This article is a guide to Singapore’s free trade zones; these are special economic areas within the country that provide beneficial customs and tax treatment to firms that operate within them. What are the current free trade zones in Singapore? How does Singapore regulate them, what advantages are available in these areas, and what permits or licenses does your company need to operate there? This article will provide answers to these and other questions about Singapore’s free trade zones.
Introduction
Singapore is known worldwide as a trade-focused country with pro-business free trade regulations that form the core of its international trade policy. Singapore’s free trade agreements, investment guarantee agreements, and more than 80 Avoidance of Double Taxation agreements ensure smooth trade with nearly all countries of the world. Another advantage that Singapore offers to international trade firms is its Free Trade Zones (FTZs). The FTZs were first established in 1969 to support the country’s aim of being a centre for entrepot trading and transhipment activities but since then their objectives have expanded. These zones are designated areas in Singapore where the payment of duties and taxes is suspended when goods arrive, are stored, or sold within the FTZ.
If you are thinking of opening a trading company in Singapore and would like to learn more about movement of goods through Singapore, this guide is for you.
This article includes the following topics:
Singapore FTZ Advantages
To facilitate entrepot trade and transshipment of overseas goods, companies operating in these areas enjoy the following benefits:
No Goods and Services Tax on imports
As a general rule, all goods brought into Singapore (other than exempt imports) are subject to Singapore’s consumption tax — the Goods and Services Tax (GST), also known as the Value Added Tax (VAT) — at the prevailing rate of 7% on the value of goods. Import GST is payable regardless of whether the importer is GST-registered or not.
If goods are imported and stored in the FTZs, import GST is suspended; in other words,no GST is payable. In addition, goods in FTZs may be supplied (bought and sold) many times before they are removed. To free businesses from the burden of having to account for GST on these multiple supplies of goods, such supplies (except for supplies of local goods to FTZs, which remain taxable) are disregarded for GST purposes. In other words, any value that is added to imports within a FTZ is not subject to the value added tax; thus, economic activities performed within the FTZ are tax exempt.
Furthermore, if you move your overseas goods from an FTZ out of Singapore (i.e., transshipment) without entering customs territory, those goods remain outside the scope of GST. Thus, you are not required to report such movement of overseas goods in your GST return.
To summarize, if a firm imports raw materials to an FTZ, adds value to the raw material to produce a final product within the FTZ; and then sells the product to a country outside Singapore, no GST will be charged by Singapore on any of these activities.
No customs duties on goods imported into FTZ
As a general rule, Singapore law considers certain categories of goods as dutiable. This means that, when imported into Singapore, they are subject to customs duty on ad valorem or specific rates. There are 4 basic categories of dutiable goods:
- Intoxicating liquors;
- Tobacco products;
- Motor vehicles;
- Petroleum products and biodiesel blends.
However, if such goods are imported into the FTZs, they are considered as goods under the customs control and you are not required to pay customs duties.
No import permit is needed
As a general rule, before the actual import of goods, an importer is required to obtain a customs permit. But when the importation is into FTZs, this document is not required.
Exemptions to the above
Duty and import GST are payable only when the goods:
- Are either consumed within the FTZ; or
- Leave the FTZ and enter into Singapore’s customs territory for local sales or domestic consumption.
In such cases, you will be required to take up an import permit with Singapore Customs and pay import GST or import duty on overseas goods used or consumed within an FTZ or imported into Singapore’s customs territory.
However, import GST and duty are not payable, and an import permit is not required, if you are moving the goods directly from one FTZ into another FTZ, a warehouse or an excise factory (a designated area licensed by Singapore Customs for manufacturing and storing dutiable goods).
Current free trade zones in Singapore
At the moment, Singapore has nine free trade zones:
- Tanjong Pagar Terminal and Keppel Terminal;
- Sembawang Wharves;
- Brani Terminal;
- Keppel Distripark;
- Keppel Distripark Linkbridge;
- Pasir Panjang Terminal;
- Jurong Port (including Pulau Damar Laut);
- Changi Airport Cargo Terminal Complex;
- Airport Logistics Park of Singapore.
