In a bid to make Singapore a shipping hub, various incentives were introduced to make it attractive to have shipping activities in Singapore. Essentially the provisions that govern the exemption of shipping activities in Singapore are found in Section 13A and Section 13F of the Singapore Income Tax Act (SITA).
Income that is derived from the operation of a Singapore-flagged or foreign flagged vessel under Section 13A is exempt in Singapore.
Section 13A(1) of the SITA provides exemption for specified income that is derived by a shipping enterprise from the operation of Singapore ships or foreign ships’.
A ‘shipping enterprise’ means any company owning or operating Singapore ships or foreign ships.
The specified income to which the exemption applies for a Singapore-flagged vessel – income from:
(a) The carriage of passengers, mail, livestock or goods outside the limits of the port of Singapore.
(b) Towing or salvage operations outside the limits of the port of Singapore; or
(c) The charter of the ship for use outside the limits of the port of Singapore; or
(d) From the year of assessment 2007 onwards, the use outside the limits of the port of Singapore of the ship as a dredger, seismic ship or vessel used for offshore oil or gas activity, and;
(ii) For a foreign ship: income from the carriage of passengers, mail, livestock or goods shipped in Singapore, except where such carriage arise solely from transshipment from Singapore, or is only within the limits of the port of Singapore.
If the conditions for the above are satisfied the exemption applies automatically on due claim basis in the tax submission.
The AIS scheme is administered by the Maritime and Port Authority of Singapore (MPA). An application is made to the MPA for approval to qualify for the AIS scheme which is granted on a 10-year renewable period; or on a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period.
The scheme hopes to attract international shipping companies with a strong track record and international connections to expand their operations from Singapore.
The following activities are exempt under this scheme:
(i) The carriage of passengers, mail, livestock or goods from outside Singapore port limits by any foreign ship.
(ii) The charter of any foreign ship to a non-resident of Singapore, or to another AIS, for the carriage of passengers, mail, or livestock or goods outside Singapore port limits.
(iii) The carriage of passengers, mail, livestock or goods by a foreign ship to Singapore solely for the purpose of transshipment.
(iv) The operation or charter of an approved floating production storage offloading ship or an approved floating storage offloading ship.
(v) The towing or salvage operations carried out by any foreign ship outside Singapore port limits.
(vi) The charter of any foreign ship to any person for towage and salvage operations conducted outside Singapore port limits.
(vii) The charter of any foreign dredger, foreign seismic ship, or any foreign vessel used for offshore oil or gas activity to any person where such vessels are used outside Singapore port limits.
(viii) Foreign exchange and risk management activities which are carried out in connection with and incidental to qualifying activities.
(ix) The provisions of ship management services to a qualifying company in respect of ships owned or operated by the qualifying company.
Apart from the above schemes, activities related to the financing of ships, container leasing, ship brokers and those engaged in ship management services are also accorded preferential tax treatment.