Singapore, a vibrant city-state in the heart of Southeast Asia, offers businesses a number of competitive advantages in setting up a treasury function. Singapore is rated as the most competitive economy in the world, according to the Global Competitiveness Index 2019.
The city has a well-established business infrastructure with a transparent and efficient institutional framework, a pool of highly skilled English-speaking professionals and a regulatory system that meets international standards. Singapore is also the largest foreign exchange market in Asia Pacific and more than 200 banks have a presence in the country, with a growing number choosing it as a base for their regional operational headquarters. Singapore also has an established financial sector, mature capital markets and a wide variety of sophisticated financial instruments.
Singapore has preferential investment and business policies with members of the Association of Southeast Asian Nations (ASEAN). In total it has 14 bilateral FTAs, and 11 regional FTAs. Singapore also has tax treaties with 88 countries and territories, offering tax incentives for businesses. In addition, it offers approved finance and treasury centres a reduced corporate tax rate of 8% on income derived from qualifying finance and treasury centre (FTC) services.
Singapore's geographic location has made it a major shipping and logistics hub, and it is the second busiest port in the world and the top maritime capital.
What solutions are available in Singapore?
|Treasury Centres||A centralised treasury is one way to reduce the tax burden, centralise risk management, improve liquidity and enhance yield on cash.|
|Interest Optimisation||Maximise your interest yield from for your balances held with the bank.|
|Notional Pooling||Cash balances in different accounts are notionally offset to derive the net balance, which is then used to calculate interest.|
|Sweeping/ Zero Balance Account (ZBA)||ZBA are checking accounts with zero balances where funds are physically swept to eliminate excess balances and maintain greater control over disbursements.|
|Intercompany loans||Similar to bank loans, intercompany loans refer to lending between entities within the same group.|
Corporate Treasury in Singapore
Singapore, a vibrant city-state in the heart of Southeast Asia and ASEAN, offers a number of competitive advantages for setting up a treasury function. Here, we highlight some of the key benefits relevant to treasury and cash management.
Financial Market Development
- The World Economic Forum ranks Singapore second in the world for its financial system and first for its overall competitiveness in The Global Competitiveness Report 2019.
- Singapore is ranked second for the soundness of its banks, while it is also in the top 10 for market capitalisation, venture capital availability and the financing of SMEs.
- Singapore has a well-established business infrastructure with a transparent and efficient institutional framework, a pool of highly skilled English-speaking professionals and international regulatory standards.
- The Monetary Authority of Singapore (MAS) has set up a FinTech and Innovation Group to oversee regulatory policies and development strategies in the financial sector.
- There are no restrictions on capital flows in and out of Singapore.
Sophistication of Banking Systems
- There are around 200 banks in Singapore, including 40 representative offices, with a growing number choosing it as a base for their regional operational headquarters.
- Singapore is the banking hub of Southeast Asia.
- Singapore is the largest foreign-exchange market in Asia Pacific and the third largest in the world (Bank for International Settlements triennial global survey 2016).
- Singapore's debt market has grown in depth and breadth over the past decade, with an extensive range of both Singapore government securities and foreign corporate bonds available, with outstanding bonds worth SGD386 billion.
- The Monetary Authority of Singapore regulates the banking industry with a regulatory framework in line with international standards. MAS is consulting on revising the capital requirements for Singapore-incorporated banks to align them with the Basel III minimum requirements from January 1, 2022.
- The corporate income tax rate is 17%. There is a partial tax exemption of 75% on the first SGD10,000 and 50% on the next SGD190,000. There is a rebate of 20% of the corporate income tax payable subject to a cap of SGD15,000 for Year of Assessment 2020.
- Both resident and non-resident companies are taxed on their Singapore-sourced income. However, in respect of resident companies, foreign-sourced income is taxed when it is remitted to Singapore, although a remittance exemption may be available subject to the fulfilment of certain conditions.
- Foreign company branch profits are taxed at the same rate as resident company profits. There is no branch profits remittance tax on the remittance of profits to a head office by the branch of a foreign company.
