Singapore: A Guide to Doing Business in Singapore

A foreign company is not allowed to "carry on business" in Singapore or acquire a "place of business" in Singapore unless it is registered with the Singapore Accounting and Corporate Regulatory Authority ("ACRA"). The foreign company may register itself as a branch, or it may incorporate a local private limited company. The governing legislation is the Singapore Companies Act (Cap. 50).

There is no precise definition of the phrase "carrying on business" in the Companies Act. It is defined in the Companies Act to include administering, managing or otherwise dealing with property situated in Singapore as an agent, legal personal representative or trustee, whether by servants, agents or otherwise. The Companies Act further provides that a foreign company is not to be regarded as carrying on business in Singapore for reason only that it:

• is or becomes a party to any action or suit or any administrative or arbitration proceeding or effects settlement of an action, suit or proceeding or of any claim or dispute in Singapore
• holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs in Singapore
• maintains any bank account in Singapore
• effects any sale through an independent contractor in Singapore
• solicits or procures any order in Singapore which becomes a binding contract, provided that such order is accepted outside Singapore
• creates evidence of any debt or creates a charge on movable or immovable property in Singapore
• secures or collects any of its debts or enforces its rights in regard to any securities relating to such debts in Singapore
• conducts an isolated transaction in Singapore that is completed within a period of 31 days, but not being one of a number of similar transactions repeated from time to time
• invests any of its funds or holds any property in Singapore
• establishes a share transfer or share registration office in Singapore
• effects any transaction through its related corporation licensed or approved under any written law by the Monetary Authority of Singapore, established under the Monetary Authority of Singapore Act (Cap. 186) under an arrangement approved by the Authority

The question as to whether a company will be deemed to be carrying on business within Singapore is ultimately one of fact. Relevant factors to consider include:

• Will a place be established in Singapore from which the business of the company will be conducted?
• Will an employee be employed to look after the company’s affairs in Singapore?
• Will an agent be employed to conduct the company’s business in Singapore?
• Will the company raise loans or finance in Singapore?
• Will the company trade within Singapore?

In addition, the phrase "carrying on business" also connotes some degree of repetition of acts. Therefore, a single transaction will generally not amount to the carrying on of business in Singapore.

There is also no precise definition of a "place of business" in the Companies Act. However, if the company’s business is being carried on from a fixed place within Singapore, that is sufficient for the purposes of the Companies Act.

The factors to consider in deciding whether to set up a branch or a local subsidiary are as follows:

An advantage of incorporating a local subsidiary is that it is a separate legal entity from its parent company even if the latter may be its only shareholder and will maintain control over its board of directors. This means that the parent company does not have to bear the losses and liabilities of the local subsidiary. On the other hand, the debts and liabilities of a branch in Singapore would attach to the foreign company, as a branch, unlike a local subsidiary, is not a separate legal entity from its head office.

The registration fee payable for the incorporation of a Singapore company is S$300 (regardless of the amount of its authorised share capital).

The registration fee payable for the registration of a branch is S$300 if the foreign company is a company limited-by-shares (regardless of the amount of its authorised share capital).

However, if the foreign company does not have a share capital, a registration fee of S$1,200 is payable.

There may be different tax consequences with respect to a branch and a local subsidiary. Under Singapore law, branches of foreign companies and private limited companies pay the same rate of tax on income accruing in or derived from Singapore, or received in Singapore from outside Singapore. The corporate tax rate for the year of assessment of 2004 is 22%. This will be reduced to 20% for the year of assessment of 2005.

Accordingly, from a tax perspective, the issue of whether or not business activities should be carried out in Singapore through a branch or through a local subsidiary will largely depend on the taxation system of the parent company’s home country. For instance, if the home country does not tax foreign income, whether earned by a branch or a subsidiary, it should not make any difference whether a branch or a subsidiary is established in Singapore. If, on the other hand, foreign income is taxed in the home country, either when it is earned or when it is remitted, then consideration must be given to the tax laws of the home country.

You should consider the following:

• Will the home country tax income which arises in Singapore? If so, will it make a difference if such income is earned by a branch or a local subsidiary? Does tax liability extend only to income that is remitted back to and received in the home country as against income that is kept outside of the home country?
• Will losses incurred in Singapore (by a branch as against a subsidiary) be allowed in the home country?
• Will dividends received from Singapore (from the locally incorporated subsidiary) which are already subject to tax in Singapore, be further taxed in the home country?

