s pro-enterprise environment also makes it one of the easiest countries to set up a business according to World Bank.

Business Regulations

The Accounting Corporation and Regulatory Authority (ACRA) is the government body that regulates business entities and public accountants in Singapore. It oversees the incorporation of businesses and companies in Singapore. Any person who wishes to set up a business in Singapore must register with ACRA. Special licenses are needed for some businesses. Banks, travel agencies, liquor distributors, private schools and childcare centres are some examples. Practitioners in businesses offering certifiable professional services need to get occupational licences. Some examples are contact lens fitters, dentists, doctors, financial planners, pilots and commodity futures traders. Government assistance & incentives The Singapore government has a comprehensive programme of incentives to help companies improve efficiency, strengthen capabilities and explore new opportunities in their business. Some programmes cater to the needs of start-ups and local enterprises, while others are designed for global companies with large-scale needs such as the set-up of regional headquarters in Singapore. Assistance from the government ranges from tax incentives to non-tax incentives such as loans, grants, equity financing and non-financial assistance. Some of the tax incentives schemes available and their tax relief / concession are:

Regional Headquarters (RHQ)/ International Headquarters (IHQ) incentive - concessionary tax rate of 15% for RHQ and 10% or lower for IHQ on incremental qualifying income. Tax incentive period of 3 years with a provision for extension of 2 years.

Pioneer incentive - tax exemption on qualifying profits derived from the pioneer product / pioneer services.

Development and expansion incentive (DEI) - concessionary tax rate of not less than 5% on expansion income.

Investment allowance incentive - allowance of 30% or 50% of approved fixed capital expenditure on top of normal capital allowance.

Approved International Shipping Enterprise scheme (AIS) - tax exemption on qualifying income from the operation of ships outside the port limits of Singapore. Companies under


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the AIS scheme can also apply for exemption from withholding tax on certain charter fees paid to non-residents.

Global Trader Programme (GTP) - concessionary tax rate of 10% or 5% on qualifying income.

Approved royalties incentive - exemption or concessionary rate of withholding tax on approved royalties.

Financial Sector Incentive Scheme (FSI) - concessionary tax rates of 5% or 10%. Government agencies Some of the main government agencies that provide assistance to support businesses’ growth in Singapore are

Economic Development Board (EDB) - The EDB is the lead government agency responsible for planning and implementing strategies to grow Singapore’s economy and enhance its position as a global hub for business, investment and talent. EDB’s responsibility also includes the administration of many of the tax incentives, grants and financing incentives for businesses.

Enterprise Singapore – Enterprise Singapore is the government body that promotes enterprise development. They help companies build capabilities, innovate and internationalise. They support the growth of Singapore as a hub for global trading and start-ups. Enterprise Singapore is also the national standards and accreditation body.

Accounting and Corporate Regulatory Authority (ACRA) - ACRA oversees the registration and regulation of business entities and public accountants. It also provides information on new business structures, compliance requirements, and corporate governance practices.

SMEPortal.sg – The SMEPortal.sg (formerly known as the EnterpriseOne portal) is a one-

stop site for enterprises looking to start, sustain and grow their businesses. It features links to government information and services, as well as industry help and how-to guides.

International Enterprise (IE) Singapore - IE Singapore spearheads the development of Singapore’s external economic wing. It helps Singapore-based companies grow and internationalise. At the same time, IE Singapore works to position Singapore as a base for foreign businesses to expand into the region, in partnership with local companies.

Bank Accounts

Opening a corporate bank account is a relatively simple and straight forward process. There are many options available for corporate bank accounts. Banks in Singapore offer attractive features including, internet banking, corporate credit cards, trade financing, multi-currency and freedom to move funds across countries etc. When opening a business bank account, it is important to compare corporate account features so that the account being opened is the closest to your business’ needs.

https://www.edb.gov.sg/

https://www.edb.gov.sg/

https://www.enterprisesg.gov.sg/

http://www.acra.gov.sg/

https://www.smeportal.sg/content/smeportal/en/home.html

https://www.enterprisesg.gov.sg/


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There are 4 local banks including: Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC), Bank of Singapore and United Overseas Bank (UOB). International banks include but are not limited to: Maybank, Standard Chartered, Citibank etc. Most major banks in the world have their presence in Singapore. In general, banks will allow businesses to open a corporate bank account as long as the necessary paperwork is submitted and the banks are satisfied with the information provided.

Copyright and Intellectual property (IP)

Intellectual property includes patents, trademarks, copyright, designs and trade secrets. These are valuable assets and there are various laws in Singapore to protect them from theft and infringement. The main laws in Singapore protecting intellectual property are the Patents Act, Trade Marks Act 1999, Registered Designs Act and Copyright Act. Trademarks Businesses that wish to register for trademarks may do so with the Intellectual Property Office of Singapore. Trademark can be registered either at IPOS office or via its e-portal. It takes approximately 9 months for a trade mark to be registered. The registration of a trademark is valid for 10 years from the date of application. It can be renewed indefinitely for 10 years at one time by paying the applicable renewal fee.

Privacy

Personal data in Singapore is protected under the Personal Data Protection Act (PDPA) 2012, and must observe the provisions under the Do Not Call registry. In accordance to the PDPA, companies are responsible for the proper collection, use and disclosure of personal data. The PDPA also governs the transfer of personal data out of Singapore. Companies that fail to comply with Data Protection Obligations may be subjected to an investigation by the Personal Data Protection Commission (PDPC) and may need to pay a financial penalty of up to S$1,000,000. In addition, if a company is in breach of the Do Not Call registry requirements, each offence can attract a maximum liability of S$10,000.

Mergers and Monopolies

Mergers and acquisition are sometimes necessary in business. The Competition Act prohibits mergers that may lead to a substantial lessening of competition in Singapore. The Competition Commission of Singapore (CCS) is authorised to investigate any merger, or anticipated merger, that it suspects to be anti-competitive in nature.

Import and Export Controls

Singapore adopts a policy of free trade and most goods can be imported without special licences and quota restrictions. More than 99% of goods imported into the country are duty-free. To import or

https://www.ipos.gov.sg/protecting-your-ideas/trade-mark/application-process

https://www.ipos.gov.sg/protecting-your-ideas/trade-mark/application-process


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export goods into Singapore, companies are required to make a declaration to Singapore Customs. For social and environmental reasons, high import duties are imposed on four broad categories of goods - intoxicating liquors, tobacco products, motor vehicles and petroleum products.

Consumer Protection

The Competition Act The Competition Act promotes healthy competitive markets by prohibiting certain business practices that restrict competition in the market. For example, businesses must not engage in price fixing, bid rigging, predatory pricing and other acts that restrict or distort competition. The Consumer Protection (Fair Trading) Act defines what actions are considered “unfair practices” and the legal remedies for the consumer. The Consumer Protection (Fair Trading) Act The Consumer Protection (Fair Trading) Act or CPFTA was developed to empower consumers to seek civil redress against unfair trade practices in Singapore. Under the CPFTA, the Consumers Association of Singapore (CASE) remains the first point of contact for local consumers to handle complaints. CASE will assist consumers to obtain redress, and in some cases, compensation through negotiation and/or mediation4.

Environment, Pollution and Waste Management

Carbon taxes From 2018 onwards, industrial companies will have to use internationally recognised methodologies and standards to measure and report greenhouse gas emissions. And from 2019, Singapore will be imposing tax on all facilities that produce 25,000 tonnes or more greenhouse gas emissions a year. The carbon tax which applies to all sectors will be set at S$5 per tonne of carbon emissions from 2019 to 2023. By 2023, Singapore will revise the tax level to a value between S$ 10 – 15 per tonne of carbon emissions. E-waste disposal By 2021, companies that produce electrical and electronics equipment, including manufacturers and importers, will be required to ensure that their products are properly collected, recycled and disposed of when products reach the end of their life cycle.

4 https://www.cccs.gov.sg/

https://www.customs.gov.sg/businesses/importing-goods/quick-guide-for-importers


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Chapter 3 - Banking and Finance

Introduction

Singapore has established itself as a global financial centre on the back of a strong regulatory framework, a pro-business environment, and sound economic fundamentals. Exchange controls were abolished in 1978, which gave the country a wider field for participation in international transactions. Singapore's financial centre offers a broad range of financial services including banking, insurance, investment banking and treasury services. According to the 2018 Global Financial Centres Index survey, Singapore ranks forth as a financial centre in the world after London, New York and Hong Kong in terms of competitiveness. In the latest survey by the Bank for International Settlements (BIS), Singapore is the third largest foreign exchange (FX) centre globally and the largest FX centre in Asia, overtaking Tokyo in 2013. Average daily FX turnover volume in Singapore was US$ 484 billion in October 2017.

