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Singapore

Mei Mei Deng Cody Belton Lindsey Gudger Amy Loeffler

ACCT 425 6380

Why Singapore?

Economic Freedom

One of the top 6 least corrupt nations in the world

Brief Overview

The Republic of Singapore: Both a city and a state

Made up of one main island surrounded by more than 60 islets, located in South East Asia

Near the equator, tropical weather attracts thousands of visitors annually

Around 281 square miles with nearly 6 million populations

Enforced free trade policy since 1819

Ranks 1st on the 2020 Index of Economic Freedom

One of the most successful economies without having significant natural resources

2019 Per-capita GDP was US$65,233.88, one of the highest per-capita GDPs in the world

Well-developed education and health care system

One of the few countries without corruption scandals in the world

High purchasing power

Higher life expectancy

Culture

A multi-cultural country, made-up of 15% Malay, 76% Chinese, and 10% Indian

Majority religion – Buddhism

Official Languages- Malay, English, Mandarin, Tamil

Challenges for MNCs

Strict laws, harsh punishment, and cultural or religious belief

Beliefs

Value culture, harmony, family, loyalty, and authority

Expect the same from international business partners

History and Social Issues

Encourage racial harmony but strict regulation of speech

Close relationship with both the U.S. and China and affected by US-China tensions

Overpopulation, aging, heavily rely on foreign domestic workers

Political Factors

Singapore is a parliamentary representative democratic republic with a multi-party system consisting mostly of two main parties:

People’s Action Party (PAP)

Workers’ Party of Singapore (WP)

Since receiving its independence in 1965, Singapore has been run mostly by the PAP.

The current administration is very restrictive when it comes to freedom of the press and therefore has a very poor ranking in this category. (Ranked 158 of 180)

The lack of freedom of the press also results in a midgrade indicator of political freedom rating for the country. (Rating of 4/7)

Economic Factors

Singapore’s Economy is highly dependent on international trade.

Main sectors of Industry include:

Electronics, petrochemicals, trade, finance, and business services.

The largest portion of GDP is derived from services related to the Port of Singapore

	Agriculture	Industry	Services
% of Employment	.7	15.2	84.1
% of GDP	0	24.5	70.4

Economic Freedom Score = 89.4 out of 100 which makes Singapore the most economically free country in the world.

Business Environment Ranking Score = 8.65 which makes Singapore the number one place in the world to do business in.

Legal Implications

Singapore operates under a common law system

Many laws having to do with employment and goods and services are very similar to those practiced in the U.S.

Two Acts that were established to regulate employment within the country are the Employment Act and the Retirement and Re-Employment Act.

These acts cover all employees except for public servants, domestic workers, and seafarers.

Legal Implications Cont.

Imported items such as liquor, tobacco, vehicles, petroleum products, and biodiesel blends are all subject to excise duties.

All imported goods are subject to a 7% goods & services tax.

Patents are protected for up to 20 years through the Patent Act.

Trademarks are protected through common law

Ecommerce transactions are governed by the Electronic Transactions Act

All advertising is regulated by the Advertising Standards Authority of Singapore

The Personal Data Protection Act 2012 only allows for an individual’s personal data to be used with their consent and organizations that wish to use the data must make it very clear as to what the data will be used for.

Product safety and liability is governed by a multitude of Act’s including:

Sale of Goods Act, Supply of Goods Act, Unfair Contract Terms Act, Consumer Protection Act, Sale of Food Act, Medicines Act, Health Products Act, Consumer Protection Regulations, and Wholesome Meat and Fish Rules

Singapore’s Accounting History and Relationship with IFRS

1977

Singapore professional accounting bodies begin to endorse IAS (Saudagaran & Diga, 2002)

2002

The Council on Corporate Disclosure and Governance (CCDG) is established (IAS, n.d.)

The CCDG becomes the accounting standard setting body for Singapore (IAS, n.d.)

2004

The Accounting and Corporate Regulatory Authority (ACRA) is created

ACRA is responsible for enforcing compliance of SFRS for companies (IAS, n.d.)

2007

The CCDG is replaced by the Accounting Standards Council (ASC) (IAS, n.d.)

The ASC is now responsible for establishing SFRS

2008

SFRS released by the ASC are nearly “identical” (IAS, n.d.) to IFRS, except for in areas of PPE, leases, and consolidated financial statements

2018 – present

Singapore listed companies have been provided a new framework of financial standards that fully converge with IFRS

The ASC has continued to prioritize the convergence of SFRS and IFRS

Singapore’s Accounting Environment

What are Singapore’s reporting standards and who are standards enforced by ?

