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Singapore: Market Profile

Picture: Singapore factsheet
Picture: Singapore factsheet

1. Overview

Singapore is one of the world's most prosperous countries and is ranked among the world's most competitive economies. The city-state benefits from strong international trade links and a per capita income level comparable to or exceeding that of many Western European nations. The government's far-sighted economic policies have helped to transform the economy into an Asian powerhouse in recent years and economic diversification efforts continue to be implemented, which bodes well for sustained expansion of economic activity. The economy is heavily reliant on exports, particularly in information technology products and pharmaceuticals, as well as its vibrant tourism, retail and financial services sectors. Therefore, it may be vulnerable to global trends such as shifting demand for electronic goods as well as ongoing trade tensions between The United States and Mainland China. The city-state offers a large, highly skilled workforce and one of the world's most business-friendly regulatory environments for local entrepreneurs. With strong financial support from the government, the 'Skillsfuture' initiative aims to further boost the flexibility of the workforce by providing continuing education that deepens technical and managerial skills across sectors.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

September 2015
General elections were held after the dissolution of parliament in August of the same year by President Tony Tan. The People's Action Party (PAP) took 83 of the 89 available seats. Lee Hsien Loong took up his third term as prime minister.

May 2016
Singapore announced that it would spend more than USD1.5 billion on expanding the capacity of its military training bases in Australia as part of a 25-year agreement.

September 2017
After President Tony Tan's term ended in August 2017, elections were scheduled for September. Halimah Yacob was deemed as the only eligible candidate by the country's election department and ran unopposed. She was inaugurated as the president of Singapore on September 13. This was the first election in Singapore after the country amended its constitution to create a provision for elections to be reserved for candidates from specific ethnic or racial groups on a rotating basis.

April 2018
Singapore hosted the first of two Association of Southeast Asian Nations (ASEAN) summits on its territory in April 2018.

November 2018
Singapore hosted the 33rd ASEAN Summit.

March 2019
Malaysia and Singapore agreed to suspend their mutual port limits as they continue negotiations to resolve the maritime dispute between the two parties. They also agreed to halt commercial activities in the disputed area and ensure that their respective vessels present in the area complied with the United Nations Convention on the Law of the Sea.

May 2019
Singapore's non-oil domestic exports declined by 15.9% y-o-y. This was the third consecutive month of double-digit decline and was driven by a 9.1% and 32.4% y-o-y drop in manufactured goods and machinery and transport equipment exports respectively.

July 2019
The government of Malaysia stated that it had halted the export of sea sand in October 2018. Malaysia accounts for the majority of Singapore's imports of the commodity which Singapore uses in its infrastructure expansion drive.

Sources: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Singapore real GDP and inflation
Graph: Singapore real GDP and inflation
Graph: Singapore GDP by sector (2018)
Graph: Singapore GDP by sector (2018)
Graph: Singapore unemployment rate
Graph: Singapore unemployment rate
Graph: Singapore current account balance
Graph: Singapore current account balance

e = estimate, f = forecast
Sources: IMF, World Bank
Date last reviewed: July 9, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Singapore merchandise trade
Graph: Singapore merchandise trade

Source: WTO
Date last reviewed: July 9, 2019

Graph: Singapore major export commodities (2018)
Graph: Singapore major export commodities (2018)
Graph: Singapore major export markets (2018)
Graph: Singapore major export markets (2018)
Graph: Singapore major import commodities (2018)
Graph: Singapore major import commodities (2018)
Graph: Singapore major import markets (2018)
Graph: Singapore major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: July 31, 2019

4.2 Trade in Services

Graph: Singapore trade in services
Graph: Singapore trade in services

Source: WTO
Date last reviewed: July 9, 2019

5. Trade Policies

  • Singapore has been a member of the World Trade Organization (WTO) since January 1, 1995.

  • Singapore is generally a free port and open economy and the average tariff is 0%. Around 99% of all imports into Singapore enter the country duty free.

  • For social and environmental reasons, Singapore levies high excise taxes on beer, wine and liquor, tobacco products, motor vehicles and petroleum products. Singapore also restricts the import and sale of non-medicinal chewing gum.

  • A goods and services tax (GST) of 7% is levied on the supply of goods and services made in Singapore by a taxable person in the course or furtherance of business. It was announced in the 2018 budget that this rate would be increased to 9% between 2021 and 2025. The only exemptions from GST are prescribed financial services (including life insurance), the sale or rental of residential properties, and the import and local supply of investment precious metals (IPM).

  • GST is not currently charged on imports of services, although this will change from January 1, 2020 with the introduction of a reverse-charge on local businesses that make exempt supplies, and those which do not make any taxable supplies, to account for GST on the services they import. At the time of writing in July 2019, the Singaporean government was seeking public comments on a draft e-Tax guide which proposes the exemption of cryptocurrency transactions from GST.