- The standard rate for goods and services tax (GST) is 7%. The export of goods and international services are zero-rated, and some goods and services are exempted from GST, including financial services. According to Budget 2018, the standard rate for GST will be increased to 9% sometime between 2021 and 2025. GST is generally not charged on the import of services, although from 1 January 2020 a reverse-charge has been introduced on local businesses that make exempt supplies, and those that do not make any taxable supplies. Overseas providers that make significant supplies of digital services to customers in Singapore are also required to register for GST in Singapore.
- Income from investment such as dividends, interest and rent is subject to tax in Singapore, although Singapore dividends are tax exempt.
- Gains made on capital transactions are not subject to tax in Singapore unless it can be proven that the gains were trade in nature.
- Interest expenses that are used for business purposes are generally tax deductible.There are no thin capitalisation rules in Singapore.
- Stamp duty of 0.2% is charged on the purchase price or value of shares, whichever is higher.
- Withholding tax of 15% is charged on interest paid or payable to non-resident companies where no tax treaty is in place. Rates range from 0% to 15% where a tax treaty is in place and the non-resident can provide a Certificate of Residence. Certain domestic law exceptions are available.
- Under the Financial Sector Incentive scheme (FSI), certain activities for qualifying institutions are taxed at 5%, while a broader range of financial activities are taxed at 13.5%.li>
- Income derived from qualifying finance and treasury centre (FTC) services is taxed at 8%. Interest payments to overseas banks or approved network companies, where the funds borrowed are used for approved qualifying FTC services, are exempt from withholding tax.
- Various tax incentives, including exemptions and concessionary rates on qualifying income, are available for companies that set up regional or international headquarters in Singapore.
- Singapore has tax treaties with 88 countries and territories.
- Singapore is a signatory to the Organisation for Economic Co-operation and Development's Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.
Benefits for Regional Treasury Centres (RTCs)
- Singapore offers approved FTCs a reduced corporate tax rate of 8% on income derived from qualifying FTC services.
- Singapore offers approved FTCs withholding tax exemptions on interest payments on loans from overseas banks or approved network companies provided the funds borrowed are used for qualifying FTC services.
- Singapore is the regional risk management and treasury hub for Asia Pacific, as well as a renminbi gateway, second to Hong Kong in the region.
- Singapore has preferential investment and business policies with ASEAN members and a total of 14 bilateral FTAs, and 11 regional FTAs.
- Singapore's Global Trader Programme provides a reduced corporate tax rate of 5% or 10% on qualifying income, including from physical trading, brokering of physical trades and derivative trading income, for three or five years.
- Cash concentration is widely available in Singapore on a domestic and cross-border basis. Different legal entities can participate in the same cash-concentration structure.
- Notional pooling is allowed in Singapore on both a domestic and cross-border basis. Different legal entities can participate in the same notional cash pooling structure.
Comparison of Singapore and Hong Kong as a Location for RTCs
- Singapore and Hong Kong offer significant benefits to FTCs.
- Corporate income tax for approved treasury operations in the two locations is broadly similar, at 8% for Singapore and 8.25% for Hong Kong.
- Singapore offers a withholding tax exemption to FTCs on interest payments on funds borrowed from non-resident banks and approved network companies, provided the funds are used for qualifying FTC services, while Hong Kong has no withholding tax on interest.
- Singapore has the edge in terms of tax treaties, having agreements with more than 90 locations, compared with around 40 for Hong Kong. Singapore also has a total of 14 bilateral FTAs, and 11 regional FTAs.
- Both cities have highly developed infrastructure, deep capital markets and strong talent pools.
- When both tax and non-tax issues are weighed up, Singapore tends to have the edge for businesses that are active in Southeast Asia, while Hong Kong tends to be the location of choice for corporations focused on Mainland China due to its status as an offshore renminbi hub.
Three banks dominate Singapore's commercial banking: DBS Bank, Overseas-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB).
- Singapore has 130 commercial banks, of which 126 are foreign and four are local. In addition, there are three finance companies, 5 representative offices and 19 merchant banks.
- Foreign banks are full banks and provide a full range of banking services under Qualifying Full Bank (QFB) privileges.