In addition, the choice of business form may impact the residency of the Singapore entity for purposes of taxation under Singapore laws. Singapore residency for tax purposes is determined by whether the control and management of the company is exercised in Singapore. In the case of a branch, the control and management of the foreign company is more likely to be exercised outside Singapore. Unlike a resident, a non-resident will not be entitled to claim relief for tax suffered on income derived from countries with which Singapore has concluded double taxation treaties. A non-resident will also not be entitled to favourable withholding tax rates relating to certain categories of payment made to the residents of treaty countries. Further, if the branch is a non-resident, any payments made to the branch by a Singapore resident will be subject to withholding tax under Singapore laws, although in practice, the Comptroller of Income Tax will usually grant a waiver of withholding tax on such payments if the requisite requirements are satisfied.

You may wish to note however that there are no restrictions on the employment of Singapore citizens or permanent residents or foreigners by either the branch office of a foreign company or by a local subsidiary. Where foreigners are employed, whether by a branch office or a local subsidiary, each foreign employee will require an employment pass sponsored by a local entity. Both a branch and a subsidiary may act as the sponsor for their respective employees.

A foreign company may consider registering a representative office in Singapore if it is keen to test the business environment in Singapore before deciding to invest here. Representative offices are opened as temporary facilities for foreign companies to explore business opportunities in Singapore.

Representative offices may only carry out promotional and liaison work in Singapore. They are prohibited from carrying on any business activities in Singapore.

We set out below a summary of the details relevant to the incorporation of a private limited company in Singapore.

A company cannot be registered under a particular name unless that name has been reserved for its use with ACRA. Thus, before a company can be incorporated, it is necessary to reserve a name for it. This reservation, once approved, is effective for two months from the date of reservation. During the period for which a name is reserved, no other company or business may be registered under, or change its name to, the reserved name. The reservation may be extended for a further period of two months at the discretion of the Registrar.

Every private limited company must have the words "Private Limited" as part of and at the end of its name. The abbreviation of the aforesaid words, "Pte. Ltd.", is permitted.

The Registrar is empowered not to register a company with a name that:

• is undesirable
• is identical to that of any other company, corporation or business as to be likely to be mistaken for it
• so nearly resembles the name of another company, corporation or business as to be likely to be mistaken for it
• is of a kind that the Minister for Finance has directed the Registrar not to accept for registration

If the proposed name of the company is or includes the trademark or patent name of a product or the name of a company existing elsewhere, you may be required to produce the written consent of the owner of the trademark or patent name or the written consent of the other company for the use of the name.

There is no limit on the number of names that you can submit for registration. Currently, a fee of S$15 is payable for each name submitted.

In Singapore, a company has full capacity to carry on or undertake any business activity and to do any act or enter into any transaction.

However, a company may choose to restrict its power by including in the memorandum of association, the objects for which the company is incorporated and a list of the powers that could be exercised by the company in achieving those objects. Thus, the legal capacity of the company to carry on any activity is thus restricted to and derived from its objects and powers contained in the memorandum.

The memorandum must state inter alia the following:

• the name of the company
• if necessary, the objects of the company
• the amount of the company’s share capital and the manner in which the share capital is to be divided into shares of fixed nominal values
• that the liability of the members is limited
• the names, addresses and occupations of the subscribers
• that the subscribers "are desirous of being formed into a company in pursuance of the Memorandum" and that they agree to take up the number of shares set out opposite their respective names

The Companies Act requires the memorandum of association to be signed by persons called the "subscribers". The subscribers must subscribe for at least one share each in the company and will be the first members of the company.

