MAJOR DEVELOPMENTS
To promote the growth of the financial service sector of the economy, the 1997 Budget introduced a package of incentives that will be effective from the year of assessment 1998 for an initial period of five years.
The following income qualifies for the tax incentives:
q Income derived by ACUs (see item 1) is taxed at 5% if the total taxable income from its activities exceeds S$50 million;
q Income derived by ACUs and approved fund managers from the management of at least S$10 billion of nonresident funds in Singapore is tax-exempt;
q Income derived by banks and merchant banks from managing initial public offerings of foreign currency is tax-exempt
q Income derived by ACUs and approved securities companies from the trading of foreign currency denominated shares listed on the Stock Exchange of Singapore is tax-exempt;
q Income earned from providing credit rating services with respect to the issue of foreign currency denominated securities in Singapore is taxed at 10%.
Other major changes include:
q Effective immediately, the investment allowance incentive is extended to satellite operators on approval capital expenditure that satisfies certain criteria;
q Effective immediately for an initial period of five years, payments for the leasing of capacity on satellites operated by nonresident persons is tax-exempt;
q Effective the year of assessment 1997, industrial building allowances are granted to buildings owned and used for the storage of goods and materials by companies providing logistic services;
q For the year of assessment 1997, individuals enjoy a 10% rebate.
INCOME TAXES ON CORPORATIONS
1. Rates
Generally, all entities locally incorporated or registered as a branchpay tax at the rate of 26% on income accruing in or derived from Singapore, or received in Singapore from outside Singapore.
Concessionary Tax Rate. The following income qualifies for the
concessionary tax rates:
q The income of Asian Currency Units, an ACU is a separate department of a financial institution licensed to handle business in Asian dollars (equivalent to Eurodollars) of financial institutions arising from syndicated offshore loans, is exempt from tax where the syndication work is carried out in Singapore.
q The income of an approved financial institution derived from the operation of its ACU is subject to tax at 10%.
q The income earned by ACUs is taxed at 5% if the total taxable income from its activities exceeds S$50 million, effective the year of assessment 1998 for five years.
q The income of approved securities companies (ASCs) from trading in non-Singapore dollar securities and transacting in non-Singapore dollar securities on their own account or on behalf of nonresidents is subject to tax at 10%.
q The income of an ASC arising from syndicated offshore loans and underwriting facilities is exempt from tax.
q Income derived by ACUs and ASCs from lending and borrowing foreign securities with another ACU or ASC or a nonresident person is taxed at 10%. The fee income derived by approved fund managers from arranging securities lending and borrowing transactions on behalf of foreign investors also is taxed at 10%. The securities lending fee, manufactured dividend, and interest received by a nonresident person from an ACU or ASC is exempt from tax.
q The increase in taxable income over the preceding qualifying year from the underwriting, managing, or placing of foreign securities by ACUs and ASCs is taxed at 5% if the taxable income from the activities exceeds S$10 million.
q The income derived by ACUs and ASCs from the trading of foreign currency denominated shares listed on the Stock Exchange of Singapore is exempt from tax from the year of assessment 1998 for five years.
q The qualifying income of approved trust companies and income derived by ACUs and ASCs from arranging, underwriting, managing, and placing of international securities from Singapore is subject to tax at 10%.
q The income of approved fund managers for providing fund management services is subject to tax at 10%.
q The income earned by nonresident investors from funds managed by approved fund managers, headquarter companies, and finance and treasury centers is exempt from tax. The income earned by unit trusts owned by nonresidents but managed by fund managers in Singapore is exempt from tax.
q The increase in taxable income over the prec
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