Singapore remains a vibrant hub for businesses, attracting entrepreneurs worldwide with its favorable business environment. In May 2024, 4,724 new companies were formed, showcasing ongoing interest in Singapore’s dynamic business landscape. The city-state continues to refine its regulations to ensure a strong and secure economy. Below is our monthly recap of recent regulatory changes, including amendments to the Cybersecurity Act, the introduction of new support schemes for unemployed employees, new flexible work regulations, and other measures that reflect the government’s commitment to fostering a resilient, adaptable, and equitable environment for businesses and workers alike.
Singapore Economy Keeps 2024 Growth Forecast
Singapore has maintained its growth forecast for 2024 at 1 to 3 percent. The Ministry of Trade and Industry (MTI) announced this on May 23, highlighting that the external demand outlook remains strong and is expected to improve throughout the year. The GDP for the first quarter showed a growth of 2.7 percent, unchanged from April’s estimate and higher than the 2.5 percent expected by private-sector economists.
The first quarter’s performance was better than the previous quarter’s growth of 2.2 percent. RHB’s acting group chief economist, Barnabas Gan, noted that the services industry played a significant role in this growth, expanding by 3.9 percent year-on-year. This growth in services outweighed the declines in manufacturing and construction. Despite some risks of slower growth in the second quarter, the MTI remains optimistic about a gradual pickup in the manufacturing sector and positive prospects for aviation, tourism, and consumer-facing sectors.
The MTI also pointed out that the finance and insurance sectors are set to benefit from increased tourist spending and the anticipated stabilization of global interest rates. This will support the banking and fund management segments through higher commissions and fees. The outlook for the electronics cluster within the manufacturing sector is also positive, with expected recovery in the coming quarters, which will positively impact related industries like precision engineering and wholesale trade.
UK and Singapore Strengthen Collaboration in Sustainable Finance and FinTech
On May 8, the United Kingdom and Singapore held the 9th UK-Singapore Financial Dialogue in Singapore, discussing opportunities in sustainable finance and FinTech. Both countries exchanged views on Non-Bank Financial Intermediation (NBFI) and efforts to enhance cross-border payment connectivity. The dialogue emphasized the importance of collaboration to support the net zero agenda, improve financial disclosures, and develop green finance initiatives.
In sustainable finance, the UK and Singapore reaffirmed their commitment to scale financing for the net zero transition. They discussed transition planning, with the UK providing updates on its Transition Plan Taskforce and Singapore sharing its Transition Planning Guidelines. Both countries agreed on the importance of globally comparable transition plans and ongoing work at international forums like the G20 and Financial Stability Board. They also highlighted the need for consistent and reliable sustainability-related disclosures, discussing their respective standards and voluntary codes of conduct for ESG ratings and data product providers.
In the field of FinTech, the UK and Singapore explored ways to manage risks and seize opportunities in the digital space. They discussed the use of artificial intelligence in finance, emphasizing the need for international standards to balance innovation with risk management. Updates were provided on the UK’s regulatory regime for crypto assets and plans for a “digital pound” central bank digital currency. Both nations shared their initiatives in tokenization and distributed ledger technology, agreeing on the benefits of these technologies for the financial ecosystem. The dialogue concluded with commitments to continue collaboration in sustainable finance and FinTech, with industry-led roundtables planned for further discussion.
India-Singapore Double Tax Treaty: Delhi Tribunal Clarifies Service PE
The Delhi Tax Tribunal recently ruled on the concept of a Service Permanent Establishment (PE) under the India-Singapore Double Taxation Avoidance Agreement (DTAA). This ruling emphasized the necessity of the physical presence of employees in the source state to constitute a Service PE. This decision comes as a significant clarification amidst the evolving digital economy where traditional physical presence requirements are being challenged.
In the case under review, a Singapore-based legal advisory firm provided services to Indian clients both remotely and through physical visits. For the Fiscal Years (FY) 2019-20 and 2020-21, the firm’s employees were present in India for only 44 days in FY 2019-20 and none in FY 2020-21. The tax authorities argued that a virtual Service PE was constituted due to the remote provision of services. However, the Tribunal held that according to Article 5(6) of the India-Singapore DTAA, a Service PE requires the actual physical presence of employees in the source country. The Tribunal excluded days spent on vacation, business development, and common days from the count, ultimately ruling that the firm did not meet the 90-day threshold necessary to establish a Service PE.
