We republish our local Managing Director’s article in the Finance & Gestion magazine as a two-part series here.
In part two, he takes a look at Singapore’s sound legal infrastructure and innovation-friendly policies that make the country one of the most competitive economies in the world.
In the last five decades, Singapore has been through an amazing journey that witnessed its transformation from a British colonial outpost to a world-class economic powerhouse.
Today, the country remains as one of the most competitive economies in the world. In 2014, it received US$81bn (27% increase from 2013) of FDI inflows making it the fourth most invested country in the world (only behind China, Hong Kong and USA). Its solid legal framework, efficient judicial system and innovation-conducive policies will continue to give it a built-in advantage in attracting foreign direct investment (FDI).
A stable legal environment
Singapore is a world-class dispute resolution hub that allows companies to benefit from the protection offered by its excellent (and corruption-free) judicial expertise. The Singapore International Commercial Court (SICC) has specialist jurists from many nations hearing international commercial disputes, i.e. cases governed by foreign law where the parties involved have agreed to use the SICC. SICC even allows foreign lawyers to represent their clients in SICC hearings and appeals. The country is one of the top seats for arbitration globally and is ranked alongside traditional places like London and Zurich.
The city-state’s arbitration laws are user-friendly and its judiciary is renowned for its pro-arbitration and pro-enforcement stance. The Singapore International Arbitration Centre (SIAC) is one of the world’s leading and Asia’s top arbitration institution. Singapore arbitration awards are enforceable in over 150 countries worldwide as it is party to the 1958 New York Convention on enforcement of arbitration awards.
There are no restrictions on foreign lawyers or law firms from representing their clients in arbitration proceedings in Singapore. The Singapore International Mediation Centre (SIMC) provides best-in-class mediation services and products targeted at the needs of parties in cross-border commercial disputes, particularly those based in Asia. Maxwell Chambers, centrally located in the heart of Singapore’s business district, is the world’s premier and first integrated dispute resolution complex housing both best-of-class hearing facilities as well as top international (Alternative Dispute Resolution) ADR institutions.
A safe place for intellectual property
The country has the ambition to become a global intellectual property (IP) hub, thanks to its protective legal framework and extensive tax treaty, free trade and investment guarantee agreement networks. Singapore’s legal framework for IP protection already is well recognized internationally. A large number of companies across a range of sectors have located their research & development and IP related work in Singapore. In the 2013-2014 Global Competitiveness Report, the World Economic Forum rated Singapore as having the best IP protection regime in Asia.
Many of Singapore’s tax treaties specify withholding tax rates on royalties as low as 0 or 5%. Where there is no tax treaty (such as with the US), Singapore provides a unilateral tax credit for foreign taxes suffered on IP income. Tax incentives are available under the Development and Expansion Incentive to provide reduced tax rates on IP income for a period of 5 years or more.
Eligible IP income may be received in the form of royalties or licensing income, or it may be income from operating a wider set of activities as a Singapore principal. Companies in the city-state are offered generous incentives to register their IP. For the acquisition of certain IP, companies are entitled to write down the acquisition costs over five years of assessment, subject to certain conditions.
Incentives for research & development
Private research & development (R&D) activities in the country are eligible for a broad range of financial, tax and non-monetary incentives. The R&D Tax Incentive Scheme is probably among the most generous incentive for R&D expenditure in the world. It offers a 400% tax deduction on eligible R&D costs. After-tax benefit can be as much as 68 cents of for each dollar of R&D spending (based on Singapore’s corporate tax rate of 17%). Companies may avail themselves of double tax deduction incentives for expenditure on approved R&D activities. World-class public funded research institutions work together with the private sector to develop impactful and meaningful innovations.
The long-term outlook for Singapore remains bright. The country is only 50 but it has already gathered all the attributes of a country bound to succeed for centuries to come. Let me wish Singapore a very happy 50th birthday!
Read the first part of our article series here
This is an extract from the article entitled "Happy 50th Birthday, Singapore!” published in the July-August issue of Finance & Gestion, the magazine of the French CFO association.
Read more about doing business in Singapore