Singapore

Business Environment

Company law and securities regulation are undergoing changes as new legislation is being brought into force or being updated. The Monetary Authority of Singapore is the regulator for the banking, insurance, securities and futures industries. Under the Business Registration Act, any person who wants to start a company or business in Singapore must first register with the Registrar of Companies and Businesses. Overseas companies may open a representative office as a temporary facility or register as a branch of a foreign company. A branch of a foreign company in Singapore must appoint two local agents in Singapore to represent the company. Foreign companies must file an annual report and audited accounts of its Singapore branch. The Companies Act requires companies to have at least two directors, one of whom must be an ordinary resident. Private companies are locally incorporated companies with 50 or less shareholders. Public companies are locally incorporated companies where the number of shareholders can be more than 50 members and the company may raise capital by offering shares and debentures to the public.

A business firm is either a sole-proprietorship or a partnership. Individuals and companies registering business firms need not be Singaporeans or incorporated in Singapore. But in all cases, the manager of a business firm must be a Singapore resident. Partnerships may have between two and twenty partners. If there are more than twenty partners, the business entity must be registered as a company under the Companies Act, Cap.50.

Taxes

The Singapore government announced a major overhaul of the tax system in the budget speech on 3 May 2002. The measures include tax incentives for the wealth- and asset-management sector, for mutual funds, for the derivatives market, for the equity capital market, and for insurance companies set up to underwrite certain offshore risks. Existing financial sector incentives would be merged into an umbrella financial sector incentive scheme to simplify the tax system. Under the measures the general corporate income tax rate would be reduced to 20% over three years, compared to the current 24.5% rate. Government will shift to a one-tier corporate taxation system, in which the tax collected from corporate profits is final and dividends are exempt from 1 January 2003.

Under the current system financial sector businesses and companies gain exemptions from all tax or concessionary tax rates of 10% for most offshore activities. For banks: 10% tax on Asian currency income, 10% on income earned from offshore activities with non-residency. For insurance companies: 10% tax on income derived from offshore business; tax exemptions for general direct insurance and reinsurance companies on income derived from underwriting profits of offshore marine hull and liability business, on non-Singapore dividends, on realised capital gains and interest derived from investing premium income derived from offshore marine hull and liability insurance business, and on shareholders' funds used to support the offshore marine hull & liability insurance business; exemption from withholding tax on claim payments made under financial guaranty insurance policies by approved financial guaranty insurers to non-residents.

Financial institutions: 10% tax on income derived from non-residents' from provision of brokerage, custodian services, trading in foreign securities, arranging and underwriting foreign securities; a tax exemption on income from transactions in foreign securities listed on the Singapore Exchange; a tax exemption on contract note stamp duty on transactions in foreign securities on behalf of non-residents; an exemption on income from arranging and underwriting initial public offerings of foreign securities on the Singapore Exchange; a withholding tax exemption on loan fees, manufactured dividends, or interest paid on loans of foreign securities; an exemption of stamp duty on loan contracts, a 10% tax on fee income derived by the fund manager from arranging the loan of foreign securities.

Asset managers: 10% on fee income to fund management companies; exemption on investment income earned by foreign investors from funds managed by the fund manager. Tax holidays will also be considered for fund managers who manage more than S$5 billion of foreign investors' fund in Singapore. Trustee and custodian services: 10% tax on selected income streams from trustee and custodian services offered in Singapore. Investment income generated by the trusts is also exempted from tax.

Bond market: tax exemption on fee income earned from arranging, underwriting and distributing qualifying debt securities; 10% tax on interest income from holding qualifying debt securities arranged in Singapore; 10% tax on income earned from trading in debt securities; withholding tax exemption on interest from qualifying debt securities arranged in Singapore payable to non-residents; withholding tax exemption on swaps in relation to S$ bond issues.

Finance and treasury centres: 10% on income derived from provision of finance and treasury services to related companies. Interest payments on foreign loans obtained from overseas banks or related companies may also be exempted from withholding tax.

Individuals: For individuals government plans to reduce the top marginal personal income tax rate to 20% from 26% over three years. The top marginal tax rate will be reduced to 22% in 2003 and tax rates for all income tax bands would be reduced, a move that would cost government S$620 in revenues a year. Income bands will also be reduced to seven rates of assessment from the current ten bands.

Links: Tax treaties

Taxation of Individuals in Singapore
Ernst & Young, PDF, October 2003

Stock Exchange
Listed companies and securities market operations are regulated by the Monetary Authority of Singapore and come under the recently enacted Securities and Futures Act and the Financial Advisors Act. The legislation is expected to be phased in over the course of the next few years.

Singapore Exchange Ltd.
2 Shenton Way
#19-00 SGX Centre 1
Singapore 068804
Tel: (65) 6236 8888
Fax: (65) 6535 6994
Internet: www.sgx.com

Contacts
Monetary Authority of Singapore
10 Shenton Way MAS Building
Singapore 079117
Tel: (65) 6225 5577
Fax: (65) 6229 9491
Internet: www.mas.gov.sg

Registry of Companies and Businesses
10 Anson Road
#05-01/15 International Plaza
Singapore 079903
Tel: (65) 6325 3731
Fax: (65) 6225 1676
Internet: www.gov.sg/rcb/information

Latest available figures

Country Information
Singapore became an independent republic in 1965 after separating from the federation of Malaysia. Prior to joining the federation in 1959, Singapore was a UK crown colony.

