Singapore is one of the most important trading hubs in Southeast Asia, with thousands of ships entering and leaving its port every year. This is one of the main reasons to set up a shipping company in the city-state. Apart from this, shipping companies also benefit from special tax regulations, or better said, an exemption from the corporate tax for certain activities.
How are shipping companies taxed, then? Our accountants in Singapore explain below the tax regulations applicable to businesses in one of the city-state’s major economic sectors.
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Tax legislation applicable to Singapore shipping companies
The taxation of shipping companies in Singapore is regulated by Section 13A in the Income Tax Law. Local and foreign companies operating vessels registered in Singapore and abroad can obtain several taxexemptions on certain incomes obtained from shipping activities. What should be noted is that there are several types of companies qualifying for this exemption. Among these:
- companies engaged directly in the shipping industry;
- companies offering ship management services;
- companies offering charter services;
- companies engaged in towing activities.
Shipping companies benefit from tax exemptions not only in Singapore but also in other countries with which Singapore has signed double tax agreements, as such activities are treated in separate chapters.
Shipping companies need to appoint auditors in Singapore. Businesses must engage such specialists in accordance with the Singapore Companies Act. The nomination of auditors must respect various requirements, among which the maximum due date for the appointment. However, there are also companies that do not need to appoint auditors if they are exempt from this requirement. Our accounting firm in Singapore is at your service if you run shipping activities here and need assistance in complying with the special regulations applicable to this sector.
Financial transaction accounting and reporting issues, such as commitments, authorizations, and the receipt and disbursement of monies, are covered under financial audits. The aim is to confirm that there are adequate process controls over resource acquisition and use, as well as adequate controls over cash and cash-like assets. Feel free to get in touch with our audit firm in Singapore for support.
The new taxation regime for shipping companies in Singapore
One of the reasons to work with our Singapore accounting specialists is that they are always updated on the latest legislation amendments. When it comes to the shipping sector, which is one of the most important in the City-State, 2024 has brought an important change.
To align with international tax policies in the shipping industry,Singapore has created an alternative taxation basis, namely the Net Tonnage Basis of Taxation (NTT). Specifically:
- the new alternative tax can be applied for by shipping companies qualifying for the Maritime Sector Incentive (MSI);
- such businesses can benefit from foreign tax credits that apply to the same income generated by a company in another country under the rules of the double tax treaty of the respective state with Singapore.
The new NTT applies per each 100 net tonnage and is calculated as follows:
- SGD 0.90 per each 100 net tons for conventional ships and SGD 0.60 per each 100 net tons for green vessels, for the first 1,000 net tons;
- for the following 9,000 net tons, SGD 6 per each 100 net tons is levied for conventional vessels, and SGD 0.30 per 100 net tons applies to green ones;
- for more than 10,000 net tons, the amount goes to SGD 33 per 100 net tons for conventional ships, while for green ones, SGD 0.30 remains.
The computation of the tax to be paid is as follows:
- the number of days the eligible company generated income from the qualifying income under the (MSI) – A;
- the daily income per ship – B;
- the deemed income for each ship is calculated as the multiplication of A and B, resulting in the C factor.
The tax to be paid implies computing C x 17% (the standard corporate tax rate).
Tax exemptions for domestic shipping companies
To Singapore shipping companies that are subject to the corporate tax, which is imposed at the rate of 17%, exemptions are available for the following activities:
- carriage of persons, goods, livestock, and mail;
- towing operations;
- ship chartering activities;
- the use of vessels for offshore exploitation of natural minerals;
- sale of vessels;
- income obtained from the construction of ships.
Apart from these, special purpose vehicles issuing ordinary shares in shipping companies are also exempt from taxation in Singapore provided certain requirements are met.
What should be noted when it comes to the accounting regulations imposed on shipping companies is that some of these are provided for under the Merchant Shipping Law in Singapore.
In the case of foreign ships operating in Singapore, the tax exemption is available only for the transportation of people, goods, livestock, and mails leaving the city-state. Transshipment activities, however, are exempt only within the Singapore port.
Our Singapore accounting firm can provide tailored assistance to those operating shipping companies.
Even if a shipping company can obtain various tax benefits, it is important to know the accounting requirements to be met in order to maximize the incentives granted in Singapore.
Accounting requirements applicable to Singapore shipping companies
Just like companies in other industries, shipping businesses are also required to file annual accounts and chargeable estimations in order to determine the amount to be paid as tax, when applicable.
Form C -Income Tax Return must be filed annually by a shipping company in Singapore. What should be noted though, is that when qualifying for a tax exemption, such a business is only required to report the amount of money obtained and the type of activity completed with Form C.
Streamlining accounting procedures forshipping companies in Singapore can be achieved with the help of our accounting firm.
On demand, you can also benefit from audits performed by our auditors in Singapore.
Incentives for shipping companies in Singapore
The Singapore Maritime and Port Authority, the main governmental body governing this important sector provide several incentives for companies operating in the city-state. Among these, we mention the following:
- the Approved International Shipping Enterprise program under which 10-year tax exemptions are offered on shipping income;
- the Approved Shipping Logistics program under which lower corporate tax rates apply on incremental income resulted from logistics and freight services;
- the Maritime Finance Incentive which provides for tax concession for up to 10 years on leasing revenue;
- the Maritime Seed Fund which was created for maritime startups.
Apart from these, it is also worth noting that:
- Singapore services more than 600 ports in over 120 countries in the world;
- it hosts more than 5,000 shipping vessels that bring 7% to the city-state’s Gross Domestic Product per year.
Services for shipping companies offered by our Singapore accountants
Our accounting firm in Singapore is at the service of shipping companies with the following solutions:
- tax and GST registration;
- fiscal representation for foreign shipping enterprises;
- EORI registration for companies exporting goods to the European Union;
- bookkeeping and accounting services;
- tax computation solutions;
- financial statements drafting;
- payroll in Singapore for local and foreign employees;
- audit services in Singapore;
- support in claiming the available tax exemptions.
Among these services, our accountants stress that some of the most important are GST and EORI registration, and tax computation in accordance with the special requirements applicable to the shipping sector. If you want a personalized approach, our accountants in Singapore can offer detailed information.
For accounting services for your shipping company, please contact our accountants in Singapore.