The Monetary Authority of Singapore (MAS) has provided further updates to the Financial Sector Incentive (FSI) scheme, as announced in the 2023 Singapore Budget, with changes effective from 1 January 2024. In the announcement, it said a list of qualifying activities incentivized under the FSI scheme will be expanded from 1 January 2014.
The FSI scheme aims to promote and encourage the development of Singapore’s financial services sector. From 1 January 2024, the FSI scheme applies concessionary corporate tax rates of 10% and 13.5% on income derived from qualifying financial service activities, following a revision to streamline the tax rates across sub-schemes conducted in Singapore. Initial award periods may vary from 5 to 10 years based on headcount and scope of activities undertaken.
For the uninitiated, there are two tiers of qualifying FSI activities – standard and enhanced. A broad range of qualifying activities, including lending, debt and equity capital markets, treasury, trust administration as well as Headquarter Services and Qualifying Processing Services Company (FSI-HQ) services fall under the standard tier. The FSI-Standard Tier (FSI-ST) continues to offer a 13.5% concessionary tax rate as of 2024, including expanded coverage for qualifying activities such as Islamic Finance.
Under the enhanced tier, a category for high-growth and high valued added services, several of the FSI sub-schemes will merge from 1 January 2014. Sub-schemes such as the FSI-Bond Market (FSI-BM) and FSI-Equity Market (FSI-EM) have merged into the FSI-Capital Market (FSI-CM) scheme, which now enjoys a concessionary tax rate of 10% under the enhanced-tier awards. The five separate FSI-Derivatives Market (FSI-DM) sub-schemes will also merge into a single FSI-DM scheme. These changes will not affect existing award holders.
Withholding tax exemption continues to apply on interest payments made by FSI-HQ award holders on qualifying loans, extended until 31 December 2028. In addition, new applicants for the FSI-Fund Management (FSI-FM) award will need to satisfy an additional an Asset under Management (AUM) requirement of at least S$250 million.
Apart from the FSI-Islamic Finance (FSI-IF) scheme whose deadline has expired, the FSI scheme has been extended until 31 December 2028 to support Singapore’s position as a leading global financial hub.
The new FSI sub-schemes will be as follows:
| Scheme | Concessionary tax rate (%) |
|---|---|
| FSI-Standard Tier (FSI-ST) | 12 |
| FSI-Headquarter Services (FSI-HQ) | 10 |
| FSI-Fund Management (FSI-FM) | 10 |
| FSI-Capital Market (FSI-CM) | 5 |
| FSI-Credit Facilities Syndication (FSI-CFS) | 5 |
| FSI-Derivative Market (FSI-DM) | 5 |
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