Tax Overview Setting up a Fund Manager in Singapore

Size: px

Start display at page:

Download "Tax Overview Setting up a Fund Manager in Singapore"

Erik Gardner
8 years ago
Views:

1 Tax Overview Setting up a Fund Manager in Singapore 8 July 2014 Singapore

2 Agenda - Overview of Singapore tax system - Taxation of fund manager and individuals - Treatment of onshore and offshore funds 2

3 Overview of Singapore Tax System

4 Basis of Taxation INCOME derived from or accruing in received in SINGAPORE 4

5 Singapore - Key Tax Features Corporate tax rate - 17% Semi-territorial basis of taxation Tax exemption for foreign income, i.e. dividends, branch profits and service income No capital gains tax (13Z exemption) No thin capitalisation provisions Productivity and Innovation Credit ( PIC ) scheme offers tax deduction of up to 400% for qualifying expenditure incurred on PIC activities Transfer pricing in line with OECD Guidelines Extensive treaty network Country Corporate Tax Rate Hong Kong 16.5% Singapore 17% Malaysia 25% Thailand 20% Australia 30% China 25% Japan 38% Goods and Services Tax ( GST ) Generally 7% for taxable supply of goods and services - zero rating only applies to export of goods and international services. Preferential individual taxation system 5

6 Basic Fund Structure Investors Fund (Singapore / Offshore) Investment Management Agreement Fund Manager (Singapore) Investments 6

7 What Could Be Taxable in Singapore? Investors Discretionary fund manager creates tax exposure for fund in Singapore. Fund (including offshore funds) Dividends Interest Revenue gains from sale of investments Fund (Singapore / Offshore) Investment Management Agreement Fund Manager (Singapore) Fund manager Management fee Performance fee Employees of fund manager company Employment income Investments 7

8 Taxation of Fund Manager and Individuals

9 Taxation of the Fund Manager Fund Manager (Singapore) Fund manager Management fee Performance fee Corporate tax at 17%. Partial tax exemption available up to first S$300,000 chargeable income (being fees less deductible expenses and tax depreciation). Financial Sector Incentive for Fund Management 10% tax rate for qualifying income Approval required Key qualifying conditions: - regulatory licence or exemption; - at least three investment professionals; - AUM S$250 mil; - Strong growth plan. 9

10 Taxation of employees Chargeable Income First $20,000 Next $10,000 First $30,000 Next $10,000 First $40,000 Next $40,000 First $80,000 Next $40,000 First $120,000 Next $ 40,000 First $160,000 Next $ 40,000 First $200,000 Next $120,000 First $320,000 Above $320,000 Rate (%) Scope of Tax Territorial basis only on income earned in Singapore No capital gains tax No estate duty Gross Tax Payable ($) ,800 3,350 4,600 7,950 6,000 13,950 6,800 20,750 21,600 42,350 Tax Residency Resident individual: No tax payable on the first $20,000 chargeable income Singapore Permanent Resident or if you have established your permanent home in Singapore or Foreigner who stayed/worked in Singapore for 183 days or more in calendar year (excludes director of a company) Otherwise, treated as a non-resident for Singapore tax purposes Non-resident individual: employment income taxed at 15% or resident rate (whichever higher); director's fees, consultation fees and income other than employment income received will be taxed at 20% from YA 2005 onwards Tax concession schemes Tax exemption on most types of local investment income Tax exemption on income from short-term employment by non-resident individuals (business trips and visiting employees) Time apportionment of income for individuals with Not Ordinary Resident (NOR) status 10

11 Not Ordinarily Resident Scheme Qualifying conditions - Resident in Singapore for the year of assessment - Not resident in Singapore for three consecutive years immediately before that year of assessment Concessions - Time apportionment of Singapore employment income - Tax exemption of pre-assignment income remitted to Singapore - Tax exemption of employer s contribution to non-mandatory overseas pension fund or social security scheme 11

12 Treatment of Onshore and Offshore Funds

13 Fund Management Incentives Fund across Alternatives Offshore Fund Tax Incentive Scheme (s13ca) Singapore Resident Fund Scheme (s13r) Enhanced-Tier Fund Tax Incentive Scheme (s13x) 13

14 Singapore Fund Management Incentives Offshore Fund Tax Exemption Scheme Qualifying Relevant Owner Non-qualifying Relevant Owner Subject to penalties payable to the IRAS Approval not required! Fund (Offshore) Hedge, PE Specified income from designated investments => Tax Free!! Fee normal rate or 10% Fund Manager (Singapore) Investments 14

