2 things that can attract new players to set up shop in Singapore

Adopting a pure territorial taxation system is one.

Global leader in tax and advisory services EY urged the Singapore government to encourage more business to set up shop in the city-state.

In its proposal ahead the Budget 2017, EY said one way is to adopt a pure territorial taxation system as not all foreign-sourced income derived by companies can be exempt from tax.

It noted that the permanent tax exemption of all foreign-sourced income without prerequisites, supplemented with safeguards such as explicit tax rules on the determination of source of an income without creating opportunities for double non-taxation, will encourage companies to grow beyond Singapore.

Ernst & Young Solutions LLP head of tax services Chung-Sim Siew Moon said this could place Singapore as a place for blooming industries.

“In the long run, it can boost Singapore’s position as a launch pad for new industries with base operations in Singapore, including digital service sectors such as media, travel, FinTech and gaming,” she said.

More so, EY also noted how enhancing tax incentive for venture capital fund managers can attract new businesses.

To recall, it was announced in Budget 2015 that an approved venture capital fund management company that manages Section 13H funds will be accorded a 5% concessionary tax rate. EY said Section 13H tax incentive is administered by SPRING Singapore and may have conditions related to the investment objective of the fund, which may not be possible for every venture capital fund manager to meet.

“As Singapore seeks to be a regional hub for start-ups and entrepreneurs, it may wish to attract smaller start-up venture capital fund managers by extending the Financial Sector Incentive – Fund Manager tax incentive to this group of managers," Ernst & Young Solutions LLP partner for financial services tax Desmond Teo said.

He furthered, "While the incentive can continue to be linked to headcount, the government can consider removing the minimum assets under management of S$250m for these start-up venture capital fund managers. Instead it could be linked to making a minimum number of investments for the funds in a certain growth industry, for instance, FinTech.”