- Commercial banks operate as full banks, wholesale banks (full services excluding SGD retail bank services) and offshore banks.
- The Monetary Authority of Singapore (MAS) encourages foreign banks to participate in domestic banking through the QFB programme
- A company with a permanent or registered address in Singapore and with its management operations in Singapore is regarded as resident.
- Residents, both domestic and overseas, and non-residents may hold foreign exchange and local currency (SGD) accounts. Local currency accounts are freely convertible into foreign currency for residents and non-residents.
- Residents and non-residents have overdraft facilities available to them.
- Interest is available to demand deposit and currency accounts.
Legal and Regulatory
- MAS takes on the role of central bank and operates autonomously. It does not require full central bank reporting.
- Singapore is a member of the Association of Southeast Asian Nations (ASEAN) and Asia-Pacific Economic Corporation (APEC).
- Singapore has in place anti-money laundering legislation which is applied by MAS. It is also a member of the Financial Action Task Force (FATF), Asia/Pacific Group of Money Laundering (APG) and Group of International Finance Centre Supervisors (GIFCS).
- A financial intelligence reporting unit has been set up, the Suspicious Transaction Reporting Office (STRO), which is a member of the Egmont Group.
(Fast And Secure Transfers)
|Interbank electronic transfer system|| |
|PayNow||Digital funds transfer system|| |
Singapore's Real Time Gross Settlement (RTGS) system
(Automated Clearing House)
Nationwide clearing system
(Interbank Giro System)
Deferred multilateral net settlement system
(SGD Cheque Truncation System)
Cheque and paper-based truncation system
(USD Cheque Truncation System)
USD cheque- and -paper-based truncation system
(Network for Electronic Transfers)
Interbank electronic credit and debit transfer system
- Used for salary and supplier payments in SGD.
- High-value and urgent interbank transfers settled via MEPS+ same day.
- Low-value, non-urgent and high-volume electronic credit transfers settled via IBG same day.
- Paper-based payments used for standing orders and sometimes payroll payments.
Direct Debits (auto debits)
- Used for low-value, regular payments in SGD such as utility bills.
- Processed through IBG, for next day.
- Singapore has a high penetration of credit and debit cards, and their popularity has in turn boosted the widespread usage of contactless payment systems.
- Visa is main card of choice, with MasterCard, American Express and Diners Club also in use.
- Processed via NETS same day.
- Electronic money schemes available as top-up prepaid cards. The main prepaid payment cards are MatchMove Mastercard and Fevo Mastercard.
- Stored-value cards come in two types: Single-purpose stored-value cards (SPSVC) used to pay only for services provided by the card issuer; and multipurpose stored-value cards (MPSVC) used for a variety of payments, with CashCard, ez-link and FlashPay the most common. E-money payments are settled next day.
- MAS and the Infocomm Media Development Authority have developed the Singapore Quick Response Code (SG QR), a series of protocols adapted from the specifications set out by EMVCo, the organisation responsible for setting global standards in debt and credit payments.
- Payments by mobile phone can be done by downloading the app onto a smartphone and storing credit in a 'mobile wallet'.
- A consortium of mobile wallet providers — Diners Club, EZi Wallet, EZ-Link, Liquid Pay, Mastercard and UnionPay International — have come together to offer a single QR-based payment scheme available for domestic and international transactions.
- In 2019, mobile payment usage grew by 46%, an increase of 12% from 2018 (Singapore Business Review).
- The three leading global digital wallets — Samsung Pay, Apple Pay and Android Pay — have an established presence, with a network of local and regional mobile wallet providers, such as Dash, PayLah! and Alipay, infiltrating the digital payment market.
- PayLah! is operated by DBS/POSB, but can be used by non-DBS/POSB account holders. It has mobile payment and banking solutions, is operable using QR codes and has linked up with the 7-Eleven store network as a payment provider.
- Infocomm Media Development Authority (IMDA), in collaboration with the Land Transport Authority and other industry players, has launched the Specification for Contactless e-Purse Application — CEPAS — which provides a national interoperable standard for different multi-purpose stored value (MPSV) card payment schemes. Several wearable devices now carry the ez-link CEPAS purse for contactless payments.
