international tax summaries——SINGAPORE（1998）（一）
international tax summaries——SINGAPORE（1998）（一）
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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
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 preceding qualifying year from the management of funds of at least S$5 billion from foreign investors by ACUs and approved fund managers is taxed at 5%.
q The income derived by ACUs and approved fund managers from the management of at least S$10 billion of nonresident funds in Singapore, provided certain conditions are met, is exempt from tax from the year of assessment 1998 for five years.
q The income derived by banks and merchant banks from managing initial public offerings of foreign currency is exempt from tax from the year of assessment 1998 for five years.
q Income earned by finance and treasury centers from trading in foreign exchange, offshore investments, and the provision of finanCIAl services to related companies is subject to tax at 10%.
q Income from approved offshore transactions of members of the Singapore International Monetary Exchange (SIMEX) is subject to tax at 10%.
q The income of an insurance company derived from carrying on the business (other than the business of life insurance) of insuring and reinsuring offshore risks is subject to tax at 10%.
q The offshore investment income of a life insurance company is subject to tax at 10%.
q Net income from offshore leasing of machinery or plant is subject to tax at 10%.
q Certain income of an approved operational headquarters company derived from providing approved services in Singapore and income from trading in foreign exchange and foreign investments on its own account are subject to tax at a 10% rate for up to ten years (plus extension).
q Trading income and brokerage commissions of approved oil trading companies that are derived from prescribed transactions in petroleum, petroleum products, and petroleum futures with nonresidents or other approved oil traders is subject to tax at 10%.
q Trading income and brokerage commissions of approved
international trading companies that are derived from trading in approved commodities with nonresidents and other approved international trading companies is subject to tax at 10%.
q Companies qualifying for relief under the Economic Expansion Incentives (Relief from Income Tax) Act are subject to speCIAl tax concessions (see item 34).
q Companies owning and operating seagoing Singapore-registered vessels deriving income from the transportation of passengers, mail, livestock, or goods or income from the charter of such ships are exempt from tax.
q Singapore-resident companies owning and operating foreign ships deriving income from the transportation of passengers, mail, livestock, or goods from outside the Port of Singapore, or income from the charter of such ships to nonresidents are exempt from tax.
q The income of a member of a prescribed commodity futures exchange derived from specified commodity futures transactions with nonresidents, ACUs, and other members of the exchange is subject to tax at 10%.
q Certain income of nonresident benefiCIAries of trusts where the trustee is an approved trustee company is exempt from tax.
q Prescribed income of an approved venture company derived from making approved investments is exempt from tax for a period not exceeding ten years.
q Income derived by approved art and antique dealers from transactions on behalf of nonresidents with approved auction houses is subject to tax at 10% for five years.
q Income earned from providing credit rating services with respect to the issue of foreign currency denominated securities in Singapore is taxed at 10% from the year of assessment 1998 for five years.
q The taxable income on royalties and other payments received by any author or composer from local publishers for the assignment of or the right to use the copyright in any literary, dramatic, musical, or artistic work is deemed to be an amount not exceeding 10% of the gross royalties or payments. The deemed 10% taxable income also is available for royalties and other payments received by a local inventor or author in respect of approved invention and product innovation.
Shareholders receiving dividends out of these profits (except the last item) are not subject to further taxation.
2. Local Income Taxes
3. Capital Gains Taxes
Capital gains are not taxed and capital losses are not deductible. However, the distinction between capital transactions and ordinary gains and losses is not always clear. Generally, a gain on a fixed asset purchased by a corporation for its use, and later sold at a profit, is a capital gain. However, if the same asset was purchased with intent to make a profit, and later sold, the profit would be treated as income and taxed at the rate of 26%.
Unit trusts and investment holding companies may elect to have their profits taxed according to a sliding scale based on their holding period of the securities. For securities held for less than 18 months, the profits will be subject to a tax that ranges from 2.6% for 18 months to 26% for holdings of less than six months. Gains on stocks held for more than 18 months are tax-free.
Approved Singapore-based unit trusts are taxed on 10% of the gains arising from the sale of shares and securities at the prevailing corporate tax rate. Such gains are exempt from tax in the hands of the foreign unit holders. The distribution of the remaining 90% will be exempt from tax in the hands of individual and foreign unit holders but taxed in all other cases.
Gains from the sale of any real property or shares in real property companies within three years of their acquisition are deemed to be income and are liable to income tax, whether or not it can be shown that the purchase was made on the capital account. The proportion of the gain that is assessable to tax depends on the length of time the property was held.
4. Branch Profits Taxes
Branch profits are taxed at the rate of 26%.
5. Foreign Tax Reliefs
Foreign-source income derived by corporations resident in Singapore is subject to tax when remitted to Singapore. Treaty relief is available through foreign tax credits granted under the relevant tax treaty.
Unilateral relief is granted to residents on income derived from professional, consultancy, and other specified services and sourced to certain countries with which Singapore has no double taxation agreements. Included in the specified services are approved operational headquarters and approved finance and treasury center services.
A restricted form of unilateral relief is granted on income arising in Commonwealth countries that provide reciprocal relief. In respect of foreign dividends remitted to Singapore, a credit is allowed for the foreign tax suffered against the Singapore tax liability. The tax credit will cover the underlying foreign corporate tax on the profits out of which the dividend is paid where the recipient of the dividend owns at least 25% of the foreign company paying the dividend.
Effective March 1, 1995, Singapore companies on a case-by-case basis may qualify for unilateral tax credit on foreign dividends without having to hold 25% of the share capital of the paying company.
6. Classification of Corporations
Corporations are classified, for Singapore tax purposes, as either resident or nonresident. A resident corporation is one that is incorporated in Singapore or carries on business in Singapore and has its control and management exercised in Singapore. Generally, the control and management of a company is vested in its directors, and a company is usually regarded as resident in Singapore if its directors meetings are mainly held in Singapore. The main differences in taxation between resident and nonresident corporations are related to the
payment of dividends and the entitlement to double taxation relief. A resident company must deduct tax at the rate of 26% from dividends paid to shareholders (see item 8). Only resident corporations are entitled to double taxation relief in respect of foreign tax suffered.
7. Payment of Taxes
On the submission of an income tax return, or in the case of a
corporation carrying on a trade or business with an accounting year ended on a date other than December 31, on the submission of estimates, the Inland Revenue Department issues a Notice of Assessment. Unless arrangements are made to settle the tax liability by installment payments, the tax stated in the Notice of Assessment must be paid within one month from the date of service of the assessment, notwithstanding any objection lodged. A penalty of 5% is imposed if the tax is not paid within the stipulated period. Furthermore, if the tax is not paid within 60 days of the imposition of