Corporate Treasury & Cash Management in Singapore
Corporate Treasury & Cash Management in Singapore
Singapore, a vibrant city-state in the heart of Southeast Asia, offers a number of competitive advantages to businesses setting up a treasury function. Singapore is ranked second in the World Bank’s Ease of Doing Business Index 2020.
The city has a well-established business infrastructure with a transparent and efficient institutional framework, a pool of highly skilled English-speaking professionals and a regulatory system that meets international standards. Singapore is also the largest foreign exchange market in Asia-Pacific, and nearly 200 banks have a presence in the country, with a growing number choosing it as a base for their regional operational headquarters. Singapore also has an established financial sector, mature capital markets and a wide variety of sophisticated financial instruments.
Singapore has preferential investment and business policies with members of the Association of Southeast Asian Nations (ASEAN) and tax treaties with 93 countries and territories, offering tax incentives for businesses. In addition, it offers approved finance and treasury centres (FTC) a reduced corporate tax rate of 8% on income derived from qualifying FTC services.
With 5G trials underway, the government is rolling out programmes to help industries adopt and utilise 5G technology. These include training programmes, innovation labs and start-up collaborations. In 2020, the Monetary Authority of Singapore (MAS) launched a SGD125 million support package for financial and financial technology (FinTech) sectors as they deal with the challenges of COVID-19. This fund is on top of a host of other government initiatives, such as innovation grants, a regulatory sandbox, the API Exchange, and Project Ubin, to assist the country’s growing fintech sector.
Singapore's geographic location has made it a major shipping and logistics hub, and it is the second busiest port in the world, as measured by container volume, and a top maritime centre.
Corporate Treasury in Singapore
Financial Market Development
- Singapore is ranked fifth in the latest version of the 2021 Global Financial Centres Index published by Z/Yen Partners.
- Singapore has a well-established business infrastructure with a transparent and efficient institutional framework, a pool of highly skilled English-speaking professionals and international regulatory standards.
- MAS has set up a FinTech and Innovation Group to oversee regulatory policies, development strategies in the financial sector, and support private enterprise.
- There are no restrictions on capital flows in and out of Singapore.
Sophistication of Banking Systems
- There are nearly 200 banks in Singapore, including 37 representative offices, with a growing number choosing it as a base for their regional operational headquarters.
- Singapore is the banking hub of Southeast Asia.
- Singapore is the largest foreign-exchange market in Asia-Pacific and the third largest in the world, according to Bank for International Settlements’ triennial global survey.
- Singapore's debt market has grown in depth and breadth over the past decade, with an extensive range of both Singapore government securities and foreign corporate bonds available, with outstanding local currency bonds worth USD380.4 billion at the end of 2020.
- MAS regulates the banking industry with a regulatory framework in line with international standards. MAS is revising the capital requirements for Singapore-incorporated banks to align them with the Basel III minimum requirements from January 1, 2023.
- The corporate income tax rate is 17%. There is a partial tax exemption of 75% on the first SGD10,000 of chargeable income and 50% on the next SGD190,000. For the 2020 year of assessment, there was a rebate of 25% of the corporate income tax payable, subject to a cap of SGD15,000.
- Both resident and non-resident companies are taxed on their Singapore-sourced income. However, in respect of resident companies, foreign-sourced income is taxed when it is remitted to Singapore, although a remittance exemption may be available subject to the fulfilment of certain conditions.
- Foreign company branch profits are taxed at the same rate as resident company profits. There is no branch profits remittance tax on the remittance of profits to a head office by the branch of a foreign company.
- According to Budget 2022, the standard rate for GST will be increased to 9% – 7% to 8% with effect from 1 January 2023; and 8% to 9% with effect from 1 January 2024. The export of goods and international services are zero-rated, and some goods and services are exempted from GST, including financial services. GST is generally not charged on the import of services, although from 1 January 2020 a reverse-charge has been introduced on local businesses that make exempt supplies, and those that do not make any taxable supplies. Overseas providers that make significant supplies of digital services to customers in Singapore are also required to register for GST in Singapore.
- Income from investment such as dividends, interest and rent is subject to tax in Singapore, although Singapore dividends are tax exempt.
- Gains made on capital transactions are not subject to tax in Singapore unless it can be proven that the gains were trade in nature.
