In seeking to reduce pollution and energy consumption, Singapore has provided certain tax and fiscal incentives to encourage conservation of the environment, being:
- income tax measures such as accelerated allowances to promote energy-efficiency, and reduce pollution of the environment;
- the green initiative to promote environmentally friendly shipping; and
- the green tax rebate and exemptions for motor vehicles.
These incentives are outlined below.
Accelerated allowances for energy-efficient equipment and technology
Income tax rules allow for capital allowances to be deducted from taxable income for expenditure incurred over the working life of a capital asset (machinery or plant) by a person carrying on a trade, business or profession. The statutory regime provides an initial allowance of 20% of the cost of the asset, followed by annual allowances over 5 to 16 years depending on the asset acquired. Although the corporate income tax rate is low at 17% and the top marginal rate of personal income tax is 20%, tax savings can be increased through accelerated allowances which reduce the period of claim for capital expenditure on certain assets to 2 or 3 years. Accelerated allowances are also available at 100% of the capital expenditure on the following assets (i.e. one year write-off):
- Certified energy-efficient pollution control equipment or device Any equipment or device for the purpose of preventing, controlling or reducing air pollution or water pollution which satisfies the prescribed criteria.
- Certified energy-efficient equipment or energy-saving equipment Replacement equipment which has been certified by a registered professional engineer to be more energy-efficient than the equipment it replaces and means any air-conditioning system, boiler, water pumping system, washing or dry-cleaning machine system, refrigeration system, lift or escalator, or instant hot water system. This category also includes equipment certified by the Standards, Productivity and Innovation Board as energy-saving equipment, namely, any solar heating or cooling system, solar energy collection system, heat recovery system, power factor controller, high efficiency electric motor, variable speed drive motor control system, high frequency lighting system, computerized energy management system, or any other energy-saving equipment or device so certified.
- Certified low-decibel machine, equipment or system Any concrete crusher or splitter, plastic granulator or crusher, automatic sawing machine, metal press or stamping machine, machine with active control noise feature, or any other certified machine, equipment or system.
- Certified effective noise control device Any acoustic enclosure for machine, equipment or process, any acoustic silencer or muffler, any vibration absorption, isolation or damping device or any certified active noise control device.
- Certified effective engineering noise control measure for existing machine, equipment or process Any detachable personnel acoustic enclosure, acoustic barrier or shield, acoustic absorption device, or any certified modification to machine, equipment or process.
- New certified machine, equipment or system which reduces or eliminates exposure to chemical risk Any water-based degreasing machine or system, automated bagging or packing machine or system, automated degreasing machine or system, or other certified machine, equipment or system.
- New certified effective chemical hazard control device Any certified local exhaust ventilation system, fugitive emission control equipment or system, or dilution ventilation system.
- New certified effective chemical hazard control measure Any certified enclosed or automated system, or modification to machine, equipment or system.
All the above income tax incentives have been available for more than 10 years, having been progressively introduced since 1996.
Other income tax incentives
Since 2008, income from the trading of carbon emission credits has been included among income from qualifying commodities and products under the Global Trader Programme (GTP). The GTP offers concessionary tax rates of 5% or 10% over a period of at least 5 years. This is part of an initiative to position Singapore as a carbon trading hub in Asia. The GTP is a fairly popular incentive for companies to use Singapore as a regional centre from which to conduct substantial offshore trading activities and strategic functions.
Additionally, since 2009 income from transactions in emissions derivatives has been treated as qualifying income that is taxed at concessionary rates.
Maritime Singapore Green Initiative (MSGI)
Recently introduced in April 2011, MSGI is aimed at combating greenhouse gas emissions from maritime shipping through commitment of S$100million of funding over the next 5 years in 3 core programmes: the Green Ship Programme, the Green Port Programme and the Green Technology Programme.
Green Ship Programme
Incentives are provided to shipowners of Singapore-flagged ships who adopt energy-efficient ship designs that reduce fuel consumption and carbon dioxide emissions. Ships exceeding the requirements of IMO's Energy Efficiency Design Index are entitled to a 50% reduction in Initial Registration Fees (IRF) and a 20% rebate on Annual Tonnage Tax (ATT). The shipowners can also receive a new "Green Ship of the Year" award which has been added to the Singapore International Maritime Awards.
Green Port Programme
Ocean-going ships calling at the Port of Singapore are encouraged to reduce the emission of pollutants like sulphur oxides and nitrogen oxides. Ships that use type-approved abatement/scrubber technology or burn clean fuels with low sulphur content exceeding MARPOL requirements within the port can benefit from a 15% reduction from port dues.
Green Technology Programme Local maritime companies are enocuraged to develop and adopt green technologies through co-funding of up to half the qualifying costs. The Maritime and Port Authority of Singapore is setting aside S$25million for this programme, which will be increased by another S$25million in funding if the response is good.
Green Vehicle Rebate and Exemptions
To reduce dependency on fossil fuels for land transportation, hybrid, electric and compressed natural gas (CNG) cars are given a tax incentive by way of a 40% rebate on the Additional Registration Fee (ARF) which is the main car tax upon passenger vehicles.
In addition, on 25 June 2011, the Energy Market Authority and Land Transport Authority (LTA) jointly announced the launch of an electric vehicle (EV) test-bed. To promote industry participation in the EV test-bed, companies and organizations participating in the EV test-bed may apply to reduce certain indirect tax costs under the Enhanced Transport Technology Innovation and Development Scheme (TIDES-PLUS). The scheme is jointly administered by the Economic Development Board (EDB) and the LTA to support EDB's efforts in attracting automobile companies to undertake knowledge-based manufacturing, research and development (R&D) activities and testing of vehicles in Singapore.
Under the scheme, the new technology vehicles undergoing R&D and test-bedding in Singapore are granted exemptions from Additional Registration Fee (ARF), Certificate of Entitlement (COE) and road tax. The COE is a programme designed to limit car ownership by making prospective purchasers of motor vehicles bid for the entitlement to own a car for 10 years. COE prices have been rising sharply in recent years. Exemption from excise duty may also be applied for, in respect of the vehicles involved in the R&D and test-bedding of transport technologies. The exemption period has been increased to a period of six years under TIDES-PLUS from a period of two years under the previous TIDES scheme.
Companies and other business organizations operating in Singapore have several opportunities to save on their tax and other costs should they decide to align their business plans more closely with their corporate and social responsibility (CSR) goals.