Singapore Investment Guide
Singapore Introduction
Singapore is strategically located at the center of Southeast Asia as one of the few city-states in the world. It is rated a high 25th place on the Human Development Index, and is considered the number one regional banking center. Its infrastructure is rated among the best in the world, having an advanced digital telecommunication network enabling businessmen to communicate anywhere in the world, as well as an internationally renowned airport and seaport.
It is the fourth largest foreign exchange trading center, and the most business-friendly economy in the world. The economy had an estimated growth rate of 8.2% for the second quarter of 2007. The government also legalized gambling in 2005.
Singapore's reputation as a successful financial center is protected by stringent banking laws governing the management of banks and financial institutions. Financial services, commodities exchanges, Manufacturing, Exports, and a well-developed infrastructure has made Singapore one of the developed country of the World.
Economic Introduction
The Singapore Economy is remarkable in the sense that in spite of its Asian background it is highly developed and doing extremely well in an open and corruption-free scenario. The Singapore Economy is a free market economy which is characterized by stable prices and a high per capita GDP.
Singapore's economic performance compares better with that of the OECD countries over the same period, with GDP growth more than twice the OECD growth of 3.3%.
The Singapore Economy is largely dependent on its electronics, chemicals, oil drilling equipment industries. At the same time other industries like petroleum refining, rubber processing and rubber products, financial services, ship repair, processed food and beverages also support the economy significantly.
Different policy initiatives are being undertaken for diversifying the economic base of Singapore after the downturn in mid 1980s. High importance is given on the service sector recently. The manufacturing sector has retained its position as the single largest sector in the economy.
Export & Import
International trade in Singapore as a proportion of total local output is considered without parallel in modern history. Merchandise exports have averaged over 130% of GDP since the mid-1980s. At the same time, services exports play a very significant role. One important feature of Singapore's trade performance has been the changing composition of exports to progressively higher capital and skill intensive products.
Insurance Industry
Singapore's general insurance industry is seeing good growth with a steady increase in both gross premiums and underwriting profits during the first nine months of the year 2005.
Figures released by the General Insurance Association show a 10 percent jump in underwriting profits for local general insurers to S$166 million during that period.
Total gross premiums climbed by 2.2 percent to S$1.71 billion. The association has reported that all major classes of business performed very well.
Motor insurance continued to be the largest class of business underwritten by local general insurers, taking up a 31 percent share of the market. Underwriting profits for motor insurance jumped nearly four-fold to S$36 million during the first nine months of the year.
The fire and personal accident insurance also registered good growth during that period. Premiums for personal accident showed the highest jump that is 13 percent as more Singaporeans bought travel insurance cover.
Singapore Mortgage
The unique feature for mortgage particularly housing finance in Singapore is the role of the mandatory saving scheme, Central Provident Fund (CPF). The home purchases in Singapore is mainly financed through the use of Central Provident Fund (CPF). This CPF was introduced in 1 July 1955 as the national funded pension scheme by the Colonial British Government. The relaxation of the CPF regulation has allowed residential property purchases in mid 1970s for public housing and early 1980s for private property. The total amount of withdrawals for housing has increased by about 14 fold in its peak in 1999 as compared to the year 1981. According to the Singapore Census 2000, the scheme has become very successful in promoting home ownership whereby 92% of the Singaporeans own a home.
Interest Rates On Mortgages In Singapore
Mortgage
Types |
Tenure |
Interest Rate % |
Fixed rate mortgage |
1 Year |
1.61 |
|
2 Year |
2.72 |
|
3 Year |
2.89 |
|
Beyond |
3.75 |
Flexible Rate Mortgage |
1 Year |
1.59 |
|
2 Year |
2.38 |
|
3 Year |
2.92 |
|
Beyond |
3.40 |
Loan To Value Ratio |
Max Tenure of Loan |
|
80% |
30-35 Years |
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In Singapore the average of the mortgages rates are offered by HSBC, Hong Leong Singapore Finance, NTUC, OCBC, DBS, May Bank and United Overseas Bank Group in October 2003.
Incentives and Preferential Treatment
The Government of Singapore provides a comprehensive package of tax concessions and incentives to businesses, the very nature of which reflects the direction in which the authorities are trying to steer economic development.