- Interest expenses that are used for business purposes are generally tax deductible. There are no thin capitalisation rules in Singapore.
- Stamp duty of 0.2% is charged on the purchase price or value of shares, whichever is higher.
- Withholding tax of 15% is charged on interest paid or payable to non-resident companies where no tax treaty is in place. Rates range from 0% to 15% where a tax treaty is in place and the non-resident can provide a Certificate of Residence. Certain domestic law exceptions are available.
- Under the Financial Sector Incentive scheme (FSI), certain activities for qualifying institutions are taxed at 5%, while a broader range of financial activities are taxed at 13.5%.
- Various tax incentives, including exemptions and concessionary rates on qualifying income, are available for companies that set up international headquarters in Singapore.
- Singapore has tax treaties with 93 countries and territories.
- Singapore is a signatory to the Organisation for Economic Co-operation and Development's Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.
Benefits for Regional Treasury Centres (RTCs)
- Singapore offers approved finance and treasury centres (FTC) a reduced corporate tax rate of 8% on income derived from qualifying FTC services.
- Singapore offers approved FTCs withholding tax exemptions on interest payments on loans from overseas banks or approved network companies provided the funds borrowed are used for qualifying FTC services.
- Singapore is the regional risk management and treasury hub for Asia-Pacific, as well as a renminbi gateway, second to Hong Kong in the region.
- Cash concentration is widely available in Singapore on a domestic and cross-border basis. Different legal entities can participate in the same cash-concentration structure.
- Notional pooling is allowed in Singapore on both a domestic and cross-border basis. Different legal entities can participate in the same notional cash pooling structure.
Comparison of Singapore and Hong Kong as a Location for RTCs
- Corporate income tax for approved treasury operations in the two locations is broadly similar, at 8% for Singapore and 8.25% for Hong Kong.
- Singapore offers a withholding tax exemption to FTCs on interest payments on funds borrowed from non-resident banks and approved network companies, provided the funds are used for qualifying FTC services, while Hong Kong has no withholding tax on interest.
- Singapore has the edge in terms of tax treaties, having agreements with more than 90 locations, compared with around 40 for Hong Kong.
- Both cities have highly developed infrastructure, deep capital markets and strong talent pools.
- Singapore tends to be preferred by businesses that are active in Southeast Asia, while Hong Kong tends to be the location of choice for corporations focused on Mainland China due to its status as an offshore renminbi hub and its location within the Greater Bay Area development.
- A company with a permanent or registered address in Singapore and with its management operations in Singapore is regarded as resident.
- Residents, both domestic and overseas, and non-residents may hold foreign exchange and local currency (SGD) accounts. Local currency accounts are freely convertible into foreign currency for residents and non-residents.
- Residents and non-residents have overdraft facilities available to them.
- Interest is available to demand deposit and currency accounts.
Legal and Regulatory
- MAS takes on the role of central bank and operates autonomously. It does not require full central bank reporting.
- Singapore is a member of the Association of Southeast Asian Nations (ASEAN) and Asia-Pacific Economic Corporation (APEC).
- Singapore has in place anti-money laundering legislation which is applied by MAS. It is also a member of the Financial Action Task Force (FATF), Asia/Pacific Group of Money Laundering (APG) and Group of International Finance Centre Supervisors (GIFCS).
- A financial intelligence reporting unit has been set up, the Suspicious Transaction Reporting Office (STRO), which is a member of the Egmont Group.
|Singapore's Real Time Gross Settlement (RTGS) system|| |
(Fast And Secure Transfers)
|Interbank electronic transfer system|| |
(Automated Clearing House)
|Nationwide clearing system|| |
(Interbank Giro System)
|Deferred multilateral net settlement system|| |
(SGD Cheque Truncation System)
|Cheque and paper-based truncation system|| |
(USD Cheque Truncation System)
|USD cheque-and-paper-based truncation system|| |
(Network for Electronic Transfers)
|Interbank electronic credit and debit transfer system|| |
|Digital funds transfer system|| |
- Used for salary and supplier payments in SGD.
- High-value and urgent interbank transfers settled via MEPS+ within the same day.
- Low-value, non-urgent and high-volume electronic credit transfers settled via IBG within the same day.
- Paper-based payments used for standing orders and sometimes payroll payments.