- DBS has launched the POSB digibank Virtual Assistant, a banking facility that operates through a ‘chatbot’, using Facebook Messenger as the media platform, and offering banking services beyond customer service.
- Infocomm Media Development Authority (IMDA) launched the nationwide e-invoicing network in 2019 to improve invoicing efficiency, reduce cost, and make payments faster.
- Cryptocurrencies have not been widely adopted (0.02% of global bitcoin trading volume according to PwC), but Singapore has become a hub for initial coin offerings (ICOs) and the government has provided a conducive environment for their use and exchange.
Cash, Cheques and Money Orders
- Cheques are the most common cashless payment method in terms of value.
- Truncated and cleared at ACH.
- Possible to use USD- and SGD-denominated cheques.
- USD and SGD cheques processed via SCHA and settled via MEPS+.
- While cash is also preferred, especially for low-value transactions, the government has stated its aim to reduce the use of cash and become cheque-free by 2025.
- Money orders are available in Singapore through vendors such as Western Union and MoneyGram. Money can be sent domestically or internationally, either online or in person.
- The official currency of Singapore is the Singapore dollar which is fully convertible domestically and offshore.
- Singapore’s monetary policy is set and managed by regulator the Monetary Authority of Singapore, which sets interest rates.
- The exchange rate of the Singapore dollar is set against a basket of the currencies of Singapore’s main trading partners and rivals. It is managed by MAS and allowed to fluctuate within a policy band.
- Singapore is the third largest FX centre globally after London and New York, and the largest in Asia Pacific, according to the Bank for International Settlements Triennial Central Bank Survey. (Bank of International Settlements, https://www.bis.org/statistics/rpfx19.htm, December 2019)
- Singapore has average daily trading volumes of USD633 billion of FX and OTC derivatives, according to BIS. (Bank of International Settlements, https://www.bis.org/statistics/rpfx19.htm, December 2019)
- Singapore has a deep and liquid market for trading and hedging G10 currencies, as well as those for emerging Asian markets.
- Singapore is the region’s second biggest offshore renminbi centre after Hong Kong.
- More than 30 foreign exchange futures and options contracts are traded on Singapore-based exchanges. (Monetary Authority of Singapore, https://www.mas.gov.sg/development/foreign-exchange, 2020)
- MAS is working with banks and trading platforms to build up Singapore’s e-trading infrastructure as it aims to position the city as the global FX price discovery and liquidity centre in the Asian time zone.
- Resident companies can have accounts denominated in both local and a wide range of foreign currencies both onshore and offshore.
- Non-resident companies may also hold accounts in both local and foreign currencies. All accounts can be converted into other currencies.
- Companies are not required to convert their foreign currency receipts into SGD.
- Both resident and non-resident companies can borrow in all currencies, however, foreign firms that borrow SGD locally must use the money for productive activities to discourage borrowing for speculative purposes.
- Non-resident financial institutions can only borrow up to SGD 5 million in local currency, companies wishing to borrow more than this sum for use offshore must convert the excess funds into a foreign currency. (Monetary Authority of Simgapore, https://www.mas.gov.sg/regulation/notices/notice-757, 2018)
- Singapore offers a wide range of products to help companies manage FX risk, including FX options, FX spot and FX forward, FX time option forward, par forward, cross currency swap, and non-deliverable forward.
- Singapore does not have any significant foreign exchange controls.
- There is no tax on foreign exchange transactions in Singapore.
- There are no restrictions on forward foreign exchange markets, but leveraged foreign exchange trading, including in OTC derivatives, is regulated by MAS and financial institutions conducting this activity must apply for a Capital Markets Services license.
- There are no restrictions on capital flows in and out of Singapore. No prior approval is required for inward investment or outward payments.
- There are no restrictions on the remittance of profits or dividends in any currency to other countries. No withholding tax is charged on dividends.
- Domestic and cross-border intercompany lending is allowed subject to transfer pricing rules.