  • For dutiable goods, the taxable value for GST is calculated based on the CIF (Cost, Insurance and Freight) value, plus all duties and other charges. In the case of non-dutiable goods, GST will be based on the CIF value plus any commission and other incidental charges whether or not shown on the invoice. If the goods are dutiable, the GST will be collected simultaneously with the duties. Special provisions pertain to goods stored in licensed warehouses and free trade zones (FTZs).

  • Labels are required on imported food, drugs, liquors, paints and solvents and must specify the country of origin.

  • There are two levels of labelling requirements for medicinal products. Administrative labelling requirements are not statutory requirements and are specified in the Health Sciences Authority's Guidance on Medicinal Product Registration in Singapore. Compliance is checked during the product registration process, before granting marketing approval. Legal labelling requirements are stipulated in the legislation related to medicinal products regulation in Singapore and are subject to the Health Sciences Authority's surveillance programme.

  • The 'Safety Mark' is used for selected electrical and electronic products as well as gas appliances which are sold to consumers for use in Singaporean households. All registered controlled goods must be tested to specific international and national safety standards and certified safe by designated product certification bodies.

  • The 'Accuracy Label' covers weighing and measuring instruments intended for trade use. In Singapore, all weighing and measuring instruments used for trade purposes (such as price computing scales in supermarkets, baggage weighing machines at airports and seaports as well as fuel dispensers at petrol stations) are regulated under the Singapore Weights and Measures Act and Regulations.

Sources: WTO – Trade Policy Review, Inland Revenue Authority of Singapore, Fitch Solutions

6. Trade Agreements

6.1 Trade Updates

Singapore is a member of a number of free trade agreements (FTAs), which create a legally binding agreement between two or more countries to reduce or eliminate barriers to trade. The country first signed an FTA under the ASEAN Free Trade Area in 1992, and has since expanded its network to cover 20 regional and bilateral FTAs with 31 trading partners. As a member of ASEAN, Singapore participates in all group FTAs.

6.2 Multinational Trade Agreements


  1. ASEAN: In addition to Singapore, members include Brunei Darussalam, Cambodia, Indonesia, Laos, Myanmar, Philippines, Malaysia, Thailand and Vietnam. Since 2015 almost all tariffs between member states have been removed in the ASEAN Free Trade Area. The FTA eliminates tariffs on 98.6% of goods. The rewards of lower tariffs within the area have been seen, with regional trade booming. The ASEAN Economic Community (AEC) which is currently under negotiation will also serve to strengthen regional economic ties and improve trade volumes in Singapore. The AEC creates new opportunities and makes the investment case for business in South East Asia more compelling. ASEAN is Singapore’s largest trading partner and top investment destination.

  2. Mainland China-Singapore FTA: The FTA between mainland China and Singapore entered into force on January 1, 2009 and was upgraded in November 2018. The agreement enhances economic co-operation between the two nations as the free trade accord facilitates productive competition. It also contributes to the economic integration of East Asia and the Asia Pacific region. Under the FTA, the two countries have accelerated the liberalisation of trade in goods on the basis of the Agreement on Trade in Goods of the mainland China-ASEAN FTA and further liberalised the trade in services. Mainland China has been Singapore’s largest single trading partner since 2013, accounting for 12.2% of exports and supplying 13.4% of imports in 2018.

  3. India-Singapore: The Comprehensive Economic Cooperation Agreement (CECA) between Singapore and India entered into force on August 1, 2005. The third CECA review was launched in September 2018 and focuses on trade facilitation, customs and e-commerce. Under the agreement, Singapore’s goods exported to India enjoy tariff reduction or elimination, making them more competitive. Singaporean service providers also enjoy preferential access to India’s services sector.

  4. Japan-Singapore Economic Partnership Agreement (JSEPA): The JSEPA entered into force on November 30, 2002. Under the existing agreement, Japan increased its zero-tariff commitments from 34% of total tariff lines under the WTO to 77%. JSEPA also liberalised trade in services significantly, expanding its commitments from 103 services sectors under the WTO to 135. The scope of the JSEPA can be categorised into three main areas: trade liberalisation and market access through concessions for trade in goods and services; enhanced co-operation for non-trade areas; and institutional arrangements centred on a dispute settlement mechanism. Singapore also benefits from the ASEAN-Japan Comprehensive Economic Partnership (AJCEP).

  5. United States-Singapore FTA and Economic Integration Agreement: Under this FTA, firms in Singapore benefit from reduced trade barriers and a large market with a high propensity for consumption of manufactured goods. The FTA entered into force on January 1, 2004. The United States is one of Singapore’s most important trading partners, accounting for 7.7% of exports and 11.4% of Singapore’s imports in 2018.

  6. ASEAN-Mainland China: The FTA, which came into effect in January 2005 for goods and July 2007 for services, is a comprehensive economic co-operation agreement between ASEAN member states and Mainland China. The goal of the agreement is to eliminate tariffs and address behind-the-border barriers that impede the flow of goods and services. The FTA overlaps somewhat with the Singapore-Mainland China FTA.