The articles of association are a company’s rules for its internal management. As to the force and effect of the articles, the following should be noted:

• they are subordinate to the memorandum of association and cannot take away any right granted by the memorandum nor can they authorise anything to be done which is prohibited by the memorandum or the Companies Act
• the articles (when registered) bind the company and the members as if they were a contract under seal and set out the members’ rights and liabilities vis-à-vis the company
• a company may sue a member and a member may sue a company to enforce or restrain breaches of the articles
• the articles (when registered) bind the company and each officer of the company as if they were a contract under seal
• the articles cannot constitute a contract between the company and an outsider which that outsider can take advantage of
• as the memorandum and articles of association of a company are public documents, everyone is regarded in law as having notice of them

The authorised or nominal capital of the company represents the ceiling of the capital available for issue. Any allotment of shares beyond the authorised capital is void. A company need not allot all the shares in its authorised capital. A company may alter its capital structure by consolidating shares into shares of larger nominal value or sub-dividing them into shares of smaller nominal value. It may also increase its share capital or reduce it. Any change in a company’s capital structure must be carried out in accordance with the Companies Act and the company’s memorandum and articles of association.

As mentioned above, the registration fee for the incorporation of a local private limited company is S$300, regardless of the size of its authorised share capital.

The issued capital is the amount of authorised capital that has actually been subscribed by shareholders. These shareholders must agree to give consideration, either in cash or in kind, for the shares to be issued to them. The issued capital may either be wholly or partly paid up by the shareholders.

There are no restrictions imposed on the foreign ownership of companies, with the exception of certain types of companies.

There must be a minimum of one share of S$1.00 to be subscribed by a minimum of one subscriber who must sign the Memorandum and Articles of Association.

For the ease of incorporation, the subscribers should be present in Singapore to sign the incorporation documents. You may consider appointing nominee subscribers for the purpose of incorporation, which nominee subscribers will transfer their shares to the intended owner after incorporation.

The Companies Act provides that there must be a minimum of one director who must be resident in Singapore. A foreigner who holds an employment pass enabling him to work in Singapore will qualify as a resident director. Only a natural person of full age and capacity can be a director of a company.

Each person to be appointed as a director must execute a consent to act in the prescribed form. The consent to act must be accompanied by a prescribed statement that the director is not disqualified from acting as a director under the Companies Act.

The first directors of a company must be named in the articles of association of the company.

From the date of its incorporation, every company must at all times have a registered office in Singapore to which all communications and notices may be addressed and which shall be open and accessible to the public. The registered office may or may not be the place of business. It must be open to the public for at least five hours during ordinary business hours every day, except Saturdays, Sundays and public holidays.

With effect from 10 June 2003, home-owners are allowed to conduct small-scale businesses in their homes under a new Home Office Scheme. This scheme applies to both private and Housing and Development Board ("HDB") properties. Eligible home-owners must seek prior written approval from HDB or the Urban Development Authority (as the case may be) to use their homes for home office use.

To incorporate a company, its memorandum and articles of association and the other prescribed statutory documents must be lodged with ACRA, together with the appropriate registration fee. The documents to be submitted for incorporation include:

• the memorandum and articles of association
• a form certifying the identity of the subscribers and officers of the company
• return of allotment of shares
• statement containing particulars of shares allotted otherwise than for cash (where applicable)

Please note that registration is not automatic even though all the required documents have been lodged. In Singapore, the Registrar has the discretion to refuse to register a company or to reject any document submitted for lodgement in any of the following circumstances:

• where the name of the company is unacceptable under the Companies Act unless the Minister approves otherwise
• where the Registrar is of the view that any of the documents filed contains a matter contrary to law
• where the Registrar is satisfied that the company will be used in an unlawful manner or for purposes prejudicial to public peace, welfare or good order of Singapore
• where the Registrar is satisfied that registering the company will be contrary to the national security or interest of Singapore

In the last two circumstances mentioned, the company aggrieved by the Registrar’s decision may appeal to the Minister whose decision is final.

The company must appoint a company secretary within six months from the date of incorporation of the company. Further, unless the company is exempted from complying with audit requirements under the Companies Act, the company must appoint an auditor, who must be an approved public accountant, within three months from the date of incorporation of the company.

