Grant Assistance for Foreign Companies in Singapore
The easiest way to enjoy the benefits of governmental cash grants and financing schemes available in Singapore – as listed in our earlier guide Grant assistance for Singapore companies – is to incorporate a Singapore company.
For this, it’s important to note that a foreigner entity, which wants to set up a Singapore company, is required to appoint at least one director who is ordinarily resident in Singapore. Being “ordinarily resident in Singapore” means the director’s usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident or an EntrePass holder can be accepted as a person who is ordinarily resident here.
Subject to compliance with prevailing laws and regulations on employment of foreign manpower, an Employment Pass holder may be accepted as a director who is ordinarily resident here. Meanwhile, the foreigner can continue to reside outside Singapore. InCorp Group can help you in this regard as part of our corporate services.
The Singapore Government, in a bid to encourage businesses to establish a strategic base in the city-state and manage their growth strategies and international operations from here, provides a range of incentives to a broad spectrum of industries. These include tax holidays and concessions, accelerated depreciation schemes, grants and favourable loan conditions.
Also, depending on the incentive or business grants in Singapore being sought, the approving government authority may be either the Singapore Economic Development Board (EDB), International Enterprise Singapore (IE Singapore), Monetary Authority of Singapore (MAS) or Maritime and Port Authority of Singapore (MPA). Importantly, all incentives and grants available are negotiated, reviewed and agreed on a case-by-case basis, and award period ranges from three to up to 10 years.
We give a detailed overview below.
Business Grants for Foreign Companies
1) Research Incentive Scheme for Companies (RISC)
This is to encourage the development of research capabilities and technologies by supporting science and technology projects. Under RISC, the Government co-funds development of strategic technologies, capabilities and the establishment of centres of competence in Singapore.
Supportable project costs expenditure is as follows:
- manpower cost (30 percent to 50 percent support)
- equipment, materials, consumables and software (30 percent support)
- Singapore-based professional services (30 percent to 50 percent support)
- IPRs such as licensing, royalties, technology acquisition (30 percent support)
2) Training Grant for Company
This is to encourage manpower capability development in applying new technologies, industrial skills and professional know-how through the support of training programmes for companies’ employees.
3) Productivity Grant
This grant is to encourage firm-level projects which aim at improvements to energy, water, land or labour efficiencies through transformation efforts to enhance companies’ operations or involving adoption of technologies.
4) Initiatives in New Technology
Under this the Singapore Government co-funds up to 30 percent to support manpower development in the application of new technologies, industrial R&D and professional know-how.
5) Writing-down allowances for IP acquisition
There is an automatic 5/10/15-year write-down for companies if legal and economic ownership of IP are acquired. But do note that EDB’s approval is required if economic ownership of IP rights is also acquired.
6) Maritime Innovation and Technology Fund
Under this the Government co-funds up to 50 percent of total project costs for R&D or test-bedding of new or better products, processes and applications relevant to the maritime industry in Singapore. This can include manpower, equipment, material, professional services, IP and other ancillary costs.
Tax Incentives and Exemptions for Foreign Companies
1) Pioneer Certificate Incentive (PI) and Development and Expansion Incentive (DEI)
These are to encourage companies to grow capabilities and conduct new or expanded economic activities in Singapore. Companies that carry out global or regional headquarters (HQ) activities of managing, coordinating and controlling business activities for a group of companies may also apply for these incentives for the HQ activities.
PI gives tax exemption on income from qualifying activities, while DEI gives reduced tax rate from 5 percent to 15 percent on incremental income from qualifying activities.
Other incentives for headquarters activities include:
- Regional Headquarters (RHQ) Award – This is the reduced tax rate of 15 percent on incremental income from qualifying HQ activities.
- International Headquarters (IHQ) Award – This is for companies that commit to exceed the minimum requirements of the RHQ Award, customised incentive packages with lower concessionary tax rates (0%, 5% or 10%) on qualifying income could be considered in discussion with the EDB.
2) Finance and Treasury Centre (FTC) Incentive
This is to encourage companies to grow treasury management capabilities and use Singapore as a base for conducting strategic finance and treasury management activities. Under FTC, companies pay the reduced tax rate of 8 percent on fees, interest, dividends, and gains from qualifying services/activities. Additionally, under this scheme, companies also enjoy withholding tax exemption on interest payments on loans from banks and approved network companies for FTC activities.
Other incentives for finance sector activities include:
- Financial Sector Incentive (FSI) – Under FSI, companies pay the reduced tax rate of 5 percent for qualifying enhanced tier financial activities and 12 percent or 10 percent for standard tier financial activities.
3) Investment Allowance
This is an allowance (on top of normal capital allowance) on a percentage of approved fixed capital expenditure.
4) Integrated Investment Allowance
This is an allowance (on top of normal capital allowance) on a percentage of approved fixed capital expenditure to be incurred on productive equipment that is placed outside Singapore for an approved project.
5) Approved Foreign Loan Incentive
This is the reduced withholding tax of 0%, 5% or 10% on interest payments on loans taken to purchase productive equipment.
6) Approved royalties incentive
Under this companies are subjected to reduced or nil withholding tax rate on royalty payments to access advanced technology and know-how.
7) Land Intensification Allowance
This is aimed at promoting the intensification of industrial land use towards more land-efficient and higher value-added activities. Under this, an initial allowance of 25 percent and annual allowance of 5 percent is awarded on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure.
8) Global Trader Programme
This scheme is important for trading companies as they pay the reduced tax rates of 5 percent or 10 percent on qualifying transactions/trades in qualifying commodities, futures and derivatives (including structured commodity financing).
9) Aircraft Leasing Scheme
This is to encourage companies to develop aircraft leasing capabilities and grow the aircraft leasing industry in Singapore.
10) Maritime Sector Incentive (MSI)
This is the tax exemption on qualifying shipping income from operating Singapore and foreign-flagged ships, provision of specified ship management services, and income from foreign exchange and risk management activities which are carried out in connection with or incidental to the operations of ships for five or 10 years.
- MSI – Approved International Shipping Enterprise (MSI-AIS) Award – The MSI-AIS award seeks to encourage international ship owners and ship operators to establish their commercial shipping operations in Singapore. A MSI-AIS company will enjoy tax exemption on qualifying shipping income for either: a 10-year renewable period; or a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period, if qualifying conditions are met.
- MSI – Shipping Related Support Services Award – The MSI-SSS award seeks to promote the growth of ancillary shipping service providers and to encourage shipping conglomerates to set up their corporate services functions in Singapore. An approved MSI-SSS company will enjoy a concessionary tax rate of 10% on the incremental income derived from the provision of the following qualifying approved shipping-related support services for a 5-year renewable period – ship broking, forward freight agreement (FFA) trading, ship management, ship agency, freight forwarding and logistics services; and corporate services rendered to qualifying approved related parties carrying on the business of shipping-related activities.
- MSI – Maritime Leasing Award – The MSI-ML award encourages entities to use Singapore as their capital and funding base to finance their vessels or sea containers. These are tax concessions for up to five years applied on qualifying leasing or management income.
With so much support when it comes to grants in Singapore, it makes sense to be a part of the city-state’s start-up eco-system. If you need help in forming a Singapore company, InCorp Group is your best solution.
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