- Foreign currency invoices must be converted into SGD using an approved exchange rate for goods and services tax purposes.
Singapore has an open economy that is driven by trade in goods and services. It has 25 free trade agreements. Its largest trading partners are China, Malaysia, and the United States.
- Singapore has 14 bilateral free trade agreements and 11 regional free trade agreements with more than 50 trading partners, including China, the EU, the US and the Gulf Cooperation Council. (Enterprise Singapore, https://www.enterprisesg.gov.sg/non-financial-assistance/for-singapore-companies/free-trade-agreements/ftas/singapore-ftas, 2019)
- Singapore is a member of the ASEAN Trade in Goods Agreement and the Trans-Pacific Partnership Agreement.
- It is a member of Asia-Pacific Economic Cooperation.
- Singapore has nine free trade zones. (Singapore Statues Online, https://sso.agc.gov.sg/SL/FTZA1966-N3, a more concise but non-government source is Healy Consultants, https://www.healyconsultants.com/singapore-company-registration/free-zones/)
- Singapore was a founding member of the World Trade Organisation.
- The country’s Networked Trade Platform enables trade and customs matters to be managed online.
- The Monetary Authority of Singapore is working with the Hong Kong Monetary Authority to create a Global Trade Connectivity Network using distribution ledger technology.
- Singapore implements the United Nations Security Council (UNSC) sanctions, which prohibits the import, export and transhipment through Singapore of certain goods, as well as prohibiting companies from engaging in certain transactions with UNSC sanctioned countries.
- Singapore also has its own sanctions under the Terrorism (Suppression of Financing) Act, which covers sanctions against individuals and terrorist organisations. The Monetary Authority of Singapore also has its own regulations covering financial institutions.
- All goods imported into Singapore are regulated under the Customs Act, the Goods and Services Tax (GST) Act and the Regulation of Imports and Exports Act.
- The following documents are required for imports and must be kept for at least five years from the date of permit application approval: commercial invoice, bill of lading or airway bill, packing list, certificates of origin, analysis and insurance, and books of accounts.
- Importers are required to obtain a customs permit. This is also used to account for tax payments on goods. In certain circumstances, a short-payment permit is also required.
- Imported goods are subject to Goods and Services Tax (GST) of 7% of the cost, insurance and freight value. GST and duty are charged on intoxicating liquors, tobacco products, motor vehicles and petroleum products. (PwC, https://taxsummaries.pwc.com/singapore/corporate/other-taxes, 2020)
- GST and duty are suspended for goods imported to a free trade zone and are only payable when the goods are consumed within the free trade zone or leave the free trade zone. GST is also not paid on goods stored in zero-GST warehouses until they are removed from the warehouses.
- Goods prohibited from being imported include chewing gum, firecrackers, endangered species or products derived from endangered species, certain items of telecommunication equipment and controlled drugs.
- A range of financing options are available including letters of credit, bankers’ guarantees, import documentary collections and pre-shipment/post-shipment trade loans.
- All goods exported from Singapore are regulated under the Customs Act, the Regulation of Imports and Exports Act and the Strategic Goods (Control) Act.
- A customs export permit is required to export goods from Singapore. Goods are categorised as containerised cargo or conventional cargo.
- The following documents are required for exports and must be kept for at least five years from the date of permit application approval: customs export permit, invoice, bill of lading or airway bill, certificate of origin.
- GST and duty are not levied on exports from Singapore.
- Certain goods, such as chemical and biological products and items for military usage, are classed as controlled goods and are subject to export restrictions and require proper authorisation, such as advance notification, licence or certificate approval. Some goods, such as rhinoceros’ horns, are prohibited from being exported.
- A range of financing options are available including letters of credit confirmation, export documentary collections, export financing under letters of credit and invoice financing/factoring.
1 (Progressive) max rate for incomes over SGD320,000
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Sources: World Economic Forum, PwC, International Monetary Fund, CIA World Factbook, Trading Economics, Organisation for Economic Co-operation and Development, Bank for International Settlements, Statistics Singapore, Monetary Authority of Singapore, The Association of Banks in Singapore, Enterprise Singapore
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