Merchandise Trade

• Singapore has been a member of the World Trade Organization (WTO) since January 1, 1995.
   
• Singapore is generally a free port and open economy, and the average tariff is 0%. Around 99% of all imports into Singapore enter duty free.
   
• For social and environmental reasons, Singapore levies high excise taxes on beer, wine and liquor, tobacco products, motor vehicles and petroleum products. Singapore also restricts the import and sale of non-medicinal chewing gum.
   
• The Singaporean government introduced a carbon tax in May 2019 to reduce greenhouse gas emissions. The tax will be applied upstream on power stations and other large direct emitters.
   
• A goods and services tax (GST) of 7% is levied on the supply of goods and services made in Singapore by a taxable person in the course or furtherance of business. It was announced in the 2018 budget that this rate would be increased to 9% between 2021 and 2025. The only exemptions from the GST are prescribed financial services (including life insurance), the sale or rental of residential properties and the import and local supply of investment precious metals.
   
• GST was not previously charged on imports of services, but this changed from January 1, 2020, with the introduction of a reverse charge on local businesses that make exempt supplies and those that do not make any taxable supplies to account for GST on the services they import. Another change was that the government is now exempting cryptocurrency transactions from GST.
   
• For dutiable goods, the taxable value for GST is calculated based on the CIF (Cost, Insurance and Freight) value, plus all duties and other charges. In the case of non-dutiable goods, GST will be based on the CIF value plus any commission and other incidental charges whether or not shown on the invoice. If the goods are dutiable, the GST will be collected simultaneously with the duties. Special provisions pertain to goods stored in licensed warehouses and free trade zones (FTZ).
   
• Labels are required on imported food, drugs, liquor, paint and solvents, and the country of origin must be specified.
   
• There are two levels of labelling requirements for medicinal products. Administrative labelling requirements are not statutory requirements and are specified in the Health Sciences Authority (HSA)'s Guidance on Medicinal Product Registration in Singapore. Compliance is checked during the product registration process before marketing approval is granted. Legal labelling requirements are stipulated in the legislation related to medicinal products regulation in Singapore and are subject to the HSA's surveillance programme.
   
• The 'Safety Mark' is used for selected electrical and electronic products, and gas appliances that are sold to consumers for use in Singaporean households. All registered controlled goods must be tested to specific international and national safety standards and certified safe by designated product certification bodies.
• The 'Accuracy Label' covers weighing and measuring instruments intended for trade use. In Singapore, all weighing and measuring instruments used for trade purposes (such as price computing scales in supermarkets, baggage weighing machines at airports and seaports, and fuel dispensers at petrol stations) are regulated under the Singapore Weights and Measures Act and Regulations.

Sources: WTO – Trade Policy Review, Inland Revenue Authority of Singapore, Fitch Solutions​​​​​​​

Trade Updates

Singapore is a member of a number of free trade agreements (FTAs) that create a legally binding agreement between two or more countries to reduce or eliminate barriers to trade. The country first signed an FTA under the ASEAN Free Trade Area in 1992 and has since expanded its network to cover more than 23 regional and bilateral FTAs with different trading partners. As a member of ASEAN, Singapore participates in all group FTAs.

Multinational Trade Agreements

Active

1. ASEAN: In addition to Singapore, members include Brunei, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Malaysia, Thailand and Vietnam. Since 2015 almost all tariffs among member states have been removed in the ASEAN Free Trade Area. The FTA eliminates tariffs on 98.6% of goods and lower tariffs within the area have seen regional trade booming. The ASEAN Economic Community (AEC), which is currently under negotiation, will also serve to strengthen regional economic ties and improve trade volumes in Singapore. The AEC creates new opportunities and makes the investment case for business in South East Asia more compelling. ASEAN is Singapore's largest trading partner and top investment destination.
    
2. Mainland China-Singapore FTA: The FTA between Mainland China and Singapore entered into force on January 1, 2009, and was revised in November 2018. The agreement enhances economic co-operation between the two nations as the free trade accord facilitates productive competition. It also contributes to the economic integration of East Asia and the Asia Pacific region. Under the FTA, the two countries have accelerated the liberalisation of trade in goods on the basis of the Agreement on Trade in Goods of the Mainland China-ASEAN FTA and further liberalised trade in services. Mainland China has been Singapore's single largest trading partner since 2013, accounting for 12.2% of exports and supplying 13.4% of imports in 2018.
    
