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HANSA 02-2017

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Finanzierung | Financing

Finanzierung | Financing Singapore flag lures with taxes Singapore wants to maintain its status as maritime hub. Ship owners grow presence with city-state’s competitive taxes, reports Zeng Xiaolin HANSA series on global maritime hubs More than a decade after Singapore began its push as an international maritime centre, the city-state continues to attract ship owners and operators, dangling both tax incentives and a well-established maritime ecosystem. In October 2003, the Maritime and Port Authority of Singapore was appointed to develop Singapore into a shipping hub. Since then, more than 130 international shipping groups have opened in Singapore, forming a cluster that employs more than 170,000 people and contributes 7% to GDP. Under Singapore’s Maritime Sector Incentive-Approved International Shipping Enterprise scheme, companies enjoy full tax exemption on qualifying income from international shipping operations, with a maximum tenure of 40 years. In addition, even for companies that are not accorded this scheme, charter income derived from Singapore-flagged ships is also tax-exempt. Due to this, the Singapore flag registry is one of the largest in the world. The amount of Singapore-flagged tonnage climbed to 86.3 mill. gt in 2015, from 82.2 mill. gt in 2014 Singapore’s tax incentives came under the spotlight in 2010, when amid the mining boom, the Australian Tax Offce reviewed the Singapore operations of BHP Billiton and Rio Tinto. In July 2010, when the government of then premier Kevin Rudd imposed a rent tax on the country’s mining companies, BHP Billiton incorporated BHP Billiton Freight Singapore. The latter was accorded the Maritime Sector Incentive-Approved International Shipping Enterprise for 10 years by the MPA. This meant that BHP Billiton Freight Singapore paid zero taxes until 2021. From 2013 to 2014, BHP Billiton Freight Singapore reported 81 mill. $ in tax-free profits. Similarly, until 2022, Rio Tinto Shipping Asia will pay zero tax on earnings. In May 2014, Rio Tinto reflagged all its 17 bulk carriers from the UK to Singapore, transferring the registered ownership of the vessels from Rio Tinto Plc to Rio Tinto Shipping Asia. Besides the tax breaks, being Singapore-flagged also made the vessels easier to manage, as under the UK flag register, the vessels were obliged to have British superintendents. Maritime accountancy firm Moore Stephens’ associate director (taxation services) Law Pei Serh told HANSA that Singapore takes a relatively liberal approach where locally registered and foreign registered vessels can generally be covered by its beneficial tax regime. She explained: »Compared to certain countries having a more restrictive approach, in Singapore, there are less detailed requirements in terms of type of vessels and specific offshore shipping activities that are covered by the incentives.« Besides ship owner-operators, there is also an MSI-ML Award, which encourages the growth and development of ship and container financing in Singapore. It is hoped that through this scheme, leasing companies will use Singapore as their capital and funding base to finance their vessels and shipping containers. Eligible companies, such as ship or container leasing companies and shipping trusts, will receive a tax exemption (or concessionary tax Singapore is well known as one of the biggest maritime hubs in the world 22 HANSA International Maritime Journal – 154. Jahrgang – 2017 – Nr. 2

Finanzierung | Financing rate of between 5% and 10%) on leasing income derived from the relevant asset, depending on the entity’s operational track record, whether the entity has a demonstrable business plan and whether it displays a commitment to expanding its shipping and container financing in Singapore. However, Singapore Shipping Association president Esben Poulsson told HANSA that while Singapore’s tax regime is attractive, it is not the only factor in Maritime Singapore’s success. More than just taxes Poulsson said: »I think when you look at tax regimes applicable in most major international maritime centres, there is very little to choose from. So whilst Singapore’s tax regime is competitive, I do not think this in itself is what has attracted more than 130 international owners to come here.« He also serves as chairman of International Chamber of Shipping and Greek ship operator Enesel’s Singapore operations. Poulsson adds: »I believe the main attraction today is that ›Maritime Singapore‹ has achieved the scale of a true ›cluster‹, in the sense that we have major owners and charterers well established here – local and international – which in turn has brought with it, over the years, the ancillary services such as banking, ship and insurance broking, legal expertise and so on. None of this happened by accident: it was a strategic decision by the government to nurture this growth with the clear aim of building a major international maritime centre. Government-friendly policies, a superb infrastructure, connectivity, geographical location and so on are other clear attractions.« The AP Møller-Maersk group, which has been present in Singapore in the 1920s, attests to Poulsson’s comments. A group spokesman told HANSA that APM remains committed to the city-state despite shifting its Asian headquarters to Hong Kong in 2016. APM’s Singapore offce, which employs a staff of 700 people, continues to oversee operations in South East Asia. Maersk Line’s intra-Asia arm, MCC Transport, remains headquartered in Singapore. The spokesman said that AP Møller- Maersk has around 12 bn $ of investments in Singapore, with 140 ships and rigs under the Singapore flag. A number of other newbuildings will also be Singapore-flagged. However, the APM spokesman asserted that Singapore’s tax regime is not the only reason why the city-state is important to the group’s business. He said: »Singapore is important to Maersk for three reasons: competitiveness, stability and access to talent. Singapore’s competitiveness comes from having a framework for shipping and offshore activities which matches other competitive flags. Singapore’s ease of doing business as well as access to services such as ports, yards, research and development, all contribute to Singapore’s competitiveness. Secondly, the Singaporean government has executed a consistent, long-term and transparent shipping policy led by an effcient and competent maritime administration and supported by other governmental agencies. Importantly, Singapore has a strong rule of law and a firm anti-corruption policy. Finally, Singapore provides Maersk access to both a Singaporean and international talent base with a competitive and multi-cultural mindset.« Ship managers and brokers also qualify for the Maritime Sector Incentive-Shipping-related Support Services that is targeted at providers of shipping support services. While rising costs in Singapore have been a major concern in recent times, Moore Stephens’ Law pointed out that Singapore’s tax regime has been continually enhanced and refined over the years. Law said: »The existing shipping incentives are periodically reviewed based on the industry developments. These help to give some tax certainty to the shipping businesses which are in a cost-cutting environment. Apart from the tax regimes, MPA has also implemented various funding and other support schemes which may help to defray business costs and alleviate issues faced by the shipping industry players.« M Credit: Pixabay HANSA International Maritime Journal – 154. Jahrgang – 2017 – Nr. 2 23

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