Singapore Taxation Assignment 2|
Double Tax Agreement3
Economic Expansion Incentives3
Singapore is a small country with only 660 square kilometer and around 5 million people. The main resources in Singapore are intellectual ones and skilled manpower with assistance in continuously improving infrastructure. Therefore, Singapore will depend heavily on foreign capital inflows and local investments to keep up economic expansion and to mimic wealthier countries with higher living standards. In order to do so, Singapore government offers and encourages business, using the economic expansion incentives act to give many advantages for local and foreign investors. Income Tax
Double Tax Agreement
Double taxation occurs when two or more countries put on taxes on taxpayers through income or capital. Income will be taxed twice, one by the country of residence and the other whereby the country of source where the income increases. The key objective of a DTA is to maintain validity on tax to be imposed in the country. This is made by an activity that generates income or when payment is made. Thereby, this provides a clear vision of each country’s taxing right. It avoids international tax invasion between contracting countries. These provide countries to claim relief for taxed paid overseas. It allows us to claim for relief for taxes paid overseas. Since 1965 to date, Singapore has provided DTA to over 60 countries. And there are grouped into 3 parts. Firstly, the Comprehensive Avoidance of Double Taxation Agreements. This agreement is set upon 64 countries. It overs on all types of income. Secondly, Limited Treaties. This treaty covers only income from shipping and/or air transport over 7 countries. And lastly, Treaties which are signed but yet to be approved are imposed over 14 countries. The credit and exemption method are used to avoid the burden of double taxing. In order to be entitled to these exemptions, the company has to provide the certain information. If not, the company has to provide details on incentive granted on the business to add evidence that income was exempt in the foreign country. Such credit and exemptions relief reduces tax, therefore encourages foreign capital inflow into Singapore.
Economic Expansion Incentives
Pioneer industries allowances are given to high- tech companies that bring benefits in the public interest and contribute to the economic development in Singapore. In relation to pioneer industries and pioneer service companies, the income and revenue are tax exempt during the tax relief period, and the tax relief period are all up to 15 years commencing from the production date of pioneer industries and the date carrying out qualifying activity of pioneer service companies. Both pioneer companies and non-pioneer companies who are conducting qualifying activities may ask for Minister to approve them as a development and expansion company .A qualified development and Expansion Company is taxed at a reduced rate, as low as 5% on its expansion income. And the initial tax relief period is not exceeding 10 years. Moreover, a pioneer company can obtain benefits from unused capital allowances and unused losses. Unused capital allowances and losses will be deducted from the profit of new business for the company. This incentive encourages various companies to establish at Singapore by investing a ton of money to start their business. In addition, Pioneer Service Companies are also given grants for qualifying activities and they are tax exempt during a tax relief period of from 5 to 15 years. The tax relief period will start on the day qualifying activity commence. Furthermore, Singapore encourages companies to invest in new equipment and to introduce high-tech technology and specialized engineering in their production processes to obtain higher productivity and to improve efficiency...