Guide Book on Investing in ASEAN: Update 2004

SINGAPORE

I. RELEVANT LEGISLATION

1. INVESTMENT ACT

- 1967 Economic Expansion Incentives Act

Law which principally consolidates investment incentives.

2. COMPANIES ACT

- Business Registration Act and Companies Act

Indicates requirements and procedures for business registration of
foreign companies.

3. INCENTIVES/EQUITY

4. MINIMUM INVESTMENT LEVEL

No minimum investment level requirement.

5. OTHER LEGISLATION

- 1968 Employment Act and 1966 Industrial Relation Act

Regulates employment and labor relations.

II. APPLICATION

1. AGENCY/IES INVOLVED IN ADMINISTERING INVESTMENT

APPLICATION AND GRANTING OF INCENTIVES

Economic Development Board (EDB), Infocomm Development Authority of

Singapore (IDA), International Enterprise (IE) Singapore, Monetary
Authority of Singapore (MAS), and Standards, Productivity and Innovation
Board (SPRING)

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2. CONDITIONS INCLUDING TIMETABLE FOR PROCESSING OF

APPLICATION

3. SPECIAL SERVICES

Since 1961, the Economic Development Board (EDB) has been steering
the growth of industry, in manufacturing and traded services. We, The
EDB, provide one-stop investment facilitation, from setting up in
Singapore, securing infrastructure and manpower, to linking with the
business community. Moving forward, our mission under EDB’s Industry
21 plan is to develop Singapore into a vibrant and robust global hub of
knowledge-driven industries in a knowledge-based economy.

III. PROMOTED AREAS/SECTORS

1. PROMOTED FIELD/SECTORS

Singapore is open to foreign investment in almost all industries, except

those with national security, health or social implications. The
sectors/areas that have proven to be attractive to foreign investors include
electronics, logistics, chemicals, communications and pharmaceuticals.

2. RESTRICTIONS

IV. FOREIGN EQUITY POLICIES

1. EQUITY REGULATIONS

With exceptions for national security purposes and in certain industries, no

restrictions are placed on foreign ownership of Singapore corporations.

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The following sectors are some of the exceptions:

- Airlines
- Shipping
- Public utility services-electricity, gas and water
- Telecommunications
- Newspaper publishing
- Arms and ammunitions is subject to a government approval.

2. CONDITIONS/RESTRICTIONS

V. INCENTIVES

1. CORPORATE INCOME TAX / INCOME TAX ALLOWANCE

Pioneer projects will be granted exemption for 5-10 years.

2. EXEMPTION FROM OR REDUCTION OF TAXES ON IMPORTED

CAPITAL GOODS

N.A

3. EXEMPTION FROM OR REDUCTION OF TAXES ON IMPORTED RAW

MATERIALS

N.A

4. OTHER INCENTIVES (I.E. GRANTS, DOMESTIC LOANS, SUBSIDIES,

ETC.)

N.A

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5. FOREIGN LOAN

There is a 15% withholding tax for interest paid to non-resident lenders.

However, the government may grant tax exemption for any 'Approved
foreign loan' if the loan is utilised for the purchase of productive
equipment.

VI. TAXATION

Tax System

Up to 31 December 2002, Singapore adopted an imputation system under which

tax assessed on a company resident in Singapore in respect of its normal
chargeable income was passed on as tax credit to its shareholders upon
distribution of dividend.
With effect from 1 January 2003, Singapore adopts a one-tier corporate tax
system. Under this system, tax paid by a company on its chargeable income is
final and all dividends paid are exempt from tax in the hands of its shareholders.

A company is taxed at a flat rate on its chargeable income.

Residential Status of a Company in Singapore

A company is resident in Singapore if the control and management of its

business is exercised in Singapore.

A resident company is entitled to the benefits conferred under the Avoidance of

Double Taxation Agreements which Singapore has concluded with treaty
countries

Basis of Taxation

Singapore adopts a territorial basis of taxation. Only income derived from

Singapore, or income derived overseas but received in Singapore, are subject to
tax.

Group relief provisions will be introduced from the year of assessment 2003.
Inter-company transactions must be concluded at an arms' length basis.

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The tax year is known as a year of assessment and runs from 1 January to 31
December. Tax is imposed on a preceding year basis, i.e. profits for a financial
year ending in 2001 are taxed in the year of assessment 2002.

1. CORPORATE TAX
The tax rate of 20% is with effect from the year of assessment 2005 (FY
2004). It applies to both Singapore-incorporated subsidiaries as well as
branches of foreign companies. It applies equally to resident and non-
resident companies.
Previously, the tax rate for year of assessment 2003 (FY 2002) is 22%.

2. VALUE ADDED TAX/SALES TAX

A Goods and Services Tax (GST) at a rate of 4% is imposed on the supply

of goods and services in Singapore and on the importation of goods into
Singapore. With effect from 1 Jan 2004, the GST rate will be increased to
5%.

