In a bid to further develop international trade-related activities in Singapore and attract high-growth international trading companies, International Enterprise (IE) Singapore has recently enhanced incentives under the Global Trader Program (GTP). Launched in June 2001, the GTP, which encourages global trading companies to use Singapore as their regional base to conduct entire trade-related activities, from procurement to distribution, has been a major success.
Under the enhanced program, the list of qualifying products and commodities include:
- petroleum and petroleum products
- agricultural commodities and bulk edible products
- building and industrial materials
- consumer products
- industrial products
- machinery components
- metals and minerals
- electronic and electrical products and
- carbon credits.
Secondly, the list of qualifying derivative instruments has been expanded to include all derivative instruments. It will apply to income from qualifying trades in the new qualifying derivative instruments from the Year of Assessment (YA) 2012.
A new sunset clause has also been introduced for the program. All existing sunset clauses for the GTP enhancements will be aligned to the new common sunset clause at the program level (i.e. 31 March 2021). Now, companies can be approved as a GTP company, or as a GTP Structured Commodity Finance company, on or before March 31, 2021. The GTP company can enjoy benefits under the various enhancements during their award tenure of up to five years. All other provisions of the GTP remain unchanged.
Rikvin, which has assisted various global entrepreneurs in Singapore company formation, is optimistic that the widened scope of GTP will strengthen Singapore’s commodity markets, facilitate better risk management among GTP companies and generate spin-offs for the entire financial sector.
“We have launched our service to assist trading companies attain GTP status in Singapore. IE has mandated three minimum criteria for a GTP application. These are substantial physical offshore trading turnover on a principal basis, significant local business spending attributable to trading activities in Singapore, and employment of professional traders here. But importantly, meeting these does not automatically qualify a company for the GTP status. The company’s overall business plan and economic contribution to Singapore is also assessed, which is where we can help,” said Mr. Satish Bakhda, Rikvin’s Head of Operations.
To date, there are more than 270 companies with the GTP status and enjoy a concessionary tax rate on qualifying trade income. Such firms have benefited from Singapore’s strategic location at world’s major aviation and maritime routes, as well as its proximity to raw materials and consumer markets.
An approved GTP company is set to benefit from a concessionary tax rate of 10% on its qualifying offshore trading income. The qualifying transactions include principal trades with offshore parties or other GTP companies on both the buy and sell legs of the transaction. The physical trade may be offshore, trans-shipments, or re-exports. Notably, only non-value added portion of re-export trade qualifies under the GTP.
In order to attract emerging high-growth international trading companies, IE Singapore grants them an initial, non-renewable 3-year GTP status. If, during this period, the company establishes its global trading network and demonstrate sustainable growth projections, with Singapore as its base, it can apply for the 5-year renewable GTP status.
Mr. Bakhda added that for companies will be well positioned to attain the GTP status should they use banking and financial services available in the city state. “We advise our clients to make use of other Singapore-based trade and logistics, arbitration and ancillary services. If the company can add value by contributing to manpower training and development of trading expertise in Singapore, its chances increases manifold,” he added.
“Generally, the GTP applicant is expected to use Singapore as the regional nerve center for its principal offshore trading, and a whole range of other business and support activities. It may be market research, product development, quality management, sales planning, global procurement, network services, financing, strategy formation, or warehousing and freight services,” concluded Mr. Bakhda.