  7. ASEAN-India: The ASEAN-India trade in goods agreement came into force on January 1, 2010 for goods and on July 1, 2015 for services with the aim of minimising barriers and deepening economic linkages between the parties. The FTA involves the liberalisation of tariffs on over 90% of products traded between the two regions, including the so-called 'special products', such as palm oil (crude and refined), coffee, black tea and pepper. The agreement will lead to the progressive elimination of tariffs on all goods. The framework agreement envisages the establishment of an ASEAN-India Regional Trade and Investment Area (RTIA) as a long-term objective. The agreement overlaps with the India-Singapore FTA.

  8. ASEAN-South Korea FTA (AKFTA): The AKFTA came into force in June 2007 and May 2009 for goods and services respectively and allows 90% of the products being traded between ASEAN and South Korea to enjoy duty-free treatment. The investment agreement entered into force in June 2009. AKFTA aims to create more liberal, facilitative market access and investment regimes between South Korea and ASEAN. A business council was set up in December 2014 to enhance economic cooperation between parties and boost total trade to USD200 billion by 2020.

  9. ASEAN-Japan FTA: Japan provides a huge market for a wide range of goods, with tariff-free trade. This benefits a number of important sectors, including manufacturing, agriculture, mining and chemicals production. The FTA entered into force on April 14, 2008 and overlaps with the Singapore-Japan FTA.

  10. ASEAN-Australia-New Zealand FTA and Economic Integration Agreement (AANZFTA): This agreement for goods and services came into force on January 1, 2010. The FTA aims to eliminate tariffs for at least 90% of all tariff lines within specified timelines.

  11. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong and ASEAN commenced negotiations of an FTA and an Investment Agreement in July 2014. After 10 rounds of negotiations, Hong Kong and ASEAN announced the conclusion of the negotiations in September 2017 and forged the agreements on November 12, 2017. The agreements are comprehensive in scope, encompassing trade in goods, trade in services, investment, economic and technical co-operation, dispute settlement mechanism and other related areas. The agreements will bring legal certainty, better market access and fair and equitable treatment in trade and investment, thus creating new business opportunities and further enhancing trade and investment flows between Hong Kong and ASEAN. The agreements will also extend Hong Kong's FTA and Investment Agreement network to cover all major economies in South East Asia. The agreement came into force on January 1, 2019, but will take time for all members of ASEAN to comply as implementation is subject to completion of the necessary procedures. Hong Kong is a key export market and the reduction of tariffs will ease the trading process; Hong Kong's potential as a key export market increases the importance of AHKFTA.

  12. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): The agreement – comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – came into force on December 30, 2018. The agreement represents 13.4% of global GDP. The agreement aims to cut tariffs, improve access to markets and set common ground on labour and environmental standards and intellectual property protections. Under the agreement, 94% of Singapore’s trade with other CPTPP countries will be tariff-free.

Under Negotiation

  1. Regional Comprehensive Economic Partnership (RCEP): The RCEP is a proposed FTA between the 10 member states of ASEAN and the six states with which ASEAN has existing FTAs, namely Australia, mainland China, India, Japan, South Korea and New Zealand. This agreement is expected to speed up the economic integration of the states involved and increase Singaporean exports' competitiveness in the global market.

  2. Eurasian Economic Union (EAEU)-Singapore FTA: The EAEU and Singapore agreed to begin negotiations for the FTA in December 2016 and have concluded five negotiation rounds to date. The FTA aims to strengthen collaboration between the two parties in areas such as trade and investment, intellectual property rights protection, customs cooperation and competition enforcement.

  3. Pacific Alliance-Singapore FTA: The proposed FTA is between Singapore and the group comprising Chile, Colombia, Mexico and Peru, all of which Singapore already has individual FTAs with.

  4. MERCOSUR-Singapore: The negotiations for an FTA between Singapore and the South American customs union which comprises Argentina, Brazil, Paraguay and Uruguay begun in July 2018.

Awaiting Ratification

European Union (EU)-Singapore FTA: The FTA between the EU and Singapore aims to eliminate duties for industrial and agricultural goods in a progressive, step-by-step approach. Negotiations have been completed. Following the European Parliament’s consent in February 2019, the agreement is awaiting ratification. The agreement creates new opportunities for market access in services and investments and includes provisions in areas such as competition policy, government procurement, intellectual property rights, transparency in regulation and sustainable development. The EU is Singapore’s third largest trading partner in goods and its largest services trading partner. Under the agreement, 84% of Singapore’s exports will enter the EU duty-free, while tariffs for the remaining goods will be removed within the first five years.

