Financial Services Tax Bulletin

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May 2017 
Financial Sector Incentive and Insurance Business Development Schemes Changes

On 11 May 2017, the Monetary Authority of Singapore (MAS) issued two circulars (FDD Cir 05/2017 and FDD Cir 06/2017), detailing changes to the existing Financial Sector Incentive (FSI) and Insurance Business Development (IBD) Schemes. Following which, the changes to the FSI Scheme have been gazetted through the Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) Regulations 2017 on 15 May 2017 (the “2017 FSI Regulations”).  The latest developments reflect the Government’s continuing efforts to fine tune Singapore’s incentives regime to ensure that it remains relevant in today’s environment.

Recent issues

Financial Sector Incentive and Insurance Business Development Schemes Changes

On 11 May 2017, the Monetary Authority of Singapore (MAS) issued two circulars (FDD Cir 05/2017 and FDD Cir 06/2017), detailing changes to the existing Financial Sector Incentive (FSI) and Insurance Business Development (IBD) Schemes. Following which, the changes to the FSI Scheme have been gazetted through the Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) Regulations 2017 on 15 May 2017 (the “2017 FSI Regulations”).

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Enhancement to the Enhanced-Tier Fund Tax Incentive Scheme

On 23 February 2015, the 2015 Budget Statement was delivered. It was then announced that with effect from 1 April 2015, the existing concession for master-feeder fund structures under the Enhanced-Tier Fund Tax Incentive Scheme (the “ETF Scheme”) will be enhanced to apply to special purpose vehicles (SPVs) held by the master fund, subject to conditions. The recent Monetary Authority of Singapore (MAS) FDD Cir 05/2015 dated 29 May 2015 provides details and clarifications with regard to the enhancement (the “2015 ETF Enhancement”). We discuss the salient points of the MAS circular below.

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Updates on the GST rules for the Fund Management Industry

The MAS issued Circular FDD Cir 02/2014 ("MAS Circular 2014") on 31 March 2014 that introduced the much debated rules on the "belonging" status of an incorporated fund for the purpose of applying the GST treatment of services to the fund. To recap, the MAS Circular 2014 stipulated that an overseas fund (other than a trust fund) will be treated as having a business establishment and hence "belonging in Singapore" if the fund wholly relies on a Singapore-based fund manager ("SFM") to carry on its business. Services provided to such a fund would be subject to GST at the standard rate of 7 percent.

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