At a recent briefing at Marina Bay Sands, the American banking behemoth Citigroup’s, Country Officer for Singapore, Mr. Michael Zink, gave an insights into the local unit’s plan to woo the growing pool of Chinese companies in the city state. He said the bank wanted to play the role of an enabler 'to attract and support Chinese multinationals looking to expand outside the mainland'. The local unit of the American banking giant has set up a China desk to encourage mainland Chinese businesses to use Singapore as a spring-board into Asia and beyond. Given the present strength of Asia and the booming Chinese economy Mr. Zink anticipates that Singapore will be a preferred gateway to the region for more Chinese firms. Industry experts believe that, Singapore will increasingly play host to many of the china bound investments as well.
Official figures reveal that 3,000 Chinese firms are registered in Singapore and of them 149 are listed on the Singapore stock exchange. Singapore will be an axis for not only the regional investments and operations but also for many of the region’s especially that of China’s outbound investments and operations targeting Middle East, Africa, Europe and the Americas.
Earlier in April, Global Intelligence Alliance (GIA), a global strategic market intelligence and advisory group, had predicted that Chinese outbound merger and acquisition (M&A) activity will gather speed strongly in the next few years, driven by an appetite for deal-making in China as well as relatively attractive asset valuations in overseas markets. Early this year financial industry experts had forecast that Singapore’s exchange will see buzzing activity due to more number of Chinese companies choosing to list themselves in Singapore. Singapore is gaining lot of attention despite the close proximity of Hong Kong and Shanghai for these Chinese companies because of their niche business sectors such as oil-and-gas, shipping and offshore marine sectors, as well as water treatment, waste recycling and alternative energy.
The 2007 revised China-Singapore Double Tax Treaty (DTT) assures many privileges. Under the new treaty, withholding tax on dividends paid by a Chinese company to a Singapore resident are cut to 5% from 7%, provided that the recipient is a company that holds at least 25% of the capital of the Chinese company. In all other cases the withholding tax on dividends has been cut to 10% from 12%. Dividends from a Chinese foreign investment enterprise (FIE) with at least 25% registered capital held by Singaporean investor(s) are generally exempt from Withholding Tax under the current Chinese domestic tax legislation. All other cases are taxed at 10%. Provided certain conditions are met the treaty also provides a full tax exemption in China on a capital gains derived by a Singapore investor from the disposal of shares in a Chinese company.
The revised China-Singapore DTT supports the rationale for multinationals when selecting Singapore as the location for an intermediate company to hold investments in China, and as for the China’s outbound businesses a Singapore incorporated company means an instant recognition internationally. There are other significant benefits which come mostly in the form of modern financial and banking systems that is easily available in the country and the potential access to the flourishing capital market here is an additional bonus. For cross border investments and businesses, the prime criteria are financial institutions that support the complex nature of international transactions and a strong judicial system. Singapore satisfies both these requirements and provides more indeed, CITI’s plans for the China wave is at the right time and we can anticipate more such efforts and facilities from its peers in the financial sector soon.
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