RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/SGP/7
19 January 1999
(99-0164)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the EUROPEAN COMMUNITY
Regarding the New and Full Notification of SINGAPORE1
The following communication, dated 11 January 1999, has been received from the Permanent
Delegation of the European Commission.
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In document G/SCM/N/38/SGP, Si ngapore has alleged that, with the exception of the three
prohibited subsidy schemes, notified in documen t G/SCM/N/6 of 8 May 1995, it does not grant any
specific subsidies.
A. In document G/SCM/N/ 6, Singapore notified the following subsidies:
1. International Trade Incentives provided under Part VII of the Economic Expansion Incentives
(Relief from Income Tax) Act (Chapter 86).
2. Double Tax Deduction Scheme provided under S ections 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 current s ituation as regards these prohibited subsidies.
In particular, when have they been phased out and when will enterprises cease to benefit from them?
The Community would also like to know the cu rrent status of the MAS Rediscounting Scheme
for Pre-Export and Export Bills of Exchange, whic h was also included in the above notification.
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 obtaining s ubsidies, companies need to make an application to
the Economic Development Board, which exercises cons iderable discretion in approving projects for
incentives.  In addition, the conditions attached to many of the incentive schemes limit their availability
to certain enterprises.  These factors mean that mo st of the following incentive schemes are, either in
law or in fact, specific under Article 2 of the Subsid ies Agreement, and Singapore is requested to notify
them in accordance with Article 25.2, using the sta ndard format, or to explain why they are not
considered to be subject to notification.
                                                     
1 G/SCM/N/38/SGP.G/SCM/Q2/SGP/7
Page 2
(a) Pioneer Status.  This is a tax incentive,  which aims to promote and encourage new
investments by manufacturing and service firms.   Companies in the manufacturing and service
sectors can enjoy an exemption of corporat e tax on profits for a period of 5-10 years.
To qualify for support, the following must be met:
- The project must introduce technolog ies, know-how or skills which are
substantially more advanced than those prevailing in the industry;
- There are no companies in Singapore with pioneer status engaging in similar
activity.
(b) Investment Allowance Scheme (IAS).  Th is aims to encourage local enterprises to
invest in new machinery and equipment that se rves to upgrade operations or lead to higher
value-added activities.  Under IAS, there is an exemption of taxable income of an amount equal
to a specified proportion of new investment in productive equipment.  Eligible companies may
be in the manufacturing or service sector.  A pproved projects for reducing the consumption of
potable water could also be covered.
(c) Expansion Incentive.  This encourages manufacturing and service companies to invest
in productive equipment and machinery to fu rther enhance their competitive advantage.
Eligible companies could be exempted from a taxable income amount equal to a specified
proportion (up to 50 per cent) of new investment in productive equipment.
(d) Development and Expansion Incentive.  This scheme aims to encourage
manufacturing and service companies to engage in new projects or expand/upgrade its
operations in Singapore.  The projects must be carried out in Singapore and generate
significant economic spin-offs for Singapore.  The incentive allows companies to enjoy a
corporate tax rate of 15 per cent for up to ten years with provision for extension.
(e) The Double Tax Deduction for R&D Expenses.  This aims to encourage both the
manufacturing and service companies to undertake research and development work in
Singapore.  The incentive will provide for double deduction of qualifying R&D expensesagainst the company's income.  Where there is in sufficient income in one year to offset the
double deduction, the expenses will be allowed to be carried forward.  The expenses include
operating expenses (excluding depreciation) for R&D activities.
(f) Under the Approved Foreign Loan Scheme, eligible manufacturing and service
companies could enjoy full or partial exemption of withholding tax on interest.  The minimum
requirement is a minimum loan of $200,000 from a foreign lender for purchase of productive
equipment.
(g) The Automation Leasing Scheme (ALS) is aimed at encouraging and assisting
companies in Singapore to invest in automa tion equipment and systems.  Foreign-owned
companies or non-SME local enterprises with productive fixed assets of more than
$15 million and established operations in Singapore  could apply for the ALS.  Local SMEs
with productive fixed assets of not more than $15 million could apply for a Special Interest
Rate (SIR) scheme under the Local Enterprise Finance Scheme.
(h) Local Enterprise Technical Assistance Scheme (LETAS) is a scheme to help local
enterprises defray cost incurred in moderniz ing and upgrading their operations through the
engagement of an external expert for a limited period of time.G/SCM/Q2/SGP/7
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The eligibility criteria are at least 30 per cent local equity, fixed productive assets
(defined as net book value of factory building, machinery and equipment) not exceeding
$15 million and employment size not exceeding 200 workers for non-manufacturing
companies.
The scope of assistance is generally grant support of up to 70 per cent of cost of
engaging an external expert for an approved short-term assignment and for deserving cases,
support can go up to 90 per cent.
(i) Under the Local Enterprise Finance Scheme (LEFS), a low-cost, fixed interest rate
financing programme for loans of up to $15 million is established which is designed to
encourage and assist local enterprises to upgrade, strengthen and expand their operations.
This scheme, which covers several different types of loans, is offered through 29 participating
financial institutions.  The interest rates and eligibility criteria are as follows:
Interest rates
Charged on all loan facilities (except working capital loans and factoring loans);Fixed for duration of the loan and com puted on monthly-rest, in-arrears basis;
Loans of up to four-year duration;  6.25 per cent interest rate;
Loans of up to 10-year duration:  6.75 per cent interest rate;Special interest rate (SIR) programme of 3.5 per cent available to encourage
companies to mechanise operations.
Eligibility criteria
At least 30 per cent local equity;Fixed productive assets (defined as net book value of factory building, machinery and
equipment) not exceeding $15 million;
Employment size not exceeding 200 workers for non-manufacturing companies.
(j) The Regionalization Finance Scheme (RFS) is a financing programme designed to
assist local enterprises to set up operations overseas.  Fixed rate loans are available under the
RFS for acquisition of fixed assets for overseas projects that generate economic spin-offs to
Singapore.
The finance scheme can be used for the following purposes:- Purchase of productive machinery and equipment;  or- Purchase or construction of industrial facilities.
The scheme is offered through nine participating financial institutions and eligible
enterprises could borrow up to a maximum amount of S$5 million.
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