3. WITHHOLDING TAX

15% for payments to non-residents of royalties, interest, 'know-how' fees

and rent for movable properties.

4. PERSONAL INCOME TAX

Graduated personal income tax rates of 2-26% depending on income tax

bracket.

5. LAND/PROPERTY TAX

Property tax is calculated as a percentage of the annual value of all

houses, lands, buildings and tenements. Annual value is defined as the
gross annual rental value of the property. It is not dependent on the type
of industry the property is used in. The common methods of determining
the annual value are:

a) Using the rental value of comparable properties in similar locations.

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b) Applying a reasonable return on the capital investment in the

property (commonly used for properties with no alternative use).
c) Adopting 5% of the market value for vacant land or land with
insignificant buildings.

The rate for industrial and commercial properties is 12%. Owner-occupied

residential properties are taxed at a concessionary rate of 4%.

6. REAL PROPERTY GAINS TAX

7. ESTATE DUTY

Estate Duty is payable on the aggregate market value of all Singapore

property (immovable and moveable property) and movable property
outside Singapore of a deceased person at the date of death. His land and
buildings (immovable property) outside Singapore are not liable to duty.

8. STAMP DUTY

This is imposed on commercial and legal documents relating to stock &

shares and immovable property.

9. Customs & Excise Duties

Singapore is a free port and has relatively few excise and import duties.
All dutiable goods imported into or manufactured in Singapore are subject
to Customs duty in accordance with the Schedule to the Singapore
Customs Duties Order.

Where the goods are dutiable, ad valorem or specific rates may be

applied. An ad valorem rate is a percentage of the assessed value of the
imported goods such as 31% ad valorem. A specific rate is a specified
amount per unit of weight or other quantity such as $130 per kg.

Excise duties are imposed principally on tobacco, petroleum products and

liquors. Also, very few products are subjected to import duties. The duties
are mainly on motor vehicles, tobacco, liquor and petroleum products.

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More information is available on the Customs & Excise Duties website at

www.customs.gov.sg.

10. MUNICIPAL TAXES

N.A

11. OTHER TAXES

Motor vehicle taxes; Betting taxes.

More information on taxation is available on the Inland Revenue Authority

of Singapore website www.iras.gov.sg.

VII. FINANCIAL REGULATIONS

1. BORROWING

2. FOREIGN EXCHANGE

There are no foreign exchange controls.

3. SOURCE OF FINANCING

Sources of financing for foreign investors include share or bond flotation,

loans for banks and other financial institutions, trade credit. Foreign
investors may also use sources derived from their enterprises, such as
undistributed profits, funds borrowed from shareholders, and new issues
of equity shares.

4. REPATRIATION OF CAPITAL/PROFITS

No capital controls on flow of investment proceeds

5. OTHER SPECIAL REGULATIONS

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N.A.

More information is available on the Monetary Authority of Singapore

website www.mas.gov.sg

VIII. EMPLOYMENT FOR APPROVAL OF FOREIGN WORKERS

1. CONDITIONS OF APPROVAL OF FOREIGN EMPLOYEES

(MANAGERIAL, SUPERVISOR, UNSKILLED LABOUR)

The Employment Pass Department of the Ministry of Manpower handles

the Employment Pass function and issues both P and Q workpasses
under the workpass system for foreigners working in Singapore.
(Please refer to Section VIII.2 for definition of P and Q workpasses)

2. WORK PERMIT PROCESSING AND REQUIREMENTS (MANAGERIAL,

SUPERVISOR, UNSKILLED LABOUR)

The different work passes are issued in accordance with applicant’s

tertiary/professional/technical qualifications and basic monthly salary level.

P passes for those who hold administrative, professional and managerial

jobs, entrepreneurs and investors, as well as specialist talent such as
world class artists and musicians;

Q passes for those skilled workers and technicians; and

Work Permits are issued to foreigners to work in Singapore if he draws a

monthly salary of up to S$2000.

Professional Visit Passes

Professional visit passes are issued to foreigners permitted to engage in

short term professional assignments/activities in Singapore eg. speakers
at seminars/ conferences.

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Business or Social Visit Visas

Business or Social Visit Visas are required for nationals of some countries.

More information is available on the Ministry of Manpower website

www.mom.gov.sg and the Singapore Immigration & Registration website
at www.ica.gov.sg.

IX. LAND AND BUILDING OWNERSHIP

1. REGULATION ON ACQUISITION OF LAND AND BUILDING

In principle, foreign companies use land in the form of lease from the
government. The lease term, initially 30 years can be extended to 60.
Lease rates vary with respect to the locations. It is possible to buy factory
buildings.

2. RESTRICTIONS

Land ownership

- Non-citizens cannot own land

- Non-citizens are restricted from purchasing certain residential

properties.