The MAS issues a circular on enhancements to the Financial Sector Incentive
The Monetary Authority of Singapore (MAS) issued a circular on 30 May 2008 providing details of enhancements to the Financial Sector Incentive (FSI) announced during the 2008 Budget Speech. These include the extension of the incentive for 5 years, from 1 January 2009 to 31 December 2013, enhancements to the FSI-Bond Market (FSI-BM) and FSI-Derivative Market (FSI-DM) awards. The circular also mentions the qualifying activities for the new FSI-Islamic Finance (FSI-IF) award, but full details of this award are provided in a separate circular on the tax concessions for Islamic financial services, released by the MAS on the same day. Click here for details.
In addition, the MAS has introduced a new FSI-Debt Capital Markets (FSI-DCM) award which merges the existing FSI-BM, FSI-Credit Facilities Syndication (FSI-CFS) and FSI-Project Finance (FSI-PF) awards. It appears that this new award has been introduced mainly to streamline the application and annual review process for taxpayers as there is no change to the qualifying criteria or conditions for each of the existing awards. Existing FSI-BM, FSI-CFS and FSI-PF companies may apply for the FSI-DCM award.
The MAS has also announced its intention to enhance the FSI-Credit Facilities Syndication (FSI-CFS) award to allow more lending arrangements to qualify for the 5% concessionary tax rate. Details will be released at a later date.
Enhancements to the FSI-BM and FSI-DM awards
With effect from 16 February 2008, income from trading in qualifying debt securities (QDS) and qualifying project debt securities (QPDS) qualified for the 5% concessionary tax rate under the FSI-BM award. Likewise, income from the trading of exchange traded financial derivatives and the provision of services as an intermediary in connection with transactions relating to them qualified for the 5% concessionary tax rate under the FSI-DM award. These enhancements also apply to existing FSI-BM and FSI-DM award holders respectively up to the expiry dates of their awards.
Renewal of FSI awards and computation of the qualifying base
Former Asian Currency Units that automatically transited to the FSI-Standard Tier (FSI-ST) incentive on 1 January 2004 must employ at least six professionals engaged in qualifying activities in order to qualify for an extension of their FSI-ST awards for a further five years after their existing awards expire on 31 December 2008. The MAS will also require their business development plans and will take qualitative factors into consideration. For other FSI awards, the qualifying criteria for renewal have been left open-ended. The circular merely states that these companies must demonstrate incremental commitments to Singapore, and that the MAS will take into consideration qualitative factors. All FSI companies should approach the MAS six months before the expiry of their existing awards to begin discussions about renewal of their awards.
Upon renewal of their awards, all FSI-ST companies are required to compute a subsequent qualifying base (QB). However, as a concession, companies that renew their awards before 31 December 2010 may continue using their initial QB until then. This concession is not available to companies with an initial QB of 0% or 100%.
On the same topic, the MAS previously allowed a nil initial QB for newly set-up companies, subject to conditions. They now clarify that only companies that apply for the FSI-ST award within two years of the date of commencement of business in Singapore will qualify for a nil QB. Other companies will have to compute a QB.
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