Sources: WTO Regional Trade Agreements database, Enterprise Singapore, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Singapore FDI stock
Graph: Singapore FDI stock
Graph: Singapore FDI flow
Graph: Singapore FDI flow

Source: UNCTAD
Date last reviewed: July 31, 2019

7.2 Foreign Direct Investment Policy

  1. The government body responsible for foreign direct investment (FDI) promotion, licensing and regulations – The Economic Development Board (EDB) – was established in 1961. Singapore's investment promotion strategy has been framed to pull in major investment towards high value-added manufacturing and service activities. As one large special economic zone, the city-state of Singapore offers a number of incentives to investors across a range of industries.

  2. Tax incentives are administered by various government agencies, including the Economic Development Board, International Enterprise Singapore, the Monetary Authority of Singapore and the Maritime Port Authority of Singapore. The broad categories of activities that could qualify for tax concessions include manufacturing, services, trade and finance.

  3. There are various tax incentives available to taxpayers involved in specified activities or industries identified as being beneficial to Singapore's economic development. Tax incentive applications are typically subject to an approval process during which the administering agency evaluates the applicant's business plans in detail. Generally, applicants are expected to carry out substantive, high value activities in Singapore, and will be required to commit to certain levels of local business spending and skilled employment.

  4. The Productivity and Innovation Credit (PIC), which previously ran from 2011 to 2018, has been replaced from 2019 with a scaled-down incentive programme called the Productivity Solutions Grant (PSG). Overall, the PSG should support up to 70% of the cost of adopting off-the-shelf solutions, with the aim of incentivising improvements to productivity. For businesses in Singapore, this will aid efforts at remaining competitive in the face of cheap labour elsewhere in the region; the initiative is a particularly valuable contribution to manufacturing industries.

  5. Under Singapore's liberal foreign investment legislation, there are virtually no restrictions on the types of activity that may be carried out. However, any company providing financial and telecommunications services, as well as manufacturing operations engaged in the production of certain restricted items, require licences from the appropriate governmental authorities prior to investment from foreign sources. Certain industries are unavailable to foreign investors. These industries are: air transportation, public utilities, newspaper publishing, and shipping.

  6. Singapore's transport infrastructure sector is almost entirely driven by government investment plans, though private and foreign companies generally find ample participation opportunities in the design, consulting, construction and operations of projects. Although Singapore's current infrastructure stock of roads, rail transit, airports and ports is well-developed by international standards, they have not kept up with population growth and immigration rates. To address capacity constraints, the government has a sizable pipeline of planned and ongoing infrastructure investments, largely in the rail sector. Within the ports segment, long-term plans to relocate port facilities away from the city centre will sustain activity over the next decade.

  7. Singapore adopts a one-tier taxation system, under which all Singapore dividends are tax-exempt in the shareholder's hands. Tax on corporate income is imposed at a flat rate of 17% on profits. A partial tax exemption and a three-year start-up tax exemption for qualifying start-up companies are available.

  8. Foreigners in Singapore face restrictions in the real estate market and are not allowed to acquire all the apartments within a building or all the units in an approved condominium apartment without prior approval. For landed homes (houses) and vacant residential land, prior approval is required. There are no restrictions on foreign ownership of industrial and commercial real estate.

  9. According to the 2018 budget (announced in February 2018), there will be a requirement for overseas vendors providing digital services to register for GST with effect from January 1, 2020 if their global turnover is more than SGD1 million annually and their online sales to Singapore consumers exceed SGD100,000.

  10. Since January 2005, qualifying banks licensed by the government have been able to open a maximum of 25 locations. Non-resident banks in the retail banking sector are not afforded national treatment. Although the government has removed a 40% ceiling on foreign ownership of local banks, it has stated that it will not approve the foreign acquisition of any local bank.

  11. All businesses (local and foreign) must be registered with the Accounting and Corporate Regulatory Authority. The government screens investment proposals to check if they qualify for incentive packages.

  12. Foreign and local firms in Singapore have equal access to the FTZ facilities. Singapore has eight FTZs: six for seaborne cargo and two for airfreight.

  13. According to the 2019 budget (announced in February 2019) the Monetary Authority of Singapore has streamlined regulations governing venture capital managers and has invested USD5 billion in a programme aimed at attracting international private equity firms to the market.

Sources: United States Department of Commerce, Inland Revenue Authority of Singapore, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
FTZs: Brani Terminal, Keppel Distripark, Pasir Panjang Terminal, Sembawang Wharves, Tanjong Pagar Terminal, Keppel Terminal, Jurong Port, Airport Logistics Park of Singapore and the Changi Airport Cargo Terminal Complex- VAT/GST is suspended for imported goods deposited in a FTZ, and will only be payable on removal from the FTZ for local consumption.

- VAT/GST is not payable on supply made in FTZ if the goods supplied are meant for transhipment or re-export.

- The FTZs at the port facilitate various trade activities and promote the handling of transhipment cargo. They offer free 72-hour storage for import/export of conventional and containerised cargo and 140-day free storage for transhipment/re-export cargo.