The post-corporation requirements relating to a Singapore company include:

• Register of Members to be maintained.
• Minutes of Board and Members' Meetings to be maintained.
• Proper books of accounts to be maintained.
• Filing of returns at ACRA of particulars and changes in particulars of directors, managers, auditor and secretary.
• Filing of returns relating to the allotment of shares at ACRA.
• Filing of returns relating to the transfer of shares at ACRA.
• Filing at ACRA of notification of any change or alteration in name, registered office, increase or decrease in capital, etc.
• Unless exempted, filing at ACRA of the audited balance sheet and profit and loss account of the company for the relevant financial year and the Annual Return.
• An annual general meeting to be held at least once every 15 months from the date of the last annual general meeting or within six months from the close of the financial year, whichever is earlier. The annual general meeting, and any extraordinary general meeting, may be held outside Singapore. However a private company may, by a unanimous resolution of members, dispense with the holding of an Annual General Meeting.

A shelf company is a "ready made" company, waiting to be purchased. Shelf companies therefore offer an immediate solution to an urgent requirement for a company. However, as the time it takes to incorporate a company in Singapore has been significantly reduced, the demand for shelf companies has also reduced. There is still a specific demand for shelf companies. For example, shelf companies with LDU certificates are available on request.

A shelf company would not come with the name and specific objects clauses which you would like, but these matters may be changed subsequent to the acquisition.

Before a foreign company can be registered in Singapore, it is necessary to reserve a name for it under the Companies Act. This reservation must be made in the prescribed form and once approved, the reservation is effective for two months from the date of lodgement of the reservation form. During the period for which a name is reserved, no other company or business may be registered under or change its name to the reserved name. The reservation may be extended for a further period of two months at the discretion of the Registrar.

In this regard, it should be noted that a foreign company will not be registered in Singapore (save with the Minister’s consent) with a name that is undesirable or a name that by virtue of a ministerial direction could not be accepted for registration in Singapore.

The following information must be provided in the application for the reservation of name:

• The name of the foreign company
• The country of incorporation of the foreign company
• The date of incorporation of the foreign company
• The capital structure of the foreign company
• The principal activities of the foreign company
• The other countries in which the foreign company is registered (if any)

Currently, a fee of S$15 is payable for each name submitted.

After the Registrar has approved the name, the foreign company must effect registration in Singapore before it commences business.

We set out below a summary of the documents that the foreign company must lodge with ACRA for registration:

The foreign company is required to submit a certified copy of the certificate of its incorporation or registration in its place of incorporation or origin or a document of similar effect. The certification must be done by the issuing body no earlier than three months prior to its lodgment with ACRA.

It is also required to submit a certified copy of its charter, statute or memorandum and articles of association or other instrument constituting or defining its constitution. The relevant document must be certified no earlier than three months beforehand by the overseas official authority which incorporated the company, a notary public, or a director, manager or secretary of the company in the form of an affidavit.

The foreign company must further furnish a list of the directors of the foreign company together with each director’s residential address, nationality, occupation, passport number (if any) and date of appointment as director. If the director is a director of any public company or subsidiary of public company in Singapore, then the name of such company in which he is director must be provided.

If the list includes directors resident in Singapore who are members of the local board of directors, a memorandum duly executed by or on behalf of the foreign company stating the powers of the local directors must be furnished.

Every foreign company is required to appoint at least two natural persons resident in Singapore (residents include foreigners with employment passes) as its agents in Singapore to accept on its behalf service of process and any notices required to be served on the company.

The agents will be appointed by way of a memorandum of appointment of agent. The memorandum, and an affidavit verifying the execution of the memorandum, must be submitted to ACRA. The memorandum must be executed under the seal of the foreign company or in such other manner as to bind the foreign company in accordance with the laws of the country in which the foreign company is incorporated, and the execution of the memorandum must be verified by a director or the company secretary in the prescribed manner.

A foreign company must have a registered office in Singapore to which all communications and notices may be addressed and which shall be open and accessible to the public for not less than five hours between the hours of 9 a.m. and 5 p.m. each day, except for Saturdays, Sundays and public holidays.

A registration fee of S$300 is payable for a limited-by-shares company regardless of the amount of its authorised share capital.

If the foreign company does not have a share capital, a registration fee of S$1,200 is payable.

Where any certificate or document required to be filed with ACRA is not in the English language, it must be accompanied by a translation in the English language and certified as a true copy by either:

• in the case of a translation made outside Singapore:

• in the case of a translation made within Singapore, a person approved by ACRA.

