Introduction
Singapore, officially the Republic of Singapore, is made up of the main island of Singapore and 60 other smaller islands. The island city-state in Asia located at the southern tip of the Malay Peninsula. The microstate lies 137 km (85 mi) north of the equator, south of the Malaysian state of Johor and north of Indonesia’s Riau Islands. At 710.2 km2 (274.2 sq mi),Singapore, the smallest nation in Southeast Asia, is by orders of magnitude the largest of the three remaining sovereign city-states in the world (along with Monaco and Vatican City). The 4,839,400 (2008 est.) population consists of English, Malay, Chinese and Tamil speaking Singaporeans.
Ranked the Top Convention City in Asia for 23 consecutive years by the Union of International Associations (2005) and the World’s 3rd Top Convention City by the International Congress and Convention Association (2006), Singapore continually attracts high-profile international business events. This includes the 117th International Olympic Committee Session and the 2006 Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank Group.
Business Environment
Singapore possesses incomparable strengths in key industries that include Information and Communication Technology, Biomedical Sciences, Electronics and Precision Engineering, Aviation, and Banking and Finance among others. Increased attention has been given by the government to research and development for emerging industries including Digital Media and Environmental Technology. As a result, Singapore paves the way for potentially high growth avenues and opportunities for business.
Economic Environment
Singapore has been rated as the most business-friendly economy in the world, with thousands of foreign expatriates working in multi-national corporations. Singapore is also considered to be one of the top centres of finance in the world and throughout the region. In addition to this, the city-state also employs tens of thousands of foreign blue-collared workers around the world.
Singapore has a highly developed market-based economy, which historically revolves around extended entrepot trade. Along with Hong Kong, South Korea and Taiwan, Singapore is one of the Four Asian Tigers. The economy depends heavily on exports refining imported goods, especially in manufacturing. Manufacturing constituted 26% of Singapore’s GDP in 2005. The manufacturing industry is well-diversified into electronics, petroleum refining, chemicals, mechanical engineering and biomedical sciences manufacturing. In 2006, Singapore produced about 10% of the world’s foundry wafer output. Singapore has one of the busiest ports in the world. Singapore is the world’s fourth largest foreign exchange trading centre after London, New York City and Tokyo.
Taxation
Singapore is in fact a financial haven and heaven both for outside investors and living residents. The tax regime for the resident individuals is rather mild. Capital gains taxes are only levied in very limited circumstances; there are no gift taxes and estate duty stands at 5% for estates up to US$5.7 million and 10% above that level. Personal income tax rates in Singapore are also relatively light- resident individuals are taxed at progressive rates up to 22% on income accruing in or derived from Singapore.
Singapore introduced a Goods and Services Tax (GST) with an initial rate of 3% on 1 April 1994 substantially increasing government revenue by S$1.6 billion (US$1b,€800m) and stabilizing government finances. The taxable GST was increased to 4% in 2003, to 5% in 2004, and to 7% on 1 July 2007.
As of January 1, 2004 resident individuals were not charged a tax on the foreign income received or deemed received in Singapore except if received through a partnership in Singapore. Besides, any gains one generates from investments made in Singapore itself remain tax exempt.
Non-residents of Singapore are not taxed on any income from a foreign source whether that income is remitted to Singapore or not, and in February 2005 the prime minister announced significant and far reaching changes to the income tax regime and he also implemented a series of tax breaks and incentives designed purely to boost the country’s attraction as an offshore centre. Therefore it is safe to say that Singapore will continue to benefit and grow as an offshore financial hub and that investors will be afforded protection and attractive conditions for the foreseeable future.
Banking
The unit of currency is the Singapore dollar. Most shops and entertainment outlets accepted major credit cards and travelers` checks. The finance industry in Singapore is regulated by the Monetary Authority of Singapore.
Banking in Singapore is a service industry that has grown significantly in recent years. Total banking assets under management in Singapore rose from about $92 billion in 1998 to about $350 billion in 2004.
Singapore has attracted assets formerly held in Swiss banks for several reasons, including new taxes imposed on Swiss accounts and a weakening of Swiss bank secrecy. Credit Suisse, the second largest Swiss bank, moved its head of international private banking to Singapore in 2005.
Offshore Banking
Today offshore banking in Singapore is one of the Republic’s fastest growing industries and according to industry analysis the country will be the fastest growing offshore private banking centre in the world within the next five years.
The success of the offshore banking centre in Singapore stems from many factors, not least of which is the fact that Singapore has some of the lowest taxation rates in Asia. In 2004 when the government announced far reaching changes to its taxation rules it became an even more attractive offshore centre. Today residents of the Republic are not taxed on income earned overseas and any gains one generates from investments made in Singapore itself remain tax exempt.
Singapore is also one of the few remaining grade A offshore centres that has not signed up to the EU’s Savings Tax Directive, which is probably why the amount of money moved from tax havens within the remit of the Directive to Singapore in 2005 surged. Financial assets of nonresident investors managed by private banks in Singapore in 2005 rose by 25% which is believed to be the world’s largest gain.
