Tag Archives: Bank Secrecy

Singapore – more tax benefits for both businesses and households

Finance Minister, Tharman Shanmugaratnam, delivered Singapore’s budget statement for the 2011/12 fiscal year on February 18, and announced tax benefits to households and businesses totalling some SGD 13bn (USD 10.2bn).

Shanmugaratnam said that the government’s long-term aim is to raise incomes by 30% in real terms over the next ten years by growing the economy, and helping businesses to invest, restructure and developing skills, while also introducing measures to expand support for lower and middle-income Singaporeans. He pointed out that Singapore’s economy had done exceptionally well in the past year. After two weak years in 2008 and 2009, when growth was close to zero, its gross domestic product (GDP) grew by a record 14.5% in 2010, and is forecast to grow by up to 6% this year. Due to the improved economic growth, the originally expected budget deficit of SGD 3.0bn, or 1% of GDP, in 2010/11, has been transformed into a much lower deficit of SGD 0.3bn, or only 0.1% of GDP.

Shanmugaratnam was therefore able to announce that, in 2011/12, companies will receive a 20% income tax rebate, capped at SGD 10,000, or a small and medium-sized enterprises (SME) cash grant of 5% of a company’s revenue, capped at SGD 5,000. Companies will automatically receive the higher of the tax rebate or the grant when Inland Revenue Authority of Singapore assesses 2011/12 tax returns.

To further encourage pervasive innovation and raise productivity efforts, the productivity and innovation credit (PIC) scheme will be simplified and enhanced. The amount of tax deduction or allowance will be increased to 400% (from 250%) of research and development (R&D) expenditure, for the first SGD 400,000 (increased from SGD 300,000) spent on each qualifying activity.

PIC benefits will also be made available to R&D made abroad; businesses will be allowed to combine the SGD400,000 expenditure cap per year for 2013 to 2015 into a new ceiling of SGD 1.2m over the three years; and there will be an enhanced cash conversion option where taxpayers can opt to receive, in lieu of tax deduction benefits, a cash payout of 30% of the first SGD100,000 of qualifying expenditure, up to a maximum of SGD 30,000.

In addition, Shanmugaratnam is to simplify and reduce the taxation of foreign income, so as to support companies that are globalised and earning a larger share of their income overseas. Foreign tax credit (FTC) pooling is to be introduced to give businesses greater flexibility in their claim of FTCs, reduce their Singapore taxes payable on remitted foreign income (FI), as well as to simplify tax compliance.

Under the FTC pooling system, FTC is to be computed on a pooled basis, rather than on a source-by-source and country-by-country basis for each particular stream of income. The amount of FTC to be granted will be based on the lower of the pooled foreign taxes paid on the FI and the pooled Singapore tax payable on such FI. This will take effect from the 2012 assessment year.

Shanmugaratnam then said that, while Singapore is making good progress to becoming a location of choice in Asia for global companies as well as a launch-pad for Asian enterprises to globalize, he has made other tax changes in strategic business sectors to enhance its overall competitiveness as such a hub.

For example, to facilitate access to a wider range of funding sources for their lending business and strengthen Singapore’s position as a regional funding centre, enhancements will be made to the withholding tax exemption (WHT) exemption regime for banks, finance companies and investment banks with effect from April 1, 2011. WHT exemption will be granted on interest payments made to all non-resident persons (including funding from non-bank sources, such as hedge funds and insurers).

With effect from June 1, 2011, existing maritime incentives will be streamlined and enhanced. New tax benefits, such as certainty of WHT exemption for interest payments on loans to build or buy ships, will be introduced to further entrench international ship operators and encourage the growth of the shipping-related services sector in Singapore.

There will also be a package of individual income tax benefits for all Singaporeans. All resident individual taxpayers will be given a one-off personal income tax rebate of 20%, capped at SGD 2,000 per taxpayer, in 2011/12, and a new personal income tax rate structure will take effect from 2012/13. Marginal tax rates will be reduced for the first SGD 120,000 of chargeable income. While all taxpayers benefit, middle-income earners will enjoy the largest percentage reduction in taxes under the new rates. Shanmugaratnam disclosed that the government will continue to review Singapore’s top personal income tax rate, but saw no pressing competitive need for it to be reduced at present. After factoring in the various tax and other measures announced in his budget, he still expected a basic fiscal deficit of only SGD 2.2bn, or about 0.7% of GDP, in 2011/12.

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Libya’s hidden wealth

According to The New York Times “As the battle for Libya rages on, the struggle over control of the country’s sovereign wealth fund and its $70 billion in assets has just begun.

The fund’s nominal head is Muhammad H. Layas, perhaps Libya’s most experienced international banker. He has had a leadership role in institutions including the Libyan Arab Foreign Bank, the only bank allowed to conduct international business during the imposition of United Nations sanctions against Libya; British-Arab Commercial Bank, a London-based wholesale bank now majority owned by Libya; and the Arab Banking Corporation, a Bahrain-based bank also majority controlled by Libya.”

See the full story in The New York Times here.

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Switzerland – Bank secrecy deteriorating

Switzerland said it will make it easier for foreign governments to hunt for tax cheats with Swiss bank accounts, amid continuing criticism that it still does too little to assist international tax authorities, even after years of pressure to ease bank secrecy.

