What are Treasury Centres
Treasury centres are specialized units within a company that centralize and manage all financial activities related to cash, liquidity, and risk. They act like an internal financial hub, overseeing various functions for a smoother operation.
Here's a breakdown of their key roles:
Core Functions:
Cash Management: Optimizing the company's cash flow by pooling resources, forecasting needs, and managing surplus or deficits. This can involve techniques like cash concentration and cash pooling.
Liquidity Management: Ensuring the company has enough readily available cash to meet its financial obligations. This involves strategies for borrowing and lending money.
Risk Management: Identifying, assessing, and mitigating financial risks associated with foreign exchange fluctuations, interest rates, and creditworthiness. This often involves using financial instruments like derivatives.
Banking Relationships: Managing relationships with banks to secure financing, negotiate favorable interest rates, and arrange for other financial services.
Financial Reporting & Compliance: Ensuring accurate and timely financial reporting related to treasury activities and complying with relevant regulations.
Benefits of Treasury Centres:
Efficiency & Cost Savings: Centralized operations lead to streamlined processes and reduced administrative costs.
Improved Visibility & Control: Provides a clear picture of the company's overall financial health and tighter control over cash flow and risk exposure.
Strategic Decision Making: Better insights into financial data allows for informed strategic decisions regarding investments, funding, and financial risk management.
Tax Optimization: Certain locations offer tax benefits for establishing treasury centres.
Structure:
Treasury centres can be structured globally, regionally, or as a hybrid model.
Global Treasury Centres (GTCs): Centralizes all treasury activities in one location, typically the company's headquarters.
Regional Treasury Centres (RTCs): Manages treasury functions for a specific geographic region, often located in strategic financial hubs.
Hybrid Model: Combines elements of GTC and RTC structures, with some centralized functions and some decentralized activities in local business units.
Overall, treasury centres play a crucial role in optimizing a company's financial health and achieving its long-term financial goals.
Setting Up Regional Treasury Centres in Singapore
Singapore is a prime location for establishing a Regional Treasury Centre (RTC). Here's why it's attractive:
Benefits:
Strategic Location: Singapore acts as a gateway to Southeast Asia (ASEAN), facilitating regional cash flow management.
Tax Advantages: Singapore offers competitive corporate tax rates and attractive tax incentives for qualifying activities conducted in an RTC https://www.dbs.com.sg/corporate/insights/treasury-centres.
Financial Hub: A robust financial ecosystem with a deep pool of liquidity, easy access to foreign exchange markets, and a strong presence of major financial institutions.
Talent & Technology: A skilled workforce experienced in treasury functions, coupled with a thriving FinTech scene promoting digitalisation of treasury operations.
Process:
The exact steps for setting up an RTC will vary depending on your company's specific needs. However, here's a general roadmap:
Feasibility Study: Assess the benefits and potential challenges of establishing an RTC in Singapore.
Company Registration: Register your legal entity in Singapore with the Accounting and Corporate Regulatory Authority (ACRA).
Regulatory Approvals: Obtain any necessary licenses or permits from the Monetary Authority of Singapore (MAS) depending on your planned activities.
Banking Relationships: Establish relationships with local and international banks to facilitate cash management and foreign exchange transactions.
Technology Implementation: Choose and implement a treasury management system (TMS) to automate and streamline treasury processes.
Staffing: Recruit or relocate qualified personnel to manage the RTC's operations.
What is the Treasury Centre Incentive in Singapore
The Singapore government offers a program called the Finance and Treasury Centre (FTC) Incentive to attract companies to establish regional treasury centres (RTCs) in Singapore. This incentive aims to make Singapore a more attractive location for managing your company's regional finances.
Here are the key benefits of the FTC Incentive:
Reduced Corporate Tax Rate: Approved FTC companies can qualify for a concessionary tax rate of only 8% on income derived from qualifying FTC activities and services provided to approved network companies (ANCs). This is significantly lower than the standard corporate tax rate in Singapore (17%).
Withholding Tax Exemptions: Interest payments on loans obtained from specific sources (e.g., banks, financial institutions) can be exempt from withholding tax, provided the funds are used for approved FTC activities.
Eligibility:
To be eligible for the FTC Incentive, your company needs to:
Be registered in Singapore.
Demonstrate a strong track record in treasury management.
Conduct a substantial level of qualifying FTC activities in Singapore. Qualifying activities include treasury management functions like cash pooling, foreign exchange management, and credit risk management.
Overall, the FTC Incentive can significantly reduce your company's tax burden and make Singapore a financially compelling location for your regional treasury centre.
For more details and the application process, you can refer to the Singapore Economic Development Board (EDB) website: https://www.edb.gov.sg/en/grants/incentives-and-schemes/finance-treasury-centre-incentive.html
Resources:
Several resources can guide you further:
Monetary Authority of Singapore (MAS): https://www.mas.gov.sg/
Singapore Economic Development Board (EDB): https://www.edb.gov.sg/
Financial Institutions: Major banks like DBS, UOB, and HSBC offer Singapore-specific RTC solutions.
How Bestar can Help
Bestar can be invaluable partner in setting up and running a successful regional treasury centre (RTC) in Singapore. Here's how we can help:
Company Establishment: Assist with incorporating your legal entity in Singapore, ensuring compliance with all registration requirements.
Regulatory Framework: Navigate the complexities of Singapore's financial regulations related to treasury activities, obtaining any necessary licenses or permits from the Monetary Authority of Singapore (MAS).
Contract Review & Negotiation: Review and draft contracts with banks, financial institutions, and other service providers involved in your RTC's operations.
Tax Structuring: Ensure your RTC is structured in a way that optimizes tax benefits under the Finance and Treasury Centre (FTC) Incentive.
Risk Management: Advise on risk mitigation strategies to address legal and financial risks associated with operating an RTC.
Financial Reporting & Compliance: Set up a robust accounting system for your RTC, ensuring accurate and timely financial reporting in accordance with Singapore's accounting standards.
Tax Compliance: Advise on tax filing obligations for your RTC and prepare tax returns to ensure compliance with Singapore's tax regulations.
Internal Controls: Implement strong internal controls to safeguard your RTC's financial assets and mitigate fraud risks.
Financial Analysis: Provide ongoing financial analysis and reporting to give you insights into your RTC's performance and identify areas for improvement.
FTC Incentive Application: Guide you through the application process for the FTC Incentive, ensuring you meet all eligibility criteria and maximize the tax benefits available.
Tax Optimization Strategies: Develop tax-efficient structures for your RTC's operations, taking advantage of Singapore's tax treaties and other relevant tax incentives.
Tax Planning & Forecasting: Help you plan for future tax liabilities and forecast the overall tax impact of your RTC's activities.
Staying Updated: Keep you informed about changes in Singapore's tax laws and regulations that may affect your RTC.
By working together, Bestar can ensure your Singapore RTC is established efficiently, operates compliantly, and leverages the available tax advantages to optimize your financial performance.
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