Contents

Page Chapter 1 Profile of Singapore

History Geography and climate Population Language Infrastructure Economy Business hours

Chapter 2

Business regulatory environment

Business registration and approval Import and export controls Exchange controls Competition / Consumer protection laws Intellectual property

Chapter 3

Government incentives and assistance

Government incentives Government agencies

Chapter 4

Labour
Workforce Employment passes and work permits Permanent residence schemes Central Provident Fund Skills Development Fund Foreign Worker Levy

Chapter 5

Banking and finance

Introduction Monetary Authority of Singapore Commercial banks Merchant banks Finance companies Insurance companies Asian Dollar Market Singapore Exchange Limited

Chapter 6

Business entities
Introduction Sole-proprietorship Partnership Incorporated company Branch of foreign company Representative office

Chapter 7

Audit and statutory requirements

Annual audit Registers and minute book Accounting records Annual general meeting

10

Chapter 8

Taxation
Introduction Corporate income tax Personal income tax Goods and services tax Withholding tax Double tax treaties Other taxes Tax administration

14

Chapter 1 Profile of Singapore

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.

Geography and climate

The Republic of Singapore consists of one main island and 63 offshore islands and has a total land area of 710.3 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, Singapores climate throughout the year is warm and humid, moderated by sea breezes. The temperature ranges between 23C and 31C. The cooler months are December and January during the Northeast Monsoon season. This period records the heaviest rainfall.

Population
Singapores multi-racial population of approximately 5 million people comprises four major ethnic groups Chinese (74%), Malays (13%), Indians (10%) and Others (3%). As people are its richest resource, Singapore invests heavily on education. The Singapore government allocates more than 20% of its annual expenditure to education. Singapores literacy rate is among the highest in Asia. The general literacy rate of the population aged 15 years and above was over 96% in 2009.

Language
Singapores four official languages are Malay, Chinese (Mandarin), Tamil and English. English is the language of administration and commerce while Malay is the national language.

Infrastructure
Through careful planning and an emphasis on excellence, Singapore has grown from small trading post to an international hub. The countrys top-class airport, port, roads and telecommunications networks are among the best in the region.

Airport The Changi International Airport is one of the busiest airports in the region with 3 terminals, which can handle 70 million passengers a year. It caters to 80 airlines providing 5,000 weekly flights connecting Singapore to more than 200 cities in over 60 countries. It has won many awards over the years and been consistently voted one of the best airports in the world. The Changi Airfreight Centre, located at the northern end of the airport, is operated as a Free Trade Zone. It handled 1.636 million tonnes of cargo in 2009. Port In terms of services, Singapores port, comparable to the worlds best, is highly efficient and competitive. It has ample modern facilities to handle all types of vessels. As the worlds busiest port, Singapore is the focal point for more than 200 shipping lines which link the region to over 600 ports in 123 countries. More than 472 million tonnes of sea cargo were handled in 2009. 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. Singapores 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 its broadband network reaches 99 per cent of the population. International and regional connectivity now stands at 27.6 Tbps to more than 100 countries. Singapore is ranked as Asias most network ready country in the World Economic Forums Global Information Technology Report 2009 -2010.

Economy
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. Singapores 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 entrept trade. Based on information released by the Monetary Authority of Singapore (MAS), Singapores domestic economic activity expanded by 24.0% quarter-on-quarter SAAR in the second quarter of 2010 driven by the trade-related sectors, particularly manufacturing, on the back of strong biomedical and electronics output. The services sector posted broad-based growth, led by tourism-related activities. In the first half of 2010, Singapores GDP grew by 18% year -on-year and growth forecast for 2010 is 13% to 15%.

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

Chapter 2 Business regulatory environment

With its political stability, a modern infrastructure, strong legal and regulatory framework and favourable tax conditions, Singapore is an attractive place for doing business. Singapores pro-enterprise environment also makes it one of the easiest countries to set up a business. In the World Banks Doing Business 2010 Report, Singapore is ranked as the worlds easiest place to do business.

Business registration and approval

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 carry on 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.

Import and export controls

Singapore adopts a policy of free trade and most goods can be imported without special licences and quota restrictions. Import duties are imposed on four broad categories of goods - intoxicating liquors, tobacco products, motor vehicles and petroleum products.

Exchange controls
There are no exchange controls in Singapore and funds may be freely remitted into and out of Singapore.

Competition / Consumer protection laws

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 legal remedies for the consumer.

