Shipping Tax Incentives In Singapore

By on Mar 15, 2014 in Informative Posts | 0 comments

Shipping Tax Incentives In Singapore: Keeping Shipping Business Alive

Foreign investors come to Singapore to build their business operations for many reasons. For one, it is very easy to set up or incorporate one’s company or business here in Singapore. And then, there is the key factor which is the Tax Scheme for businesses and companies which attract more entrepreneurs around the world. Attractive tax scheme in Singapore for business includes corporate and personal tax rates, absence of capital gains tax, tax relief measures, extensive double tax treaties, and one-tier tax system.

Singapore also offers shipping tax incentives. Section 13A of Singapore Income Tax Act or SITA, shipping entity can be exempted from tax with the following conditions:

  • Singapore registered ships working in international waters where income come from

–        Carrying passengers, goods, mails, and farm animals or livestock;

–        Charter of ships;

–        Hauling or salvaging operations

–        As searcher or dredger, seismic ship or vessel for offshore gas or oil undertakings which takes effect since YA 2007;

–        Foreign exchange and risk management undertakings in relation to and incidental to its business operations which is in effect since YA 2009;

–        Giving ship management services to eligible business or company in connection with ships owned by Singapore or handled by qualifying company where income comes on or after February 22, 2010.

  • Foreign Ships/Vessels where profit comes from the freight uplift from Singapore. The tax exemption does not include charter fees and carriage coming from transshipment from Singapore, or within the limits of Singapore port.

Companies with this kind of business operations need not apply for this exemption to IRAS. If the company has an income that qualifies for the exemption, then, the company will just have to report the amount and nature of the profit in their Annual Tax Form or Form C and their tax computation.

Take Note that:

  • For preparation of tax computation, the shipping company should split the operational accounts for every Singapore vessel and foreign vessel. This will help in identifying the income and direct expenses of every vessel. Copies of Certificate of Singapore Registry or CSR for every vessel should be kept and maintained. This is particularly true especially when the shipping company intends to claim exemption under the Section 13A.
  • On Capital Allowances – When the shipping company obtains exempt and non-exempt profit, the capital allowances should be allocated on common fixed assets which are based on turnover.

When fixed assets are identified to exempt or non-exempt source of profit, capital allowance for these assets should be subtracted against the source of profit.

The shipping company may opt not to declare capital allowance for the part that is credited to exempt income which is under S13A.

  • Shipping Company Losses – In case the shipping company experiences losses from part of the business qualifying for S13A exemption, the value of losses will not be allowed to set-off against non-exempt profit. These losses will not be permitted to be carried to the following years for set-off against future’s profit.

 

“Information  in the website does not claim to be correct in all situations and professional help should be sought for the readers’ specific situation”