15 Singapore Fund Management Incentives Singapore Resident Fund Scheme Qualifying Relevant Owner Non-qualifying Relevant Owner Subject to penalties payable to the IRAS Application required, subject to approval! Approved Company (Singapore) Fee normal rate or 10% Fund Manager (Singapore) PE, RE, Infrastructure Apply directly to Master Fund or SPV Specified income from designated investments => Tax Free!! Investments 15

16 Singapore Resident Fund Scheme Conditions at a glance Application required Incorporated in Singapore Legal form: Company Singapore tax resident Uses Singaporebased fund administrator Managed by a fund manager in Singapore No change in investment strategy S$200k annual Business Spending Not 100% owned by SG persons Valid for the life of the fund Annual reporting and tax filing requirement 16

17 Singapore Fund Management Incentives Enhanced-Tier Fund Tax Incentive Scheme In 2009, the Enhanced-Tier Fund Tax Incentive Scheme was introduced. Tracking of non-qualifying relevant owners is unnecessary under this scheme. No penalty is imposed on investors. Application required, subject to approval! Specified income from designated investments => Tax Free!! Approved Person (Singapore / Offshore) Fee normal rate or 10% Fund Manager (Singapore) Across all AM Accommodate Master-Feeder structures Investments 17

18 Enhanced-Tier Fund Tax Incentive Scheme Conditions at a glance Application required Fund size: S$50 million at the point of application Legal form: certain companies, trusts or limited partnerships Uses Singaporebased fund administrator Managed by a fund manager in Singapore No change in investment strategy S$200k annual Local Business Spending Valid for the life of the fund Annual reporting and tax filing requirement 18

19 At a glance Place of incorporation / constitution and tax residency Scope of Tax Exemption Offshore Funds Tax Incentive Scheme Unit Trusts Futures contracts Debt securities Singapore Resident Fund Scheme Shares Real property outside Singapore Qualifying loans Enhanced-Tier Fund Tax Incentive Scheme Offshore Singapore Singapore / Offshore Specified Income from Designated Investments Investor restriction Yes Yes No Application required? No Yes Yes Derivatives Tax filing requirement No Yes Yes 19

20 Use of Singapore Domicile Funds Comparison of tax treaties Country Dividends Interest Capital Gains Local / No treaty Singapore treaty Local / No treaty Singapore treaty Australia 0% / 30% 15% 10% 10% Local / No treaty Exempt for non-land rich co s China 10% 5% / 10% 10% 10% Taxable Singapore treaty N/A Exempt for non-land rich co s India 0% N/A Up to 40% 15% Taxable Exempt Indonesia 20% 10% / 15% 20% 10% Taxable N/A The reduced rates/exemptions under the relevant tax treaties apply in certain situations and if certain conditions are satisfied. These are only indicative rates. The purpose of this table is to show the potential advantage of investing in a jurisdiction from a treaty country. N/A in the table above indicates that there is no additional benefit under the relevant tax treaty. The Cayman Islands has not negotiated tax treaties with these countries. As such, the local rate will apply. 20

21 Singapore fund Tax free dividends Hedge, Private Equity, Real Estate, Infrastructure Japan, India, China Master or SPV APPROVED FUND (Singapore) Fee FUND MANAGER OR ADVISER (Singapore) Tax free Dividends, interest, gains Normal rate or 10% 21

22 Summary Singapore offers opportunities Pros and cons thus careful structuring required Definitely something to consider 22

23 Lim Maan Huey Partner Tax Financial Services Telephone : maan.huey.lim@sg.pwc.com

24 The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers Services LLP ( ). has no obligation to update the information as law and practice change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances. The materials contained in this presentation were assembled on 8 July 2014 and were based on the law enforceable and information available at that time PricewaterhouseCoopers Services LLP. All rights reserved. PricewaterhouseCoopers and "" refer to PricewaterhouseCoopers Services LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity.

THE TAXATION INSTITUTE OF HONG KONG CTA QUALIFYING EXAMINATION PILOT PAPER PAPER 5 ADVANCED TAXATION PRACTICE

THE TAXATION INSTITUTE OF HONG KONG CTA QUALIFYING EXAMINATION PILOT PAPER PAPER 5 ADVANCED TAXATION PRACTICE Advance Tax- pilot_1007_q&a_jy R28/3/2013 1 QUESTIONS Section A Case Answer Question 1 in this