Intellectual property
Intellectual property includes patents, trade marks, 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.

Chapter 3 Government incentives and assistance

Government 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 startups and local enterprises, while others are designed for global companies with largescale 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 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 Singapores economy and enhance its position as a global hub for business, investment and talent. It is the agency responsible for the administration of many of the tax incentives, grants and financing incentives for businesses.

Spring Singapore Spring Singapores mission is to help Singapore enterprises grow and to build trust in Singapore p roducts and services. It aids local enterprises in financing, capabilities and management development, technology and innovation, and access to markets. Spring Singapore is also the national standards and accreditation body. International Enterprise (IE) Singapore IE Singapore spearheads the development of Singapores external economic wing. It helps Singaporebased 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.

Chapter 4 Labour
Workforce
As of June 2010, Singapores total labour force was 3.053 million. The educational composition of the labour force reflects Singapores continuing investment on educati on, with the degree holders making up 26.7% of the total resident labour force in 2009 compared to 14.6% a decade ago. To prepare the Singapore workforce for the future and maintain a competitive advantage for Singapore, the Singapore government has introduced a nation-wide system of continuing education and training (CET). The CET aims to enhance quality and productivity by helping their workers acquire industry-relevant skills and equip them with the skills for job opportunities in new growth industries. Singapore is ranked among the top 5 in Asia for best skilled labour in the IMD World Competitiveness Yearbook 2010.

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): Employment pass (EP) - for foreign professionals with recognised degrees, professional qualifications or specialist skills earning a fixed monthly salary of at least S$2,500. 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 S$1,800. Personalised employment pass (PEP) - suitable EP holders who have graduated from institutions of higher learning in Singapore and worked in Singapore for a period of time may be eligible for the PEP. PEP offers flexibility as the holders can remain in Singapore for up to six months without a job. Work permit (WP) - WP is for semi-skilled or unskilled workers with a monthly basic salary of not more than S$1,800. 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 foreigners to undergoing practical training in Singapore.

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: 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.

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). CPF contributions are not allowed for foreigners.

Skills Development Fund

The primary objective of the Skills Development Fund (SDF) is to encourage employers to invest skills upgrading of employees by providing assistance by way of grants or loans 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 rates vary depending on several factors including industry sector and worker category.

Chapter 5 Banking and finance

Introduction
Singapore has developed into an international 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 2009 Global Financial Centres Index survey, Singapore is the No. 3 financial centre in the world after London and New York in terms of competitiveness. In the latest survey by the Bank for International Settlements (BIS), Singapore is the fourth largest FX centre globally and the second largest FX centre in Asia, after Tokyo. Average daily foreign exchange (FX) turnover volume in Singapore was US$266 billion during April 2010.

Monetary Authority of Singapore (MAS)

MAS is the central bank of Singapore. Its mission as stated on its website is to promote sustained noninflationary economic growth and a sound and progressive financial centre. Its functions include the setting of monetary policy, issuance of currency, oversight of payment systems and serving as banker to and financial agent of 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 full banks may provide the whole range of banking business approved under the Banking Act. There are currently 30 full banks in Singapore. Out of the 30 banks, 6 are local banks. 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 49 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' 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 are currently 38 offshore banks

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 46 merchant banks in Singapore.

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.

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. 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 Lloyds Asia scheme is the only foreign insur er scheme in Singapore.

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. 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.

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. 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.

Chapter 6 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-proprietorship Partnership Company

Sole-proprietorship
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 Employment Pass or Dependent Pass holder.

Partnership
General partnership Partnership is a business firm owned by two or more persons 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. 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) 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) An 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

10

Incorporated company
The types of companies that can be incorporated under the Companies 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. Exempt private company (EPC) EPC is a private company with no more than twenty shareholders and none of the shareholders is a corporation. An EPC is exempt from the audit requirements if its annual turnover is less than S$5 million for the financial year concerned. 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. 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.

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 Companies Act requires a foreign company to appoint at least two local agents (i.e. ordinarily resident) from Singapore to act on behalf of the foreign branch.

Representative office (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.

11

Chapter 7 Audit and statutory requirements

Annual audit
Under the Companies 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 companys 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 exempt private companies with an annual turnover less than S$5 million 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.

Registers and minute book

The Companies Act requires incorporated companies to maintain the following registers and minute book: Registers 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 shareholdings - a record of the directors interests in shares in the company and related companies. 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. 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 companys 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.

