Tax Incentives to Promote Project Financing

In the 2008 budget, the Singapore government has proposed several amendments to the Tax Incentives to Promote Project Financing, which businesses need to take note of.

Current ( prior to Budget 2008)

The following tax incentives are valid from 1 November 2006 to 31 December 2008:

• Tax exemption on qualifying income derived by investors from qualifying project debt securities;
• Tax exemption on foreign-sourced interest income received by qualifying entities listed on the Singapore Exchange (SGX) from offshore qualifying infrastructure projects/assets;
• Remission of stamp duties payable on the instrument of transfer relating to qualifying infrastructure projects/assets to entities listed or to be listed on the SGX; and
• 5% concessionary tax rate on income derived by a Financial Sector Incentive (project finance) company from arranging, underwriting and distributing any qualifying project debt security, qualifying project loan and from provision of project finance advisory services related to a qualifying infrastructure project.

Changes to Tax Incentives to Promote Project Financing

• The validity period of these tax incentives is extended for another three years to 31 December 2011.
• A new tax incentive (valid from 1 April 2008 to 31 December 2011) will be introduced to grant a 10% concessionary tax rate, for a period of up to ten years, on income derived by a company from the provision of management services to business trusts and funds that own offshore infrastructure assets and list in Singapore.

Technical / Business Considerations for Tax Incentives to Promote Project Financing

The introduction of this new tax incentive is a further catalyst for the growth of the project finance industry through Singapore’s capital market.