Singapore Financial Reporting Standards (SFRS) are used to prepare financial statements

Financial statements in Singapore are prepared with accrual-based accounting (Hawksford, n.d.)

For small businesses, Singapore has provided SFRS for Small entities

ACRA is responsible for public accountant, corporate service, and public entity regulation

The Commissioner of Charities and Registrar of Co-operative societies enforce accounting standards for charities and co-operative societies, respectively

How has Singapore’s accounting environment shifted recently?

The role of the government in Singapore’s accounting has grown in the last two decades through ACRA

As of January 2021, the Singapore Exchange regulation announced that auditing standards will be stricter, this is due to growing numbers of accounting scandals (Reuters, 2021)

For example, in 2020 Hin Leong, a Singapore oil trading company, was found to have overstated 2.23 billion in accounts receivables and to have hidden million in losses (Jaganathan & Daga, 2020)

Audit opinions in Singapore must now be issued by an accountant or entity that has been approved by ACRA

Singapore’s Currency

Photo Source: Bloomberg

Singapore’s currency is the Singapore dollar

The Monetary Authority of Singapore (MAS) is the country’s central bank and issues Singapore’s currency (MAS, n.d.)

In early 2020, the MAS placed Singapore’s exchange rate band on a zero percent annual appreciation rate to protect the country from a recession (Brock & Geddie, 2020)

Singapore uses exchange rate settings instead of interest rates as its primary “monetary policy tool” (Lee, 2020)

Singapore Foreign Currency Reporting

Historically, Singapore SFRS 21 has provided guidance for Singapore entities that are reporting foreign currencies and exchange rates

Foreign currency reporting is essential for Singapore’s multinational corporations

For example, Singapore’s Wilmar International Limited is a global agribusiness group that is listed on the Singapore Exchange

Wilmar International Limited has subsidiaries in Australia and Africa that require the application of foreign exchange rate reporting standards

Due to IFRS now being required for Singapore’s domestic public companies, IAS 21 currently provides guidance for Singapore’s reporting of foreign exchange rates (IFRS, n.d.)

Singapore Taxation

Taxpayer Base Compliance

Singapore Belief about Taxpayers

Willing to comply but require assistance

Voluntary compliant

Assist and Serve (e-services, No-Filing services, Auto-Inclusion Scheme, Frontline services, Website information)

Unaware

Educate and Prevent (SMS reminders, Industry engagements, Public communications)

Negligent

Detect and Reform (Audits, Voluntary Disclosure Programmed)

Errant

Penalize and Deter ( Penalties, Enforcement, Investigations, Prosecutions)

Downward pressure of societal norms to comply

Types of Taxes

Common types of taxes	Detailed
Corporate income tax	Singapore levies taxes on profits and not on revenue. Profits of your Singapore company will be taxed at 17%.
Individual income tax	Singapore tax residents are taxed at a progressive rate of 0% to 22%. Non-tax residents are taxed at a rate that varies between 15% to 22%.
Goods and Services tax	The Singapore government levies a 7% goods and services tax on general consumption and imported goods.
Withholding tax	In order to collect taxes on income earned by non-residents, Singapore levies withholding tax.
Customs and Excise Duty	Singapore is essentially a duty-free port. Singapore does not tax exports and import duty is levied only on petroleum products, tobacco products, motor vehicles, and liquor.
Property tax	Real estate owners in Singapore are required to pay annual property taxes. Singapore property tax rates are considered very low especially for owner-occupied property.
Stamp Duty	Stamp duty refers to the tax paid on the transfer of real estate property and company shares.

Domestic notional cash pools are widely available for single and multiple entities, as long as they share a common beneficial ownership.

Cross-guarantees may be required by banks to allow them to offset balances.

Resident and non-resident bank accounts can participate in the same domestic notional cash pool structure.

Domestic notional cash pools are available in SGD and USD-denominated accounts.

Withholding tax may be applied on interest payments to non-resident entities which do not participate in an Approved Finance and Treasury Unit.

Transfer Pricing Documentation

Purpose of Preparing and Maintaining Transfer Pricing Documentation

Taxpayers should prepare and keep contemporaneous transfer pricing documentation.

Transfer pricing documentation refers to the records kept by taxpayers to show that their related party transactions are conducted at arm's length.

The preparation and maintenance of transfer pricing documentation will facilitate reviews by tax authorities and therefore help resolve any transfer pricing issues that may arise.

Cash management processes

Transfer pricing

Conclusion

By researching Singapore, all members of our team like this country:

Singapore's highly liberalized free trade makes it easier, faster, cheaper and more transparent for any enterprise to conduct business.

