Why Singapore is tax heaven for Shipping business?
Due to its crucial location, Singapore connects west with the east. It is one of the busiest ports in the world. It started in the early 19th century when Sir Stamford Raffles promoted Singapore as a major trading hub. Thus, giving recognition to Singapore on the global map. Since then, there has been no looking back.
Shipping has played an important role in the growth of Singapore. Currently, more than 5,000 maritime establishments contributing about 7% to Singapore's GDP. Shipping has always been a blue-eyed industry of the country. This is why the Government has left no unturned stones to invite the global shipping and logistic companies to Singapore.
Major incentives come in the form of tax benefits:
(1) Qualifying shipping and charter hire income for companies that own or operate Singapore or foreign-registered vessels in international traffic is exempt u/s 13A. This is an automatic exemption whereby no separate application is required.
(2) Maritime Sector Incentives (MSI): Additional incentives are provided u/s 13F to Singapore tax resident companies registered under MSI schemes:
a) Approved International Shipping (AIS) Enterprise: Companies with a good track record and worldwide network enjoy exemption on income earned from foreign operations. If conditions are met, the relief period is 10 years (renewable) or 5 years (non-renewable). Exempt income includes shipping and charter hire income, dividends, and income from the operation of vessels used for offshore activities.
b) Shipping related support services (SSS): Companies operating as Ship Agency, ship management, freight forwarders, shipbroking, and group corporate entities providing services to qualified companies are entitled to tax relief. The relief is available for 5 years, whereby a concessionary tax rate of 10% is provided on the service income, and management fees received. The incentive is available till 31 December 2026.
c) Maritime Leasing (ML): This is available to the companies looking to raise funds to finance their vessels or containers. The leasing companies will earn a concessionary tax rate on their financing income over 5 years. This relief is available to eligible companies registered on or before 31 December 2026.
d) Exemption on Withholding Tax (WHT): The qualified companies shall be exempt from WHT on payments made financing or construction of the vessels or purchase of containers.
e) Expempting vessel disposal gains: Qualifying companies shall be exempt from tax on the gains from vessels' disposal.
f) Zero-rated GST on goods or parts for the vessel: Goods procured by approved marine customers for use or installation on a commercial ship that is wholly bound for international travel will not attract GST. The supplier can provide zero rates for the goods or parts so supplied.
Maritime Sector Incentives are provided by Maritime and Port Authority of Singapore (MPA).
Note that tax benefits are only part of incentives available to shipping companies in Singapore. Besides, there are attractive schemes for R&D and Human Resources development.
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