Maritime Sector Incentive Singapore – What You Need To Know

Overview of the Maritime Sector Incentive (MSI) in Singapore

The Maritime Sector Incentive (MSI) represents a significant initiative by the Singapore government to bolster the maritime industry. Aimed at encouraging shipping enterprises to establish and expand their operations in Singapore, the MSI offers a range of benefits tailored to different aspects of the maritime business.

This program comprises various awards, each targeting specific segments within the sector. The primary awards under the MSI include the MSI-Approved International Shipping Enterprise (MSI-AIS) Award, the MSI-Shipping-Related Support Services (MSI-SSS) Award, and the MSI-Maritime Leasing (MSI-ML) Award.

MSI-Approved International Shipping Enterprise (MSI-AIS) Award

Benefits of the MSI-AIS Award

The MSI-Approved International Shipping Enterprise (MSI-AIS) Award is designed to incentivize international ship owners and operators to establish their commercial shipping operations in Singapore. The benefits of this award are substantial and focused on tax exemptions. Companies under the MSI-AIS Award can enjoy tax exemption on qualifying shipping income, which is available for:

1. A 10-year renewable period.
2. A 5-year non-renewable period, with the option to transition to the 10-year renewable award at the end of the 5-year period, subject to meeting certain conditions.

These tax exemptions serve as a significant financial incentive for shipping enterprises, enabling them to operate more competitively on a global scale while leveraging Singapore’s strategic location and facilities.

Eligibility Criteria for MSI-AIS Award

To be eligible for the MSI-AIS Award, applicants must demonstrate a robust track record and a well-defined business plan concerning their shipping operations in Singapore. The criteria include:

• A credible and demonstrable business plan detailing the shipping operations.
• The business plan must illustrate how the shipping operations will contribute economically to Singapore. This includes total business spending, undertaking additional activities from Singapore, and ensuring that strategic or commercial decision-making functions are conducted in Singapore.

These criteria are designed to ensure that the benefits of the MSI-AIS Award are aligned with the broader goals of Singapore’s maritime sector development.

Application Process for MSI-AIS Award

The application process for the MSI-AIS Award involves a detailed submission of the applicant’s business plan and track record. Interested parties should:

1. Prepare a comprehensive business plan that aligns with the eligibility criteria.
2. Email the application and relevant documents to the Maritime and Port Authority of Singapore (MPA)

The MPA’s review process focuses on the potential contributions of the applicant to the Singapore maritime industry, ensuring a mutually beneficial relationship.

MSI-Shipping-Related Support Services (MSI-SSS) Award

Benefits of the MSI-SSS Award

The MSI-Shipping-Related Support Services (MSI-SSS) Award is aimed at fostering the growth of ancillary shipping service providers and encouraging shipping conglomerates to establish their corporate services functions in Singapore. Under this award, eligible companies can benefit from a concessionary tax rate of 10% on the incremental income derived from a range of qualifying shipping-related support services. The services include:

• Shipbroking
• Forward freight agreement trading
• Ship management
• Ship agency
• Freight forwarding and logistics services
• Corporate services rendered to related parties engaged in shipping-related activities

This concessionary tax rate is applicable for a 5-year renewable period, providing a significant incentive for companies to develop and expand their shipping-related support services in Singapore.

Eligibility Criteria for MSI-SSS Award

To qualify for the MSI-SSS Award, applicants must meet certain criteria, including:

• A strong track record in ancillary shipping activities.
• A business plan that demonstrates how their activities will contribute to Singapore’s economy. This includes total business spending, additional activities undertaken in Singapore, and the employment of professionals.

The eligibility criteria ensure that the award supports companies that not only provide essential services to the maritime sector but also contribute meaningfully to Singapore’s economy.

Application Process for MSI-SSS Award

The process to apply for the MSI-SSS Award involves the following steps:

1. Preparation of a detailed business plan that meets the eligibility criteria.
2. Submission of the application and required documentation to the Maritime and Port Authority of Singapore (MPA)
3. Speak to us to learn more.

MSI-Maritime Leasing (MSI-ML) Award

Benefits of the MSI-ML Award

The MSI-Maritime Leasing (MSI-ML) Award is targeted at enhancing Singapore’s position as a capital and funding base for maritime leasing, including vessels and sea containers. The incentives under this award include:

• Tax concessions for up to 5 years on qualifying leasing income for ship or container leasing companies, business trusts, or partnerships.
• A concessionary tax rate of 10% on qualifying management income for the approved manager of the asset-owning entity.

These tax concessions apply to both operating and qualifying finance leases, providing flexibility in asset-owning, leasing, and chartering options. This award is instrumental in attracting and retaining maritime leasing businesses in Singapore, contributing to the nation’s status as a global maritime financing hub.

Eligibility Criteria for MSI-ML Award

To be eligible for the MSI-ML Award, applicants must fulfil specific requirements:

• A proven track record in ship and container financing operations.
• A comprehensive business plan that demonstrates how the operations will drive economic contributions in Singapore, including total business spending, employment of professionals, additional activities from Singapore, and ensuring strategic or commercial decision-making functions are based in Singapore.

These criteria aim to ensure that the benefits of the MSI-ML Award align with Singapore’s strategic goals in the maritime sector, particularly in maritime financing.

Application Process for MSI-ML Award

The application process for the MSI-ML Award involves several key steps:

1. Development of a detailed business plan that adheres to the eligibility criteria.
2. Submission of the application and relevant documentation to the Maritime and Port Authority of Singapore (MPA)

The evaluation of applications focuses on the prospective economic impact of the applicant’s ship and container financing operations in Singapore, emphasizing the mutual benefits for both the company and the Singapore maritime industry.

Tax Implications and Compliance Requirements

Tax Implications

The Maritime Sector Incentive (MSI) in Singapore offers various tax benefits to eligible companies, which include tax exemptions and concessionary tax rates. However, these benefits come with specific tax implications that companies need to understand and adhere to. For instance, the tax exemptions under the MSI-Approved International Shipping Enterprise (MSI-AIS) Award and the concessionary tax rates under the MSI-Shipping-Related Support Services (MSI-SSS) and MSI-Maritime Leasing (MSI-ML) Awards have distinct conditions and durations that must be closely monitored.

Compliance Requirements

In addition to understanding the tax benefits, companies participating in the MSI must also adhere to strict compliance requirements. These include:

1. Maintaining accurate and up-to-date financial records.
2. Ensuring all business activities and operations align with the eligibility criteria of the respective MSI award.
3. Regularly reporting to the Maritime and Port Authority of Singapore (MPA) on their business activities and financial status.
4. Adhering to all applicable Singaporean laws and regulations, including those related to maritime operations, taxation, and corporate governance.

Failure to comply with these requirements can result in the revocation of the MSI benefits and potential legal consequences. Companies should establish robust internal processes to ensure ongoing compliance with the MSI’s conditions and the broader regulatory framework in Singapore.

Speak To An Expert

Speaking to a lawyer who is familiar with Singapore’s maritime sector and its associated regulatory requirements ensures that companies not only benefit from the MSI but also remain compliant with all relevant laws and regulations.