The Tribunal’s decision rejects the notion of a virtual Service PE, aligning with traditional interpretations that emphasize physical presence. This ruling is particularly important as it provides clarity for businesses engaged in remote service provision. While some jurisdictions have moved towards recognizing virtual PEs, India-Singapore DTAA still mandates physical presence for Service PE.
New Inter-Ministerial Committee to Make Singapore’s Rules More Business-Friendly
In April the Singapore Government established a new inter-ministerial committee on Pro-Enterprise Rules Review, aimed to enhance the country’s business environment by making regulations more favorable for Small and Medium-sized Enterprises (SMEs). Chaired by Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong, the committee will collaborate with various business groups to understand their feedback and concerns regarding government rules and processes. By identifying opportunities for improvement, the committee seeks to reduce costs for businesses, particularly SMEs, when they interact with the Government.
As part of its efforts, the committee highlights ongoing initiatives, such as reducing regulatory costs for drone light show operators. Although this specific initiative is not directly carried out by the committee, it exemplifies the type of impact they aim to achieve. Additionally, Singapore has launched the Alliance for Action (AfA) on Business Competitiveness Program, focusing on manpower, land, and regulations. By gathering feedback and suggestions from both public and private sectors, the AfA aims to present recommendations to the government by end-2024.
The new inter-ministerial committee will reinforce existing efforts and collaborate with stakeholders to enhance Singapore’s pro-business environment.
Former Group Executive Director First to Be Jailed for Unauthorized Collection of GST
Vijay Kumar Muvva, the former Group Executive Director of Ensoft Consulting Pte Ltd, has made history as the first individual to be jailed for unauthorized collection of Goods and Services Tax (GST) under section 64A of the GST Act. Vijay was also convicted for failing to notify the tax authorities of Ensoft’s liability to register for GST, highlighting a significant breach of Singapore’s tax regulations.
Vijay faced multiple penalties for his actions. For failing to notify the tax authorities of Ensoft’s liability to register for GST, he was fined S$2,000 and penalized S$13,961. For unauthorized collection of GST, he received a 7-week imprisonment sentence and a penalty of S$83,300. These penalties underscore the seriousness with which the Singaporean authorities treat such offenses, especially following the enactment of section 64A in 2019, which was designed to bolster prosecution and deterrence against unauthorized GST collection.
The case against Vijay involved Ensoft’s business operations in employment, recruitment, and manpower outsourcing for the IT industry. Despite Ensoft’s taxable supplies exceeding S$1 million by December 2017, which mandated GST registration by January 2018, Vijay failed to comply. Moreover, he knowingly authorized his employees to collect GST from clients despite Ensoft not being GST-registered. This breach of duty not only violated GST laws but also resulted in significant financial penalties and imprisonment, setting a precedent for future cases of unauthorized GST collection.
Increase in Maximum Fines for Workspace Safety Breaches
In an effort to maintain Singapore’s commendable workplace safety record and foster a culture of Workplace Safety and Health (WSH) excellence, the Ministry of Manpower (MOM) has announced significant measures effective from 1 June 2024. These measures include an increase in maximum fines for safety breaches under the WSH Act’s Subsidiary Legislation and the mandatory installation of Video Surveillance Systems (VSS) at high-value construction sites.
The MOM will raise the maximum fines for safety breaches from S$20,000 to S$50,000. This change aims to act as a stronger deterrent against violations of the WSH Act that could result in severe consequences such as death, serious injury, or dangerous occurrences. The increase is designed to hold senior company leadership more accountable, reinforcing the importance of proactive safety measures and the creation of a robust safety culture within organizations. This enhanced penalty structure underscores the commitment to improving WSH standards and ensuring that severe offenses are met with appropriate repercussions.
Additionally, the construction sector, a significant contributor to workplace injuries, will see the introduction of mandatory VSS installations at sites with contract sums of S$5 million and above. The VSS will enable remote monitoring of high-risk activities, deterring unsafe behaviors, providing valuable training material, and assisting in the investigation of safety incidents. This measure is expected to push for further improvements in the sector, promoting a proactive approach to WSH management and fostering a culture of incident prevention. Collectively, these initiatives reinforce the notion that workplace safety is a shared responsibility, essential for the well-being and success of both workers and businesses in Singapore.
