Growing “High-Trust” Services

We will also develop Singapore as a centre for a range of “high-trust” services - from legal and financial services to highly specialised, niche services. Near Changi Airport, a company has set up the Singapore Freeport, a Fort Knox-like vault to house private art collections and treasures from all over the world. It is an example of a niche area that plays to Singapore’s strengths.

Legal Services

In legal services, we will position Singapore as a trusted centre for high-end arbitration work. We have the key ingredients in place to do so - efficiency, reliability and neutrality. We also have plans for an integrated dispute resolution complex. We will complement these efforts by introducing a tax incentive that allows a 50% tax exemption for a law firm’s incremental qualifying income for international arbitration activities.

Financial Services

The financial sector is a key pillar of our economy. The asset management industry has seen double-digit growth each year over the past five years. Singapore’s Over-The-Counter (OTC) derivative market has also doubled in size since 2004 to US$37 billion in daily volumes, building on our role as the fourth-largest foreign exchange trading centre in the world. Many more finance professionals are locating themselves in Singapore.

We are also growing new niches in our financial sector. Singapore is increasingly serving as a bridge between the Middle East and Asia. More Middle Eastern banks are setting up in Singapore. We are also seeing double-digit growth in funds coming here from the Middle East, for investment in Asian capital markets and real estate. Banks in Singapore are structuring various new products, including Islamic financial products such as murabaha investment products and Shariah-compliant mutual funds to meet the needs of this new class of global investors. These opportunities can only grow.

We will keep refining our schemes to anchor more activities here and keep up the momentum of growth in our financial centre. We introduced a package of tax incentives to promote infrastructure finance in September last year. We will make other revisions in this Budget to ensure our tax rules and incentives remain relevant and competitive.

First, I will remove the “80:20” rule under our tax exemption scheme for non-resident funds. This will give certainty of tax exemption to foreign investors whose funds are managed in Singapore, and also provide fund managers based in Singapore with greater flexibility in sourcing for mandates from investors. The list of designated investments will also now include qualifying loans. Details of these changes will be released later.

I will also enhance our tax incentives relating to Finance and Treasury Centres, OTC financial derivatives, and Qualifying Debt Securities. Details are in Annex A.