3. India-Singapore: The Comprehensive Economic Cooperation Agreement (CECA) between Singapore and India entered into force on August 1, 2005. The third CECA review was launched in September 2018 and focuses on trade facilitation, customs and e-commerce. Under the agreement, Singapore's goods exported to India enjoy tariff reduction or elimination, making them more competitive. Singaporean service providers also enjoy preferential access to India's services sector.
    
4. Japan-Singapore Economic Partnership Agreement (JSEPA): The JSEPA entered into force on November 30, 2002. Under the existing agreement, Japan increased its zero-tariff commitments from 34% of total tariff lines under the WTO to 77%. The JSEPA also liberalised trade in services significantly, expanding its commitments from 103 services sectors under the WTO to 135. The scope of the JSEPA can be categorised into three main areas: trade liberalisation and market access through concessions for trade in goods and services, enhanced co-operation for non-trade areas and institutional arrangements centred on a dispute settlement mechanism. Singapore also benefits from the ASEAN-Japan Comprehensive Economic Partnership.
    
5. United States-Singapore FTA and Economic Integration Agreement: Under this FTA, firms in Singapore benefit from reduced trade barriers and a large market with a high propensity for consumption of manufactured goods. The FTA entered into force on January 1, 2004. The United States is one of Singapore's most important trading partners, accounting for 7.7% of exports and 11.4% of Singapore's imports in 2018.
    
6. ASEAN-Mainland China: This FTA, which came into effect in January 2005 for goods and July 2007 for services, is a comprehensive economic cooperation agreement between ASEAN member states and Mainland China. The goal of the agreement is to eliminate tariffs and address behind-the-border barriers that impede the flow of goods and services. The FTA overlaps somewhat with the Singapore-Mainland China FTA.
    
7. ASEAN-India: The ASEAN-India trade in goods agreement came into force on January 1, 2010, for goods and on July 1, 2015, for services with the aim of minimising barriers and deepening economic linkages between the parties. The FTA involves the liberalisation of tariffs on more than 90% of products traded between the two regions, including the so-called special products, such as palm oil (crude and refined), coffee, black tea and pepper. The agreement will lead to the progressive elimination of tariffs on all goods. The framework agreement envisages the establishment of an ASEAN-India Regional Trade and Investment Area (RITA) as a long-term objective. The agreement overlaps with the India-Singapore FTA.
    
8. ASEAN-South Korea FTA (AKFTA): AKFTA came into force in June 2007 and May 2009 for goods and services, respectively, and allows 90% of the products traded between ASEAN and South Korea to enjoy duty-free treatment. The investment agreement entered into force in June 2009. AKFTA aims to create more liberal, facilitative market access and investment regimes between South Korea and ASEAN. A business council was set up in December 2014 to enhance economic cooperation between parties and to boost total trade to USD200 billion by 2020.
    
9. ASEAN-Japan FTA: Japan provides a huge market for a wide range of goods, with tariff-free trade. This benefits a number of important sectors, including manufacturing, agriculture, mining and chemicals production. The FTA entered into force on April 14, 2008, and overlaps with the Singapore-Japan FTA.
    
10. ASEAN-Australia-New Zealand FTA and Economic Integration Agreement (AANZFTA): This agreement for goods and services came into force on January 1, 2010. The FTA aims to eliminate tariffs for at least 90% of all tariff lines within specified timelines.
     
11. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong and ASEAN commenced negotiations for an FTA and an investment agreement in July 2014. After 10 rounds of negotiations, Hong Kong and ASEAN announced the conclusion of the negotiations in September 2017 and forged the agreements on November 12, 2017. The agreements are comprehensive in scope, encompassing trade in goods, trade in services, investment, economic and technical cooperation, dispute settlement mechanism and other related areas. The agreements will bring legal certainty, better market access, and fair and equitable treatment in trade and investment, thus creating business opportunities and enhancing trade and investment flows between Hong Kong and ASEAN. The agreements will also extend Hong Kong's FTA and investment agreement network to cover all major economies in South East Asia. The agreement came into force on January 1, 2019, but it will take time for all ASEAN members to comply as implementation is subject to completion of the necessary procedures. Hong Kong is a key export market and the reduction of tariffs will ease the trading process. Hong Kong's potential as a key export market increases the importance of AHKFTA.
     
