Tax incentive/scheme application

We have assisted various clients with the application of tax incentives and the preparation of income tax computations for tax incentive tax companies. Issues to consider typically include:

  • When applying for a particular incentive, whether the business is able to meet the conditions on an on-going basis, and the costs and benefits for applying for the tax incentive
  • Identification of income into qualifying and non-qualifying categories
  • Identification of direct expenses relating to the incentive/non-incentive income
  • Apportionment of common expenses
  • Identification of assets used in the derivation of qualifying/non-qualifying income and its associated capital allowance claims

We have assisted our clients in the application/claiming of various tax incentive/tax schemes in Singapore. These include the following:

1. Land Intensification Allowance

The Land Intensification Allowance (LIA) is administered by the Economic Development Board (EDB). It was introduced to support enhanced land productivity among industrial users.

The main benefit of LIA is that it allows businesses to claim allowances on qualifying capital expenditure incurred on the construction of a qualifying building or structure. Without applying for the LIA scheme, some of these capital expenditures would not have qualified for capital allowance claims as only expenditure relating to “plant and machinery” can be claimed for capital allowance purposes.

Qualifying LIA expenditure include:

  • Cost of feasibility study on the layout of the building or structure;
  • Design fees of the building or structure;
  • Cost of preparing plans for obtaining approval for the building or structure;
  • Piling, construction and renovation/ extension costs;
  • Demolition costs of an existing building or structure;
  • Legal and other professional fees in relation to the approved construction or approved renovation/ extension; and
  • Stamp duties payable in respect of title of the building or structure.

2. Global traders programme

The Global Trader Programme (GTP) is administered by International Enterprise Singapore (IE Singapore) and mainly targets global trading companies trading in a broad range of products in Singapore (including metals and minerals, agricultural commodities, industrial products and electronics etc.)

The incentive provides a reduced corporate tax rate of 5% or 10% on qualifying trading income for three or five years. Qualifying trading income includes income from physical trading, brokering of physical trades and derivative trading income.

To qualify for the GTP, companies must have substantial operations in Singapore and meet certain quantitative criteria (such as employment of trading professionals, local business expenditure, turnover thresholds etc).

3. Tax incentives for funds

Our principals have extensive experience with the structuring of investment funds and the application of tax incentives for funds and fund managers. Some of these incentives include:

Offshore funds

Offshore funds which are managed by Singapore fund managers may be subject to Singapore tax even if the funds are incorporated or registered overseas.

Under the offshore fund tax exemption regime, an offshore fund which is a “prescribed person” will be exempted from Singapore tax on income and gains derived in respect of designated investments, subject to certain conditions being satisfied.

Offshore funds may also apply for the Enhanced-Tier Fund Tax Incentive Scheme.

Singapore funds

Singapore corporate funds are increasingly popular given Singapore’s extensive tax treaty network, which may provide for reduced tax rates/tax exemption on dividends, interest and/or gains derived from their overseas investments.

The Singapore resident fund scheme (under Section 13R) and Enhanced-Tier Tax Exemption Scheme (under Section 13X) may provide for Singapore tax exemption on income/gains derived from designated investments.

Fund management companies

Fund management companies in Singapore who meet certain conditions may apply for the Financial Sector Incentive for Fund Managers, which provides for a concessionary tax rate of 10% on fee income derived by the fund manager.

4. Productivity and Innovation Credit (PIC)

An incentive scheme which is popular amongst Singaporean businesses, PIC allows a business to either claim 400% deductions/allowances or a cash payout on qualifying expenditure.

Qualifying expenditure includes expenditure under the following categories:

  • Acquisition and Leasing of PIC IT and Automation Equipment
  • Training of Employees
  • Acquisition and Licensing of Intellectual Property Rights (IPR)
  • Registration of Patents, Trademarks, Designs and Plant Varieties
  • Research and Development (R&D) Activities
  • Design Projects Approved by DesignSingapore Council

Besides the “typical” claims on the acquisition of PIC automation equipment and training, we are also familiar with the other categories of PIC claims. For instance, we have assisted our clients in successfully submitting R&D project plans and obtaining R&D claims and also obtained approval for certain unique equipment to be approved on a case-by-case basis.

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