Special Tax Incentives For Shipping Companies in Singapore
According to the World Bank in 2014, Singapore ranked as the no.1 Logistic Hub in Asia as per the Logistics Performance Index, and sound physical infrastructure and logistical capabilities, coupled with strong government initiatives. Strategically located in South Asia, the city state sits right in the middle of the key trading routes, and attracts top logistics firms such as DHL, APL and UPS.
In recent years, trading companies from all around the world are beefing up their investments in Singapore with many setting up regional offices here due to healthy growth in logistics demand in the region. With a total value add of close to US $ 60 billion in 2011 and a growth rate of more than 10% per annum through the past decade, the wholesale trade sector contributes to the biggest piece in Singapore’s GDP within the services industry and remains one of the fastest growing sectors.
The Government of Singapore has always adopted a pro-business mentality and has consistently rolled out various tax incentives, on top of an attractive headline corporate tax rate of 17% (compared with US – 39%; China – 25%; India – 30%).
In this piece, we focus on the special tax incentives for global trading, shipping and maritime companies, for those who are interested in the sector.
Tax Incentives for Global Trading Companies in Singapore
Companies approved as a global trading company (GTC status) could enjoy tax concession of 5-10% for tenures varying from five to ten years on qualifying offshore trade income, i.e. income earned by parent company by creating its subsidiary or branch into another country in order to reap legal tax benefits from others countries and Singapore. Qualification depends on criteria as follows -
To qualify under GTP Scheme, firms have to fulfil the following criteria:
Medium or large size firm should be performing excellently in international market where it must carry out international trading, purchasing and procurement, transportation and distribution of qualifying goods and services.
It aims to use Singapore as main regional base for all main offshore, trade and support activities.
It is outstanding firm with excellent track record
It possesses minimum turnover and local spending; it must hire good number of professionals in Singapore, and use Singapore financial markets and institutes to conduct business operations
Derivatives that qualify under GTP are given below:
Exchange-traded and over the counter (OTC) derivatives of approved products under GTP company’s list of products; and
Exchange traded and Over the counter freight derivatives
Benefits Specific to Shipping and Maritime Companies
Singapore government has established the Maritime and Port Authority (MPA), which aims to promote maritime and port business by designing and implementing various strategies and programs. One of the key strategic incentives given by MPA is the “Maritime Sector Incentive (MSI) Scheme”, which describes all the tax incentives for firms involved in international maritime services, maritime support services, and ship or container leasing segment. More details about the three key MSI sub-awards are given below for reference -
A - MSI-Approved International Shipping Enterprise (MSI-AIS) Award:
International shipping firms, which have developed shipping network world-wide, have performed excellently and decided to open a shipping business in Singapore, are eligible to go for tax relaxation after qualification on shipping income either on ten year renewable period; or five year non-renewable period, with the choice of taking renewal after completion of first five years. Firms have to fulfill criteria under GTP scheme in order to enjoy concessionary tax benefits for qualifying shipping income.
B - Maritime Sector Incentive-Maritime Leasing (MSI-ML) Award:
Firms with proven track record and commitment to invest in shipping financing, or container businesses in Singapore can file application to get MSI-ML Award on or before May 31 2016. According to MSI-ML Award, container or ship leasing firms, fund providers, partnerships, and business trusts can take concession for five years on qualifying leasing income.
C - Maritime Sector Incentive-Shipping Related Support Services Award (MSI-SSS):
MSI-SSS approved firm can take advantage of 10% tax concession on increased income achieved from the provision of following qualifying approved shipping related support services for a five year period,
Ship management
Ship broking
Ship agency
Forward Freight Agreements trading
Freight forwarding and logistics services
Other Incentives
The Maritime and Port Authority has designed policies facilitating GST compliance for maritime industry: From July 2010, the Singapore Government has decided to charge zero GST on pleasure and recreational ships that are used in international travel. This rate is extended to all products (tangible and intangible commodities) that are used on ships or installed on ships, and also all passenger or non-passenger ships to or from international water.
Large multinationals shipping companies with worldwide network and excellent performance can enjoy tax incentives for ten consecutive years once they get approved by relevant schemes.
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Frequently Asked Questions
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Singapore tax incentives offer substantial benefits to a wide range of businesses, including holding companies and other corporate entities involved in trading.
These incentives typically include reduced tax rates or exemptions on qualifying offshore trade income, which can significantly lower the overall tax burden for businesses.
For all types of companies, these incentives enhance financial efficiency and profitability, particularly in international trade.
They can leverage these tax benefits to optimize their investment strategies and improve their competitive edge in global markets.
Singapore's favourable tax regime, combined with its strategic location and pro-business environment, makes it an attractive destination for businesses seeking to maximize their operational efficiency and growth potential.