Singapore-Australia Free Trade Agreement (SAFTA) - a business guide
Chapter 6: Investment
Foreign investment has traditionally been welcomed in Singapore and has accounted for a significant share of total investment in the economy. Reflecting the important contribution of foreign investment to the development of the economy, in most sectors there are no restrictions on inward foreign investment. The only formal restrictions on foreign investment are found in broadcasting, the domestic news media, retail banking, legal and other professional services, multi-level marketing, and property ownership. In addition, under Singapore law, corporate Articles of Incorporation may include shareholding limits that restrict ownership by foreign persons. Some, but not many, companies include such shareholding restrictions.
Foreign investors are not required to enter into joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (financial and telecom services), the Singapore Government examines investment proposals only to determine eligibility for various incentive regimes.
The Singapore Government offers a wide range of tax and non-tax incentives to companies and individuals choosing to invest in Singapore. Investment incentives are provided mainly by the Economic Development Board (EDB), and include corporate tax holidays; concessional tax rates; exemption of taxable income of specified proportions on new fixed investment; and a concessional tax rate for operational headquarters on income arising from approved services. Singapore’s tax rates for corporations, for example, are set at a maximum of 22 per cent. The Monetary Authority of Singapore (MAS) also offers concessionary tax incentives for financial institutions looking to set up operations in Singapore.
See guide to Singapore’s tax system.
Singapore places no restrictions on reinvestment or repatriation of earnings or capital.
Under SAFTA, Australian investors and investments are treated on the same terms as Singapore businesses (national treatment), including in relation to the establishment, acquisition, expansion, management, conduct, operation, liquidation, sale, transfer and expropriation of investments. The exceptions to this rule (‘negative listing’) are listed in Annexes 4-I (A) and 4-II (A) of SAFTA, and are summarised in Annex I of this guide.
SAFTA contains strong investor protection provisions in relation to expropriation and the right to receive fair market value for property in the event of an expropriation. Australian investors have the right to challenge any measures by Singapore which violate SAFTA investment rules. SAFTA provides a more certain environment for Australian investors, and puts them on a level playing field with local competitors.
SAFTA also offers greater transparency in relation to investment restrictions in Singapore’s government-linked companies. For example, individual investors are subject to equity ownership limits in the following enterprises:
- Singapore Technologies Engineering – 15 per cent
- Port of Singapore Authority (PSA) Corporation – 5 per cent, while aggregate foreign shareholdings are limited to 49 per cent
- Singapore Airlines – 5 per cent
- Singapore Power, Power Grid, Power Supply, Power Gas – 10 per cent
Table of contents - Singapore-Australia Free Trade Agreement (SAFTA) - a business guide