Singapore FTZ Regulations
Singapore’s main legislation on FTZs is embodied in the Free Trade Zones Act, which came into effect in 1966 and was last amended in 2014. The law outlines:
- The authorities in charge of verifying the activities of companies operating in the FTZs, namely the Free Zone Advisory Committee, the Director of the Singapore Customs, and the Ministry for Trade and Industry;
- Activities that may be undertaken by free zone companies in Singapore;
- The types of licenses and permits required to manufacture and sell goods in the free zones; and
- The penalties for not respecting regulations imposed by the free zone authorities.
Additional ancillary FTZ legislation includes:
- Free Trade Zones Regulations, covering matters of security in the FTZs, dutiable goods transferred between different zones, and other factors;
- Free Trade Zones (Declared Areas) Notification, listing all the current Singapore FTZs;
- Free Trade Zones (Manufacture) Regulations, covering issues related to manufacturing goods in FTZs.
Permits and licenses required for operating in FTZs
To operate in one of Singapore’s free zones, companies must obtain a permit or license from one of three authorities responsible for administering the relevant FTZ. They are as follows.
- PSA Corporation Limited administers the following free trade zones:
- Tanjong Pagar Terminal and Keppel Terminal;
- Sembawang Wharves;
- Brani Terminal;
- Keppel Distripark;
- Keppel Distripark Linkbridge; and
- Pasir Panjang Terminal.
2. Jurong Port Pte Ltd is the authority appointed to operate
- Jurong Port (including Pulau Damar Laut).
3. Changi Airport Group (Singapore) Pte Ltd is responsible for
- Changi Airport Cargo Terminal Complex; and
- Airport Logistics Park of Singapore.
Two basic types of permits or licenses are needed to operate in Singapore free zones. The first is available to corporate users, while the second is issued to individuals and has a short temporary validity. To apply for a permit, one must agree to abide by the permit conditions, safety regulations, and security rules imposed by the relevant agency.
A temporary permit can be issued with validity from 24 hours to 2 weeks. Corporate permits are usually valid for 1 to 3 years and subject to various fees. It typically takes no more than 4 days for an authority to issue either of the two types of permits.
If you plan to apply for the FTZ permit, or have any questions regarding free zones in Singapore, contact our CorporateServices.com specialists, who can guide and help you with these tasks.
Requirements for companies operating in FTZs
Which Singapore FTZ is best for you?
Each of Singapore’s nine free trade zones offers different opportunities and charges different fees. It’s best to explore carefully which is the right FTZ for you. The CorporateServices.com experts can provide you this guidance. However, two of the best-known and more popular Singapore FTZs are the following:
Jurong Port
- Jurong Port is one of the leading global maritime multipurpose ports, handling bulk, general and containerized cargo. The port’s main terminal welcomes at least 15,000 international and regional vessels each year.
- The port offers more than 170,000 square meters of warehouse facilities open to interested investors and entrepreneurs. Jurong also offers one of the largest common-user cement terminals in the world.
- Jurong Port also houses the Offshore Marine Centre, a state-of-the-art waterfront facility offering services to local and global entities involved in fabricating offshore and marine equipment.
The Changi Airport
- Changi Airport Group offers, among other services, over 100,000 square meters of warehouse and office space, at least 3 million tonnes of annual handling space, over 70 hectares of free trade zones, round-the-clock efficient customs operations, and at least 14 dedicated freight parking bays.
- Changi Airport provides global companies with a unique opportunity to establish their regional redistribution centers in a free zone that has a comparative advantage over other airports in the region.
- The free zone also offers direct connections to the Changi Airfreight Centre, ensuring that your goods and products are transported quickly and on time. This zone is appropriate for high-tech manufacturing that relies on just-in-time inventory of high value parts that have to be moved quickly by air.