The Swiss Finance Ministry said Tuesday that Switzerland will provide information on holders of bank accounts if foreign tax authorities provide just the bank account number or other information, such as a Social Security number or credit-card details.

Until now, the Swiss demanded full bank account details, as well as the name and address of the individual. Also remember that Switzerland accepts foreign countries court decisions.

However, there are attractive alternatives. We have a global approach and can help you, contact us if you need advice regarding your private banking and/or your business banking.

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Paraguay – Dollar economy – Still no personal income tax

Paraguay has a number of advantages going for it like 10% VAT (the lowest in South America), no personal income tax, 10% corporate tax (the lowest in South America), low labor cost, young population, plenty of commodities and enormous fresh water resources. In addition the capital Asunción has the lowest general price level in the world of any capital.

The personal “no income tax” regime should last at least to 2013 and very likely beyond. Bolivia and Guatemala are other countries in the region with “low or almost no” personal income tax. The employer’s contribution to social security is 16.5% of an employee’s (worker) total salary which includes bonuses. The employee’s (worker) portion is 9%

However, dividend distributions are subject to a 5% corporate income tax. Dividends distributed to non residents are subject to a 15% withholding tax.

Paraguay has a high degree of openness in the economy and a high degree of dollarization. There is no foreign exchange control in Paraguay.

Paraguay is a member of Mercosur. Other members of this trade organization are Argentine, Brazil and Uruguay. Venezuela is in the process of being a future member. The purpose of Mercosur is free trade with limited or no custom between its member countries as well as visa free travelling. Mercosur is planning to introduce the same “car plate” among its members.

See more in IMF research document regarding Paraguay here

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Liechtenstein – New tax structure

Determined to increase the attractiveness of Liechtenstein as a finance centre, the principality’s state parliament has adopted the government’s bill for a comprehensive reform of taxation, and has given the green light for the law to enter into force as planned on January 1, 2011. According to the government, the modern, competitive new tax system fulfils current requirements for legislation that is both internationally compatible and in accordance with European law.

Designed to be more transparent, the new simplified tax law retains the traditionally low tax rates to prevent an increased fiscal burden on individuals, excepting those with particularly high income. Indeed, as a result of the new tax structure, the tax burden will be reduced for families and taxpayers on low income.

Following the state parliament’s meeting, Liechtenstein’s Prime Minister Klaus Tschütscher welcomed the decision to adopt the historic reform of the country’s taxation after almost 50 years of the existing law. According to Tschütscher, the adoption of the modern tax law once again reinforces Liechtenstein’s political credibility and its ability to reform. The new law will serve to strengthen the principality in the current drive towards globalization and to improve the attractiveness and stability of Liechtenstein’s financial centre, he added.

An attractive system of personal income taxation

The reforms usher in a simplified system for individuals calculating their own taxes. As regards the taxation of real estate and land, this will follow the same practice as before.

Abolition of inheritance and gift tax

Inheritance and gift tax will be abolished for individuals to avoid multiple taxation. Currently, inherited or donated money is already subject to wealth and acquisitions tax. In general, however, the principle is that acquired income should basically only be taxed once during the course of an individual’s lifetime.

Benefits for companies in Liechtenstein

The government’s tax reform aims to strengthen Liechtenstein’s position in terms of international competition, as it is all too aware that tax rates are one of the key factors in business location.

Consequently, the new tax law, which was developed in close cooperation with industry, is designed to provide companies located in Liechtenstein with better opportunities to structure themselves and to adapt to global competition. The introduction of the new flat rate tax of 12.5% for all companies will ensure that all companies are taxed equally. With only a few exceptions, all businesses will be required to pay a minimum income tax of CHF 1,200 (EUR 908).

According to the government, the unequal treatment of foreign and own-capital will also be removed thanks to the introduction of the company own-capital interest deduction. Provisions on group taxation will also be included in the new law. As a result of these changes, the government believes that it will be even more attractive to set up a new company in Liechtenstein.

Abolition of coupon and capital tax

As regards legal entities, coupon tax and capital tax will be abolished, although coupon tax will still apply to any reserves as at December 31, 2010. However, in the first two years following entry into force of the new law, there will be the possibility to calculate this tax at a reduced rate of 2%. Thereafter, the tax will be calculated at a rate of 4%. The government’s decision is designed to enable a company to re-invest its capital and will serve to further increase Liechtenstein as a business location.

Measures to strengthen Liechtenstein as a centre for philanthropy

As under the existing law, legal persons that exclusively pursue charitable goals, will be exempt from tax. In the areas of both civil and tax law, the same concept of charitable status will also apply.

Attractive taxation for private asset structures

The tax law provides that legal persons can be used to manage wealth as an independent legal person and indeed as a private asset structure (Privatvermögensstruktur – PVS), provided that the PVS is exclusively active in wealth management and does not engage in any other economic activity.

Modern and compatible law

The government maintains that by making the new tax law compatible with European law, this has increased legal certainty, in particular for financial intermediaries and for their customers. The tax policy now complies with European standards.

Commenting on the reform, Prime Minister Tschütscher stated that it is a big step towards a successful future and has served to dramatically increase the economic location of Liechtenstein as a result.

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