Singapore Regulatory Update: December 2023

Vadim Krasovskiy Business News, Corporate Compliance, Monthly Newsletter, Taxation

Singapore remains a lively hub for businesses, attracting entrepreneurs worldwide with its favorable business environment. In December 2023, about 4,000 new companies were formed, showcasing ongoing interest in Singapore’s business landscape. The city-state continues to refine its rules to ensure a strong and secure economy. Below is our monthly recap of recent regulatory changes, including new tax rules, steps taken against financial scams, and collaborations with countries.

ACRA to Implement Penalties for Corporate Service Providers and Restrictions on Directors Next Year

The Accounting and Corporate Regulatory Authority (ACRA) is set to introduce significant changes aimed at reinforcing Singapore’s Anti-Money Laundering (AML) framework. Second Minister for National Development Indranee Rajah revealed that several proposals would be presented to Parliament in early 2024 as part of this initiative.

Among these measures, ACRA intends to increase penalties for non-compliant Corporate Service Providers (CSPs) and introduce constraints on directorships. These restrictions include capping the number of nominee directorships an individual can hold. Presently, there are no limitations on the number of companies a director can be involved with, adhering to international benchmarks.

The impending legislation also requires nominee directors and shareholders to disclose their status and nominators to ACRA, ensuring greater transparency. These amendments extend to the Accounting and Corporate Regulatory Authority Act 2004 and the Companies Act of 1967, emphasizing the enforcement of Anti-Money Laundering policies by CSPs.

Singapore Implements Taxation on Gains from Sale or Disposal of Overseas Assets

Starting January 1, 2024, Singapore will implement section 10L of the Income Tax Act 1947 (ITA). This new legislation will result in a significant change as, until now, capital gains from the sale of foreign assets received in Singapore were not subjected to Singapore income tax.

Under the newly introduced section 10L, Singapore will levy taxes on capital gains accrued in Singapore from the sale or disposal of foreign assets in specific circumstances. Nevertheless, some entities will be exempt from the scope of section 10L. Notably, entities demonstrating “adequate economic substance” in Singapore and conducting operations managed and executed within Singapore will fall outside this taxation scope.

An area of particular interest revolves around how the Inland Revenue Authority of Singapore (IRAS) will interpret and enforce the “adequate economic substance” requirement (Economic Substance Requirement). To provide clarity on these changes, IRAS published an e-Tax Guide titled “Income Tax: Tax Treatment of Gains or Losses from the Sale of Foreign Assets”. This guide summarizes the alterations and outlines the specifics of the new regulations.

Singapore Authorities Warn of Scammers Posing as MAS Officers

The Singapore Police Force (SPF) and Monetary Authority of Singapore (MAS) have alerted the public about a scam involving imposters posing as MAS representatives. Victims, numbering at least 41 since January 2023, faced significant financial losses amounting to at least S$2.6 million.

In this scam scammers impersonate bank officers, querying victims about purported transactions and subsequently transfer the call to a fake MAS officer. Victims are accused of illicit activities and coerced into transferring money to specified accounts or revealing sensitive banking information. MAS and SPF emphasize that they never request money transfers or account control. They caution against sharing banking details without initiating transactions.

Precautionary measures advised by MAS and SPF include using the ScamShield App, remaining vigilant for scam signs, reporting suspicious activities promptly, and utilizing bank-provided security features to prevent unauthorized transactions.

Singapore and Malaysia to Sign MOU for Johor-Singapore Special Economic Zone

Singapore and Malaysia are partnering to establish a Special Economic Zone (SEZ) in Malaysia’s Johor state, adjacent to the Singaporean border. The joint initiative aims to strengthen business connections and enhance connectivity between the two nations amidst a global economic slowdown. 

A feasibility study is currently underway to define the SEZ’s focus, assess investor interest, and gauge market demand. The Johor-Singapore SEZ is envisioned to incorporate specialized tax arrangements and other measures that facilitate smoother movement of goods across the borders, offering potential economic benefits for both nations. Additionally, both nations are exploring renewable energy collaborations, including electricity trading and sharing technologies to promote low-carbon energy solutions, aligning with sustainability goals.

The upcoming signing of a Memorandum of Understanding (MoU) scheduled for January 11, 2024, marks a significant milestone. This follows the 10th Singapore-Malaysia Leaders’ Retreat held in late October, where leaders discussed leveraging bilateral relations for mutual economic growth. The SEZ aims to optimize the Iskandar region’s (formerly Iskandar Development Region and South Johor Economic Region) potential, boosting sectors like electronics, healthcare, finance, and business services.

Enterprise Singapore Launches San Francisco Overseas Centre for Tech Collaboration

Enterprise Singapore has recently opened its San Francisco Overseas Centre (SFOC), marking the organization’s third office in the United States. The SFOC, situated in a leading global startup hub, aims to facilitate Singapore companies’ market entry into the US and bolster bilateral trade and investments. This new center supplements EnterpriseSG’s existing offices in New York and Los Angeles.

The opening ceremony was graced by Singapore Prime Minister Mr. Lee Hsien Loong and attended by Mr. Lee Chuan Teck, Chief Executive Officer of EnterpriseSG. Notable attendees included Ms. Eleni Kounalakis, Lieutenant Governor of California, and Mr. Charles Freeman, Senior Vice President of Asia at the US Chamber of Commerce. Around 50 business leaders from both Singapore and the US, along with senior US government officials, academic institutions, research bodies, and members from the startup ecosystem, were present at the event.

Mr. Lee Chuan Teck emphasized, “The US and Singapore share robust economic ties. Our new office in San Francisco aims to further strengthen these ties and enable Singaporean businesses to tap into the vibrant innovation ecosystem of the Bay area.

Singapore and China Strengthen Digital Finance and Capital Markets Cooperation

Singapore’s Monetary Authority (MAS) recently announced initiatives aimed at strengthening financial collaboration with China during the 19th Joint Council for Bilateral Cooperation (JCBC) in Tianjin. 

One significant initiative involves the introduction of a Cross-border E-CNY Pilot. This pilot project, a result of an MOU between MAS and China’s Digital Currency Institute, allows travelers from both countries to utilize e-CNY, or digital yuan, for spending during their visits, simplifying transactions for tourists in Singapore and China.

Additionally, the Singapore Exchange (SGX) and Shanghai Stock Exchange (SSE) launched an  Exchange-Traded Fund (ETF) Product Link, following a successful venture with the Shenzhen Stock Exchange. This collaboration enables ETF product exchanges between SGX and SSE, offering new investment opportunities and fostering closer relations between fund managers in both markets.

Moreover, SGX and Guangzhou Futures Exchange (GFEX) signed an MOU to strengthen collaboration through information exchange, mutual visits, and joint research on green development, affirming their commitment to environmentally sustainable financial practices.

Efforts also continue under the China-Singapore Green Finance Task Force (GFTF) to deepen cooperation in green and transition finance, including establishing a green corridor for financing products, underscoring a shared commitment to sustainable finance practices.

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