Singapore’s Global Trader Programme
The Global Traders Programme (GTP) is an incentive program designed to encourage international trading companies to choose Singapore as a base for their global trading activities. The primary purpose of the programme is to promote Singapore as an international trading hub. The incentive is provided by International Enterprise (IE) Singapore, and it offers a reduced corporate tax.
Enterprise Singapore, in a move to promote trading operations in the country, introduced the GTP in 2001. A business can apply for the GTP on the fulfillment of certain conditions. After a business is approved, tax concession extended by this scheme is applicable to qualifying income and activities of the business. This article will outline the basic requirements to qualify for the scheme.
What is GTP?
GTP is a tax incentive scheme that encourages large trading companies to locate their headquarters in Singapore. In June 2001, the Global Traders Programme was launched to replace the Approved Oil Trader (AOT) and the Approved International Trader (AIT) programmes. These prior programmes were launched in 1989 and 1990 respectively and were implemented to attract oil companies to Singapore. The GTP merges the AOT and AIT.
Enterprise Singapore (ESG), a government agency under Singapore’s Ministry of Trade and Industry, launched the GTP. IE Singapore’s mission is to help Singapore companies establish a global presence in other countries. IE Singapore introduced the GTP to promote the country as the preferred base for international trading firms. It did so by providing incentives in the form of tax concessions to such firms.
Global Trading Company Defined
The Income Tax Act defines the terms Global Trading Company and Qualifying Company as follows:
Global Trading Company
A global trading company is a company carrying out business in international trading of:
Commodities or
Commodities futures
The products and commodities covered under this scheme are explained below.
Qualifying Company
A qualifying company (i.e. a company that will qualify as a Global Trading company) is a company registered in Singapore and either:
An approved global trading company or
A wholly-owned subsidiary (i.e. 100% ownership ) of a global trading company.
The qualifying company will receive the tax benefits only on income derived from qualifying commodities.
GTP Benefits
Companies that qualify for the GTP enjoy a concessionary corporate tax rate (5% or 10%) for a renewable 5-year period on qualifying trading income (including offshore trading income) that includes any income from physical trading, derivative trading income, etc. Companies eligible for this benefit must carry out a majority of their trading operations in Singapore. GTP companies are eligible for the 5% tax rate only if a substantial amount of their business is executed in Singapore, they utilise the country’s financial services and hire local Singaporeans to work in their company. This criteria is in addition to the eligibility conditions that a company must fulfill to qualify for GTP.
In 2003, the government announced that it will consider medium-sized international companies (who wish to choose Singapore as their base for their global trading operations) for the scheme. These companies initially qualify for the 10% concessionary tax benefit for a non-renewable period of 3 years. During this period, if the companies are successful in establishing a global trading network and operations according to the requirements of the GTP, they will be eligible to apply for the GTP scheme for a 5-year renewable period.
GTP Eligibility Requirements
As outlined by IE Singapore, a company is eligible to apply for the GTP if:
The company is a well-established (either medium or large-sized) international company and the company conducts international trading, procurement, distribution as well as transportation of the products covered under the scheme;
The company must have a global network and a good track record; and
The company wishes to set up a regional base of its principal offshore trading and business activities along with their support functions in Singapore. These include marketing, development and planning, logistics management, finance and treasury functions, etc.
To be eligible for the GTP, the following additional conditions need to be fulfilled. The company must have a minimum:
Annual turnover of $100 million;
Local expenditure of S$ 3 million and
3 trading professionals employed. These professionals can be either local Singaporeans or foreigners. The professionals must be engaged in risk management, sales, marketing activities, etc.
Products Covered by GTP
The GTP covers income generated from the following products and commodities:
Machinery Components
Agricultural Commodities
Minerals
Petroleum and Petroleum Products
Carbon Credits
Electronic and Electrical Products
Building and Industrial Products
Consumer Products
Industrial Products
This list is not conclusive and is updated by IE Singapore from time to time.
Additionally, IE Singapore has stated that the following physical trades will qualify for the GTP:
Trans-Shipment Trade;
Offshore Trade; and
Re-Export Trade.
You can find additional details of the scheme here.
Conclusion
The Mergers & Acquisitions scheme is an attractive incentive for companies who wish to expand through acquisitions. The M&A scheme along with the other tax schemes available in the country makes Singapore a very attractive place for companies to set up their business. To understand how your company can avail the benefits of this scheme, it is best to engage a corporate services provider who can explain the exact requirements and tax deductions, relief, etc that this scheme offers.