- The Land Intensification Allowance provides an initial tax allowance of 25% and annual tax allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure. This allowance is available to businesses in industry sectors which have large land takes and low gross plot ratios. Approvals will be granted by the Economic Development Board between July 2010 and June 2020.                                                       

- A pioneer enterprise is exempt from income tax on its qualifying profits for a period of up to 15 years.

- The Development and Expansion Incentive (DEI) is available to companies that engage in high value-added operations in Singapore, but do not qualify for pioneer incentive status, and to companies whose pioneer incentive DEI companies enjoy a concessionary tax rate of not less than 5% on their incremental income derived from the performance of qualifying activities. The maximum initial relief period is 10 years, with possible extensions not exceeding five years at a time, subject to a maximum total incentive period of 20 years.
Incentives for internationalisationThe double tax deduction scheme for internationalisation allows companies expanding overseas to claim a double deduction for eligible expenses for specified market expansion and investment development activities. This includes manpower expenses incurred when Singaporeans are deployed to overseas entities.
PIC/PSGCertain activities are subject to approval or minimum ownership requirements. With the expiry of the PIC scheme in 2018, the following further deductions (under the banner of the PSG regulation) have been introduced for the years of assessment 2019 to 2025:
  • 250% deduction for qualifying expenditure incurred for R&D carried out in Singapore.
  • 200% deduction for the first SGD100,000 of qualifying expenditure incurred to register qualifying IP.
  • 200% deduction for the first SGD100,000 of expenditure incurred to license qualifying IP.
Overall, the PSG should support up to 70 per cent of the cost of adopting off-the-shelf solutions, with the aim of incentivising improvements to productivity - particularly in light of the increased competition for cheap labour from neighbouring Malaysia.
Headquarters schemesApproved regional headquarters in Singapore are taxed at a concessionary rate of tax of 15% on qualifying overseas income. Depending on their level of economic commitments to Singapore, international headquarters can apply for various tax incentives.
Maritime Sector Incentive (MSI) schemeThe MSI scheme is the umbrella incentive for the maritime sector. Incentives offered include tax exemption for shipping companies and a 10% concessionary tax rate for international freight and logistics operators. Approved ship investment managers are also taxed at 10% on qualifying management-related income. The scheme also includes approved ship investment vehicles, which are tax exempt on their qualifying vessel lease income; approved container investment enterprises, which are taxed at 5% or 10% on qualifying income from container leasing; and approved container investment management companies, which are taxed at 10% on qualifying management fees.
Global Trader Programme (GTP)International traders are taxed at concessionary rates of 5% or 10% on qualifying income from physical trading, brokering of physical trades and derivative trading income.
Mergers and acquisitions allowanceThe mergers and acquisitions allowance allows a write-off, over five years, of 25% of the value of qualifying mergers or acquisitions deals executed between April 1, 2015 and March 31, 2020, subject to a cap of SGD5 million (SGD10 million for deals executed from April 2016 to March 31, 2020) per year of assessment. This incentive is available to companies that are incorporated, tax resident and conducting business in Singapore; however, this requirement may be waived for companies under the headquarters schemes and the MSI. A 200% tax allowance is also granted on transaction costs (capped at SGD100,000 per year of assessment) incurred on qualifying deals. The allowance is granted consecutively over a period of five years and may not be deferred.
Investment allowanceUnder the investment allowance, a tax exemption is granted on an amount of profits based on a specified percentage (of up to 100%) of the capital expenditure incurred for qualifying projects or activities within a period of up to five years (up to eight years for assets acquired on hire purchase). Capital expenditure incurred for productive equipment placed overseas on approved projects may likewise be granted integrated investment allowances. Investment allowances of 100% of capital expenditure (net of grants) may be granted to businesses seeking to make substantial investment in automation, subject to a cap of SGD10 million per project.
The Pioneer incentiveCorporations manufacturing approved products with high technological content or providing qualifying services may apply for tax exemption for five to 15 years for each qualifying project or activity under the pioneer tax incentive. Corporations may apply for their post-pioneer profits to be taxed at a reduced rate under the Development and Expansion Incentive.
Financial services incentives (FSI)
Under the FSI scheme, income from certain high growth, high-value-added activities, such as services and transactions relating to the bond market, derivatives market, equity market and credit facilities syndication, may be taxed at 5%, while a broader range of financial activities will qualify for a 12% tax rate. This rate has been increased to 13.5% for awards granted or renewed from June 1, 2017, and the scope of qualifying income has been expanded (broadly speaking, certain currency, counterparty and investment instrument restrictions have been removed). The tax incentive period may last for five, seven, or 10 years, subject to certain conditions being met.

Finance and treasury centre (FTC):

- Income derived by an FTC is taxed at a reduced rate of 8%.

- Interest payments to overseas banks and approved network companies are also exempt from withholding tax where the funds borrowed are used for approved activities.

- A package of tax concessions is available to various players in the Singapore bond market, including those involved in certain Islamic financing arrangements.