The post-registration obligations of a foreign company include notifying ACRA of the following and lodging the relevant forms and documents with ACRA:

• Any change or alteration made in:

• Any increase in the authorised share capital of the foreign company. This must be notified to ACRA within one month from the date of the increase, unless ACRA grants a special extension.
• In the case of a foreign company not having a share capital, any increase in the number of its members beyond the registered number. This must be notified to ACRA within one month of the increase.
• Any order restraining further proceedings against the foreign company (except by leave) following a compromise with creditors and members being effected. This must be notified to ACRA within one month of the order.

• A copy of the audited balance sheet of the foreign company accompanied by such annexures as required by the law of the country of incorporation, together with a duly audited statement showing its assets and liabilities arising out of its Singapore operations and a duly audited profit and loss statement in respect of its Singapore operations. The said documents must be filed with ACRA within two months from the date of the annual general meeting of the foreign company.

The ACRA may waive compliance with the above if she is satisfied that:

• Notice of cessation of business where the foreign company ceases to have a place of business or to carry on business in Singapore, which notice must be lodged with ACRA within seven days after the cessation of business.

• Notice of liquidation/dissolution where the foreign company goes into liquidation in its place of incorporation or origin, which notice must be lodged with ACRA within one month after the commencement of the liquidation.

Singapore tax laws only tax income of a corporation that is derived from a source within Singapore or received in Singapore from outside Singapore. There is no precise definition of "source" in the Singapore Income Tax Act and consequently, each commercial activity has to be carefully examined to determine the source from which it generated income. Income is regarded as received in Singapore from outside Singapore if the income:

• is remitted to, transmitted or brought into, Singapore;
• is applied in or towards the satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; or
• is applied towards the purchase of any movable property which is brought into Singapore.

In Singapore, income is assessed to tax on a preceding year basis. Essentially, this means that income earned by a company in a fiscal year will be taxed in the following tax year, referred to as the year of assessment. For example, income for the fiscal year ended in 2001 will be assessed in the year of assessment of 2002.

As discussed, Singapore incorporated companies and Singapore branches of foreign companies are both taxed at the same corporate tax rate.

Singapore laws do not impose tax on capital gains. Singapore only imposes tax on income gains.

Accordingly, gains arising from a sale of shares are only subject to tax where the gains are of an income nature and are derived from Singapore or are received in Singapore.

The gains are usually deemed to be of an income nature where the seller engages in or is deemed to be engaging in a business of dealing in or trading of shares and securities. The gains are usually deemed to be of a capital nature where the seller is merely an ordinary investor. Whether the sale of shares amounts to income gains or capital gains is dependent on the facts of each case. In determining whether the gains constitute taxable income gains, the factors that the tax authority takes into consideration include:

• the length of the holding period of the shares in question;
• the frequency of share sale transactions carried out by the seller;
• the reasons for which the shares were acquired;
• the circumstances under which the disposal of the shares were made; and
• the nature of business or trade carried on by the seller.

Dividends distributed by a company resident in Singapore is deemed to be sourced from Singapore. A company is considered as a resident in Singapore if the control and management of its business is exercised in Singapore.

Singapore has, since 1 January 2003, adopted the one-tier corporate tax system ("one-tier system"). Pursuant to the one-tier system, the tax paid by a company on its normal chargeable income would constitute a final tax. Accordingly, any tax assessed on or after 1 January 2003 in respect of its chargeable income for any year of assessment would not be credited into any dividend franking account. Instead, the dividends declared would be exempt from tax in the hands of their shareholders.

Therefore, under the one-tier system, companies need not maintain a record of corporate tax paid for the purposes of paying dividend.

In the meantime, companies with unutilised tax credits as at 31 December 2002 would be given up to 5 years (from 1 January 2003 to 31 December 2007) to remain on the imputation system (for the purpose of paying franked dividends) before moving to the one-tier system. This is to allow such companies some time to utilise their available franking credits.

Companies will move to the one-tier system once they have either fully utilised their Section 44 credit balance or they opt to move to the one-tier system.

Further, with effect from 1^st June 2003 foreign dividends remitted to or received in Singapore will be tax exempt provided the following conditions are met:

(a) in the year the foreign dividend is received in Singapore, the headline tax rate of the foreign jurisdiction from which the dividend is received is at least 15%; and

(b) the foreign dividend has been subjected to tax in the foreign jurisdiction from which they were received.