Direct Debits (auto debits)
- Used for low-value, regular payments in SGD such as utility bills.
- Processed through IBG, for the next day.
- Singapore has a high penetration of credit and debit cards, and their popularity has in turn boosted the widespread usage of contactless payment systems.
- Visa is main card of choice, with MasterCard and American Express also in use.
- Processed via NETS within the same day.
- Consumer payment options are diversifying as tech companies partner with financial institutions to offer key fobs and other wearable devices that incorporate tap-and-go technology.
- Stored-value cards come in two types: Single-purpose stored-value cards (SPSVC) used to pay only for services provided by the card issuer; and multipurpose stored-value cards (MPSVC) used for a variety of payments, with CashCard, ez-link and NETS FlashPay the most common. E-money payments are settled next day.
- The Singapore Quick Response Code (SGQR) combines multiple electronic payment schemes into a single SGQR code, simplifying mobile payments for both consumers and merchants and providing an ‘infrastructure-light’ payment solution. Co-owned by MAS and the Infocomm Media Development Authority (IMDA), SGQR was the first of its kind in the world and uses a series of protocols adapted from the specifications set out by EMVCo, the organisation responsible for setting global standards in debt and credit payments.
- The three leading global digital wallets—Samsung Pay, Apple Pay and Google Pay—have an established presence, with a network of local and regional mobile wallet providers infiltrating the digital payment market.
- PayLah! is operated by DBS/POSB, but can be used by non-DBS/POSB account holders. It has mobile payment and banking solutions, is operable using QR codes and has linked up with the 7-Eleven store network as a payment provider.
- DBS has launched the POSB digibank Virtual Assistant, a banking facility that operates through a ‘chatbot’, using Facebook Messenger as the media platform, and offering banking services beyond customer service.
- While cryptocurrencies are not legal tender, exchanges and trading are. The Inland Revenue Authority (IRAS) has set out GST requirements for digital payment tokens, such as Bitcoins and Ether.
- Singapore has become a hub for initial coin offerings (ICOs), and the government has provided a conducive environment for their use and exchange.
- One such example is the DBS Digital Exchange which offers investors a fundraising platform through offerings of security tokens and secondary trading of digital assets, including cryptocurrencies.
Cash, Cheques and Money/Cashier’s Orders
- Cheques are the most common cashless payment method in terms of value and are truncated and cleared at ACH.
- Possible to use USD- and SGD-denominated cheques.
- USD and SGD cheques processed via SCHA and settled via MEPS+.
- While cash is also preferred, especially for low-value transactions, the government has stated its aim to reduce the use of cash and become cheque-free by 2025.
- Money transfers (formerly known as money orders) are available in Singapore through vendors such as Western Union and MoneyGram. Money can be sent domestically or internationally, either online or in person.
Foreign Exchange (FX)
The Government of Singapore is positioning the city as a leading regional financial centre. As such, there are minimal foreign exchange controls in place. Singapore is the third largest foreign exchange centre in the world.
- The official currency of Singapore is the Singapore dollar which is fully convertible domestically and offshore.
- Singapore’s monetary policy is set and managed by regulator the Monetary Authority of Singapore, which sets interest rates.
- The exchange rate of the Singapore dollar is set against a basket of the currencies of Singapore’s main trading partners and rivals. It is managed by MAS and allowed to fluctuate within a policy band.
- Singapore has a deep and liquid market for trading and hedging G10 currencies, as well as those for emerging Asian markets.
- Singapore is the region’s second biggest offshore renminbi centre after Hong Kong.
- More than 30 foreign exchange futures and options contracts are traded on Singapore-based exchanges.
- MAS is working with banks and trading platforms to build up Singapore’s e-trading infrastructure as it aims to position the city as the global FX price discovery and liquidity centre in the Asian time zone.
- Resident companies can have accounts denominated in both local and a wide range of foreign currencies both onshore and offshore.
- Non-resident companies may also hold accounts in both local and foreign currencies. All accounts can be converted into other currencies.
- Both resident and non-resident companies can borrow in all currencies, however, foreign firms that borrow SGD locally must use the money for productive activities to discourage borrowing for speculative purposes.
- Non-resident financial institutions can only borrow up to SGD 5 million in local currency, companies wishing to borrow more than this sum for use offshore must convert the excess funds into a foreign currency.