- The Insurance Business Development (IBD) scheme is an umbrella incentive for the insurance sector. Incentives offered under this scheme include a 10% concessionary tax rate for qualifying income of insurers and income derived from the provision of insurance broking and advisory services.  

Real Estate Investment Trusts (REITs):

- Distributions made to foreign non-individual investors by a listed REIT out of rental income from Singapore real estate are subject to a reduced tax rate of 10%, subject to certain conditions being met. Listed REITs investing in foreign properties can apply for tax exemption for certain foreign income received in Singapore. Distributions out of this income are similarly exempt.

- From July 1, 2018 to March 31, 2020, tax transparency treatment will be accorded for specified income of Singapore-listed REIT Exchange-Traded Funds.

Islamic financing arrangements:

- The income tax, stamp duty and GST treatment of prescribed Islamic financing arrangements and Islamic debt securities (sukuk) are aligned with that of the conventional financing contracts to which they are economically equivalent, subject to certain conditions.

Infrastructure project finance incentives:

- Tax exemption is available for interest income earned from qualifying investments in qualifying infrastructure projects or assets. FSI companies that provide project finance advisory services related to qualifying projects or assets may enjoy certain tax concessions for their qualifying income, and companies that provide management services to qualifying business trusts and funds pay tax at 10% on their qualifying income.

Sovereign wealth funds:

- Tax exemption is available for income derived by a sovereign fund entity and an approved foreign government-owned entity from funds managed in Singapore.

- A Singapore Variable Capital Companies (S-VACC) will be treated as a company and a single entity for tax purposes. The tax exemptions for income from funds managed in Singapore and the existing GST remission for funds will be extended to qualifying S-VACC. A 10% concessionary tax rate under the FSI incentive for fund managers will be extended to approved fund managers managing an incentivised S-VACC. This tax framework will take effect when or after the regulatory framework for S-VACC comes into effect.
Development and Expansion incentiveUnder the Development and Expansion Incentive, corporations engaging in new high-value-added projects, expanding or upgrading their operations, or undertaking incremental activities after their pioneer period may apply for their profits to be taxed at a reduced rate of not less than 5% for an initial period of up to 10 years. The total tax relief period for each qualifying project or activity is subject to a maximum of 40 years (inclusive of the post-pioneer relief period previously granted, if applicable).
The Venture Capital Funds incentiveGains derived from the disposal of approved investments, interest from approved convertible loan stocks and dividends derived from approved investments are exempt from tax or taxed at a concessionary rate of not more than 10% for a period of up to 10 years. Extension periods of up to five years each may be available, but the maximum total incentive period is 15 years.

Sources: United States Department of Commerce, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 7%
  • Corporate Income Tax: 17%

Source: Inland Revenue Authority of Singapore

8.1 Important Updates to Taxation Information

The main changes announced in the 2018 budget related to corporate income tax and VAT regimes to be implemented over the short- to medium term. These include enhancements of the tax rebates and adjustments to the Partial Tax Exemption and Start-up Tax Exemption schemes that are to be implemented over 2018-2020. A 250% tax deduction for qualifying research and development projects, and 200% tax deductions for the first SGD100,000 of qualifying intellectual property registration costs and the first SGD100,000 of qualifying IP licensing costs were also introduced.

Singapore imposes a GST. GST is expected to be raised to 9%, from the current 7%, between 2021 and 2025. GST on imported services will take effect from January 1, 2020.

8.2 Business Taxes

Type of Tax
Tax Rate and Base
Corporate Income Tax17%
RoyaltiesWithholding tax of 10%
Skills development levy0.25% of gross salaries – minimum of SGD2 and a maximum of SGD11.25 per month
Property Tax10% on property value
Interest on loans and rentalsWithholding tax of 15%
GST7% on value of the products, some products are zero-rated
Social security contributionsStatutory rate of the employee's contribution is up to 20%; employer's contribution is up to 17% on taxable earnings

Sources: Inland Revenue Authority of Singapore, World Bank – Doing Business 2019, Fitch Solutions
Date last reviewed: July 10, 2019

9. Foreign Worker Requirements

9.1 Employment Pass (EP)

The EP is applicable to foreign individuals employed as managers, executives and skilled professionals. It is valid for two years and may be renewed thereafter for up to three years at a time. It is generally applicable to individuals with a minimum monthly salary of SGD3,600 (as of April 2019). Applicants may also apply for a pass for their dependants – such as spouses and unmarried children under the age of 21. The EP must be applied for by the employer on behalf of the individual. The average time needed to obtain an EP is five weeks and falls under the auspices of the Ministry of Manpower (MoM).

9.2  S Pass (SP)

The SP is identical to the EP, but is applicable to individuals with a minimum monthly income of SGD2,300 (and SGD6,000 in order to receive benefits for dependants). The average time needed to obtain an SP is three weeks and falls under the auspices of the MoM.

