A Foreign Investor’s Guide to Industry-Specific Tax Incentives in Singapore

tax incentives

The Singaporean government is actively supporting businesses nationwide. They’ve implemented numerous initiatives to provide financial and social support to various companies throughout the years.

Among their countless initiatives, the government has offered tax incentives for foreign investors to conduct business in the country with an added advantage.

The incentives may vary depending on the industry foreign investors decide to venture to.

Financial Services Industry

The financial services industry encompasses banks, insurers, and financial institutions that play an integral role in boosting the country’s economy. To support their endeavors, the government is offering the following incentives:

  • Finance and Treasury Centre (FTC) IncentiveIt is offered to businesses that deal with foreign exchange, corporate finance advisory, and interest rate management. One key advantage of this incentive is that it allows eligible companies to benefit from a reduced corporate tax rate from 17% to 8%.

    Companies need to apply for this incentive through the Singapore Economic Development Board.

  • Financial Sector Incentive (FSI) SchemeIt is offered to licensed financial institutions that perform a combination of business and corporate functions. Qualified entities will obtain multiple concessionary tax rates for their fund management, headquarter services, and loans.

    To qualify, applicants will need to demonstrate their plans to expand their operations in Singapore. Those that succeed will be subject to yearly reviews conducted by the Monetary Authority of Singapore.

  • Insurance Business Development (IBD) SchemeIt is offered to licensed insurance companies that provide services related to risk consultancy, claims to handle, etc. Successful applicants will receive a 10% concessionary tax rate from the income they derived from insurance services.

    Similar to the FSI Scheme, businesses who qualify for this incentive will be subject to annual reviews.

Research, Development, and Innovation

Foreign companies that fall under this category engage in projects that drive technological, medical, social, and cultural advancements to enhance the country’s competitive global advantage.

The incentives that aid these projects include:

  • Research Incentive Scheme
    This incentive is offered to companies doing research in the field of science and technology. Approved businesses can benefit from a 30% tax relief in the form of co-funding to support projects like employee training, consultancy, and equipment acquisition.
  • Intellectual Property Development SchemeQualified companies can receive a reduced corporate tax rate of 5% or 10% depending on the income derived from their services during the established incentive period. The initial period usually lasts up to 10 years, but it can be further extended to another ten years if necessary.

Trading Industry

Corporations under this industry engage in activities relating to the exchange of goods. There are two types of trading businesses: retailers who sell goods to the general public and wholesalers who supply merchandise to other companies.

To provide businesses in this industry with financial support, the government implemented corporate tax incentives, such as:

  • Approved Cyber TraderThis incentive allows qualifying businesses to receive up to 10% of concessionary taxes. It is catered towards businesses conducting international trade and marketing online.
  • Global Trader ProgrammeThis programme aims to provide corporate tax relief worth 5% to 10% of concessionary taxes to locally operated companies trading commodities internationally for three to five years.

Services and Manufacturing Industry

On the one hand, the services sector covers companies that provide services to customers. On the other hand, the manufacturing industry refers to businesses that facilitate the production of goods from raw materials.

To be qualified for a corporate tax incentive in these industries, companies must contribute substantially to Singapore’s economy, whether that’s developing innovative technology or showcasing revolutionary skills. Once qualified, corporate entities can benefit from the following incentives.

  • Development and Expansion IncentiveCompanies that have successfully demonstrated their role in boosting the country’s economy can receive a 5% tax rate incentive in the span of 10 years to support their development and expansion plans.
  • Pioneer Incentive SchemeCompanies who have successfully demonstrated their expertise to advance services already available in Singapore can receive a 5% concessionary tax rate incentive in five years. It is a way to provide them with financial support.

Conclusion

These incentives open new opportunities for exciting new business ventures in 2022. Whether that’s incorporating a new company or expanding existing operations, the incentives can provide financial leverage to kickstart your long-term success.

To know more about how you can apply and qualify for these incentives, be sure to get accounting services from reputable accounting firms in Singapore.

 

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