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

12

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 companys 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. 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 aeneral 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 one month after the AGM is held. Audited/unaudited accounts are required to be attached when filing the AR. Exempt private companies need not file the audited/unaudited accounts; 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 statement 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 companys annual general meeting or within 7 months from the end of its financial year.

13

Chapter 8 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 and consumption of goods and services. Presently, there is no capital gains tax.

Corporate income tax

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 refers to the financial year ending in the year preceding the Year of Assessment. For example, if a companys financial year end is 30 June each year, the basis period for the Year of Assessment 2011 is 1 July 2009 to 30 June 2010. Income tax rate The corporate income tax rate for both resident and non-resident companies is 17% with effect from Year of Assessment 2010, with a partial tax exemption for normal chargeable income of up to S$300,000. To support entrepreneurship and help local enterprises grow, qualifying new start-up companies are granted full tax exemption on the first S$100,000 of normal chargeable income for each of its first three consecutive Years of Assessment. A further 50% exemption is given on the next S$200,000 of the normal chargeable income for each of its first three consecutive Years of Assessment. 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. 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 tax in the hands of the shareholders in Singapore. There is no withholding tax on dividends.

14

Tax residence A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. A Singapore tax resident company can enjoy certain tax benefits that are not available to nontax resident companies. 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 1st Jun 2003 if certain conditions are met. Benefits conferred under the Avoidance of Double Taxation Agreements that Singapore has concluded with treaty countries. Tax exemption scheme for qualifying new start-up companies.

Business expenses To qualify for tax deduction, the expenses must be wholly and exclusively incurred in the production of income. They must also satisfy the following conditions: The expenses must be revenue in nature. The deduction must not be prohibited under the Income Tax Act. The expenses must be incurred.

Capital expenditure and contingent liability are not tax deductible. Deduction is also not allowed for domestic or private expenses. Productivity and innovation credit (PIC) To encourage businesses to invest in productivity and innovation, the Productivity and Innovation Credit was introduced in the Singapore Budget 2010. The PIC is available from the Years of Assessment 2011 to 2015. It provides enhanced tax deductions and/or allowances of 250% on up to S$300,000 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 intellectual property rights Registration of certain intellectual property rights Research and development Design activities

Losses Carry forward of unutilised losses - Trade losses incurred by a company can be carried forward indefinitely to offset subsequent years profits if the ultimate shareholders of the company on the last day of the year in which the losses were incurred are substantially the same as those on the first day of the Year of Assessment in which such losses are to be utilised. Loss carry-back relief - 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 if the ultimate shareholders of the company on the first day of the year in which the trade losses were incurred are substantially the same as those on the last day of the Year of Assessment in which such trade losses are used for offset against the companys income.

15

Group relief system - Under the group relief system, current year unutilised trade losses 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. 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 companys 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 or 3 years. Unutilised capital allowances - Similar to losses, unutilized capital allowances can be carried forward, carried back or transferred under the group relief system provided the requisite conditions are met. The relevant dates in the shareholding test for capital allowances are: For carry forward of capital allowances - 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 the carry forward or carry back of capital allowances is that the business carried on in the carry back/forward year must be same as that carried on in the year that the capital allowances are claimed.

Personal income tax

Basis of assessment Income is taxed on a preceding calendar year basis i.e. income earned during the calendar year 2010 is taxed in the Year of Assessment 2011. 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, he is allowed to use the accounting year basis for business income. Income tax rate 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 First S$20,000 Next S$10,000 Next S$10,000 Next S$40,000 Next S$80,000 Next S$160,000 Above S$320,000 Tax rate 0% 3.5% 5.5% 8.5% 14% 17% 20%

16

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 20%. Non-residents are also not entitled to personal reliefs. Generally, foreign income received in Singapore on or after 1 January 2004 is not taxable. This exemption does not apply if the foreign income is received through a partnership in Singapore. Tax residence For tax purposes, an individual is resident in Singapore if he is physically present or exercises an employment (other than as a director) in Singapore for 183 days or more during the year preceding the Year of Assessment. Under a 3-year administrative concession, if an individual works or stays in Singapore for three or more consecutive years, he is treated as a Singapore resident from the year of his arrival. A foreign employee (excluding directors and public entertainers) who stays or works in Singapore for a continuous period of at least 183 days which straddles over 2 calendar years will be treated as a resident for both years under a 2-year administrative concession. Short term employment Income from an employment exercised for a period which does not exceed 60 days in a calendar year is tax exempt. This is not applicable to professional entertainers, self-employed individuals and directors. Area Representative (AR) scheme An employee of a non-resident enterprise who based in a representative office in Singapore and performing regional duties that require him to travel outside of Singapore may qualify to be assessed under the AR scheme. The tax liability under the AR scheme is computed on the basis of the number of days spent in Singapore. Not Ordinarily Resident (NOR) scheme This 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 individuals Singapore employment income must be at least S$160,000 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 meeting the requisite conditions, a resident individual may enjoy the following tax concessions under the NOR scheme: A non-Singapore citizen or permanent resident NOR will enjoy tax exemption on his employers contribution to 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 he spends at least 90 days outside Singapore for business reasons in relation to his Singapore employment, 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.