New Flexible Work Arrangements Regulations
Singapore’s new regulations on Flexible Work Arrangements (FWA) emphasize fair compensation and robust processes for handling employee requests. Minister of State for Manpower Gan Siow Huang clarified that under the new regulations employers cannot reduce pay for employees on FWAs if their productivity remains unaffected. This comes in response to concerns about the interaction between these guidelines and the Progressive Wage Model (PWM), which ties wage increases to skills development and productivity. Effective from December 1, 2024 the guidelines require employers to evaluate FWA requests fairly within two months, only rejecting them based on valid business reasons and providing written explanations.
The PWM, targeting sectors with high concentrations of lower-income employees like cleaning and security, mandates wage increases linked to productivity gains. Nominated Member of Parliament Raj Thomas raised concerns about potential pay reductions if flexible work requests led to fewer workdays, possibly breaching PWM wage floors. Gan refuted this, stressing the importance of competitive compensation to attract and retain talent. Minister of Manpower Tan See Leng supported this view, highlighting that the PWM’s spirit should guide the guidelines’ implementation, aiming for a nuanced approach built on tripartite collaboration.
Singapore to Introduce New Scheme to Support Unemployed Employees
The Singapore government is set to launch a re-employment support scheme by the end of the year, aimed at providing additional assistance to citizens who face involuntary unemployment due to changing economic conditions. This initiative was announced by Dr. Tan See Leng, Minister of Manpower, in his recent May Day message, highlighting the need to bolster support for employees experiencing unexpected job losses in a rapidly evolving economic landscape.
The “re-employment support scheme,” initially introduced by Prime Minister Lee Hsien Loong during the 2023 National Day Rally speech, will offer temporary financial assistance to retrenched employees. This support is intended to help them pursue skill enhancement programs that can lead to sustainable long-term employment. Dr. Tan emphasized the government’s dedication to refining the scheme based on a comprehensive review of global best practices, ensuring it effectively aligns workforce capabilities with future job demands.
Dr. Tan outlined the Ministry of Manpower’s strategic priorities, which include incentivizing employees to participate in skill enhancement initiatives such as Workforce Singapore’s Career Conversion Programme and the Overseas Markets Immersion Programme. These efforts aim to provide global market exposure and better prepare the workforce for future challenges. Additionally, ongoing initiatives to strengthen workplace safeguards, such as the upcoming Workplace Fairness Legislation and Tripartite Guidelines on Flexible Work Arrangement (FWA) Requests, reflect the government’s commitment to fostering equitable, progressive, and secure workplaces.
Amendments to Cybersecurity Act 2018: More Entities Covered
On 3 April 2024, the Cybersecurity (Amendment) Bill was tabled in Parliament for its first reading, aiming to update the Cybersecurity Act 2018. The Bill seeks to keep pace with the evolving cyber threat landscape and technological advancements. Key changes include updating provisions related to the cybersecurity of Critical Information Infrastructure (CII) and introducing new regulations for owners of Systems of Temporary Cybersecurity Concern (STCC), Entities of Special Cybersecurity Interest (ESCIS), and major Foundational Digital Infrastructure (FDI) service providers.
The Bill strengthens the responsibility of CII owners to ensure cybersecurity resilience, even as they adopt new technologies and business models like cloud computing. A new Part 3A in the Act will regulate providers of essential services that depend on third-party-owned CII, making these providers accountable for the cybersecurity of the third-party systems they use. Additionally, CII owners must report cybersecurity incidents involving systems under their control or those of their suppliers that interconnect with their infrastructure.
New provisions will also regulate STCC and ESCIS. The Commissioner of Cybersecurity can designate computers or systems as STCCs if they pose a high temporary cybersecurity risk with potentially severe impacts on national security, public safety, or the economy. Similarly, ESCIS designation will apply to entities storing sensitive information or performing critical functions whose disruption could significantly affect national interests. The Bill also introduces requirements for FDI service providers, such as cloud services and data centers, to adhere to cybersecurity standards and report incidents, thereby extending the Act’s regulatory scope to critical digital infrastructure.
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