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Why is Singapore's Tax Regime so ideal for Mining companies?

· financing,singapore,investors,tax savings,tax

Are you curious about setting up a company in Singapore as part of your corporate organisation for your Energy and Mining Business? Do you want to know more about the corporate tax regime for Singapore and how it can benefit your business?

According to World Bank, the Lion City with a 5.5 million population and a GNI per Capita of US$ 52,090 holds the second spot among 190 countries in the World Bank’s Ease of Doing Business Rank for 2018. There are more than 3,000 multinational corporations in the sovereign city-state that is described as one of Asia’s economic “tigers”.

Once a British colonial trading post, today Singapore boasts a market economy that is highly developed, trade-oriented and business-friendly. It has also been ranked as the most open and least corrupt global financial hub, attracting all types of business investors locally and internationally.

If you are keen on tapping into tax savings for your Energy and Mining Business, making your mark in Singapore would entail sufficient knowledge about the country – not only the overall business climate and the trending business opportunities here but also its existing establishments, local laws and culture.

You also have to read this.

What is Taxable Income in Singapore?

For Singapore tax purposes, taxable income refers to:

  1. Gains or profits from any trade or business;
  2. Income from investment such as dividends, interest and rental;
  3. Royalties, premiums and any other profits from property; and
  4. Other gains that is revenue in nature.

Deductions such as business expenses, capital allowances and reliefs can be claimed to reduce taxable income, which leads to lower taxes.

When is Income in Singapore Taxable?

A company is liable to pay tax in Singapore on income that is:

  1. Accrued in or derived from Singapore; or
  2. Received in Singapore from outside of Singapore.

What is "Income from outside Singapore received in Singapore?"

Under Section 10(25) of the Income Tax Act, income from outside Singapore is considered received in Singapore when it is:

  1. Remitted to, transmitted or brought into Singapore;
  2. Used to pay off any debt incurred in respect of a trade or business carried on in Singapore; or
  3. Used to purchase any moveable property brought into Singapore (e.g. equipment or raw materials connected to your business).

Here is the interesting part

Section 10(25) says that tax will only be applied to foreign income if that income belongs to an individual who is resident in Singapore or an entity which is located in Singapore. So if that income belongs to a non-resident individual or goes to a foreign businesses which is not operating in or from Singapore, that income can be remitted to Singapore without being taxed.

InProved/theAsianIR/Kimbo Corporate Pte Ltd welcomes foreign investors to set up an entity in Singapore and use it as an integral part of their expansion plans to grow their business and optimise their operations.

It gets better!

As an administrative concession, Singapore Corporate law says that foreign income which is applied towards overseas investments will not be treated as having been received in Singapore under section 10(25) at the point of reinvestment. This means that the taxing point of the foreign income is deferred till when the investment is realised and the proceeds are brought into Singapore. This is in line with the Government's effort in promoting globalisation of Singapore's businesses. So in lay-man terms, this means that monies used to acquire a mining permit or concession that is paid out from a Singapore Corporate Entity will only be subjected to tax when the Project is operational and Revenues are received.

Joint-Venture Structure in Singapore

There are 2 joint venture structures which an individual or a company can pursue in Singapore to enjoy tax advantages.

  1. Joint-Venture between Local individual Partner and Overseas Corporate Entity

Under Singapore Government Law, Person(s) registered with Accounting and Corporate Regulatory Authority (ACRA) are consider as self-employed. They provide services under a Company they incorporated (or Jointly-Incorporated).

Self-employed people who derive their income from Overseas while operating under a Jointly-Incorporated Entity from overseas are not taxed at corporate level.

These people are taxed at Personal Income Tax level only.

For an Overseas Corporate Entity to quickly expand via Singapore, there are Win-Win tax advantages with appointing a Local Partner under a Contract for Service agreement.

  1. Renumeration paid to the Contract can be considered as an expense on the Overseas Entity P&L.
  2. Renumeration paid to Local Partner is tax-free and doesn't have to be declared by the Local Partner .

So Overseas companies can consider appointing a local partner in Singapore and engage his/her services under the "Contract for Service" agreement, all monies paid to the Corporate Account jointly can potentially be Tax-free both Overseas and Locally if structured appropriately.

2. Joint-Venture between Local Corporate Partner and Overseas Corporate Entity

Singapore government is actively encouraging overseas entities to set up subsidiaries in Singapore. This means that any capital that is remitted by the Parent Overseas Entity to its Local Branch is tax-free and can be counted as Paid-up capital. This paid-up capital can then be legally recognised and updated on ACRA, after the following are approved;

  1. Receipt of the proof of capital injection;
  2. Obtaining investor's signatures on the necessary documents

We will be able to update ACRA on the increase in paid-up capital and get an updated company profile issued by ACRA which shows the revised paid-up capital of your Joint-Venture Singapore company.

Some other good points about using Paid-up Capital to finance a subsidiary company in Singapore

  • Paid-up capital of the company can be utilised towards the company’s business expense without reserve.
  • Non-cash consideration such as fixed assets can be used as consideration, for as long as sufficient evidence of the valuation of the assets is provided.
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