17

Personal reliefs The following are the some of the tax reliefs, with effect from Year of Assessment 2010, that a resident individual taxpayer can claim for deduction against his assessable income: Amount Earned income relief Spouse/handicapped spouse relief Parent/handicapped parent relief Qualifying/handicapped child relief NSman (self/wife/parent) relief Grandparent caregiver relief Handicapped sibling relief Course fees relief (with effect from Year of Assessment 2011 S$5,500) CPF relief S$1,000 to S$6,000 S$2,000/S$3,500 S$4,500 to S$11,000 S$4,000 to S$5,500 per child S$750 to S$5,000 S$3,000 S$3,500 S$3,500

Compulsory employee CPF contribution

Withholding tax
Withholding tax is payable on certain payments made to non-residents of Singapore. Such payments include interest or other payments made in connection with any loans or indebtedness, royalties, technical assistance fees (for services rendered partially / wholly in Singapore), management fees, rental of movable property, directors remuneration, etc. The tax withheld must be paid to the Comptroller by the 15 th of the month following the date of actual or deemed payment to the non-resident. Subject to certain conditions, royalty payments to non-residents for shrink-wrap software, downloadable software for end-user, site licence and software bundled with computer hardware are exempt from withholding tax. The rates of withholding tax with effect from Year of Assessment 2010 are shown in the table below: Nature of payment Interest Royalty Rent or other payments for the use of movable property Technical or service fee for services performed in Singapore Management fee Charter fees Directors fee Professional fee paid to non-resident individual or foreign firm
1

Tax rate 15% 1 10% 1 15% 1 17% 17% 0% - 3% 20% 15% of gross income; or election for 20% on net income

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 establishments overall Singapore tax liability, if any. The above withholding tax rates may be reduced under the relevant double tax treaty with Singapore.

18

Double tax treaties

Singapore has concluded comprehensive double tax treaties with the 62 countries listed below: Australia Austria Bahrain Bangladesh Belgium Brunei Bulgaria Canada China Cyprus Czech Republic Denmark Egypt Estonia Finland Fiji France Georgia Germany Hungary India Indonesia Israel Italy Japan Kazakhstan Kuwait Latvia Lithuania Luxembourg Malaysia Malta Mauritius Mexico Mongolia Myanmar Netherlands New Zealand Norway Oman Pakistan Papua New Guinea Philippines Poland Portugal Qatar Romania Russian Federation Slovak Republic South Africa South Korea Sri Lanka Sweden Switzerland Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom Uzbekistan Vietnam

In addition, Singapore has limited tax treaties that cover only income from shipping and/or air transport with Bahrain, Chile, Hong Kong, Oman, Saudi Arabia, United Arab Emirates and the United States of America. These tax treaties help lessen the burden of double taxation on Singapores resident s. In concluding the tax treaties with other countries, Singapore has largely adopted the Organisation for Economic Co-operation and Development (OECD) model, in form and intention. Since endorsing the OECD revised Standard on Exchange of Information as set out in the revised Article 26 of the OECD Model Convention tax on 10 February 2009, Singapore has been re-negotiating existing tax treaties to adopt the new Standard. Generally, Singapores comprehensive tax treaties include provisions for the exchange of information for tax purposes.

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.

19

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.

Income tax administration

Tax return Persons chargeable to tax must submit a return of total income to Comptroller of Income Tax. 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 a statement showing a taxpayers assessed income and tax payable. The tax payable must be settled within one month from the date of service of the Notice of Assessment, failing which, late payment penalties will be imposed. Notices of Assessment are usually issued by the Comptroller upon receipt of estimated chargeable income or tax returns submitted by taxpayers. 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.