The Banking System

Monetary Authority of Singapore (MAS) MAS is the central bank of Singapore. Its mission as stated on its website is “to promote sustained non-inflationary economic growth through appropriate monetary policy formulation and close macroeconomic surveillance of emerging trends and potential vulnerabilities.” Its functions include setting of monetary policy, issuance of currency, oversight of payment systems and serving as banker and financial agent to the Singapore government. It also conducts integrated supervision of financial services and financial stability surveillance and manages the official foreign reserves of Singapore. Commercial banks Commercial banks in Singapore are licensed under and governed by the Banking Act, which is administered by MAS. Presently, there are three types of commercial banks:

Full banks – Provide a comprehensive range of banking business approved under the Banking Act. There are currently 19 full banks in Singapore.

Wholesale banks – Wholesale banks may engage in the same range of banking business as full banks, except that they do not carry out Singapore dollar retail banking activities. There are currently 94 wholesale banks.

Offshore banks – Offshore banks can engage in the same activities as full and wholesale

banks for businesses transacted through their Asian Currency Units (ACUs). The banks'


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Singapore dollar transactions are separately booked in the Domestic Banking Unit (DBU). The scope of business transacted in offshore banks' DBU has slightly more restrictions on dealings with residents as compared with wholesale banks and their Singapore dollar lending limit is S$ 500 million. There is currently 1 offshore bank.

Merchant banks The typical activities of merchant banks include corporate finance, underwriting of share and bond issues, mergers and acquisitions, portfolio investment management, management consultancy and other fee-based activities. Most merchant banks have ACUs to carry out activities in the Asian dollar market. In their DBU, merchant banks may not accept deposits or borrow from the public. However they may accept deposits or borrow from banks, finance companies, shareholders and companies controlled by their shareholders. Currently, there are 29 merchant banks in Singapore.

Sources of Funds for Businesses

Sources of funds in Singapore include: Angel Investing Networks, venture capital firms, private equity firms, government schemes. Angel investors invest in companies despite having no proven success of the company’s business model. Venture capital firms are suitable for start-ups or late stage businesses need large capital investment. Private equity firms invest in profitable companies which are in a high-growth stage. In addition, the Asian Dollar Market has been critical to Singapore’s role in financing regional growth. Banks in Singapore draw in non-SGD deposits globally, and deploy these funds to serve the financing and treasury needs of individuals, corporates and institutions in Singapore and the region.

Currency Exchange Control

There are no significant restrictions on remittances, foreign exchange transactions, capital movements, reinvestment or repatriation of earnings and capital.

Other Financial and Investment Institutions

Finance companies Finance companies are licensed under and governed by the Finance Companies Act. They may not offer deposit accounts which are repayable on demand by cheque, draft or order. Generally, finance companies are not allowed to grant unsecured credit facilities exceeding S$5,000 to any person or deal in any foreign currency, gold or other precious metals or acquire foreign currency denominated stocks, shares or debt securities. There are 3 finance companies in Singapore namely Hong Leong Finance Limited, Sing Investments & Finance Limited and Singapura Finance Ltd. Insurance companies Insurers may conduct insurance activities in Singapore as registered insurers, authorised reinsurers or foreign insurers. Registered insurers may conduct life and/or general insurance business in Singapore.


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They can be registered as direct insurers, reinsurers or captive insurers. In addition, reinsurers without an operating presence in Singapore can apply for authorisation to carry out life and/or general reinsurance business in Singapore. Foreign insurers operate in Singapore under a foreign insurer scheme established under the Insurance Act. Currently the Lloyd’s Asia scheme is the only foreign insurer scheme in Singapore.

Singapore Exchange Limited (SGX)

SGX was inaugurated on 1 December 1999, following the merger of two established and well respected financial institutions – the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX). Its operation is governed by the Security Industry Act 1973. On 23 November 2000, SGX became the first exchange in Asia-Pacific to be listed via a public offer and a private placement. On 26 November 2007, SGX unveiled a new sponsor-supervised board called Catalist aimed at providing a conducive listing platform for fast-growing companies in the region. In August 2009, SGX formed a joint venture with Chi-X Global, called Chi-East. At the beginning of October 2010, this joint venture received approval from the Monetary Authority of Singapore to operate a dark pool trading platform. Home to Singapore's leading listed companies, SGX is also at the forefront of exchanges globally in attracting international issuers and is rapidly emerging as Asia's offshore risk management centre for international derivatives. In recognition of the positive effects of exchange networks, SGX pro-actively forges alliances with like-minded institutions to augment its position as one of Asia's leading exchanges. These alliances are aimed at enhancing the attractiveness of the exchange's markets, increasing its market depth and liquidity, and extending the global reach of the exchange's products.


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Additional Information: Asian Dollar Market

Singapore is a major centre of the Asian dollar market. More than 180 financial institutions have been licensed to operate Asian Currency Units (ACU). The government has taken various steps to stimulate the Asian dollar market in Singapore. These steps included the removal of foreign exchange controls, the abolition of withholding tax on interest on foreign owned deposits, the reduction of corporate tax on interest from offshore loans, the abolition of stamp duty on negotiable certificates of deposits and bills of exchange and the relaxation of rules to enable Singapore companies to borrow from the Asian dollar market and maintain accounts in foreign currencies. In 2015, Singapore announced that banks in the city state will no longer be required to segregate their domestic and offshore operations for accounting purposes. Previously, they were required to register their DBU and ACU as separate accounting entities. The DBU of a bank holds its domestically focused operations denominated in Singapore dollars, while the ACU holds its offshore operations entirely denominated in foreign currency. The divide was intended to safeguard Singapore’s domestic market without unduly affecting regional activity of banks in the city state. Banks book their domestically focused operations, primarily denominated in Singapore dollars, in the DBU. The divide served Singapore well for decades but is losing its relevance given major regulatory developments in the last five years that have resulted in banks’ offshore activities being subject to rules which are broadly similar to those governing domestic banking in Singapore.


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Chapter 4 - Business Entities

Introduction

Any person intending to carry on business or maintain a place of business in Singapore must register a business entity with the Accounting Corporation and Regulatory Authority (ACRA). The type of business entities operating in Singapore can be broadly categorised into:

• Sole-proprietorships and general partnerships • Limited partnerships • Companies • Foreign branches • Representative offices

Sole proprietorships A sole-proprietorship is a business owned by one person or one locally incorporated company. The owner has unlimited liability. If the owner is not a resident in Singapore, a local resident manager must be appointed. A local resident is defined as a Singaporean, a Singapore permanent resident or an EntrePass holder. General partnerships A partnership is a business firm owned by two or more partners carrying on a business with a common view to profit. If the number of partners exceeds twenty, it must be incorporated as a company under the Singapore Companies Act, Chapter 50 (the “Act”). Partnership may consist of individuals or companies. It is not a separate legal entity and the owners have unlimited liability. The partners are jointly and severally liable for all liabilities. Limited liability partnership (LLP) A LLP offers the flexibility of operating as a partnership while having a separate legal identity like a private limited company. It has perpetual succession and may consist of individuals or companies or other LLP. The minimum number of partners required is two and there is no maximum limit. The partners are personally liable for the debts and losses resulting from their own careless actions but not those incurred by other partners. Limited partnership (LP) A LP is a partnership consisting of a minimum of two partners, with at least one general partner and at least one limited partner. There is no maximum limit. It is not a separate legal entity, i.e. it cannot sue or be sued or own property in its own name. A general partner is responsible for the actions of the LP and liable for all debts and obligations of the LP whereas a limited partner is not liable for debts and obligations of the LP beyond his agreed contribution, provided he does not take part in the management of the LP.


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Companies

The types of companies that can be incorporated under the Act are as follows: Private company limited by shares This is a locally incorporated company where the maximum number of shareholders is limited to fifty. A private limited company is the most flexible and advanced business structure in Singapore. It is also the preferred business vehicle for doing business in Singapore. A private company with no more than twenty shareholders and none of the shareholders is a corporation is known as exempt private company (“EPC”). Public company limited by shares A public company limited by shares is one where the number of shareholders can be more than fifty. The company may raise capital by offering shares and debentures to the public. Majority of the public companies are listed on a stock exchange. Public company limited by guarantee A public company limited by guarantee is one which carries out non-profit making activities that have some basis of national or public interest, such as for promoting art, charity, etc. It has no share capital. Branch of foreign company One of the options for foreign companies to conduct business in Singapore is to set up a branch office. A branch is not a separate legal entity. It is merely an extension of the parent company. The Act requires a foreign company to appoint at least one authorized representative who must be an ordinarily resident in Singapore. This means he must be either a Singapore citizen, Singapore permanent resident or an EntrePass holder. Representative offices (RO) Foreign companies that are keen on exploring the viability of doing business in Singapore or interested in using Singapore as a launching pad into the Asia Pacific may wish to set up an RO. An RO has no legal corporate status. It is not allowed to engage in any profit making or trading activities nor is it permitted to conclude contracts or open and receive letters of credit. Its activities should be confined to market research, feasibility studies, liaison and co-ordination activities done on behalf of its head office.

