RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/SGP/8
24 March 1999
(99-1191)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions from the EUROPEAN COMMUNITY1
Regarding the New and Full Notification of SINGAPORE2
The following communication, dated 22 March 1999, has been received from the Permanent
Mission of Singapore.
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Questions
A. In document G/SCM/N/6, Singapore notified the following subsidies:
1. International Trade Incentives provided und er Part VII of the Economic Expansion
Incentives (Relief from Income Tax) Act (Chapter 86).
2. Double Tax Deduction Scheme provided under Sections 14(B) and 14(C) of the Income
Tax Act.
3. Production for Export Incentive provided under Part VI of the Economic Expansion
Incentives (Relief from Income Tax) Act (Chapter 86).
The Community would like to know the curren t situation as regards these prohibited
subsidies.  In particular, when have they b een phased out and when will enterprises cease to
benefit from them?
The Community would also like to know the current status of the MAS Rediscounting
Scheme for Pre-Export and Export Bills of Exchange, which was also included in the above
notification.
Replies
International Trade Incentive (ITI)
The ITI is no longer in operation since 1986.  We had notified it to the WTO in 1995 as a matter
of procedure since it was still existent in our Economic Expansion Incentives Act (EEIA).  We are still
waiting for an opportune time to remove the ITI from the EEIA, i.e. when the EEIA is next amended.
                                                     
1 G/SCM/Q2/SGP/7
2 G/SCM/N/38/SGPG/SCM/Q2/SGP/8
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Double Tax Deduction (DTD) Scheme
The DTD Scheme has been amended and brought into conformity with the Agreement on
Subsidies and Countervailing Measures in August 1998.  The key change is the removal of the export
condition to qualify for the DTD Scheme.  Please refer to Annex 1 for a copy of the amended law under
which the DTD is granted.
Production for Export Incentive
The Economic Development Board (EDB) no longer  accepts applications for the Production for
Export Incentive.  The Production for Export Incentive granted to the remaining "live" case will expire
on 30 June 1999 and will not be renewed.
MAS Rediscounting Scheme for Pre-Export and Export Bills of Exchange
The MAS Rediscounting Scheme will be terminated with effect from 1 April 1999.
Question
B. In addition, as regards the remainder of document G/SCM/N/38/SGP, publicly available
information reveals that investment incentives play a key role in Singapore's economy.  The
Government of Singapore established the Econom ic Development Board, which administers the
different subsidy programmes.  Prior to obtain ing subsidies, compan ies need to make an
application to the Economic Development B oard, which exercises considerable discretion in
approving projects for incentives.  In addition, the conditions attached to many of the incentive
schemes limit their availability to certain enterpri ses.  These factors mean that most of the
following incentive schemes are, either in law or in fact, specific under Article 2 of the SubsidiesAgreement, and Singapore is requested to notify  them in accordance wi th Article 25.2, using the
standard format, or to explain why they are no t considered to be subject to notification.
(a) Pioneer Status
(b) Investment Allowance Scheme (IAS)
(c) Expansion Incentive
(d) Development and Expansion Incentive(e) The Double Tax Deduction for R&D Expenses
(f) Approved Foreign Loan Scheme
(g) Automation Leasing Scheme (ALS)
(h) Local Enterprise Technical Assistance Scheme (LETAS)
(i) Local Enterprise Finance Scheme (LEFS)(j) Regionalization Finance Scheme (RFS)
Reply
It is not necessary to notify the incentives high lighted in the EC's query as they clearly do not
fall within the meaning of specificity under Article  2 of the Agreement on Subsidies and Countervailing
Measures ("the Agreement").  The incentives are not specific within the meaning of Article 2.  They are
not specific in law or in fact.  They are generally available and are governed by clear and objective
criteria with regards to eligibility and support leve l.  (The eligibility criteria for each highlighted
incentive can be found in Annex 2.)  The incentives have benefited a broad base of industries and
enterprises.
With regards to the EC's comment that compan ies have to apply to the Economic Development
Board (EDB) for the incentives, this is a very comm on practice in many countri es (including the EU),
where the granting of incentives requires the approval of the administering body.  In the case of most ofG/SCM/Q2/SGP/8
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our investment incentives, the administering body is th e EDB.  EDB's approval is based on a set of clear
and objective criteria for each incentive to ensure c onsistent and equitable treatment for all investments.
