Taxation of shipping operators in Singapore
A shipping operator who operates Singapore ships or foreign ships can enjoy exemption of specified income as a ‘shipping enterprise’ under Section 13A of the SITA.
Section 13A of the Singapore Income Tax Act
The specified income to which the exemption applies:
(i) For a Singapore-flagged vessel, income from:
(a) The carriage of passengers, mail, livestock or goods outside the limits of the port of Singapore.
(b) Towing or salvage operations outside the limits of the port of Singapore, or
(c) The charter of the ship for use outside the limits of the port of Singapore, or
(d) From the year of assessment 2007 onwards, the use outside the limits of the port of Singapore of the ship as a dredger, seismic ship or vessel used for offshore oil or gas activity.
(ii) For a foreign ship, income from the carriage of passengers, mail, livestock or goods shipped in Singapore, except where such carriage arise solely from transshipment from Singapore, or is only within the limits of the port of Singapore.
If the conditions for the above are satisfied the exemption applies automatically on due claim basis in the tax submission.
Approved International Shopping Enterprise (AIS) scheme: Section 13F of the SITA
International ship operators can apply for exemption under the AIS scheme if they operate foreign flagged vessels.
The AIS scheme is administered by the Maritime and Port Authority of Singapore (MPA). An application is made to the MPA for approval to qualify for the AIS scheme which is granted on a 10-year renewable period; or on a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period.
The scheme hopes to attract international shipping companies with a strong track record and international connections to expand their operations from Singapore.
The following activities are exempt under this scheme:
(i) The carriage of passengers, mail, livestock or goods from outside Singapore port limits by any foreign ship.
(ii) The charter of any foreign ship to a non-resident of Singapore, or to another AIS, for the carriage of passengers, mail, or livestock or goods outside Singapore port limits.
(iii) The carriage of passengers, mail, livestock or goods by a foreign ship to Singapore solely for the purpose of transshipment.
(iv) The operation or charter of an approved floating production storage offloading ship or an approved floating storage offloading ship.
(v) The towing or salvage operations carried out by any foreign ship outside Singapore port limits.
(vi) The charter of any foreign ship to any person for towage and salvage operations conducted outside Singapore port limits.
(vii) The charter of any foreign dredger, foreign seismic ship, or any foreign vessel used for offshore oil or gas activity to any person where such vessels are used outside Singapore port limits.
(viii) Foreign exchange and risk management activities which are carried out in connection with and incidental to qualifying activities.
(ix) The provisions of ship management services to a qualifying company in respect of ships owned or operated by the qualifying company.
To qualify for the AIS scheme, a shipping operator must:
- Be a Singapore resident company.
- Be a significant ship-owner and fleet operator of foreign ships.
- Have a direct attributable business spending of at least S$4 million a year in Singapore, and
- Have at least 10% of its fleet (or a minimum of one ship) registered in Singapore.
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