Business Trusts

A business trust is a trust that runs and operates a business enterprise. It has a trustee-manager whose role is to safeguard the interests of beneficiaries of the trust and to manage the business. A business trust is created using a trust deed which sets out the terms of the trust and its management, investment policy and the rights of the beneficiaries.


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Chapter 5 - Company Formations and Administration

Forming a Company

The first step in incorporating a company is to apply for and reserve the company name. This can be done by submitting the application online through BizFile+ which is an electronic filing and information retrieval system of the Registrar - The Accounting and Corporate Regulatory Authority (“ACRA”). The cost is S$15.00 per application and the processing time is one working day. However, if the application needs to be referred to Regulatory Authorities for comments due to various reasons, the process may take between 14 days to 2 months. Once the name is approved, the incorporation registration could be performed within one working day and the cost of registration payable to ACRA is S$300.00. The company can commence business upon incorporation. Certain business activities require a business license, such as, employment agency, travel agency, tuition center, etc. In such case, the company can only commence business after it obtains the requisite license. Shares and capital structures There is no concept of authorized capital in Singapore. The standard initial paid-up capital is 1 share at S$1.00 and the shares can be issued in any currency and any class with the rights set out in the constitution of the company. The minimum number of shareholder is one and it could be an individual or a corporation. There is no residency requirement on this.

Directors

The minimum number of director required of a company is one and all directors must be individuals. There should be at least one director in the company who is an ordinarily resident in Singapore, i.e. a Singapore citizen, Singapore permanent resident or an EntrePass holder or an Employment Pass holder under the company. The minimum age of a director is 18 years old. Directors may be appointed by the board of directors or the shareholders of the company. However, removal of directors can only be approved by shareholders. Retirement and re-election of directors are governed by the constitution of the company.

Type of Directors

A director is defined under the Act as to include any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors or the majority of the directors of a corporation are accustomed to act and alternate or substitute director. The types of directors can be broadly categorized as follows:


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Executive director An executive director takes an active role in the management of the company. The executive director generally works full time in the company and is paid salary and the terms of his appointment is usually contained in a service agreement. This function is in addition to his role as director of the board of directors. Non-executive director A non-executive director is an independent director who does not engage in the daily management of the company but is involved in policy making and planning activities. Alternate director No alternate director can be appointed unless the authority to make such appointments is provided for in the constitution of the company. The right to appoint an alternate director is not statutory provided for. The manners of appointment of alternate director is regulated by the constitution and the appointment could be for a specific period until the alternate director resigns or until his appointment is terminated by his principal director who appoints him or until the appointment of his principal director ceased.

Duties of Directors

Primary duties of directors include: • Duty to exercise power in good faith for the company’s interests. The directors must act bona

fide and in the best interests of the company instead of for personal gain and they must ensure transactions are commercially justifiable and not for improper purposes.

• Duties of skill, care and diligence. It is a mandatory duty under the Act for a director to act honestly and use reasonable diligence in the discharge of his duties at all times. He shall not make improper use of his position as an officer or agent of the company or any information acquired by virtues of his position in the company to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the company.

• Duty to avoid conflicts of interest and duty to disclose. A director should avoid being in a situation where other interests or duties conflict with his duties to the company. Conflicts of interest arise in several situations, such as interests in transactions, properties and offices and also holding shares, debentures, rights or options in the company or related corporation and he should familiarize himself with the disclosure requirements under the Act.

• Other statutory duties, such as, duty to maintain proper records, prepare financial reports, comply with the reporting requirements under the Act, to appoint company secretary and etc.


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Shareholders’ Meetings

A public company limited by shares is required to hold its first shareholders’ meeting within a period of not less than one month and not more than 3 months after the date at which it is entitled to commence business which is called “statutory meeting”. Annual General Meeting (AGM) An AGM is the general meeting which must be held at least once in each calendar year and not more than 15 months after the holding of the last AGM (within 18 months from date of incorporation for newly incorporated company). The business before the AGM may be of 2 kinds, ordinary or special. The usual ordinary business transacted at an AGM includes adoption of annual accounts, dividend declarations, approval of directors’ fee, re-election of directors and re-appointment of auditors. Extraordinary General Meeting (EGM) An EGM is any meeting other than the AGM which may generally be called by the directors at any time to transact matters that requires the consent of the members. Shareholders’ written resolution The Act provides for the passing of written resolutions by shareholders of private companies and unlisted public companies instead of holding physical meetings. A company that has only one shareholder may pass a resolution by the shareholder recording the resolution and signing the record. Board meetings A board meeting is a meeting of directors where they discuss and execute business decisions. The conduct of board meetings is largely regulated by the constitution of the company. Any director may call for a directors’ meeting. Board written resolution The board can also make decision by written resolution which gives the directors greater flexibility as they need not be present at a board meeting. The manner on how a board written resolution may be passed is regulated by the constitution.

Striking Off

A company may apply to ACRA to strike its name off the register if it has ceased business operations and it meets the strike off criteria. If the application is approved, the entire process will take at least 4 months to complete.

Liquidations

Liquidation is a process where the company’s assets are realised, with the resulting proceeds used to pay off its debts and liabilities.


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A members’ voluntary liquidation is where a company decide to wind up its affairs voluntarily and the company is able to pay its debts in full within 12 months after the commencement of the liquidation. The company will appoint a liquidator to wind up its affairs and file the necessary notifications and returns with ACRA under the Act. A company may decide to opt for a creditors’ voluntary liquidation if its directors believe that it cannot, by reason of its liabilities, continue its business. Compulsory liquidation is where a company is being wound up under an Order of the Court under certain circumstances, i.e. unable to pay its debts. The Court may appoint a liquidator to wind up the affairs of the company.

Administrative Receivership

A company may be placed under a receivership by its creditors if it is unable to pay off its debts. A receiver will be appointed to take control of some or in other cases all of the company’s assets in an attempt to collect payments for the company’s debts. The receiver’s primary duty is to realise the assets for the benefit of the secured creditor(s) that appointed him or in the case of the receiver and manager, to manage and realise the assets that come within the scope of his appointment.


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Chapter 6 - Financial Reporting and Audit Requirements

Reporting and Audit Requirements

Annual audit Under the Act, the directors of a company shall within 3 months after its incorporation appoint a person or persons to be the auditor or auditors of the company. With the exception of the company’s first auditor, who may be appointed by the directors, auditors are appointed by shareholders at the general meeting and they shall hold office until the conclusion of the next annual general meeting. Singapore branches of foreign corporation are required to be audited by an approved company auditor. Dormant companies and small companies are exempt from the obligation to appoint auditors to audit their accounts. Nevertheless, they must continue to maintain proper accounting records and prepare financial statements that comply with the Accounting Standards. Sole proprietorships, partnerships and representative offices are not required to prepare audited accounts. A dormant company refers to a company with no accounting transactions occurred throughout the entire financial period. Effective 3 January 2016, a dormant un-listed company (other than a subsidiary of a listed company) is exempt from preparing financial statements if:

a. the company has been dormant from the time of formation or since the end of the previous financial year; and

b. the company fulfils the substantial assets test, i.e. the total assets of the company at any time within the financial year must not exceed S$500,000. For a parent company, the consolidated total assets of the group at any time within the financial year must not exceed S$500,000.

Dormant listed companies and their subsidiaries and dormant unlisted companies which do not fulfil the substantial asset test must still prepare financial statements but are exempt from the audit requirements. The “small company” concept is applicable to financial years commencing on or after 1 July 2015 and for a company to qualify as a small company:

a. it must be a private company in the financial year in question; and b. it must meet at least 2 of the 3 following criteria for the immediate past two consecutive

financial years: i. total annual revenue of not more S$10 million;

ii. total assets of not more than S$10 million; iii. total number of employees of not more than 50.

For a company which is part of a group: a. the company must qualify as a small company; and the entire group must be a “small group”.


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Statutory Requirements

Registers and minute book The Act requires companies to maintain the following registers and minute book: Registers

Register of directors’ shareholdings – a record of the directors’ interests in shares in the company and related companies.

Register of substantial shareholders – applicable to companies whose shares are listed on Stock Exchange and it shall contain the names of the substantial shareholders and the details of their interest in shares of the company.

Register of charges – a record of all charges affecting the company’s property and all floating charges created by the company.

Register of debenture holders – a record of the names and addresses of the debenture holders and the amount of debentures held by them.

The following registers are maintained by the Registrar (ACRA):

Register of members – a record of the names and addresses of members and their shareholdings, amounts paid on the shares and the dates on which persons become or cease to be members.

Register of directors, managers, secretaries and auditors – a record of their names, addresses, identification and occupation and in the case of directors, to include the particulars of their directorships in other companies.

Minute book

Minutes of all proceedings of both general meetings and board meetings must be entered into the minute book within one month of the date upon which the relevant meeting was held.