As the criteria for each incentive are adhered to by EDB, the incentives are therefore not specific within
the meaning of Article 2.  Likewise for other incen tives administered by our other economic agencies.G/SCM/Q2/SGP/8
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ANNEX 1
Income Tax Act
Further deduction for expenses relating to approv ed trade fairs, exhibitions or trade missions or
to maintenance of overseas trade office.
14B. (1) Subject to this section, where the Comptro ller is satisfied that the expenses specified in
subsection (2) have been incurred by an approved co mpany or firm resident in or having a permanent
establishment in Singapore for the primary purpose of:
(a) promoting the trading of goods or  the provision of services;  or
(b) the provision of services in connection with the use of any right under a master
franchise or master intellectual property licence where the company or firm is the
holder of the franchise or licence,
there shall be allowed a further deduction of the amount of such expenses in addition to the amount
allowed under section 14.
(2) The expenses referred to in subsection (1) are:(a) expenses in establishing, maintaining or ot herwise participating in an approved trade
fair, trade exhibition, trade mission or trade promotion activity;
(b) expenses in maintaining an approved overseas trade office;  or(c) market development expenditure for the carrying out of any approved marketing
project.
(2A) The Minister may specify the maximum amount of expenditure (or any item thereof) to
be allowed under subsection (1).
(3) No deduction shall be allowed under this section in respect of:
(a) any expenses which are not allo wed as deductions under section 14;
(b) travelling, accommodation and subsistence expenses or allowances for more than the
approved number of employees taking part in the approved trade fair, trade exhibition,
trade mission, trade promotion activity or the approved marketing project;
(c) any expenses incurred during its tax relief period (or qualifying period in the case of
investment allowance) by a company which is given tax relief under the EconomicExpansion Incentives (Relief from Income Tax) Act;  and
(d) any expenses relating to an approved overseas trade office:
(i) which are incurred in the establishmen t of the approved overseas trade office;
(ii) by way of remuneration, travelling, accommodation and subsistence expenses
or allowances for more than the approved number of employees of the
approved overseas trade office;G/SCM/Q2/SGP/8
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(iii) which are specifically excluded as a condition for the approval of the overseas
trade office under this section;
(iv) which are incurred after the end of the approved number of years from the date
of establishment of the approved overseas trade office;  and
(v) which are incurred by a firm or company having a permanent establishment
subject to tax in the country in which the approved trade office is established.
(3A) As soon as any amount of further deduction is allowed to any company under this
section, section 14E, 14J or 14L, a sum equal to that amount shall be credited to an account (referred to
in this section as the further deduction account) to be kept by the company for the purposes of any ofthose sections.
(3B) Where for any year of assessment a furthe r deduction account of a company is in credit,
the company shall:
(a) debit from that account such amount as would have been the chargeable income had the
further deduction not been allowed or the amount of the credit in that account,
whichever is the less;  and
(b) credit the amount debited under paragraph (a) to an account to be called a tax exempt
account which shall be kept by the company for the purposes of this section,
sections 14E, 14J or 14L,
and any remaining balance in the further deduction acc ount shall be carried forward to be used by the
company in the first subsequent year of assessmen t when the company has chargeable income had the
further deduction not been allowed, and so on for s ubsequent years of assessment until the credit in the
further deduction account has been fully used.
(3C) Where a tax exempt account of a company is in credit at the date on which any
dividends are paid by the company out of the amount credited to that account, an amount equal to those
dividends or to that credit, whichever is the less, shall be debited to the tax exempt account.
(3D) Section 13B (4) to (7) shall apply, with the necessary modifications, in respect of any
dividend paid out of the tax exempt account of the company.