- Singapore offers a wide range of products to help companies manage FX risk, including FX options, FX spot and FX forward, FX time option forward, par forward, cross currency swap, and non-deliverable forward.
- There are no restrictions on forward foreign exchange markets, but leveraged foreign exchange trading, including in OTC derivatives, is regulated by MAS and financial institutions conducting this activity must apply for a Capital Markets Services license.
- There are no restrictions on capital flows in and out of Singapore. No prior approval is required for inward investment or outward payments.
- There are no restrictions on the remittance of profits or dividends in any currency to other countries. No withholding tax is charged on dividends.
- Domestic and cross-border intercompany lending is allowed subject to transfer pricing rules.
- Foreign currency invoices must be converted into SGD using an approved exchange rate for goods and services tax purposes.
Singapore has an open economy that is driven by trade in goods and services. It is a member of the ASEAN Trade in Goods Agreement and its largest trading partners are China, Malaysia, and the United States, in terms of the total value of merchandise trade in Singapore dollars
- Singapore has nine free trade zones.
- Singapore was a founding member of the World Trade Organisation.
- The country’s Networked Trade Platform enables trade and customs matters to be managed online.
- Singapore’s biggest imports in 2020 were machinery and transport equipment, chemicals and chemical products and miscellaneous manufactured articles.
- Singapore has launched a digital cross-border trade platform with China, OneSME, to help local SMEs expand into each other’s markets.
- Singapore implements the United Nations Security Council (UNSC) sanctions, which prohibits the import, export and transhipment through Singapore of certain goods, as well as prohibiting companies from engaging in certain transactions with UNSC sanctioned countries.
- Singapore also has its own sanctions under the Terrorism (Suppression of Financing) Act, which covers sanctions against individuals and terrorist organisations. The Monetary Authority of Singapore also has its own regulations covering financial institutions.
- All goods imported into Singapore are regulated under the Customs Act, the Goods and Services Tax (GST) Act and the Regulation of Imports and Exports Act.
- Importers are required to obtain a customs permit. This is also used to account for tax payments on goods. In certain circumstances, a short-payment permit is also required.
- Imported goods are subject to GST of 8% of the cost, insurance and freight value. Customs and excise duties are charged on intoxicating liquors, tobacco products, motor vehicles and petroleum products. GST will be extended to low-value goods worth $400 or less imported by air or post from 1 January 2023.
- GST and duty are suspended for goods imported to a free trade zone and are only payable when the goods are consumed within the free trade zone or leave the free trade zone. GST is also not paid on goods stored in zero-GST warehouses until they are removed from the warehouses.
- A range of financing options are available including letters of credit, bankers’ guarantees, import documentary collections and pre-shipment/post-shipment trade loans.
- The Singapore Customs Electronic Banker’s Guarantee (eBG) Programme was recently implemented to make the lodgement of banker’s guarantees more efficient.
- All goods exported from Singapore are regulated under the Customs Act, the Regulation of Imports and Exports Act and the Strategic Goods (Control) Act.
- A customs export permit is required to export goods from Singapore. Goods are categorised as containerised cargo or conventional cargo.
- GST and duty are not levied on exports from Singapore.
- A range of financing options are available including letters of credit confirmation, export documentary collections, export financing under letters of credit and invoice financing/factoring.
For more information, login to Treasury Prism for contextual insights on market regulations that are relevant to your cash management structure.
Sources (Intro & Corporate Treasury)
The World Economic Forum, The Monetary Authority of Singapore, PwC, Trading Economics, IMF, CEIC, CIA World Factbook, BIS, Enterprises Singapore, Asian Development Bank, Z/Yen Partners, Singapore Marine and Port Authority, Singapore Economic Development Board
Sources (Banking & Payments)
The Association of Banks in Singapore, Infocomm Media Development Authority (IMDA), The Monetary Authority of Singapore, Singapore Business Review, DBS, SkillsFuture Singapore, The Government of Singapore (various ministries)
Sources (Foreign Exchange)
The Monetary Authority of Singapore, Bank for International Settlements, Baker McKenzie, Deloitte, PwC
Ministry of Trade and Industry Singapore, Enterprise Singapore, Department of Statistics Singapore, Singapore Customs