Accounting records Every company must keep accounting records which sufficiently explain the transactions and financial position of the company with accuracy. The accounting records must be kept in such a way as to enable true and fair financial statements of the company to be prepared from time to time, and for the financial statement to be conveniently and properly audited. The accounting records are to be kept at the company’s registered office or at such other place as the directors think fit. If the records are kept outside Singapore, adequate working papers and other documents must be maintained in Singapore to enable the preparation of true and fair financial statements. All companies are required to retain their accounting records for at least 5 years from the end of the financial year in which the transactions or operations to which those records relate are completed. There is no requirement as to the form in which accounting records are to be kept except that they must be kept in a manner to enable an audit to be carried out.


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There is no statutory requirement for a branch of a foreign corporation to keep accounting records in Singapore on its operations. However, the branch will probably need to retain the records for the current year so that its accounts can be audited locally. Annual general meeting The first annual general meeting (AGM) of a company has to be held within 18 months after its incorporation and subsequently, once in every calendar year and the interval between AGMs should not be more than 15 months. The annual accounts presented at the AGM shall be made up to a date not more than 6 months before the AGM. Private companies are allowed to dispense with AGM if at a general meeting of the company a resolution to that effect is passed by all members with voting rights. An annual return (AR) is required to be filed with ACRA within 30 days after the AGM is held. Audited/unaudited financial statements are required to be attached in XBRL format when filing the AR. Exempt private companies (EPCs) need not file the audited/unaudited financial statements if they are solvent; they can complete an online declaration of solvency instead. In the case of a branch of a foreign company, a copy of the duly audited financial statements showing the assets used and liabilities arising out of its operations in Singapore as at the date which the balance sheet is made up to, and the balance sheet of the foreign company as at the end of its last financial year must be lodged within 2 months of the foreign company’s annual general meeting or within 7 months from the end of its financial year.


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Chapter 7 - Company Taxation

Introduction

Singapore operates a territorial tax system. Income tax is levied on income accruing in or derived from Singapore or received in Singapore from outside Singapore. Taxable income includes:

Gains or profits from any trade, business, profession or vocation Gains or profits from employment Dividends interest or discounts Pension, charge or annuity Rents, royalties, premiums and any other profits arising from property Any other gains or profits of an income nature not included above

Taxes are also levied on the use of property, the consumption of goods and services and on dutiable documents relating to any immovable property in Singapore and any stocks or shares. Currently there is no capital gains tax.

Company Taxation

Basis of assessment Income is assessed on a preceding year basis. For a company, this generally means that the basis period for any Year of Assessment (YA) refers to the financial year ending in the year preceding the YA. For example, if a company’s financial year end is 30 June each year, the basis period for Year of Assessment 2019 is 1 July 2017 to 30 June 2018. Income tax rate The corporate income tax rate for both resident and non-resident companies is 17% with effect from Year of Assessment 2010. It has been proposed in the Singapore Budget 2018 that a corporate income tax rebate at 40% of the tax payable, capped at S$15,000, is available for Year of Assessment 2018. The corporate income tax rebate will also be extended to Year of Assessment 2019, at 20% of tax payable, capped at S$10,000. Tax exemption on chargeable income A partial tax exemption is currently applicable for the first S$300,000 of normal chargeable income of a company as follows:

a. 75% of up to the first S$10,000 of normal chargeable income is exempt; and b. 50% of up to the next S$290,000 of normal chargeable income is exempt.

Normal chargeable income refers to income to be taxed at the prevailing corporate tax rate.


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From YA 2020, the partial tax exemption is applicable on the first S$200,000 of normal chargeable income of a company as follows:

a. 75.0% of up to the first S$10,000 of normal chargeable income is exempt; and b. 50.0% of up to the next S$190,000 of normal chargeable income is exempt.

To support entrepreneurship and help local enterprises grow, qualifying new start-up companies are granted full tax exemption on up to the first S$100,000 of normal chargeable income for each of the company’s first three consecutive Years of Assessment. A further 50% exemption is given on up to the next S$200,000 of the normal chargeable income for each of its first three consecutive Years of Assessment. From Year of Assessment 2020, the tax exemption is granted on 75% on up to the first S$100,000 of normal chargeable income and 50% on up to the next S$100,000 of normal chargeable income for each of the company’s first three YAs. To qualify for the tax exemption for new start-up companies, the company must be Singapore incorporated and resident in Singapore with no more than 20 shareholders, at least one of which is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company. However, the tax exemption is not available to companies carrying on the following principal activities:

Investment holding; and Property development for sale, for investment or for both investment and sale.

One-tier corporate tax system With effect from 1 January 2003, Singapore moved to a one-tier corporate tax system. Under the one-tier tax system, tax paid by a company on its chargeable income constitutes a final tax and all dividends paid by the company are exempt from Singapore income tax in the hands of the shareholders. There is no withholding tax on dividends.

Resident Companies

A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. A Singapore tax resident company may enjoy certain tax benefits that are not available to non- tax resident companies, subject to conditions. These include:

Tax exemption on its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore on or after 1 Jun 2003 if certain conditions are met.

Tax relief under the Avoidance of Double Taxation Agreements that Singapore has concluded with treaty countries.

Tax exemption scheme for qualifying new start-up companies.


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Non-Resident Companies

In general, a company is treated as a non-resident in a basis period if the control and management of its business is exercised outside of Singapore. Non-resident companies are generally not taxed directly by the Comptroller of Income Tax (the “Comptroller”). However, payments of certain natures made to non-resident companies are subject to withholding tax, other they are specifically exempt from tax. Please refer to the section on withholding tax. Payments to non-residents include:-

a. Interest, commission, fees in connection with any loan or indebtedness; b. Royalty or other payments for use of or the right to use any movable property; c. Payments for the use of or the right to use scientific, technical, industrial or commercial

knowledge or information or for the rendering of assistance or service in connection with the application or use of such knowledge or information;

d. Payments of management fees; e. Rent or other payments for the use of any movable property; f. Payments for the purchase of real property from a non-resident property trader; g. Structured products (other than payments which qualify for tax exemption under the Income

Tax Act); h. Distribution of real estate investment trust (REIT).

However, payments of the following natures are not subject to withholding tax when made to a non-resident company:-

a. Dividend payments; b. Payments to Singapore branches of non-resident companies. The Singapore branches are

required to declare the income in their annual tax returns; c. Payments made by banks, finance companies and certain approved entities; d. Payments for the charter of ships; and e. Other payments.

Tax Returns and Assessment

Companies that are incorporated in Singapore and foreign companies that operate in Singapore through a permanent establishment in Singapore are required to file annual tax returns. Companies are assessed to tax on the income derived in the preceding financial year. For example, income derived in the financial year 2017 is assessed to tax in the YA 2018. Within three months of its financial year-end, a company is required to submit an estimated chargeable income (“ECI”) unless it meets the conditions under an administrative concession of not having to submit the ECI. The conditions are that the ECI is nil and the revenue does not exceed S$5 million.


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In the Year of Assessment corresponding to the financial year-end, the company is required to file the tax return with a supporting tax computation and financial statements. The financial statements have to be audited unless the company meets the audit exemption criteria. A simplified tax return may be filed if the company meets the relevant conditions. The tax return filing deadline is 30 November of the Year of Assessment. However if the tax return is filed electronically, the deadline is extended to 15 December of the Year of Assessment.

Profits Subject to Tax

Companies are subject to tax on income accrued in or derived from Singapore or received in Singapore from outside Singapore in respect of:

Gains or profits from a trade, business, profession or vocation; Dividends, interest or discounts; rents, royalties, premiums and other income from property; and Gains or profits of an income nature from other sources.

Employee Taxes

Employees are responsible to file their tax returns and to pay their taxes to the Inland Revenue Authority of Singapore (IRAS). Employers are not required to withhold taxes from their employees’ remuneration. However, employers are required to withhold monies from payments due to their foreign employees who have ceased employment in Singapore or are leaving Singapore. The employers are to seek tax clearance for such employees and to pay their taxes out of the monies withheld. Employers are required to complete a Return of Employee’s Remuneration in respect of remuneration paid to their employees in the preceding calendar year. The employers are required to provide the Return of Employee’s Remuneration to their employees. From Year of Assessment 2019, employers with 8 or more employees are required to electronically submit the employment information of their employees directly to the IRAS.

Calculating Trading Profits

Companies can claim deduction of business expenses against their income that is subject to tax. In general, deductible business expenses are expenses that are solely incurred in the production of the income, revenue, and not capital, in nature and not prohibited from deduction under the Income Tax Act. Some examples of deductible business expense are employees’ remuneration including obligatory contributions to approved pension funds such as the national provident fund, i.e. the Central Provident Fund, foreign workers’ levy, directors’ fees, directors’ remuneration, bad trade debts, repair and maintenance and utilities.


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Some examples of non-deductible expenses are travel or entertainment expenses incurred for personal purposes, acquisition cost, including depreciation, on fixed assets, fines, penalties and expenses incurred on Singapore-registered motor cars. Business expenses To qualify for tax deduction, the expenses must satisfy the following conditions:

The expenses must be revenue in nature. The expenses must be wholly and exclusively incurred in the production of income. The deduction must not be prohibited under the Income Tax Act.

