The EDB and the Ministry of Law issue circulars on the tax incentive for international arbitration

May 2008

The Singapore Economic Development Board (EDB) and Ministry of Law have recently issued circulars on initiatives to promote Singapore as a venue for international arbitration.

Tax incentive for international arbitration in Singapore

This incentive was announced during the 2007 Budget Speech and provides for tax exemption of 50% of an approved law practice's qualifying incremental income for a period of up to five years. The circulars provide details of the qualifying criteria and conditions as summarised below.

Qualifying income
  • Incremental income from international arbitration cases that culminate in substantive hearings held in Singapore within the incentive period. This excludes income from legal work outsourced to other law firms.
  • Incremental income refers to the amount in excess of a base amount, which is the average annual income of the approved law practice from the provision of legal services in connection with any international arbitration hearing held in Singapore for the three years preceding the commencement of the incentive.
Qualifying criteria and conditions
  • Minimum of three "full-time equivalent" lawyers engaging in international arbitration work in Singapore, which must be maintained over the tax relief period.
  • The number of "full-time equivalent" lawyers is computed as:

    billable hours for all international arbitration work performed by the firm during the year
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    average billable hours for the year for all legal work per lawyer
  • The approved law practice must meet an agreed income target for each year.
Application
  • The window period for applications is from 1 July 2007 to 30 June 2012.
  • This incentive is administered by the EDB.
Work pass exemption for arbitration and mediation services

From 1 February 2008, non-resident arbitrators, mediators, legal counsels and other professional service providers involved in arbitration proceedings (e.g. translators and transcribers) are not required to apply for a work pass to enter Singapore. Instead, for a maximum of 60 days, the work can be performed on a Social Visit Pass, subject to certain conditions. For further details, please call your usual PricewaterhouseCoopers contact.