9.3 Personalised Employment Pass (PEP)

The PEP is applicable to high-earning individuals who already have an EP or are overseas foreign professionals. The minimum monthly income for an applicant already in possession of an EP is SGD12,000, whereas foreign professionals require a minimum monthly income of SGD18,000 to qualify. The PEP allows holders to switch jobs without the need to reapply for a pass, and permits the individual to stay in Singapore for an additional six months before securing their next job. The PEP is only valid for three years. After the three years, the individual needs to obtain an EP. The process to obtain a PEP takes roughly eight weeks and falls under the auspices of the MoM.

9.4 Entrepreneur Pass (EntrePass)

The EntrePass is applicable to foreign individuals who wish to start a business in Singapore. The pass is valid for two years and the applicant may apply for it themselves. The EntrePass may be renewed if the applicant's company obtains funding from an accredited source, holds intellectual property (registered with a recognised IP institution), does research with a recognised institution or is being incubated by a government-supported incubation programme. Applicants may also apply for a dependant pass for their family members.

9.5 Work Permit

The work permit applies to semi-skilled jobs in manufacturing and construction, as well as jobs in the services sector. A work permit is valid for up to two years and is only applicable to companies which pay a levy and security bond, meet the quota criteria and provide the applicant with healthcare. Work permits do not allow for dependants and take up to seven working days to be processed.

9.6 Training Employment Pass (TEP)

The TEP is valid for three months and applicable to individuals undergoing practical training for jobs of a professional, managerial, executive or specialist nature in Singapore. The applicant must also earn a minimum of SGD3,000 a month. The TEP is not renewable.

9.7 Training Work Permit (TWP)

The TWP is applicable to unskilled or semi-skilled foreign trainees or students on practical training in Singapore for up to six months. Students are subject to a levy. An employer may only have 5% of its total workforce or 15 employees (whichever comes first) working under TWP regulations.

9.8 Employment Charges

The Foreign Worker Levy is a monthly levy of up to SGD950 that employers are liable to pay for each foreign employee hired. The levy rate depends on the employee's qualifications, the employer's industry and the ratio of foreigners to Singaporeans and permanent residents employed in the company. The government has announced that levy increases for work permit holders in the marine and process sectors that were originally proposed for July 1, 2016 will be deferred for yet another year until July 1, 2019.

9.9 Visa Requirements

Citizens of Afghanistan, Algeria, Bangladesh, the Commonwealth of Independent States, North Korea, Egypt, Georgia, Ukraine, Iran, Iraq, Jordan, Kosovo, Lebanon, Libya, Mali, Morocco, Nigeria, Mainland China, Pakistan, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, Turkmenistan and Yemen require a visa to travel to Singapore.

9.10 Workplace Quota

According to the 2019 budget, the government has revised workforce quotas aimed at the services sector. These include lowering the Dependency Ratio Ceiling (DRC) from 40% to 38% effective from January 1, 2020 with a further decrease to 35% set to take effect from January 1, 2021. The government will also lower the sector S Pass Sub-DRC from 15% to 13% effective from January 1, 2020, and further to 10% effective from January 1, 2021. These revised limits will be applicable as and when companies apply for permit renewals.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Moody'sAaa (Stable)12/11/2018
Standard & Poor'sAAA (Stable)06/03/1995
Fitch RatingsAAA (Stable)11/09/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness3/633/631/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk IndexN/A30/20231/202
Short-Term Economic Risk Score73.372.773.3
Long-Term Economic Risk Score72.572.672.2
Economic Risk IndexN/A28/20228/202
Short-Term Political Risk Score94.894.894
Long-Term Political Risk Score80.281.181.1
Operational Risk Index2/2011/2011/201
Operational Risk Score81.583.182.0

Source: Fitch Solutions
Date last reviewed: July 31, 2019

10.4 Fitch Solutions Risk Summary

Singapore's strong fundamentals suggest that the city-state will remain a top choice for investment because of its business-friendly environment. We expect the market to shrug off weaker-than-anticipated economic growth which was led by a decline in the manufacturing sector. Key supporting factors will be the highly welcoming stance towards foreign investors and a superior business environment and financial services industry, as well as the city-state's strategic location in Asia. We expect the government's sound economic policy and the steady maturation of the political environment to maintain economic stability ahead of the country's general elections which are set to take place by early 2021. However, Singapore's heavy dependence on international trade places it in a particularly vulnerable position at a time when global trade protectionism is on the rise. The economy is also vulnerable to the economic performance of Asia and its large exposure to Mainland China which will also present downside risks in light of ongoing trade tensions between Mainland China and the United States.

Singapore is the most appealing destination for investment in the world. This government has successfully developed the city-state into a major global hub for trade, investment and finance by providing a highly productive workforce, a stable and secure operating environment and world-class logistics connections. Firms benefit from proactive regulation and economic policies that encourage foreign direct investment. Moreover, the well-developed legislation protecting investors and their intellectual property rights further limits risks. The government has prioritised economic diversification, leading to growth in areas such as tourism, financial services, the pharmaceuticals industry, multimedia as well as retail and leisure. The government has also earmarked significant investments into research and development to boost the capabilities and appeal of the labour force and ready it for the fourth industrial revolution. There are limited risks facing businesses located in Singapore, with moderate concerns stemming from increasingly stringent restrictions on the import of foreign labour into the city-state, moderate cybercrime risks, money laundering and significant exposure to global economic headwinds.