Contingent liabilities are not tax deductible. Deduction is also not allowed for domestic or private expenses. Capital expenditure is not tax deductible. However capital expenditure incurred on plant and machinery and qualifying intellectual property rights may qualify for capital allowances or writing-down allowances. Please refer to the section on Capital Assets for more details. Productivity and Innovation Credit Scheme To encourage businesses to invest in productivity and innovation, the Productivity and Innovation Credit Scheme is available from the Years of Assessment 2011 to 2018. It provides enhanced tax deductions and/or allowances of 400% on up to S$400,000 of qualifying expenditure incurred on each of the following six categories of activity:

Acquisition or leasing of prescribed automation equipment Training of employees Acquisition of certain intellectual property rights Registration of certain intellectual property rights Research and development Design activities

In lieu of enhanced tax deductions and/or allowances, a cash payout option that allows for the conversion of qualifying expenditure into cash is available subject to conditions. Group relief system Under the group relief system, current year loss items of one company (“transferor”) can be transferred to a company (“claimant”) of the same group for deduction against the assessable income of the claimant if certain specified conditions are met. The loss items available for group relief are current year unabsorbed tax losses, unabsorbed capital allowances and unabsorbed donations.

Interest Deduction

Interest expenses incurred on loans specifically taken up to finance income-producing assets or assets employed in acquiring income are deductible against the income produced. However, if the assets do not produce income, the interest expenses are not deductible. Where the usage of interest-bearing borrowings cannot be specifically identified and tracked, the common interest expenses are generally required to be attributed to income-producing assets and


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non-income producing expenses. The interest expenses attributed to income-producing assets is deductible against the income produced, while the interest expenses attributed to non-income producing assets is not deductible. There are no thin capitalisation provisions in the Income Tax Act.

Capital Assets

Capital allowances Depreciation of fixed assets is not deductible for tax purposes. In place of depreciation, capital allowances may be claimed on expenditure incurred on the provision of plant and machinery for use in the company’s trade or business. Capital allowances rates vary according to the type of fixed assets but generally most assets would qualify for write-off over 1 year or 3 years. Unutilised capital allowances can be carried forward, carried back or transferred under the group relief system provided the shareholding test is met as at the relevant dates which are:

For carry forward of capital allowances - the last day of the Year of Assessment in which the capital allowances were incurred; and the first day of the Year of Assessment in which such capital allowances are utilised.

For carry back of capital allowances - first day of the Year of Assessment in which the capital

allowances were incurred; and the last day of the Year of Assessment in which such capital allowances are utilised.

An additional condition for carrying forward or carrying back capital allowances is that the company must carry on the same business in the Year of Assessment in which the capital allowances arose and the YA in which the capital allowances are utilised. Writing-down allowances Companies may claim writing-down allowances on capital expenditure incurred in the period from 1 November 2003 to the last day of the basis period for Year of Assessment 2020 on acquiring qualifying Intellectual Property Rights (“IPRs”) for use in their trade or business. Qualifying IPRs refer to patents, copyrights, trademarks, registered designs, geographical indications, lay-out designs of integrated circuit, trade secrets or information with commercial value, and plant varieties.


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Double Taxation Relief

Singapore has concluded comprehensive double tax treaties with the 84 countries listed below:

Albania Fiji Mauritius Seychelles Australia France Mexico Slovak Republic Austria Georgia Mongolia Slovenia Bahrain Germany Morocco South Africa Bangladesh Guernsey Myanmar South Korea Barbados Hungary Netherlands Spain Belarus India New Zealand Sri Lanka Belgium Indonesia Norway Sweden Brunei Ireland Oman Switzerland Bulgaria Israel Panama Taiwan Cambodia Isle of Man Pakistan Thailand Canada Italy Papua New Guinea Turkey China Japan Philippines Ukraine Cyprus Jersey Poland United Arab Emirates Czech Republic Kazakhstan Portugal United Kingdom Denmark Kuwait Qatar Uruguay Ecuador Latvia Romania Uzbekistan Egypt Lithuania Rwanda Vietnam Estonia Luxembourg Russian Federation Ethiopia Malaysia San Marino Finland Malta Saudi Arabia

These tax treaties help lessen the burden of double taxation on residents. Where applicable, the tax treaties provide foreign tax exemption or reduced foreign tax rates for Singapore’s residents on income that they derive from the treaty countries. Where the income is subject to tax in both Singapore and the treaty partner country, the treaty also provides for foreign tax relief in respect of the Singapore tax payable on the income. In addition to the above treaties, Singapore has limited tax treaties that cover only income from shipping and/or air transport with Bahrain, Brazil, Chile, Hong Kong, Oman, Saudi Arabia, United Arab Emirates and the United States of America.

Withholding Tax

Withholding tax is payable on certain types of payments made to non-residents of Singapore, unless the payment is exempt from tax. Payments subject to withholding tax include interest or other payments made in connection with any loans or indebtedness, royalties, technical or service fees (for services performed in Singapore), management fees (for services performed in Singapore), rental of movable property, directors’ remuneration. The rates of withholding tax with effect from Year of Assessment 2010 are shown in the table below:


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1. Where these are derived by a non-resident company through its operations carried out in Singapore, the income will be taxed at the prevailing corporate tax rate. In this case, the withholding tax is not a final tax and is a prepayment of the permanent establishment’s overall Singapore tax liability, if any. The above withholding tax rates may be reduced under the relevant double tax treaty with Singapore.

Capital Gains Tax (CGT)

Currently, there is no tax on capital gains in Singapore. As such, gains derived from the sale of property, shares or other financial instruments are generally not subject to tax. However, in cases where the company derives gains or makes losses from trading in properties, shares or financial instruments, such gains or loss may be taxable or deductible respectively.

Use of Tax Losses

Trade losses incurred by a company can be carried forward indefinitely to offset subsequent years’ profits provided that the shareholding test is met. Under the shareholding test, the ultimate shareholders of the company and their shareholdings must be at least 50% the same on the last day of the year in which the losses were incurred and on the first day of the Year of Assessment in which such losses are to be utilised. Companies may also elect to carry back its current year unutilised trade losses (subject to a cap of $100,000) to the Year of Assessment immediately preceding the current Year of Assessment subject to the shareholding test. Under the shareholding test, the ultimate shareholders of the company and their shareholdings must be at least 50% the same on the first day of the year in which the trade losses were incurred and on the last day of the Year of Assessment in which such losses are utilised.

Nature of payment Tax rate Interest 15% 1 Royalty 10% 1 Rent or other payments for the use of movable property 15% 1 Technical or service fee (for services performed in Singapore) 17% Management fee (for services performed in Singapore) 17% Charter fees 0% - 3% Director’s fee 22%

Professional fee paid to non-resident individual or foreign firm 15% of gross income; or election for 22% on net income


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General Anti-Avoidance Provision

The general anti-avoidance provision is found in Section 33 of the Income Tax Act. Section 33 empowers the Comptroller to disregard and make relevant adjustments to arrangements carried out with tax avoidance as one of their main purposes and not for bona fide commercial reasons. The Comptroller has said that bona fide commercial transactions which are carried out not in pursuance of any tax avoidance arrangement will not come within the scope of Section 33. In addition, companies and individuals granted tax exemptions and concessions under specific tax provisions should not be affected by Section 33, provided that no artificiality or contrivance exists to exploit the exemptions or concessions intended by the Parliament.

Transfer Pricing

In Singapore, all related party transactions must be carried out on an arm’s length basis, i.e. the transfer prices between related parties should be equivalent to prices that unrelated parties would have charged in the same or similar circumstances. If the pricing of related party transactions is not at arm’s length, the Comptroller of Income Tax is empowered under the ITA to make transfer pricing adjustments on the Singapore taxpayer. From Year of Assessment 2019, the Comptroller can impose a surcharge of 5% on the transfer pricing adjustment that is made regardless of whether the taxpayer is in a taxable position after the adjustment. The ITA also contains provisions that take effect from Year of Assessment 2019 requiring companies, unless otherwise exempted, to prepare transfer pricing documentation.

Planning Points for Foreign Investors

Business structure Foreign companies may invest in Singapore by incorporating a subsidiary company or by setting up a branch. The corporate taxation of a subsidiary and a branch is generally the same. However a branch generally is not treated as a resident of Singapore for tax purposes. Hence a branch would not be entitled to tax benefits that only resident companies may enjoy, such as full tax exemption on chargeable income of up to S$300,000 (to be amended to S$200,000 effective from YA 2020) for qualifying start-up companies, tax exemption on foreign-sourced dividends, foreign branch profits and foreign-sourced service income and tax relief under Singapore’s double taxation agreements. Foreign companies may also conduct business in Singapore through a general partnership, limited liability partnership or limited partnership. For these types of business structure, income tax is not assessed on the partnership but instead each partner is taxed on his or its share of the income from the partnership.


