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    Singapore's Free Trade Agreements

    Benefiting from FTAs

    Singapore’s extensive free trade agreements (FTA), coupled with a transparent legal system and educated workforce, have been credited with accelerating the country’s transformation to a first-world economy.

    The country’s 13 bilateral and 11 regional FTAs include some of the largest combined trade agreements in the ASEAN-China, ASEAN-India, and ASEAN-Hong Kong trade blocs — providing Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.

    Despite regional players maintaining strong FTA networks, they are not as extensive as Singapore’s. Due to these factors, the country will continue to be the default location for businesses seeking to expand into Southeast Asia and neighboring regions.  

    Foreign investors should seek the help of registered advisors to understand how they can benefit from the incentives covered under Singapore’s FTAs.

    What are the types of FTAs?

    There are two types of FTAs: bilateral (agreements between Singapore and a single trading partner) and regional (signed between Singapore and a group of trading partners).

    List of Bilateral Free Trade Agreements 

    China-Singapore FTA (CSFTA)

    Peru-Singapore FTA (PeSFTA)

    India-Singapore Comprehensive Economic Cooperation Agreement (CECA)

    Singapore-Australia FTA (SAFTA)

    Japan-Singapore Economic Partnership Agreement (JSEPA)

    Singapore-Costa Rica FTA (SCRFTA

    Republic of Korea-Singapore FTA (KSFTA)

    Singapore-Jordan FTA (SJFTA)

    New Zealand-Singapore Comprehensive Economic Partnership Agreement (ANZSCEP)

    Sri Lanka-Singapore FTA (SLSFTA)

    Panama-Singapore FTA (PSFTA)

    Turkey-Singapore FTA (TRSFTA)

    United States-Singapore FTA (USSFTA)

     
     
     

    List of Regional Free Trade Agreements

    ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)

    ASEAN Free Trade Area (AFTA)

    ASEAN-China Free Trade Area (ACFTA)

    Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

    ASEAN-Hong Kong, China Free Trade Area (AHKFTA)

     

    EFTA-Singapore FTA (ESFTA)

    ASEAN-India Free Trade Area (AIFTA)

    Singapore-Eurasian Economic union (EAEUSFTA)

    ASEAN-Japan Comprehensive Economic Partnership (AJCEP)

    Regional Comprehensive Economic Partnership (RCEP)

    ASEAN-Republic of Korea Free Trade Area (AKFTA)

    GCC-Singapore FTA (GSFTA)

    Trans-Pacific Strategic Economic Partnership (TPSEP)

     

    Since the inception of the CSFTA, China has since become Singapore’s largest trading partner, with total trade worth more than US$135 billion in 2019.  In October 2019, the two countries announced an upgrade to the CSFTA, which included changes to the investment chapter of the original agreement.

    Under this chapter, investors from both countries will receive a ‘high-level’ of investment protection through the application of a ‘national treatment’ and the ‘most favored nation treatment status’ (MFN) for businesses.

    This means businesses from either country are not treated less favorably than their own investors or investors from a third country with respect to operations, the management or other aspects related to their investments.

    How to apply for FTA tariff concessions

    Foreign investors looking to operate from Singapore, establishing a subsidiary company (private limited company) is advisable in order to benefit from prevailing FTAs as well as other tax incentives.

    Businesses will first need to apply for a Preferential Certificate of Origin (PCOR) which is issued by Singapore Customs. The PCOR helps to identify the origin of the goods in question.

     To apply, companies will need to fill out a form on the Singapore Customs website that details:

    • Details of the businesses’ manufacturing premises;
    • the manufacturing cost statement;
    • Application for the certificate of origin with exporter permit via TradeNet; and
    • Certificate collection.

    Companies can apply for ‘back-to-back’ PCORs which would allow them to re-export goods. This certificate can only be issued if:

    • The impending FTA contains the back-to-back PCOR provisions;
    • The goods will not undergo any further processing in Singapore;
    • The first exporting country, Singapore, and the final importing country are signatories to the FTA; and
    • The goods fulfil the requirements covered in the FTA.