12. Eurasian Economic Union (EAEU)-Singapore FTA: The EAEU and Singapore agreed to begin negotiations for an FTA in December 2016 and concluded five negotiation rounds. The two parties signed the FTA on October 1, 2019. The agreement aims to strengthen collaboration between the two parties in areas such as trade and investment, intellectual property rights protection, customs cooperation and competition enforcement.
     
13. European Union (EU)-Singapore FTA: The FTA between the EU and Singapore aims to eliminate duties for industrial and agricultural goods in a progressive step-by-step approach. The FTA entered into force on November 21, 2019. The agreement creates opportunities for market access in services and investments, and includes provisions in areas such as competition policy, government procurement, intellectual property rights, transparency in regulation and sustainable development. The EU is Singapore's third largest trading partner in goods and its largest services trading partner. Under the agreement, 84% of Singapore's exports will enter the EU duty free, while tariffs for the remaining goods will be removed within the first five years.
     
14. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): The agreement – comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – came into force on December 30, 2018, and represents 13.4% of global GDP. It aims to cut tariffs, to improve access to markets and to establish common ground on labour and environmental standards, and intellectual property protection. Under the agreement, 94% of Singapore's trade with other CPTPP countries will be tariff free.

Under Negotiation

1. Regional Comprehensive Economic Partnership (RCEP): Negotiations on a framework agreement for the RCEP have stalled after India announced its withdrawal from the trade pact at a RCEP summit held in Bangkok in November 2019. Expectations had been for negotiations to conclude in 2019, paving the way for the agreement to enter force by late 2020. RCEP negotiations without India may now be concluded in 2020, but the withdrawal of India is a setback in attempts to counter the growing wave of protectionism in the United States and other parts of the world. The RCEP will have broader and deeper engagement with significant improvements over existing regional FTAs and agreement will need to be reached on politically sensitive issues, including trade in services, investment rules and protection for intellectual property rights, and tariffs, where the target is to remove trade barriers on at least 92% of products within ten years. Formally launched in 2012, RCEP is a Mainland China and ASEAN-led project which, before the withdrawal of India, involved 16 countries, namely the 10 ASEAN countries and the ASEAN Free Trade Partners (Australia, China, India, Japan, South Korea and New Zealand). It would have been the world’s largest trade pact covering nearly half the world’s population, one third of global GDP and around 29% of global trade.
    
2. Pacific Alliance-Singapore FTA: The proposed FTA is between Singapore and the group comprising Chile, Colombia, Mexico and Peru, of which Singapore already has individual FTAs.
3. MERCOSUR-Singapore: The negotiations for an FTA between Singapore and the South American customs union (comprising Argentina, Brazil, Paraguay and Uruguay) began in July 2018.

Sources: WTO Regional Trade Agreements database, Enterprise Singapore, Fitch Solutions

Foreign Direct Investment

• Value Added Tax: 7%
• Corporate Income Tax: 17%

Source: Inland Revenue Authority of Singapore

Important Updates to Taxation Information

• The main changes announced in the 2018 budget related to corporate income tax and value-added tax regimes will be implemented over the short to medium term. These include enhancements of the tax rebates and adjustments to the Partial Tax Exemption and Start-up Tax Exemption schemes that are being implemented over 2018-2020. A 250% tax deduction for qualifying research and development projects, and 200% tax deductions for the first SGD100,000 of qualifying intellectual property (IP) registration costs and the first SGD100,000 of qualifying IP licensing costs were also introduced.
   
• Singapore imposes a GST. GST is expected to be raised to 9%, from the current 7%, between 2021 and 2025. GST on imported services, including foreign digital service providers, took effect from January 1, 2020.
• The Singapore government introduced a carbon tax (May 2019) to reduce greenhouse gas emissions. The proposed carbon tax will be applied upstream on power stations and other large direct emitters. The carbon tax will be implemented after consultation with stakeholders.

Employment Pass (EP)

The EP is applicable to foreign individuals employed as managers, executives and skilled professionals. It is valid for two years and may be renewed thereafter for up to three years at a time. It is generally applicable to individuals with a minimum monthly salary of SGD3,600 (as of April 2019). Applicants may also apply for a pass for their dependants, such as spouses and unmarried children under the age of 21. The EP must be applied for by the employer on behalf of the individual. The average time needed to obtain an EP is five weeks and falls under the auspices of the Ministry of Manpower (MoM).