(3E) Notwithstanding anything in this section, wh ere it appears to the Comptroller that in any
year of assessment:
(a) any further deduction which has been allo wed under this section, sections 14E, 14J or
14L;  or
(b) any dividend, including a dividend paid  by a holding company, which has been
exempted from tax in the hands of any shareholder,
ought not to have been so allowed or exempted, as  the case may be, the Comptroller may, within the
year of assessment or within six years after the expiration of that year of assessment thereof:
(i) make such assessment or additional assessment upon the company or any such
shareholder as may be necessary in order to make good any loss of tax;  or
(ii) direct the company to debit its tax exempt account with such amount as the
circumstances require.G/SCM/Q2/SGP/8
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(4) In this section:
"approved" means approved by the Minist er or such person as he may appoint;
"market development expenditure" means:
(a) approved expenses directly attributable to the carrying out of market research or
obtaining of market information, including any feasibility study;
(b) expenses in respect of advertisements placed in approved media;
(c) expenses incurred on approved promotion campaigns;  or
(d) approved expenses incurred in the design of packaging, or in the certification of goods
or services where such certification is carried out by an approved person;
"master franchise" means any agreement under whic h the franchisor authorizes or permits the
franchisee to use in Singapore or overseas a business system owned or controlled by the
franchisor, including the sub-franchising of the business system;
"master intellectual property licence" means an y licence under which the licensor authorizes or
permits the licensee to use in Singapore or overseas the rights under a patent, copyright,
trademark, design or know-how, incl uding the sub-licensing of the same.G/SCM/Q2/SGP/8
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ANNEX 2
Eligibility Criteria for EDB's Incentive Schemes
Highlighted by the EC
Scheme Objective and Eligibility Criteria
Pioneer Incentive To encourage creation of industr ies not yet established in Singapore or not
established on a scale adequate for Singapore's economic needs.
Criteria:1. Project introduces into an industry technology, know-how or skills which
are substantially more advanced than the average industry level.
2. There are either no companies in Singapore performing a similar activity;
or
Companies performing a similar activity are/have been awarded a pioneer
incentive.
Development andExpansion IncentiveTo encourage companies to expand, upgrade and invest in high value-added
activities in Singapore.
Criteria:
1. Project must generate significant economic spin-offs for Singapore.
Expansion Incentive To encourage the increased  manufacture of any product that has economic
value and the increased provision of specified service activities.
Criteria:1. Minimum investment of S$10 milli on in new productive equipment and
machinery.
Approved ForeignLoan IncentiveTo assist companies to access offshore financing for investments in productive
equipment.
Criteria:1. Minimum loan of S$200,000.2. Tax relief should not result in increase in tax liability in foreign country.
Investment Allowance To encourage investment in  equipment for greater productivity and to upgrade
the technology of the industry.
Criteria:
1. Investment results in greater efficiency in resource utilization.
2. Investment introduces new technology into existing industry.G/SCM/Q2/SGP/8
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Scheme Objective and Eligibility Criteria
Investment Allowance
(cont'd)3. Project is significantly more efficient in resource utilization than the
industry average.
4. Project produces parts and com ponents used by other industries.
Double Deduction for
R&D ExpensesTo encourage companies to engage in R&D activities in Singapore.
Criteria:
1. R&D project must be  done in Singapore.
2. R&D must have economic spin-offs.
Resource Productivity
Scheme (formerly
known as Automation
Leasing Scheme)To encourage and assist companies in Singapore to invest in equipment and
systems which enhance the utilization of scarce resources such as labour,
water and land.
Criteria:
1. Project should result in substantial savings in manpower, land or water.
Regionalization
Finance SchemeTo assist enterprises in the setting up of overseas operations.
Criteria:
1. Singapore-registered company with not more than 49% foreign
shareholding.
2. Overseas operation must have economic linkages and generate spin-offs
for Singapore.
3. Fixed productive assets (defined as book value of factory, building,
machinery and equipment) must not exceed S$30 million.
Local EnterpriseTechnical Assistance
Scheme (LETAS)
*To help enterprises which are seeking external expertise to modernize and
upgrade their operations.
Criteria:1. Not more than 70% foreign shareholding.2. Fixed productive assets (defined as book value of factory, building,
machinery and equipment) must not exceed S$15 million.
3. If in the service industry, must have an employment size not exceeding
200 workers.
                                                     
* Administered by Singapore Productivity and Standards Board.G/SCM/Q2/SGP/8
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Scheme Objective and Eligibility Criteria
Local Enterprise
Finance Scheme
(LEFS)*To encourage and assist enterprises to upgrade, modernize and expand their
operations.
Criteria:1. Not more than 70% foreign shareholding.2. Fixed productive assets (defined as book value of factory, building,
machinery and equipment) must not exceed S$15 million.
3. If in the service industry, must have an employment size not exceeding
200 workers.
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