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Investment by shares or loans Where the foreign investment is made through a subsidiary company, the investment may take the form of equity or loan investment. There are no thin capitalisation rules that prescribe a maximum debt equity ratio. Where the loan to the subsidiary is interest-bearing, the subsidiary may claim deduction on the interest expenses if the loan is used for income producing purposes and provided that the interest expense is charged at arm’s length. Generally, withholding tax would be applicable on the interest payable. On the other hand, where the investment in the subsidiary is made through shares, tax deduction is not available on any dividends paid to the holding company. In addition, Singapore withholding tax is not applicable on the payment of dividends. Tax incentives Singapore offers a wide range of tax incentives to businesses including foreign investors that conduct high-value, substantive business activities. Subject to approval and qualifying conditions, companies that are awarded the tax incentives may enjoy tax exemptions or concessionary tax rates on qualifying income, further deductions of qualifying expenses or additional capital allowances. Examples of these tax incentives are the Approved International Shipping Enterprise Incentive, Financial Sector Incentives, Finance and Treasury Incentive, Global Trading Programme, Pioneer Incentive, Development and Expansion Incentive, Investment Allowance, Land Intensification Allowance and Aircraft Leasing Scheme.


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Chapter 8 - Personal Taxation

Residents and Non-Residents

A Singapore Citizen or Singapore Permanent Resident who resides in Singapore, except for temporary absences, is treated as a tax resident of Singapore. A foreign individual is treated as a tax resident if he:

a. stays or works in Singapore i. for at least 183 days in a calendar year; or

ii. continuously for three consecutive years.

b. are employed for at least 183 days for a continuous period over two years. This applies to foreign employees who entered Singapore from 1 Jan 2007 but excludes directors of a company, public entertainers or professionals.

Non-residents are exempt from tax on foreign-sourced income received in Singapore from outside Singapore. Residents are exempt from tax on foreign-sourced income received in Singapore on or after 1 January 2004. However exemption does not apply if the foreign income is received through a partnership in Singapore. Residents and non-residents are subject to tax at different rates. In calculating the taxable income, personal reliefs may be claimed by residents. However non-residents are not entitled to claim personal reliefs. Income from an employment exercised by a non-resident for a period which does not exceed 60 days in a calendar year is tax exempt. The exemption is not applicable to company directors, professionals and professional entertainers.

Income Tax

Basis of assessment Individuals are subject to income tax on income accruing in or derived from Singapore or received in Singapore from outside Singapore, unless the income is exempt from tax. Taxable income includes:

Gains or profits from any trade, business, profession or vocation Gains or profits from employment Dividends interest or discounts Pension, charge or annuity Rents, royalties, premiums and any other profits arising from property Any other gains or profits of an income nature not included above

Individual taxpayers, including employees, are required to file their income tax returns with the Inland Revenue Authority of Singapore. Employers are not required to withhold taxes from their employees’

https://www.iras.gov.sg/irashome/Individuals/Foreigners/Your-Situation/Company-Directors--Foreigners-/

https://www.iras.gov.sg/irashome/Individuals/Foreigners/Your-Situation/Company-Directors--Foreigners-/

https://www.iras.gov.sg/irashome/Individuals/Foreigners/Your-Situation/Non-resident-public-entertainer--artiste-musician--sportsman--etc--/

https://www.iras.gov.sg/irashome/Individuals/Foreigners/Your-Situation/Non-resident-professional--consultant--trainer--coach--etc-/


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remuneration. However employers are required to withhold monies from payments due to their foreign employees who have ceased employment in Singapore or are leaving Singapore. The employers are to seek tax clearance for such employees and to pay their taxes out of the monies withheld. Basis period Income is taxed on a preceding calendar year basis i.e. the basis period for a Year of Assessment is the income earned during the preceding calendar year. For example, the basis period for the Year of Assessment 2019 is the calendar year 2018. As an exception, if an individual carries on a business in the form of a sole-proprietorship or a partnership with an accounting year-end other than 31 December, the basis period for his business income is the accounting year-end.

Capital Gains Tax (CGT)

Generally, gains derived from the sales of a property in Singapore are considered as capital gains and not taxable. However, if an individual is deemed to be trading in properties, the gain from the sale of the property in Singapore is considered taxable income. Generally, shares and other financial instruments are considered as personal investments. As such, the gains from the sales of shares or other financial instruments are generally considered as capital gains and not taxable.

Personal Tax Rates

From Year of Assessment 2017, Resident individuals are taxed at progressive tax rates shown in the table below on their net income after the deduction of personal reliefs:

Chargeable income Tax rate (%)

Tax payable (S$)

First S$20,000 Next S S$10,000

0 2

0 200

First S$30,000 Next S$10,000

- 3.5

200 350

First S$40,000 Next S$40,000

- 7

550 2,800

First S$80,000 Next S$40,000

- 11.5

3,350 4,600

First S$120,000 Next S$40,000

- 15

7,950 6,000

First S$160,000 Next S$40,000

- 18

13,950 7,200

First S$200,000 Next S$40,000

- 19

21,150 7,600


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Non-resident individuals are taxed at a flat rate of 15% on their employment income or the progressive resident tax rates, whichever results in a higher tax. Director's fees and other income are taxed at 22%.

Temporary Residents

Not Ordinarily Resident (NOR) scheme The NOR scheme is aimed at attracting global talent to relocate to Singapore, and senior management of companies to use Singapore as their base for regional activities. To qualify for NOR status, the individual’s Singapore employment income must be at least S$160,000 per annum and he must be a Singapore tax resident in the Year of Assessment that he wishes to qualify for the NOR scheme, and a non-resident for the three consecutive Years of Assessment immediately before that. Subject to the relevant conditions, the individual who is awarded the NOR status may enjoy the following tax concessions in any Year of Assessment that he is resident in Singapore:

If the NOR is a non-Singapore citizen or non-Singapore permanent resident, he may enjoy tax exemption on his employer’s contribution to a non-mandatory overseas pension fund or social security scheme (subject to capping rules) provided a tax deduction has not been claimed on such contributions by his employer; and/or

If the NOR spends at least 90 days outside Singapore for business reasons in relation to his Singapore employment and his total Singapore employment income is at least S$90,000, the NOR will not be taxed on the portion of his employment income that corresponds to the number of days he spent outside Singapore for business reasons.

Other Rates

Goods and services tax (GST) GST is a broad-based consumption tax levied on the import of goods, as well as nearly all supplies of goods and services in Singapore. The standard rate of tax is 7%. Export of goods and international services are zero-rated. The provision of financial services and sale/lease of residential properties are exempted from GST.

First S$240,000 Next S$40,000

- 19.5

28,750 7,800

First S$280,000 Next S$40,000

- 20

36,550 8,000

Above S$320,000 In excess of S$320,000

- 22

44,550


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Other taxes • Property tax – This is levied on immovable properties. It is computed at a flat rate of 10% of

the annual value of the property. Annual value is the estimated annual gross rental of the property if it were to be let. It is payable by the owner yearly in advance.

• Estate and gift tax – There is no estate or gift tax in Singapore.

• Stamp duties – Stamp duties are imposed at fixed or ad valorem rates on executed documents relating to immovable property and stock and shares. There is stamp duty relief on documents executed in connection with the transfer of an undertaking or shares in respect of a scheme for the reconstruction of any company or companies, or the amalgamation of companies if certain conditions are met.

• Customs and excise duties – Customs and/or excise duties are imposed at varying rates on certain goods imported into or manufactured in Singapore.

Calculating Taxable Income

Retrenchment payments for loss of office Notwithstanding any contractual terms or collective agreement, retrenchment payments that are given to the employees to compensate for their loss of employment are considered capital in nature and are not taxable. Salary in-lieu of notice, ex-gratia and gratuity for past services are not considered payments for loss of office but are considered consideration for services rendered by the employee in the past and are therefore taxable.

Employee Share Scheme

Generally, gains and profits arising from Employee Share Options and other forms of Employee Share Ownership are subject to tax if the employee is granted the options or shares while he is exercising employment in Singapore. Where an employee is granted share options, he is subject to tax at the time that he exercises the share options. The amount of taxable gain is determined based on the difference between the open market price and the exercise price. However, where the employee is restricted from selling the shares due to a moratorium, he is taxed on the gains only when the moratorium is lifted. The amount of the taxable gain is determined based on the difference between the open market price on the date that the moratorium is lifted and the exercise price. Where an employee is granted shares under an Employee Share Ownership plan, he is subject to tax on the open market price of the shares on the date that the shares are granted. However, where there is vesting imposed, the employee is subject to tax on the open market value of the shares on


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the date that the shares vest. Where a moratorium is imposed on the shares, the employee is taxed on the open market value of the shares on the date that the moratorium is lifted.