S Pass (SP)

The SP is identical to the EP, but is applicable to individuals with a minimum monthly income of SGD2,300 (and SGD6,000 in order to receive benefits for dependants). The average time needed to obtain an SP is three weeks and falls under the auspices of the MoM.

Personalised Employment Pass (PEP)

The PEP is applicable to high-earning individuals who already have an EP or are overseas foreign professionals. The minimum monthly income for an applicant already in possession of an EP is SGD12,000, whereas foreign professionals require a minimum monthly income of SGD18,000 to qualify. The PEP allows holders to switch jobs without the need to reapply for a pass and permits the individual to stay in Singapore for an additional six months before securing their next job. The PEP is only valid for three years. After the three years, the individual needs to obtain an EP. The process to obtain a PEP takes roughly eight weeks and falls under the auspices of the MoM.

Entrepreneur Pass (EntrePass)

The EntrePass is applicable to foreign individuals who wish to start a business in Singapore. The pass is valid for two years and the applicant may apply for it themselves. The EntrePass may be renewed if the applicant's company obtains funding from an accredited source, holds intellectual property (IP; registered with a recognised IP institution), does research with a recognised institution, or is being incubated by a government-supported incubation programme. Applicants may also apply for a dependant pass for their family members.

Work Permit

The work permit applies to semi-skilled jobs in manufacturing and construction, and jobs in the services sector. A work permit is valid for up to two years and is only applicable to companies that pay a levy and security bond, meet the quota criteria and provide the applicant with healthcare. Work permits do not allow for dependants and take up to seven working days to be processed.

Training Employment Pass (TEP)

The TEP is valid for three months and applicable to individuals undergoing practical training for jobs of a professional, managerial, executive or specialist nature in Singapore. The applicant must also earn a minimum of SGD3,000 a month. The TEP is not renewable.

Training Work Permit (TWP)

The TWP is applicable to unskilled or semi-skilled foreign trainees or students on practical training in Singapore for up to six months. Students are subject to a levy. An employer may only have 5% of its total workforce or 15 employees (whichever comes first) working under TWP regulations.

Employment Charges

The Foreign Worker Levy is a monthly levy of up to SGD950 that employers are liable to pay for each foreign employee hired. The levy rate depends on the employee's qualifications, the employer's industry and the ratio of foreigners to Singaporeans and permanent residents employed in the company. The government has announced that levy increases for work permit holders in the marine and process sectors that were originally proposed for July 1, 2016, will be deferred for another year until July 1, 2019.

Visa Requirements

Citizens of Afghanistan, Algeria, Bangladesh, the Commonwealth of Independent States, North Korea, Egypt, Georgia, Ukraine, India, Iran, Iraq, Jordan, Kosovo, Lebanon, Libya, Mali, Morocco, Nigeria, Mainland China, Pakistan, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, Turkmenistan and Yemen require a visa to travel to Singapore.

Workplace Quota

According to the 2019 budget, the government has revised workforce quotas aimed at the services sector. These include lowering the Dependency Ratio Ceiling (DRC) from 40% to 38% effective from January 1, 2020, with a further decrease to 35% set to take effect from January 1, 2021. The government also lowered the sector's SP sub-DRC from 15% to 13% effective from January 1, 2020, and will further lower to 10% effective from January 1, 2021. These revised limits will be applicable as and when companies apply for permit renewals.

Sources: Government websites, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices

Source: Fitch Solutions
Date last reviewed: April 27, 2020

Hong Kong’s Trade with Singapore

Export Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Electrical machinery, apparatus and appliances, and electrical parts thereof	2,924.2
Commodity 2	Telecommunications and sound recording and reproducing apparatus and equipment	1,782.0
Commodity 3	Office machines and automatic data processing machines	935.7
Commodity 4	Power generating machinery and equipment	824.3
Commodity 5	Miscellaneous manufactured articles	761.7

Import Commodity	Commodity Detail	Value (US$ million)
Commodity 1	Electrical machinery, apparatus and appliances, and electrical parts thereof	26,678.3
Commodity 2	Petroleum, petroleum products and related materials	2,632.0
Commodity 3	Office machines and automatic data processing machines	1,933.5
Commodity 4	Essential oils and resinoids and perfume materials; toilet, polishing and cleansing preparations	972.6
Commodity 5	Telecommunications and sound recording and reproducing apparatus and equipment	831.6