The Global Trader Programme (GTP) is an incentive scheme that encourages global trading companies to use Singapore as their preferred regional or global base to conduct trading activities along the total trade value-add chain from procurement to distribution, in order to expand into the region and beyond. Administered by the Enterprise Singapore, it is a merger of the previous approved oil traders and approved international traders schemes on 11 June 2001. The GTP is a very effective tool in promoting and retaining Singapore’s position as a global trading hub.
It provides approved global trading companies a reduced corporate tax rate of 5% or 10% on qualifying trading income for three or five years.
In particular, income derived from the following transactions with any counterparty qualifies for the GTP:
Physical trading, brokering of physical trades and derivative trading income.
Physical trading where commodities are imported, undergo value-added activities in Singapore, such as physical alteration, addition or improvement (e.g. refining, blending, processing or bulk-breaking), and then are reexported.
Physical trading where commodities are stored in Singapore.
Physical trading where commodities are purchased for the purposes of consumption in Singapore.
Transactions where the commodities are purchased for the supply of fuel to aircraft or vessels within Singapore.
Storage and blending are important business activities for oil traders. This makes Singapore’s oil storage industry attractive.
The scheme is currently available to players trading a broad range of products and commodities in Singapore, including
energy commodities and products,
chemicals,
metals and minerals,
agricultural commodities and bulk edible products,
consumer goods,
industrial products,
electronics and electrical products,
building and industrial materials,
consumer products,
machinery components and
carbon credits.
GTP concessionary tax rate applies only to qualifying income from transactions in specified commodities as approved by Enterprise Singapore.
General Criteria
To qualify for the GTP incentive, companies must meet stringent quantitative criteria. An applicant company must satisfy the following conditions:
It is a well established international player (large or medium-sized) and engaged in international physical trading, procurement, distribution and transportation of qualifying commodities and products. International physical principal trading involves having control over key decisions with regard to entering trades, exercising optionality and flexibility across the value chain to match demand and supply, manage trade flows, bear principle title and commercial risks.
It intends to use Singapore as its regional base for its principal offshore trading activities, business activities support and strategic functions, such as:
compliance and risk management
general and administrative management control
business and investment planning and coordination
financial control, derivatives and treasury functions
market development and planning
logistics management, including warehousing and freight services.
It has a wide trading and distribution network and good track record.
It must also be committed to:
principally conduct substantial international physical trading activities in Singapore,
incur a significant amount of annual local business spending in Singapore,
employ a substantial number of experienced trading professionals in Singapore (involved in either procurement/sourcing, sales and marketing, or risk management, may include senior management and can be either locals or expatriates),
make significant use of Singapore’s banking, financial infrastructure, trade and logistics, trade arbitration and its other supporting services (eg trade institutes, etc.), and
contribute to manpower training and aid in the development of trading expertise in Singapore throughout the incentive period.
High-growth medium-sized international trading companies that are keen to choose Singapore as their regional base for trading activities can be considered for the concessionary tax rate for an initial, non-renewable three-year period. During this period, the companies can establish and develop their regional or global trading network, with Singapore as their base. Once the companies are able to demonstrate sustainable growth projections that are in line with the requirements of the GTP, they can apply to join for the five-year renewable GTP scheme after the initial three-year period.
There could also be other factors to be considered when evaluating the GTP application, like related party transactions and group manufacturing turnover. The company should ensure that a majority of its physical trading activities involves unrelated parties on the buy and/or sell legs of the transactions. If the company does not meet these benchmark criteria, on application it will be required to show that it can commit to these benchmarks for its projected incentive period.
The fundamental spirit of the GTP status is to provide and incentivise physical trading activities of GTP companies. In any case, the intent of the GTP is to encourage companies to carry out their international physical trading activities in Singapore, and approved GTP companies should ensure that they remain bona fide physical trading companies for the entire incentive period as Enterprise Singapore would monitor the volume of paper versus physical trades on an annual basis.
The classification of qualifying and non-qualifying income is a compliance focus area for the Inland Revenue Authority of Singapore (IRAS). To this end, GTP companies should pay attention and be diligent in the identification of income and expenses.
Approved GTP companies should pay close attention to the classification of qualifying and non-qualifying income and expenses, as well as the allocation basis of indirect expenses, which would be a focus area of review by the Inland Revenue Authority of Singapore (IRAS).
Application
Enterprise Singapore would need to do an initial assessment. Please note that meeting the above criteria does not automatically mean that a company will be approved upon application. These criteria will serve as the requirements to qualify for the initial assessment by the officer in charge.
To better understand your interest, please fill up the attached word doc.
How Bestar can Help
Bestar’s Tax Advisory department is made up of professionals with extensive experience assisting clients with incentive applications and negotiations, as well as with extensive experience formulating and administering incentives. With our experience, we can assist your business in the following areas:
Assess whether your business meets the qualifying conditions to benefit from the GTP, taking into consideration your company’s financial projections and business plan for the Singapore operations
Liaise and negotiate with relevant authorities for the initial incentive application as well as the renewal of the incentive on behalf of the company
Review your internal controls and processes with a view to benefit from the GTP
If you would like to know more about our services, please contact Bestar.
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