If the above conditions are not met, the foreign dividend remitted to or received in Singapore will remain taxable unless the foreign dividend is from a country in which Singapore grants a tax credit for foreign tax suffered.

Please note however that the one-tier system does not apply to dividends paid on shares of a preferential nature.

Withholding tax is a tax collection mechanism enacted primarily to ensure and facilitate the collection of taxes due on specified categories of income sourced or deemed to be sourced in Singapore where such payments are made by a person in Singapore to a non-resident.

Generally, withholding tax applies to the following categories of income or payment:

• interest and related payments;
• royalties and other lump sum payments for the use of movable property;
• know how payments for the use of scientific, technical, industrial or commercial knowledge/information;
• technical assistance or service fees;
• management fees;
• rent for use of movable property;
• director’s remuneration;
• certain distributions by unit trusts; and
• proceeds from sale of real property by a real property trader.

The rate of withholding tax applicable to a payment made to a non-resident is either the prevailing corporate tax rate (of 22% for the year of assessment of 2004), or the reduced rate of 15%, depending on the nature of the payment. This rate may be reduced under Singapore’s tax treaties with other countries in respect of payments made to residents of such treaty countries.

GST is a tax imposed on the supply of goods or services made in Singapore. GST is payable on any taxable supply made by a taxable person in the course or furtherance of any business carried on by him; and on the importation of goods into Singapore.

A "taxable supply" is a supply of goods or services made in Singapore other than an exempt supply. A "supply" refers to any form of supply made for a consideration. An "exempt supply" generally relates to financial services, leases and sales of residential properties.

GST is only required to be charged on a supply of goods and services made in Singapore. There are different rules for determining the place of supply of goods and the place of supply of services.

Generally, goods are treated as being supplied at the place where they are "removed" from. If a supply of goods involves "their removal" to Singapore (i.e. they are imported), these goods are treated as supplied outside Singapore. If the supply of goods does not involve their removal from or to Singapore, the supply is made in Singapore if the goods are "in" Singapore at the time of the supply. If the goods are not in Singapore at the time of the supply, the supply is not made in Singapore.

In the case of services, a supply of services is deemed made in Singapore if the supplier "belongs" in Singapore. A supplier of services will be treated as belonging in Singapore if:

• he has a business establishment or some other fixed establishment in Singapore and no such establishment elsewhere;
• he has no such establishment in any country but his usual place of residence is in Singapore; or
• he has such establishments in Singapore and elsewhere and his establishment in Singapore is the one that is most directly concerned with the supply.

A "taxable person" is a person who is, or required to be, registered under the GST Act. At present, a person is required to be registered as a taxable person if his annual turnover of taxable supplies exceeds or is expected to exceed S$1 million.

Only a GST registered person can charge and collect GST on all taxable supplies he makes ("output tax"). He is also entitled to recover any GST ("input tax") that he had paid in the purchase of goods and services, provided that the goods and services purchased are directly attributable to the making of the taxable supplies in respect of which the registered person has charged and collected GST (ie, output tax). The amount of GST payable by the GST registered supplier to the Inland Revenue Authority of Singapore ("IRAS") is the difference between the output tax and the input tax. Where the input tax exceeds the output tax, the IRAS will refund the difference to the registered person.

If a person’s taxable supply is below the S$1 million threshold, he is not required to be registered as a taxable person. However, if he transacts frequently with suppliers and customers who are GST registered, he may consider voluntary registration in order to claim credits or refunds for input tax paid on such goods or services. The Comptroller of GST is not obliged to accept a request for voluntary registration and will only consider such registration if:

• the applicant makes taxable supplies in the course his business;
• the taxable supplies contribute substantially to the livelihood of the applicant; and
• the denial of registration would cause the applicant to incur substantial input tax which he is unable to recover by virtue of his non-registration.

Once registered under the voluntary registration category, the person must remain registered for at least two years.

GST is charged at a prevailing standard rate of 5%. However, there are certain specified goods and services which are termed zero-rated supplies and are subject to GST at 0%. Generally, exported goods and international services rank as zero-rated supplies.