Source: Fitch Solutions
Date last reviewed: July 10, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Singapore short term political risk index
Graph: Singapore short term political risk index
Graph: Singapore long term political risk index
Graph: Singapore long term political risk index
Graph: Singapore short term economic risk index
Graph: Singapore short term economic risk index
Graph: Singapore long term economic risk index
Graph: Singapore long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: July 9, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Singapore score82.078.288.6
East and Southeast Asia average55.055.956.853.853.6
East and Southeast Asia position (out of 18)1124
Asia average48.249.748.24649.1
Asia position (out of 35)1124
Global average49.650.349.8
Global Position (out of 201)12223

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Singapore vs global and regional averages
Graph: Singapore vs global and regional averages
Operational Risk
Labour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Hong Kong80.772.3
South Korea71.865.9
Mainland China56.353.8
North Korea31.345.8
Regional Averages55.055.956.753.853.6
Emerging Markets Averages46.948.645.447.446.1
Global Markets Averages49.650.349.8

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: July 31, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Singapore

Graph: Major export commodities to Singapore (2018)
Graph: Major export commodities to Singapore (2018)
Graph: Major import commodities from Singapore (2018)
Graph: Major import commodities from Singapore (2018)

Note: Graph shows the main Hong Kong exports to/imports from Singapore (by consignment)
Date last reviewed: July 10, 2019

Merchandise exports to Singapore
Merchandise exports to Singapore
Graph: Merchandise imports from Singapore
Graph: Merchandise imports from Singapore

Note: Graph shows Hong Kong exports to/imports from Singapore (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: July 10, 2019

Growth rate (%)
Number of Singapore residents visiting Hong Kong610,508-2.7
 2017Growth rate (%)
Number of Singaporeans residing in Hong Kong10,0331.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions

Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong61,04412.0
 2017Growth rate (%)
Number of East Asians and South Asians residing in Hong Kong2,784,8701.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Date last reviewed: July 31, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Singaporian companies in Hong Kong4274.6
- Regional headquarters462.2
- Regional offices1060
- Local offices2757

Sources: Hong Kong Census and Statistics Department – Business Expectation Statistics Section, Fitch Solutions

11.3 Treaties and agreements between Hong Kong/PRC and Singapore

  • Singapore has a Bilateral Investment Treaty with mainland China which entered into force on February 7, 1986.
  • Singapore has double taxation agreements (DTAs) with mainland China and concluded a DTA with Hong Kong on November 19, 2004.

Sources: Hong Kong Inalnd Revenue Department, UNCTAD, Fitch Solutions

11.4 Chamber of Commerce or Related Organisations

The Singapore Chamber of Commerce (Hong Kong)
The Singapore Chamber of Commerce (Hong Kong) was incorporated in Hong Kong in September 1995 with the support of the Singapore Consulate-General, the then Singapore Trade Development Board, the Singapore EDB and the Singapore Tourism Board.

Address: Unit 702, 7/F, China Hong Kong Tower, 8-12 Hennessy Road, Wanchai, Hong Kong
Email: scc@scchk.com.hk
Tel: (852) 2838 3733
Fax: (852) 2838 3390

Source: The Singapore Chamber of Commerce (Hong Kong)

Hong Kong Singapore Business Association
Email: secretariat@hsba.org.sg
Tel: (65) 6730 9285
Website: www.hsba.org.sg
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Consulate-General of the Republic of Singapore in Hong Kong
Address: Unit 901-2, 9/F, Admiralty Centre Tower I, 18 Harcourt Road, Hong Kong
Email: singcg_hkg@mfa.sg
Tel: (852) 2527 2212
Fax: (852) 2861 3595

Source: Singapore Ministry of Foreign Affairs

11.5 Visa Requirements for Hong Kong Residents

All foreign visitors must ensure that they meet or possess the entry requirement stated by the Singapore Immigration and Checkpoints Authority. A Singapore tourist visa is not required for Hong Kong residents (with a valid Hong Kong passport) for a stay up to 30 days. To apply for an entry visa for business or social visits, holders of a Hong Kong document of identity will need the following documents: a duly completed Form 14A, a recent passport-sized colour photograph taken within the last three months and a photocopy of the passport biodata page (valid for at least six months from the date of entry into Singapore). Additional supporting documents (eg, Form V39A - Letter of Introduction for Visa Application) may be required on a case-by-case basis. These travellers are advised to apply for an entry visa within 30 days prior to arrival in Singapore.

Source: Singapore Ministry of Foreign Affairs
Date last reviewed: July 31, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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