S'pore gives tax breaks to boost trade

S'pore gives tax breaks to boost trade

SINGAPORE (Reuter): Singapore yesterday offered a tax relief
package to boost its attraction as the region's financial hub but
kept corporate and personal taxes unchanged.

Finance Minister Richard Hu unveiled in his budget speech for
1997/98 fresh tax incentives for fund management, stocks,
commodity trading and offshore debt issues.

"We will continue to give priority to investments in
infrastructure and ensure that our tax rates are competitive," he
told Parliament.

He said the financial sector was a key area of the economy,
contributing 12 percent to gross domestic product.

Among the relief measures, fund managers with substantial
operations in Singapore could qualify to be exempted from income
earned from non-resident funds.

Fund managers handling at least Singapore $10 billion (US$7
billion) of non-resident funds, employing at least seven
professionals and analysts and operating for three years under
Singapore's tax exemption for fund managers scheme, could
qualify.

He would cut the tax rate for fund managers managing more than
Singapore $5 billion of non-resident funds to five percent on
incremental income earned.

Fund managers previously enjoyed a concessionary 10 percent
tax rate on income earned from managing non-resident funds.

These measures would encourage them to expand their business
in Singapore and to use the city-state as a regional hub.

Hu also announced tax incentives for Asian Currency Unit (ACU)
activities.

Banks and merchant banks are now taxed at a concessionary rate
of 10 percent on income earned from such activities.

He announced a further reduction in the tax rate to five
percent on the incremental income derived from certain high value
activities, provided the taxable income of some of these
activities exceeds S$10 million.

Hu said the five percent tax on incremental income would be
extended to income derived from all taxable ACU activities, if
the figure exceeded S$50 million.

This new incentive would be granted for an initial five-year
period with effect from the 1998 year of assessment.

Further, Hu said the Singapore Commodity Exchange (SICOM)
would enjoy a five year tax holiday extension.

The package further relaxed the terms of its overseas
enterprise incentive (OEI) scheme to encourage more companies to
invest in the region.

To boost stock and debt markets, Hu said banks would not be
taxed on income earned from managing initial public offerings of
foreign currency denominated shares for an initial period of five
years, effective from 1998.

To encourage borrowers to issue bonds and other debt
securities, he said all fees earned by financial institutions in
arranging offshore debt issues would be exempted from tax.

In contrast to last year, the budget package did not offer
across-the-board tax rate cuts for corporations and individuals.

"We reduced our corporate tax and personal income tax rates
last year. The lower rates will take effect from the year of
assessment 1997, there is therefore no need to make further
adjustments to these tax rates so soon after the last revision,
Hu said.

He added that Singapore's tax rates were already among the
lowest in the world.

The minister, however, offered a once-off across the board
personal tax rebate of 10 percent on individual income tax.