International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
business transacted, their scope of business in the Singapore dollar retail
market is slightly more limited. In the domestic market, offshore banks
cannot accept any interest-bearing deposits from persons other than
approved financial institutions, nor can they open more than one branch. By
the end of November 1998, there were 104 offshore banks in Singapore, all
of which were branches of foreign banks. By 2003 the number of banks
crossed 120.
In Singapore, offshore banking is carried out by separate bookkeeping
entities known as Asian Currency Units. ACUs do not have the right
to incur assets and liabilities in Singapore dollars but can engage in all types
of banking transactions in other currencies. Various incentives have been
given to encourage the development of ACUs, the most important of which
is that ACUs face a tax on profits of only 10% compared with the standard
corporate rate of 27% and are not subject to reserve and liquidity
requirements. ACUs have functioned in the region primarily as a centre for
routing capital from markets in Europe, North America and the Middle East
to the fast growing regions of Asia.
Important measures to promote offshore banking in Singapore include:
• 1973 – Offshore banking licenses issued to seven foreign banks;
corporate tax of ACU on interest earnings from overseas loans reduced
from 40% to 0%; interest received by non-resident holders of approved
Asian dollar bonds exempted from tax.
• 1976 – Non resident deposits with ACUs and approved Asian dollar
bonds held by non-residents exempted from Singapore estate duty.
• 1979 – Income earned from offshore general reinsurance business
granted 10% concessionary tax rate.
• 1980 – Stamp duty on ACU offshore general reinsurance business
granted 10% concessionary tax rate.
• 1980 – Stamp duty on ACU offshore loan agreements and Asian dollar
bond certificates abolished.
• 1983 – ACUs granted 5 year tax holiday for all income derived from
syndicated offshore loans arranged in Singapore.
• 1989 – A concessionary 10% tax rate was granted on income from
international oil trading activities.
• 1990 – Monetary Authority of Singapore (MAS) raised the ceiling on
foreign ownership of shares in local banks to 40% from 20%.
Only for Private Circulation