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Comprehensive Tax Exemption Scheme in Singapore

Jun 20, 2008
The Hong Kong-based financial consultancy reports that, beginning in 2009 a newly launched company that sticks to specified conditions can claim a full tax exemption on the first 100,000 Singapore dollars (US$73,000) of normal chargeable income. This is apart from the 50 percent tax exemption provided to the next S$200,000, the report says.

Beginning in 2008, a partial tax exemption will also be provided to companies on income of up to S$300,000. The measures are an apparent attempt to stimulate economic growth in the middle of worries of a global economic slowdown.

Prime Minister Lee Hsien Loong magnified economic challenges recently but said he remained confident about Singapore's economic prospects. Lee added he was optimistic the city-state was on line to attain 4 to 6 percent growth this year. Lee however said that, the economy will backtrack in the next few quarters, and the backtracking could last into next year.

He cited the climbing cost of living, which was brought about by increasing energy and food prices, and hiccups in the U.S. economy as reasons for concern. Inflation in the city-state reached a 26-year high of 6.7 percent in March. The central bank anticipates inflation to reach the upper-end of a 4.5-5.5 percent range this year, although some economists said inflation for the year could average 6 percent.
Singapore Minister for Finance Tharman Shanmugaratnam on February 15 delivered Singapore's fiscal 2008 budget. The budget enhances Singapore's attraction as one of the top private wealth centers in the world by clearing the estate duty. It also comprises new measures to trigger innovation and business competitiveness, such as tax incentives for research and development, stock options, financial services, and shipping.

The government decided not to reduce corporate or individual tax rates this year considering predictions of strong headwinds for the local economy because of continuing global turbulence -- but it did not shut the door on future tax cuts.

Singapore is now the world's second largest private banking center with nearly $300 billion (about 5 percent of the world total) in private banking assets under management, according to industry estimates. Although it is still way behind the industry leader, Switzerland, which has $1.7 trillion in private banking assets under management, Singapore remarkably has progressed from obscurity to a private banking giant (from about $50 billion in 1998 to $300 billion today) within a decade.

Until recently, Europe was a significant cause behind Singapore's growth. But, now it is also whole of Asia -- basically India, China, and Indonesia -- as well as Middle Eastern oil money. For example, the Chinese who fear that Hong Kong may be within the reach of the Chinese authorities are considering Singapore more and more seriously, given that Hong Kong is now part of China.

The United States is probably in a recession and the Singapore economy will be more severely influenced if the turmoil in global financial markets deteriorates further, Singapore's prime minister said.
While the construction, marine engineering and port sectors would be safe, he said, other sectors such as finance, tourism and information technology could be "seriously dented" by the impending U.S. recession.

In any case the comprehensive Singapore tax exemption scheme is definitely going to benefit Singapore start-up firms. So, good times is awaiting potential starters.
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