Right place, right remedies Tax optimisation for the life sciences and health care industry in Singapore

Transcription

1 Right place, right remedies Tax optimisation for the life sciences and health care industry in Singapore

2 Singapore as a global life sciences and health care hub It is crucial for life sciences companies to achieve a streamlined, transparent, and efficient tax function one that can address compliance and planning issues while expanding its strategic support to the broader business enterprise. The life sciences and health care industry faces one of the toughest period in recent history. Pharmaceuticals, biotechnology, and medical equipment companies are not only emerging from a period of extreme economic turmoil, but also have to adjust to fundamental and transformative changes in the markets they serve. Amidst these shifts, Singapore has firmly established itself as a global hub for life sciences and health care. As leading companies expand their presence in Singapore by investing in local research and development (R&D) and manufacturing facilities, the time has come for organisations to reevaluate their tax functions. Singapore has a number of attributes that are attractive to investors: World class intellectual property (IP) protection Liberal and investor-friendly economic system Stable legal, financial and political environment A gateway for investments into the region One of the leading places for living and working Fastest growing bio-cluster in Asia Global scientific community fostered by the Agency for Science, Technology and Research (A*Star) Reputation for clinical excellence in an integrated research ecosystem Diverse partnership opportunities with research institutes in the public sector Excellent physical and regulatory infrastructure with global connectivity Strong global talent pool of about 6,000 researchers

3 Overview of tax incentives Tax systems can be complex and hard to navigate. While the Singapore tax system is one of the friendliest and most competitive in the world, understanding its key features and incentives can help you get it right from the very first step. Key tax features Friendly tax environment for life sciences companies with a wide range of investment incentives including tax holidays and enhanced deductions / depreciation schemes No dividend withholding tax and capital gains tax Extensive double tax treaty network Qualifying tax exemption Extensive advance ruling practice, including advance pricing agreements Different deductions, allowances, as well as (partial) tax holidays may be applied depending on the functions that are performed. Incentive Benefit Tax holiday Allowances / deductions Subsidies / grants Pioneer status Development and expansion incentive (DEI) Regional and international headquarters programme Approved foreign loan incentive Approved royalties incentive Writing-down allowance for acquired IP Writing-down allowance for R&D payments under an approved cost-sharing agreement Productivity and Innovation Credit (PIC) scheme Investment allowances Initiatives in New Technology (INTECH) Research Incentive Scheme for Companies (RISC) Tax exemption for qualifying income for up to 15 years Reduced rate (5-15%) for up to 20 years on incremental income from qualifying activities Reduced rate of between 0-15% for up to 5 years on qualifying income negotiable Reduced withholding tax on interest payments on loans to purchase productive equipment Reduced withholding tax on royalty payments to access advanced technology and know-how Automatic 5-year write-down of IP acquired Enhanced deduction of 100% for R&D cost-sharing payments Enhanced deduction of 400% of qualifying expenditure (e.g. acquisition / registration of IP rights, R&D and in-licensing of IP) subject to expenditure caps Enhanced deduction of 100% on qualifying fixed capital expenditure on top of normal allowance Co-funding to support the manpower development in the application of new technologies, industrial R&D and professional know-how Co-funding to support the set-up of R&D centers and / or the development of in-house R&D capabilities in strategic areas of technology

4 How Deloitte can help you get it right Design / planning phase Entity set-up R&D activities IP registration or acquisition Manufacturing IP out- / in-licensing Distribution / IP sale Key activities Provide tax structuring support/advice (e.g. tax efficient cash repatriation, financing) Obtain understanding of the planned activities/business model (e.g. hold/facilitate workshops) Identify activities qualifying for tax incentives and grants Fine-tune business model to enhance likelihood of incentive eligibility Apply and negotiate for tax incentives and grants (e.g. pioneer status, Development and Expansion Incentive, Research Incentive Scheme for Companies, Initiatives for New Technology) Determine feasibility of implementing IP/royalty structures Register for Goods and Services Tax (GST) purposes Consider special GST schemes (Major Exporter Scheme, Approved Contract Manufacturer and Trader Scheme) Provide customs duties advice on physical flow of goods (covering ingredients, API, finished products) Mitigate duty costs through application of free-trade agreements (FTAs) and duty relief regimes Ensure appropriateness/correctness of valuation planning and tariff classifications Assist in identifying and reviewing the qualifying expenditure to maximise tax deduction claims Document qualifying activities to substantiate claims Claim enhanced deductions (e.g. for R&D and IP acquisition expenditure) or cash payout Liaise with the Inland Revenue Authority of Singapore during claim review process Assist in valuing IP Claim writing-down allowances of IP acquired Claim deductions for R&D cost-sharing payments Confirm GST treatment of transactions Determine tariff classifications/tariff re-engineering opportunities for new products Determine appropriate customs values for cross-border movements of samples and clinical trial materials Secure applicable licenses/registrations/ marking requirements for the import/export of ingredients, API and clinical trial materials Claim allowances for qualifying fixed capital expenditure Plan/implement IP/royalty structures Determine and set arm s length royalty rates/charges Claim foreign tax credits (e.g. on royalty payments) Claim enhanced deductions (e.g. in regard to in-licensing of IP expenditure) Provide GST advice on the treatment of the transactions Support in the utilisation of customs and trade facilitation schemes (e.g. duty relief regimes and Authorised Economic Operators) Secure applicable licenses/factory registrations/preferential Certificates of Origin for the import/export of finished products Determine arm s length transfer pricing model for supply of goods to distributors Provide GST input (e.g. transferring business as a going concern or asset sale) to ensure GST efficient disposals/supplies Optimize customs liabilities and other border taxes and controls in destination markets Obtain rulings/agreements from the appropriate customs authorities on customs valuations, classifications and methodologies adopted Ensure tax optimisation (non-taxability) of IP sale Provide tax consulting and compliance services (e.g. preparation/filing of required forms such as PIC, R&D and other claim forms, GST reporting on a quarterly basis, assistance with the GST scheme application process)/assist with review of legal documents Deliverables Initial meetings/discussions with management (workshops) Advance tax rulings/tax holiday/grant applications or requests Negotiations with the authorities Tax optimised structure Tax efficient allocation of revenue/expenses between legal entities Maximum tax deductions/allowance Valuation of IP Valuations for customs purposes Mitigation of withholding tax exposure Transfer pricing documentation regarding royalties Implemented customs and trade facilitation schemes Implemented transfer prices for supply of goods Transfer pricing documentation regarding sales GST and customs efficient set-up Tax rulings and returns, claim forms, legal agreements In some instances, companies may achieve both cash flow savings and reduced tax liabilities through the use of tax incentives. Are you aware of all the incentives that Singapore offers?

5 Contact us Singapore Industry Leader Janson Yap Audit Sanjay Sharma Consulting Lee Chew Chiat Enterprise Risk Services Yong Chern Chet Financial Advisory Heath Snyder Tax Michael Pfaar Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms Deloitte & Touche LLP