    Determining HS codes and rules of origins

    Companies will need to establish the Harmonized System (HS) code and the rules of origin (ROO) annex to see if the specific product or service is eligible for free or preferential import tariffs.

    The HS code is an international nomenclature used for classifying products. The system comprises of six numbers that define product descriptions that appear as headings and sub-headings, grouped into 21 categories.

    Singapore’s DTA network

    Singapore has one of the world’s most extensive double tax agreement (DTA) networks, attracting international businesses from a multitude of conventional and nuanced industries. DTAs eliminate instances of double taxation from cross-border activities, such as trade, knowledge sharing, as well as investments between two countries.

    Singapore has signed over 90 DTAs with various countries and the full list can be found on the website of the Inland Revenue Authority of Singapore or IRAS, the main tax authority in the country. Foreign investors should seek the help of registered tax advisors to better understand how they can benefit from Singapore’s vast DTA network.

    These DTAs also include treaties with ASEAN’s 10 member states – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam – providing businesses with a greater competitive edge when entering this market.

    Income types covered under a DTA

    Currently, there are several types of DTAs signed by Singapore: comprehensive, limited, and exchange of information arrangements (EOIAs). Comprehensive DTAs provides relief from double tax for all income types between the two signatories. Limited DTAs, however, only provides relief from income generated from air transport and shipping, and EOIAs are provisions for the exchange of tax information.

    The tax reliefs under each DTA treaty differs for each country. They normally cover several income types:

    • Tax on royalties;
    • Tax on dividends;
    • Tax on capital gains;
    • Tax on interests;
    • Shipping and air transport;
    • Directors’ fees;
    • Independent and dependent personal services;
    • Researchers;
    • Students; and
    • Income from immovable property.

    Claiming relief under the DTA

    To obtain the benefits of the DTA, the company must first submit its Certificate of Residence (COR) to the IRAS as evidence it is a tax resident in Singapore. Only Singaporean tax residents and the tax residents of the treaty partner are recognized. To qualify as a Singaporean tax resident, an individual must be employed in the country for 183 days or more during the year. For companies, they must be registered in Singapore. Tax residents of the treaty partner must also submit a COR certified by the tax authority of the treaty partner to the IRAS in order to obtain relief under the DTA.

    Singaporean tax residents can still avoid double taxation even if Singapore does not have a DTA with a particular country through the Universal Tax Credit (UTC) scheme. This applies to all foreign taxes paid by a Singaporean tax resident on the following income categories:

    • Royalties derived from outside of Singapore;
    • Foreign income from professional services or consultancy;
    • Foreign-sourced dividends; and
    • Foreign branch profits.

    The IRAS will grant the tax exemption if the following conditions are met:

    • At least 15 percent in corporate taxes (headline tax) are paid on the income sourced from the foreign jurisdiction;
    • The company has been subjected to tax in the foreign jurisdiction, this can be different from the headline tax; and
    • The IRAS is satisfied that granting the tax exemption will benefit the tax resident in Singapore.

    Determining the treatment of profits

    Defining a permanent establishment (PE) is an important feature within all DTA treaties in order to determine the treatment of business profits. The PE refers to the fixed place of business through which the taxpayer carries out their business operations.

    The taxation of profits falls under the country where the PE is set up unless the company opens a PE in another country. In the absence of a DTA treaty, any profits would mean the PE would bear a double tax burden for the business.

    This means foreign investors who have a subsidiary company registered in Singapore can take advantage of the country’s DTAs as well as FTAs through ASEAN and Asia.

    A business is deemed to have a PE if they carry out business activities lasting over 183 days in the following places:

    • Offices;
    • Factories;
    • Warehouses;
    • Farm or plantation;
    • Construction or installation site
    • Mines, wells, or quarries; and
    • workshops
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