20

The Nexia International network covers:

Angola Argentina Australia Austria Azerbaijan Bahrain Belgium Bolivia Brazil British Virgin Islands Burkina Faso Cameroon Canada Cayman Islands Channel Isles Chile China Colombia Costa Rica Cyprus Czech Republic Denmark Dominican Republic Ecuador Egypt El Salvador

Estonia Finland France French Polynesia Germany Ghana Gibraltar Greece Guatemala Honduras Hong Kong SAR Hungary India Indonesia Iran Ireland Isle of Man Israel Italy Japan Jordan Kazakhstan Kenya Korea Kuwait Latvia

Lebanon Liechtenstein Lithuania Luxembourg Malawi Malaysia Malta Mauritius Mexico Mongolia Morocco Namibia Nepal Netherlands Nevis New Zealand Nigeria Norway Oman Pakistan Palestine Panama Paraguay Peru Poland Portugal

Puerto Rico Qatar Romania Russia Saudi Arabia Singapore Slovak Republic Slovenia South Africa Spain Sri Lanka Sweden Switzerland Taiwan Tanzania Thailand Tunisia Turkey Ukraine United Arab Emirates United Kingdom United States Uruguay Venezuela Vietnam

21

Nexia International
Nexia International is an international network of independent accounting and consulting firms. Our origins go back 33 years, making Nexia one of the longest established networks. Formerly Spicer & Oppenheim International, Nexia International is one of the few accountancy networks born out of a genuine need to provide a cross-border capability for its clients, this capability being matched only by that of the global firms. Currently we have approximately 14,000 professional staff serving our members in 590 offices in over 100 countries ranking us within the top 10 international networks. Nexia is different from other networks as our Member firms remain independent and most of our Members have exclusive representation in their national markets. On the other hand, Nexia Member firms share their experience and expertise on behalf of the international network and our clients. Our specialised committees on audit and tax set professional standards for our Member firms. Quality Control Reviews ensure that these high standards are met. Apart from this, our specialised committees publish several professional publications and manuals all contributing to the quality and international expertise of our network. We set high standards for all our member firms and continually ensure that these standards are met. Groups of international experts in specialist areas such as audit, tax and information technology determine the professional standards, which define Nexia. These groups also act as focal points, bringing together the latest ideas. As centres of excellence, they support members across the globe and underline our common commitment to quality. Whenever you do business in a foreign country, local advice and expertise are vital. As a client of a Nexia International member firm, your business has access to professional services from other members around the globe. Our international clients rely on our advice for a wide range of issues including cross-border mergers and acquisitions, corporation finance, international taxation and audit. Nexia International 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 does not accept liability for any loss arising from any action taken, or omission, on the basis of these publications. Professional advice should be obtained before acting or refraining from acting on the contents of these publications. Membership of Nexia International, or associated umbrella organizations, does not constitute any partnership between members, and members do not accept any responsibility for the commission of any act, or omission to act by, or the liabilities of, other members.

www.nexia.com

22

DISCLAIMER

We will not be held responsible for any error or omission for the above articles nor for the consequences of any actions taken based on the information in this article. All information is current at the date of writing. We are not obliged to update any changes. Readers are advised to seek professional advice before acting on any of the above. We will be happy to assist in whatever way we can. 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.

23

Nexia TS was formed in 1993 by two experienced certified public accountants Henry Tan and Sitoh Yih Pin. After working as managers for one of the international accounting firms, they saw a vision and an opportunity to establish their own organization not any accounting firm but one which is unique in its personalised and well qualified expertise. Nexia TS is recognized as an established accounting and consulting firm. We have grown significantly in size over the years. Being part of the Nexia International network, we are affiliated to accounting firms in many parts of the world. This means that our clients 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 a testimony to this, we are among the first local accounting firms to be accredited by the Institute of Chartered Accountants in Australia to provide supervision of professionals undergoing traineeship to qualify as Chartered Accountants. Nexia TS offers the following services: Assurance and business services Tax services Internal audit Advisory and transaction services Financial advisory, insolvency and corporate recovery Accounting and corporate services

24

Singapore
Nexia TS Public Accounting Corporation 100 Beach Road Shaw Tower, #30-00 Singapore 189702 Tel: (65) 6534 5700 | Fax: (65) 6534 5766 www.nexiats.com.sg

China
Nexia TS Shanghai (Co.), Ltd Unit 2104 Hong Kong Plaza 283 Huai Hai Zhong Road Shanghai 200021, China Tel: (8621) 6390 6000 | Fax: (8621) 6390 6300 www.nexiats.com.cn

25