Singapore Free Trade Zones: All You Need To Know

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Free-trade zones in Singapore are special economic areas that offer beneficial customs and tax treatment to firms that operate within them. In this guide, we will discuss what are free-trade zone in Singapore, how they are regulated, what are their advantages, and which permits or licenses your company requires to operate within free-trade zones in Singapore.
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What Are Free-Trade Zones in Singapore?

Singapore is known around the world as a trade-focused country with pro-business free trade regulations that form the core of its international trade policy. Singapore’s free-trade agreements, investment guarantee agreements, and more than 80 Double Tax Treaties, or Double Taxation Avoidance Agreements (DTAAs), including the India-Singapore DTAA) and the Spain-Singapore DTAA, allow smooth trade with nearly every country in the world.

Another advantage that Singapore offers to international trade firms is its free-trade zones (FTZs). FTZs in Singapore were first established in 1969 to support the country’s aim of being a centre for entrepot trading and transhipment activities. Since then, their objectives have expanded. FTZs in Singapore are designated areas where the payment of duties and taxes is suspended when goods arrive, are stored, or sold within the FTZ.

FTZs in Singapore: Key Advantages

To facilitate entrepot trade and transshipment of overseas goods, companies operating in these areas enjoy the following Singapore free trade zone benefits.

No Import Permit Is Needed in FTZs in Singapore

As a general rule, before the actual import of goods, an importer is required to obtain a customs permit. But when the importation is into fair-trade zones in Singapore, this document is not required.

No Customs Duties on Goods Imported into FTZs

As a general rule, Singapore law considers certain categories of goods as dutiable. This means that when imported into Singapore, they’re subject to customs duty on ad valorem or specific rates. There are four basic categories of dutiable goods: intoxicating liquors, tobacco products, motor vehicles, petroleum products and biodiesel blends.

However, if such goods are imported into a free-trade zone in Singapore, they’re considered as goods under the Singapore customs control and are therefore not subject to customs duties.

No Goods and Services Tax on Imports

As a general rule, all goods brought into Singapore (other than exempt imports) are subject to Singapore’s consumption tax — the goods and services tax (GST), also known as alue-dded tax (VAT) — at the prevailing rate of 7% on the value of goods. Import GST is payable regardless of whether the importer is GST-registered.

If goods are imported and stored in a free-trade zone in Singapore, import GST is suspended. In other words, no GST is payable. Additionally, goods in FTZs in Singapore may be supplied (i.e., bought and sold) many times before they’re removed.

Exemptions

Duty and import GST are payable only when goods are consumed within the FTZ in Singapore, or leave the FTZ and enter into Singapore’s customs territory for local sales or domestic consumption.

In such cases, you are required to take up an import permit with free trade zone Singapore Customs and pay import GST or import duty on overseas goods used or consumed within an FTZ or imported into free trade zone Singapore customs territory. However, when moving goods directly from one free-trade zone in Singapore to another, import GST and duty are not payable, and an import permit is not required.

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Existing Free-Trade Zones in Singapore

Currently, there are nine Singapore free trade zones:

  • Airport Logistics Park of Singapore
  • Brani Terminal
  • Changi Airport Cargo Terminal Complex
  • Jurong Port (including Pulau Damar Laut)
  • Keppel Distripark
  • Keppel Distripark Linkbridge
  • Pasir Panjang Terminal
  • Sembawang Wharves
  • Tanjong Pagar Terminal and Keppel Terminal

Singapore Free Trade Zones Regulations

Singapore’s main legislation on FTZs in Singapore is embodied in the Singapore Free Trade Zones Act, which came into effect in 1966 and was last amended in 2014.

The Singapore Free Trade Zones Act outlines:

  • The authorities in charge of verifying the activities of companies operating in the free-trade zones in Singapore, namely the Free Zone Advisory Committee, the Director of the Singapore Customs, and the Ministry for Trade and Industry
  • Activities that may be undertaken by free trade zone companies in Singapore
  • Types of licenses and permits required to manufacture and sell goods in the free zones
  • Penalties for not respecting regulations imposed by the free zone authorities

Additional ancillary FTZ legislation includes:

Permits and Licenses Required for Operating in FTZs Singapore

To operate in one of free trade zones Singapore, companies must obtain a permit or license from one of three authorities responsible for administering the relevant FTZ. They are as follows:

  1. PSA Corporation Limited administers the following free-trade zones in Singapore:
    • Tanjong Pagar Terminal and Keppel Terminal
    • Sembawang Wharves
    • Brani Terminal
    • Keppel Distripark
    • Keppel Distripark Linkbridge
    • Pasir Panjang Terminal
  1. Jurong Port Pte Ltd is the authority appointed to operate:
    • Jurong Port (including Pulau Damar Laut)
  1. Changi Airport Group (Singapore) Pte Ltd is responsible for:
    • Changi Airport Cargo Terminal Complex
    • Airport Logistics Park of Singapore

Two basic types of permits or licenses are needed to operate in FTZs in Singapore. The first is available to corporate users, while the second is issued to individuals and has a short temporary validity. To apply for a permit, one must agree to abide by the permit conditions, safety regulations, and security rules imposed by the relevant agency.

A temporary permit can be issued with validity from 24 hours to 2 weeks. Corporate permits are usually valid for one to three years and are subject to various fees. It typically takes no more than four days for an authority to issue either of the two types of permits.

If you plan to apply for the FTZ permit or have questions regarding free-trade zones in Singapore, contact CorporateServices.com. We can provide guidance and help you with these tasks.

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Requirements for Starting a Business in a Free Trade Zone in Singapore

Companies using an FTZ must have a paid up share capital of S$100,000 if they require a Singapore free trade zone warehouse. Those who require only an office space, on the other hand,  need a paid up share capital of S$50,000. The paid up share capital must be deposited during the company’s first year of operations, but the company is allowed to use this capital for business expenses.

Read our comprehensive guide on how to get your company registered in Singapore in 5 easy steps.

Which Singapore FTZ is Right for You?

Each of Singapore’s nine free trade zones offers different opportunities and charges different fees. It’s best to carefully explore which is the right FTZ for your business. Contact CorporateServices.com for customer support in making a decision. However, two of the best-known and more popular Singapore FTZs are the following:

Conclusion

Free-trade zones in Singaore are salient components of the infrastructure that undergirds Singapore’s status as a pro-business country, with efficient and low-tax trade regulations that bolster its international trade. Companies operating in FTZs in Singapore enjoy streamlined customs procedures (such as the suspension of duties and goods and services tax, and no customs duty) as long as products are thereafter exported and not sold locally within Singapore.

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How Can We Help?

All Singapore free zones fall under the Singapore Free Trade Zones Act. Both local and foreign companies must comply with this law. Under the act, companies wishing to operate in FTZs in Singapore are required to obtain the necessary permits from the relevant free-rade zone authorities.  If you’re interested in running your operations in one of Singapore’s FTZs and you’re interested in personalized guidance on how to take advantage of free-trade zones in Singapore to grow company revenue while taking advantage of attractive tax benefits, or need assistance in obtaining the relevant permit or wish to start a new company in Singapore, connect with our team today.
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