Singapore's multi-cultural and multi-language provide a rare partner for any company in its development.

Singapore's legal structure provides more protection basis for trademarks, business transactions, and copyright protection.

Singapore's exchange rate setting and foreign currency reporting are of vital importance to multinational companies in Singapore.

Finally, Singapore’s cuisine is known for its quality and diversity. This city is also home to the cheapest Michelin star restaurant in the world.

References:

(n.d.). About Singapore. Singapore Expats. Retrieved from https://www.singaporeexpats.com/about-singapore/about-singapore.htm

Rodgers, G. (January 11, 2021). Where Is Singapore ? Tripsavvy. Retrieved from https://www.tripsavvy.com/where-is-singapore-1458491

Statista Research Department. (December 01, 2020). Country ranking of the 2020 Index of Economic Freedom. Statista. Retrieved from https://www.statista.com/statistics/256965/worldwide-index-of-economic-freedom/

Young, A. (August 28, 2020). Singapore’s Fears about US-China Relations, and Three Wishes. Providence. Retrieved from https://providencemag.com/2020/08/singapore-fears-us-china-relations-three-wishes/

Finnerty, D. (2020, May 24). Singapore Dollar Looks Vulnerable as Economy Opens Up. Bloomberg. https://www.bloomberg.com/news/articles/2020-05-24/singapore-dollar-looks-vulnerable-even-as-economy-opens-up

Hawksford. (n.d.). Singapore Accounting Standards. Guide Me Singapore. https://www.guidemesingapore.com/business-guides/taxation-and-accounting/accounting-standards/singapore-accounting-standards

Brock, J, & Brock, J. (2020, March 30). Singapore Eases Monetary Policy Sharply as Virus Heralds Deep Recession. Reuters. https://www.reuters.com/article/us-singapore-cenbank/singapore-eases-monetary-policy-sharply-as-virus-heralds-deep-recession-idUSKBN21H0HF

IAS Plus. (n.d.) Singapore. https://www.iasplus.com/en/jurisdictions/asia/singapore

IFRS. (n.d.). Singapore. https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/singapore/

Jaganathan, J, & Daga, A. (2020, June 23). RPT-Oil trader Hin Leong has no future as an independent company-PwC.

https://www.reuters.com/article/singapore-oil-hinleong/rpt-oil-trader-hin-leong-has-no-future-as-an-independent-company-pwc-idUSL4N2E108J

References:

Monetary Authority of Singapore. (n.d.). What We Do. https://www.mas.gov.sg/who-we-are/What-We-Do

Lee, Y. (2020 July 16). Singapore’s Economic Situation is ‘dire’ as Global Coronavirus Resurgence Looms, Central Bank Says. CNBC. https://www.cnbc.com/2020/07/16/singapore-economy-still-dire-amid-global-resurgence-in-coronavirus-mas-says.html

Reuters. (2021 January 11). Update 1 – Singapore Exchange Tightens Audit for Firms After Market Criticism. https://www.reuters.com/article/sgx-regulations/update-1-singapore-exchange-tightens-audit-rules-for-listed-firms-after-market-criticism-idUSL1N2JN01S

Saudagaran, S. M., & Diga, J. G. (1997). Accounting Regulation in ASEAN: A Choice between the Global and Regional Paradigms of Harmonization. Journal of International Financial Management & Accounting, 8(1), 1–32. https://doi-org.ezproxy.umgc.edu/10.1111/1467-646x.00015

Corporate Services. (2019). Singapore tax rates and tax system. https://www.corporateservices.com/singapore/singapore-tax-system/#types

Inland Revenue Authority of Singapore. (2021). Encouraging Tax Compliance. https://www.iras.gov.sg/irashome/About-Us/Taxes-in-Singapore/Encouraging-Tax-Compliance/

BNP Paribas. (2020). Singapore Cash Management. https://cashmanagement.bnpparibas.com/currency/singapore

IRAS. (2020). Introduction to Transfer Pricing. https://www.iras.gov.sg/irashome/Businesses/Companies/Working-out-Corporate-Income-Taxes/Specific-topics/Transfer-Pricing/Introduction-to-Transfer-Pricing/

Santander. (February 2021). Singapore: Economic and political outline. Retrieved from https://santandertrade.com/en/portal/analyse-markets/singapore/economic-political-outline

Chye, L., Teo, J., and Zenglin, S. (2021). Doing business in Singapore: Overview. Retrieved from https://uk.practicallaw.thomsonreuters.com/4-524-0309?transitionType=Default&contextData=(sc.Default)&firstPage=true

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