Pioneer Status
Pioneer status is usually given to high-tech companies which introduce high-tech skills to the economy. High-tech companies include business entities engaged in computer based information services, engineering services, technical services, the development or production of industrial designs and other computer related services. A company designated pioneer status is entitled to the following fiscal benefits:
Profits are fully exempted from corporate income tax for a period of 5-10 years. The current rate of corporate income tax is 18%.
Dividends: In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge levied on dividends, the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it. In the case of Pioneer Status companies the shortfall is exempt from any further taxation.
In February, 2004, the government announced that the Pioneer Incentive scheme would have its maximum duration increased immediately from 10 to 15 years.
Development & Expansion Scheme Status
Development & Expansion scheme status has replaced the incentive known as post-pioneer status. It is available to companies whose pioneer status has expired and which are engaged in capital investment to upgrade or modernize production capacity. The investment must have significant economic spin offs.
A company designated development and expansion scheme status is entitled to the following fiscal benefits:
• Income relating to "qualifying activities" is subject to a corporate income tax rate of not less than 10% (usually 13%) for a period of 10 years (extendable on application for a further period of 10 years). "Non-qualifying activities" are taxed at the normal corporate income tax rate of 18%.
• Dividends: In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate, with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge levied on dividends the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it. In the case of companies which hold Development & Expansion Scheme status the shortfall is exempt from any further taxation in so far as the shortfall is caused by tax free income from "qualifying" activities.
Export Incentives
The purpose of this incentive is to increase the value of exports through the provision of the following fiscal incentives:
• 90% of "qualifying" export income is exempt from corporate income tax. "Qualifying" export income refers to any annual increase in export income. The exemption period is 5-10 years in the case of companies engaged in the provision of services (with a provision for extension) and 3-15 years in the case of companies engaged in the production of manufacturing products.
•Dividends: In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate, with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge levied on dividends the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it. Companies which hold "export incentive certificates" are exempt from any further taxation on the shortfall in so far as that shortfall is a direct result of the concessionary tax status granted.
Investment Allowance Incentive
Investment allowance incentives entitle a corporation to set off against profits up to 50% of the cost of "qualifying" capital expenditure which has been incurred on the purchase of plant, machinery and factory buildings (excluding land) for the purpose of an "approved project" which involves either research & development, the provision of specialized engineering or technical services, the promotion of tourist industries (other than hotels) or the manufacture of any product. The allowance is in addition to the right of every corporation to annually depreciate the cost of a fixed asset and set off the amount of depreciation against taxable profits. In this respect investment allowances represent a form of double deduction. The allowance is granted as an alternative and not in addition to pioneer status and export incentives.
Overseas Enterprise Incentives
Companies engaged in providing designated services to "approved" overseas projects are entitled to the following fiscal concessions:
•"Qualifying export services income" is taxed at the concessionary rate of 10% for a maximum initial period of 10 years. The recipients of the services cannot be Singaporean residents or companies with permanent establishments in Singapore. The company providing the service must at least be 50% owned by Singaporean citizens or permanent residents and must be incorporated and resident in Singapore for tax purposes.
• Dividends: In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate, with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge levied on dividends the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it. Companies which have been granted "overseas enterprise incentives" are exempt from any further taxation on the shortfall in so far as that shortfall is caused by the concessionary tax status.
International Trading Companies
International trading companies which trade with non-residents and other "approved" traders in "approved" commodities (e.g. agricultural commodities, bulk edible products, building and industrial materials, minerals, machinery components, consumer products and industrial products) are entitled to the following fiscal benefits:
•An indefinite 10% concessionary tax rate on corporate profits. The current corporate income tax rate is 18%.
• Dividends: In Singapore there are no withholding taxes levied on dividends. Instead dividends are taxed at the standard rate, with a tax credit being given for any corporate tax levied on the profits out of which dividends are paid. Where there is a shortfall between the tax credit and the standard rate charge levied on dividends the shortfall must be made up by the company paying the dividend and not by the shareholder receiving it. Companies which hold "approved international trader" status are exempt from any further taxation on the shortfall in so far as that shortfall is caused by approved international trader status.
Tannet—Global Corporate Solution Provider，Value Investment & Strategic Development.
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