Financial Sector Incentive (FSI) Scheme

In the 2008 budget, the Singapore government has proposed several amendments to the Financial Sector Incentive (FSI) Scheme which businesses need to take note of.

Current (Prior to 2008 Budget)

• Under the FSI scheme, the following concessionary tax rates applies:
  
  - 5% on income from qualifying high growth and high value-added activities; and
  
  - 10% on income from qualifying financial activities that are important to Singapore’s financial centre development objectives.
• Specifically, income derived by a FSI company from qualifying activities is taxed at 5%.
• The FSI scheme will expire on 31 December 2008.

Changes to the Financial Sector Incentive (FSI) Scheme

• The FSI scheme will be renewed for another five years until 31 December 2013.
• A new Enhanced-Tier award [FSI-Islamic Finance (FSI-IF)], with approval period from 1 April 2008 to 31 March 2013 (with no extension), will be introduced to provide successful applicants with the concessionary tax rate of 5% for a period of five years. Under this new award, qualifying income derived by the successful applicant from the following qualifying Shariah-compliant activities will enjoy the concessionary tax rate of 5%, subject to conditions.
• For the existing FSI-BM Enhanced-Tier award, the scope of qualifying activities will be expanded to include trading of Qualifying Debt Securities and Qualifying Project Debt Securities with effect from 16 February 2008.
• For the existing FSI-DM Enhanced-Tier award, the scope of qualifying activities will be expanded to include trading of exchange-traded financial derivatives with effect from 16 February 2008.
• The Monetary Authority of Singapore (MAS) will be providing further details on these changes by end May 2008, which will spell out the conditions for the new FST-IF Enhanced-Tier award.

Technical / Business Considerations  of the FSI Scheme

The renewal of the FSI scheme for another five years is a continued effort by the Government to develop Singapore as a financial hub. The government’s effort to promote Islamic financing activities is evidenced by the introduction of the new FSI-IF Enhanced-Tier award, providing a more level playing field for Islamic finance institutions to compete with other financial institutions.

To have a better understanding, and to get detailed advice on the eligibility & claim of the amended Financial Sector Incentive (FSI) Scheme, get in touch with our experienced Accounting Consultants in Singapore at AccountServe.