Deductions

Expenses Individual taxpayers may claim deduction on expenses that are solely incurred in the production of their income. Donations Individual taxpayers may claim deduction on approved donations. Personal reliefs Personal reliefs may be claimed by resident individual taxpayers, subject to the relevant qualifying conditions. The chargeable income of a resident individual taxpayer is the assessable income after deducting personal reliefs. Personal reliefs are not claimable by non-resident individual taxpayers. The following are the some of the tax reliefs that a resident individual taxpayer may claim for deduction against his assessable income:

Amount Earned income relief S$1,000/S$6,000/S$8,000

(the higher amounts apply for older taxpayers) Spouse/handicapped spouse relief S$2,000/S$5,500

Parent/handicapped parent relief S$5,500 or S$9,000 / S$10,000 or S$14,000 (the higher amounts apply if the parent/handicapped parentsstays with the taxpayer)

Qualifying/handicapped child relief S$4,000 / S$7,500 per child

NSman self-relief S$1,500, S$3,000, S$3,500 or S$5,000

NSman wife relief S$750

NSman parent relief S$750

Grandparent caregiver relief S$3,000

Handicapped sibling relief S$5,500

Course fees relief S$5,500

CPF relief Compulsory employee CPF contribution


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Additional Information: Income Tax Administration

Tax return Persons chargeable to tax must submit a return of total income to Comptroller. They are required to request their tax return from the Comptroller if they did not receive it and ensure that it is completed and submitted by the due date. Failure to file a return is an offence. Notice of assessment A Notice of Assessment is the tax bill issued to a taxpayer that shows his assessable income, deductions granted, and tax payable for the relevant Year of Assessment. Unless the taxpayer is on an instalment payment plan, the tax payable based on the Notice of Assessment must be settled within one month from the date of service of the Notice of Assessment, failing which, late payment penalties will be imposed. A Notice of Assessment is issued after the tax return is submitted by the taxpayer and processed by the Comptroller. However, the Comptroller is also empowered to make advance assessments on taxpayers under certain circumstances. Objection to assessment If a taxpayer disputes an assessment, he must give notice of objection in writing stating the grounds of objection within 30 days from the date of service of the Notice of Assessment. Notwithstanding an objection, the tax payable must be settled within one month of the issue of the Notice of Assessment.


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Chapter 9 Labour Regulations, Welfare and Social Security

Introduction:

The World Forum (WEF) has ranked Singapore top in Asia for developing human capital in 2017. Singapore combines the world's second-economic highest proportion of high-skilled employment with significant strengths in the quality of its education system and staff training. Singapore has valued and attracted professional qualified workforce including highly educated local and international talents by upholding fair employment and labour standards to regulate the fair practices for both business and workforce. To stay competitive and secure talent pools, the Singapore government is also in partnership with various corporations to provide assistance for recruitment, work pass support, training and development, workfare funding, consultant services and etc. In terms of social security landscape, the Central Provident Fund (CPF) Board manages the retirement, housing, health care and asset enhancement.

Employment and Labour Standards

The principle statue covering employment in Singapore is the Employment Act. The Employment Act lays out the basic employment terms and conditions as well as the rights and responsibilities of employers and employees. Other statues related to employment in Singapore include Workplace Safety and Health Act (WSHA), the Child Development Co-Savings Act (Cap 38A) (CDCSA); the Retirement Age Act (Cap 274A) (RA); the Trade Unions Act (Cap 333) and the Industrial Relations Act (Cap 136) (IRA). Employment Act The Employment Act covers every employee regardless of nationality who is under a contract of service in Singapore. The Employment Act also cover rest days, hours of working, overtime, minimal annual leave and other conditions of service. However, an employee will not be covered under the Employment Act if he/ she is:

• A manager or executive with monthly basic salary of more than $4,500

• A seafarer

• A foreign domestic worker

• A statutory board employee or civil servant

For employees that are not covered by the Employment Act, all terms and conditions of employment will be according to the employment contract. Employment passes and work permits Foreigners intending to take up employment or do business in Singapore must have valid work passes. The following are several types of work passes issued by the Ministry of Manpower (MOM):


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• Employment pass (EP) - for foreign professionals with recognised degrees, professional qualifications or specialist skills earning a fixed monthly salary of at least $3,600.

• Entrepreneur pass (EntrePass) - for foreign entrepreneurs who would like to start businesses

in Singapore.

• S pass - for mid-level skilled foreigners (e.g. technicians) earning a fixed monthly salary of at least $2,200 with at least a Diploma or Degree. Employer shall buy and maintain a medical insurance coverage of at least $15,000 per year to cover inpatient care and day surgery.

• Personalised employment pass (PEP) - for high earning existing EP holders or overseas foreign

professionals. PEP offers flexibility as the holders can remain in Singapore for up to six months without a job to search for new employment and the holders do not need to re-apply for a new pass if they change jobs.

• Work permit (WP) - WP is for semi-skilled or unskilled foreign workers with no minimum salary

required working in the construction, manufacturing, marine shipyard, process or services sector. Employer shall buy and maintain a medical insurance coverage of at least $15,000 per year for each WP holder to cover inpatient care and day surgery.

• Short term passes – (a) miscellaneous work pass for foreigners on short-term assignments (up

to a maximum of 60 days) that fall into the certain activity categories; and (b) work permit (Performing Artiste) for foreign artistes performing at any public entertainment licenced bar, discotheque, lounge, nigh club, pub, hotel, private club or restaurant for a maximum of 6 months.

• Training employment pass (TEP)/ Training work permit (TWP) - for foreign professionals/ semi-

skilled foreign trainees or students to undergoing practical training in Singapore.

Other Employment and Industrial Relations Information

Permanent residence schemes A foreigner can apply to take up permanent residency in Singapore and some of the schemes for Singapore Permanent Residence application are as follows:

Professionals, Technical Personnel and Skilled Workers Scheme (PTS) - for foreigners working in Singapore on an employment pass or S Pass.

Investor scheme for entrepreneur - entrepreneurs with substantial business and entrepreneurial track record and interested in investing in Singapore may apply at the Economic Development Board (EDB) under the Global Investor Programme (GIP).

Scheme for spouse and unmarried children of Singapore citizens/permanent residents - for spouse and unmarried children below 21 years old of Singapore citizens/permanent residents.

http://www.mom.gov.sg/passes-and-permits/entrepass


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Skills Development Fund The primary objective of the Skills Development Fund (SDF) is to encourage employers to invest skills upgrading of employees by providing training grants to companies. Employers are required to contribute a monthly Skills Development Levy for all employees up to the first $4,500 of gross monthly remuneration at a levy rate of 0.25%, subject to a minimum of $2, whichever is higher. Foreign Worker Levy The Foreign Worker Levy (FWL) is a pricing mechanism to control the number of foreign workers in Singapore. While employers are not required to pay CPF contributions for foreign workers, they are liable to pay monthly levies to hire employees who hold Work Permits or S Passes. The FWL rate varies and is depending on several factors including industry sector and worker category.

Statutory Board Contributions - Central Provident Fund (CPF)

The CPF is a comprehensive social security savings plan that provides for the retirement, housing and health care needs of CPF members. CPF contributions are mandatory for any employee working in Singapore, where the employee is a Singapore citizen or a Singapore Permanent Resident (SPR). The CPF contribution for monthly ordinary wage is capped at $6,000 currently. Below is one of the CPF contribution rates by both the employee and employer according to employee’s age. This table is applicable to the following specific category of employees. Contribution rates from 1 January 2016 for private sector and public sector non-pensionable employees being:

• Singapore Citizen • SPR from the third year of obtaining SPR status • SPR during the first two years of obtaining SPR status but who has jointly applied with

employer to contribute at full employer-full employee rates

By Employer (% of wage)

By Employee(% of wage)

Total(% of wage)

55 and below 17 20 37

Above 55 to 60 13 13 26

Above 60 to 65 9 7.5 16.5

Above 65 7.5 5 12.5

Contribution Rates from 1 Jan 2016(for monthly wages ≥$750)Employee's age

(years)


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For more details on other specific categories of employees including employees being SPR during the first two years of obtaining SPR status, please refer to CPF Contribution and Allocation Rates5. Contributions to Self-Help Groups (SHGS) and Social Help and Assistance Raised by Employees (SHARE) CPF Board is the collecting agent for contributions to SHGs funds and SHARE donations. These contributions and donations are deducted from your employee’s wages together with the employee’s share of CPF contribution. All employees (including full-time, casual, part-time, temporary staff) are required to contribute to self-help groups’ fund. Contribution to the Self-Help group depends on the race and/or religion of the employee which is indicated on the National Registry Identity Card (NRIC).

Work Injury Compensation Act (WICA)

Work Injury Compensation Act covers all employees against accidents at work, with some exceptions. Under Work Injury Compensation Act coverage, the employee is eligible to claim for medical expenses, medical leave wages and lump sum compensation for permanent incapacity or death.