Examples of zero-rated international services include:

• services connected with international transportation
• hiring of transport for use outside Singapore
• services connected with offshore property
• services connected with offshore goods
• services (including prescribed financial services) connected with goods for export
• cultural, artistic, sporting etc services performed outside Singapore
• services supplied to persons and businesses abroad
• services related to ships and aircraft, other than recreation or pleasure craft
• prescribed international telecommunication services

Although such goods and services are zero-rated, the suppliers of zero-rated goods are entitled to obtain credits or refunds in the form of input tax for GST paid on purchases of goods and services used in the making of these zero-rated supplies. This is unlike the case of an exempt supply, where no credit is available for the input tax charged to an exempt supplier.

A registered taxable person is required to furnish a tax return to the Comptroller not later than one month after the end of each three-month accounting period. An application may be made to the Comptroller for a shorter accounting period of one month, or a longer period of six months. In each case, the tax return for the period must be furnished within one month after the end of period to which it relates.

A person furnishing his GST return must pay the Comptroller the GST due (ie the difference between the output tax and input tax for the relevant period) for the accounting period to which the return relates. The payment must be made no later than the last day on which he is required to forward the GST return to the Comptroller.

The imposition of Singapore tax on the income of an individual depends on the source of the income and the tax resident status of the individual. Generally, an individual who is a Singapore resident is subject to Singapore income tax on his income derived from a source in Singapore as well as his foreign-sourced income that is received in Singapore. A non-resident individual, on the other hand, need only pay Singapore income tax on his Singapore-sourced income and is exempt from Singapore income tax on income arising abroad even when such income is received in Singapore.

As a general rule, a person is considered resident in Singapore if he is physically present in Singapore or exercises employment in Singapore (other than as a director of a company) for 183 days or more during the year preceding the year of assessment.

Singapore income tax on individuals is imposed on a marginal basis. For the year of assessment of 2004, the maximum marginal tax rate is 22%.

Unlike most countries, there are no compulsory contributions to any pension scheme or social security insurance scheme in Singapore. Singapore instead has the CPF Scheme, which is a form of a long term savings scheme. Compulsory contributions to the CPF account of an employee are required for an employee who is a Singapore citizen or permanent resident.

For such an employee, the employer must deduct and pay to the CPF Board a specified percentage of the employee’s salary ("employee’s contribution") for deposit into the employee’s CPF account. Further, the employer must also itself contribute to the employee’s CPF account, which contribution is also a specified percentage of the employee’s salary ("employer’s contribution"). Currently, the employee’s rate of contribution is 20% whilst the employer’s rate of contribution is 13%.

Under the Singapore Stamp Duty Act, stamp duty is levied on instruments and agreements which relate to stocks and shares and immovable properties situated in Singapore. Stamp duty is payable at ad valorem rates or at fixed rates, depending on the document concerned. Where the document is executed in Singapore, stamp duty is payable within 14 days after the document has been executed. Where the document is executed outside Singapore and received in Singapore, stamp duty is payable within 30 days after the document has been received in Singapore.

In the case of corporate reorganisation involving transfer of shares or the undertaking of a particular company or transfer of beneficial interests in assets between associated companies, exemption of stamp duty may apply if certain prescribed conditions are met.

Property tax is levied on immovable properties in Singapore based on the annual value of the property at the prevailing rate of 4% for owner-occupied residential properties and 10% (with effect from 1 July 2001) for other properties. Certain buildings may, however, qualify for exemptions or concessions. The annual value is the estimated annual market rent that the property can reasonably be expected to fetch if it were let from year to year.

Custom duty is levied on certain products, notably, tobacco, liquor, motor vehicles and petroleum related products.

In order to promote the economic and industrial development in Singapore, the Singapore government has introduced various tax incentives. However, certain conditions must be satisfied before a company can qualify for approval.

The tax incentives are found mainly in the following legislation:

• the Economic Expansion Incentives (Relief from Income Tax) Act; and
• the Income Tax Act.

Broadly, there are two types of tax incentives:

• incentives to attract specific investments; and
• incentives to promote overseas investment.

Most of these tax incentives are administered by the Economic Development Board, the Monetary Authority of Singapore, the Trade and Development Board, the Ministry of Finance and the Industrial Development Authorities.

We set forth below some of the more important incentives that fall within each category.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.