Population (2001)
4,131,200 (including resident foreigners). Ethnic groups: Chinese 77%, Malays 14%, Indians 8%. Malay is the national language. Chinese, English, and Tamil are official languages. English is used by government.

Capital
Singapore (country is a city-state)

Currency
Singapore dollar. US$1 = S$1.81 (May 2002)

Legal System
Singapore has a High Court, a Court of Appeal, and subordinate courts. The High Court exercises original criminal and civil jurisdiction in serious cases as well as appellate jurisdiction from subordinate courts. The chief justice, senior judge, and six judges are appointed by the president. Appeals from the High Court are heard by the Court of Appeal. The right of appeal to the Privy Council in London was abolished effective April 1994.

Government
Parliamentary republic. Singapore has a president as chief of state, and a unicameral parliament headed by a prime minister and a cabinet. The president is elected for a six-year term and exercises powers over legislative appointments, government budgetary affairs, and internal security matters. The prime minister is the head of government. The prime minister is the leader of the political party or coalition of parties having the majority of seats in 90-member parliament. Parliament consists of 84 members elected by universal suffrage and six members nominated by the president. The maximum term of any one parliament is five years. A constitutional provision requires there must be at least three sitting opposition members, even if fewer than three are elected. Nominated members enjoy the same privileges as elected members but cannot vote on constitutional matters or expenditures of funds. Voting is compulsory in elections.

Executive
President: Sellapan Ramanathan Nathan (S.R. Nathan)
Prime minister: GOH Chok Tong

Cabinet
Senior minister, prime minister's office: LEE Kuan Yew
Deputy prime minister, finance: Brig-Gen LEE Hsien Loong
Deputy prime minister, co-ordinating minister for security and defence: Tony TAN Keng Yam
Law, foreign affairs: S. JAYAKUMAR
Prime minister's office, second minister for foreign affairs: LEE Yock Suan
Home Affairs: WONG Kan Seng
Transport: YEO Cheow Tong
Trade and industry: Brig-Gen George Yong-Boon YEO
Manpower: Ng Eng Hen
National development: MAH Bow Tan
Defence: Rear-Admiral TEO Chee Hean
Second minister for finance, minister in prime minister's office: LIM Hng Kiang
Education: Tharman Shanmugaratnam
Health (acting): Khaw Boon Wan
Environment: LIM Swee Say
Information, communications and the arts: Lee Boon Yang
Community development and sports, and minister-in-charge of Muslim affairs: Yaacob Ibrahim

Politics
People's Action Party (PAP), Workers' Party (WP), Singapore Democratic Alliance, Singapore Democratic Party, Democratic Progressive Party. In the last general election on 4 November 2001 the governing People's Action Party (PAP) won 82 seats and 75.3% of the vote. The Workers' Party won one seat. The Singapore Democratic Alliance won one seat. The last presidential elections were held on 24 august 1999. Only one candidate was declared eligible.

Economy
Manufacturing accounted for 22% of real GDP, wholesale and retail trade 16%, business services 14%, financial services 12%, transport and communications 11%, construction 5.8%, and hotels and restaurants 2.6%. The electronics industry leads Singapore's manufacturing sector, accounting for 46% of Singapore's total industrial output.

Gross Domestic Product (2002)
GDP grew by 2.2%, after a decline of 2.4% during 2001.

Trade (2002)
Current account surplus: US$19.25 billion (S$33.5 billion); capital and financial account: net outflow of US$16.26 billion (S$28.3 billion),

Inflation Rate (2002)
0.4% decline

Labour Force (2002)
About 2,120,000. Unemployment rate: 4.4%

Government Accounts (2003-2004 budget)
Operating revenues: US$17.02 billion (S$29.62 billion); total expenditure: US$17.54 billion (S$30.52 billion) made up of capital expenditures of US$5.49 billion (S$9.56 billion) and transfers to various social funds of S$0.6 billion (US$0.34 billion). The budget forecasts a total deficit of S$0.9 billion (US$0.52 billion). Government financial year: 1 April - 31 March.

Foreign Reserves (end-2002)
US$82.01 billion (S$142.7 billion) equivalent to 8.2 months of current imports.

Public Holidays (2004)
1 January (New Year's); 22-23 January (first and second days of Chinese New Year); 2 February (Monday after Hari Raya Haji); 9 April (Good Friday); 1 May (Labour Day); 2 June (Vesak Day); 9 August (National Day); 11 Novembre (Deepavali); 15 November (Monday after Hari Raya Puasa); 25 December (Christmas Day).

Time Zone
GMT plus 8 hours. There is no summer time clock change.

Sources
Government of Singapore
Monetary Authority of Singapore
International Monetary Fund
US State Department
Elections Around the World
CIA Fact Book
Holiday Festival