5 https://www.cpf.gov.sg/Employers/EmployerGuides/employer-guides/paying-cpf-contributions/cpf-contribution-and-allocation-rates

https://www.cpf.gov.sg/Employers/EmployerGuides/employer-guides/paying-cpf-contributions/cpf-contribution-and-allocation-rates

https://www.cpf.gov.sg/Employers/EmployerGuides/employer-guides/paying-cpf-contributions/cpf-contribution-and-allocation-rates


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Chapter 10 - Indirect Taxes

Introduction

Under Section 7 of the Goods and Services Tax (GST) Act, GST is a broad-based consumption tax levied on almost all supplies of goods and services in Singapore as well as the importation of goods into Singapore. In some countries, GST is also known as the value added tax. GST was first introduced in 1994 to help Singapore to shift its focus away from direct taxes to indirect taxes. Since 1 July 2007, the GST rate is 7%. However, the Government has announced in the Singapore Budget 2018 that GST rate will increase to 9% some time from 2021 to 2025.

GST Registration

Only GST-registered businesses can charge GST. GST registration is compulsory when the value of a Company’s taxable turnover exceeds $1 million. This refers to the value of goods and services supplied by the Company which are regarded as taxable supplies. There are two ways to determine a Company’s liability for GST registration. The Company has to undergo compulsory GST registration if: Retrospective view

Before 1 January 2019: Total taxable turnover at the end of the calendar quarter (i.e. 3 months ending Mar, Jun, Sep or Dec) and the past three quarters exceeds $1 million.

On or after 1 January 2019: Total taxable turnover at the end of the calendar year exceeds $1 million.

Prospective view

At any point in time, there is certainty that the total taxable turnover would exceed $1 million in the next 12 months. Supporting documents (e.g. signed contracts, approved quotations, confirmed purchased orders from customers, fixed routine invoices to customers etc.) would have to be provided to substantiate this forecast.

Companies who are not liable for GST registration on a compulsory basis can be registered for GST on a voluntary basis. Exemption from A company that is required to register for GST on a compulsory basis can apply for exemption from registration if its taxable turnover is wholly or mainly from zero-rated supplies. Exemption may also be available if a company is only liable under the retrospective view but not liable under the prospective view.


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Types of Supplies

A “supply” includes anything done for a consideration. It can be in the form of provision of tangible goods or the provision of services. Supplies are broadly classified under two categories: taxable supply (standard-rated supply and zero-rated supply) and non-taxable supply (exempt supply and out-of-scope supply). The type of supply will determine its GST treatment. Standard rated supply All sales of goods and services in Singapore are charged at the prevailing rate of 7% unless exempted by the GST Act. Zero rated supply Export of goods (with required supporting documents) as well as the provision of international services under Section 21(3) of the GST Act is charged at 0%. Exempt supply There are specific supplies that are exempted from GST under the GST Act. These include the provision of financial services, sale and lease of residential properties and local supply of investment precious metals. Out-of-scope supply Out-of-scope supplies refer to supplies which are not within the scope of the GST Act. They also include supplies where the place of supply is outside of Singapore.

Charging GST on the Supply of Goods and Services in Singapore

For GST to be chargeable on a supply of goods or services, all of the following conditions must be satisfied:

1. The supply is made in Singapore; 2. The supply is a taxable supply; 3. The supply is made by a taxable person and 4. The supply is made in the course or furtherance of any business carried on by the taxable

person. Supply is made in Singapore For GST to be applicable, the place of supply must be in Singapore. If the place of supply is outside Singapore, the supply is an out-of-scope supply. In relation to the supply of goods, the place of supply is determined by its physical location during the transfer of ownership. Therefore, for goods sold within and exported from Singapore, the place of supply is in Singapore. In relation to the supply of services, the place of supply is determined by where the supplier belongs. A supplier will be considered to belonging in Singapore if the supplier has:


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a business establishment (BE) or fixed establishment (FE) in Singapore and no such establishment elsewhere; or

a BE or FE both in Singapore and overseas but the establishment most directly connected with this supply is in Singapore; or

no BE or FE but his usual place of residence (for company, it is the place where it is legally constituted) is in Singapore.

Supply is a taxable supply This includes standard-rated supplies and zero-rated supplies. Supply is made by a taxable person A taxable person refers to a GST-registered person or a person who is liable to register for GST. Supply is made in the course or furtherance of his business GST is only chargeable if the sale is conducted in the normal course of the business of the taxable person.

Charging GST on the Importation of Goods into Singapore

For all imported goods, GST is chargeable regardless of whether the importer is GST- registered or not. The importer is required to take up the appropriate import permit and pay GST at the point of importation. GST is charged based on the value of import. The value of import is the summation of the CIF (Cost, Insurance and Freight) value, all duties payable, commission and other incidental charges.

Claiming of Input Tax

Singapore adopts a credit mechanism whereby GST-registered businesses can claim their input tax incurred on their business purchases in their GST return. By deducting the total input tax paid from the total output tax payable, the difference will either be the net GST payable or net GST refundable that the company has to either pay to or be refunded by the Comptroller of GST.

Accounting for Indirect Taxes

The time of supply is the earlier of when the invoice is issued or payment is made. GST is charged on the value of the supply of goods and services at the time of supply. The value of the supply may be for a consideration in monetary or for the open market value of the supply. Tax Invoices and receipts GST-registered businesses must issue tax invoices to their GST-registered customers so that the customers can use them as supporting documents to claim input tax on standard-rated purchases. A tax invoice has to be issued within 30 days from the time of supply. If the supply made to customers whereby the amount (including GST) does not exceed S$1,000, a simplified tax invoice may be issued.


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For non-GST registered customers, the GST-registered businesses can choose to issue a receipt instead of tax invoice for the payments received. Recordkeeping and penalties Businesses are required to keep the following records for at least five years:

Source documents that substantiate all business transactions; Accounting records and schedules; Bank statements; and Any other records of transactions connected with their business.

It is the responsibility of a GST-registered business to maintain proper records. Under the Income Tax Act and GST Act, failure to retain sufficient records is an offence and can result in:

1. Disallowed expense claims; and /or 2. Imposition of penalties.

Other Taxes

Excise taxes & customs duties As a regional trade hub, Singapore imposes few excise and import duties. Import duties are mainly levied on tobacco, liquor, petroleum and motor vehicles. Excise duties are mainly levied on tobacco, liquor and petroleum products. There are no export duties for exports from Singapore.

Additional Information

Deemed supply Even when there is no consideration involved, goods which are disposed of, transferred, or applied to non-business use can be considered as deemed supplies for GST purposes. Output tax has to be accounted for the deemed supplies except for the following cases:

Provision of food or beverage for employees in staff cafeteria or at the employer’s premises or provision of free accommodation in a hotel, inn, boarding house or similar establishment;

Goods with value not exceeding $200 each; and Goods for which no input tax has been claimed when purchased.

Contact Details


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Nexia TS is a member firm of the “Nexia International” network. Nexia International Limited does not deliver services in its own name or otherwise. Nexia International Limited and the member firms of the Nexia International network (including those members which trade under a name which includes the word NEXIA) are not part of a worldwide partnership. Member firms of the Nexia International network are independently owned and operated. Nexia International Limited does not accept any responsibility for the commission of any act, or omission to act by, or the liabilities of, any of its members. Nexia International Limited does not accept liability for any loss arising from any action taken, or omission, on the basis of the content in this [depending on the medium which displays this disclaimer, insert email, publication or article] or any documentation and external links provided. The trademarks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited and used under licence. References to Nexia or Nexia International are to Nexia International Limited or to the “Nexia International” network of firms, as the context may dictate. For more information, visit www.nexia.com.

http://www.nexia.com/


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Singapore Nexia TS 100 Beach Road, Shaw Tower, #30-00, Singapore 189702 Tel: +65 6534 5700 Fax: +65 6534 5766 Email: [email protected] Website: nexiats.com.sg China Nexia TS (Shanghai) Co Ltd Shanghai Nexia TS Certified Public Accountant Room A, 20 Floor, Heng Ji Building, No.99 East Huai Hai Road, Huang Pu District, Shanghai 200021, China Tel: (8621) 6047 8716 Fax: (8621) 6047 8712 Email: [email protected] Website: nexiats.com.cn Malaysia NTS Asia Advisory Sdn Bhd Unit No 23A-06, Level 23A Menara Landmark, No. 12 Jalan Ngee Heng 80000 Johor Bahru, Johor Tel: (60) 7 221 3285 Fax: (60) 7 221 3289 Email: [email protected] Website: ntsasia.com.my Myanmar NTS Myanmar Co. Ltd La Pyayt Wun Plaza, 410 (B), 4th Floor, 37 Alanpya Pagoda Road, Dagon Township, Yangon Myanmar Tel: (95) 1 370 836, (95) 1 370 837, (95) 1 370 838 (ext-406, 407, 408) Fax: (95) 1 376 945 Email: [email protected] Website: nts.com.mm

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