Study of the operational headquarters incentive awarded to firms in the electronics industry
Lam, Wei Pin
Date of Issue1993
College of Business (Nanyang Business School)
The Singapore Government has always been generous in giving tax incentives to promote a conducive environment for doing business. One of such incentives is the OHQ incentive scheme. Under the scheme, tax concessions such as tax exemption on dividends and concessionary tax of 10% on management fees, royalties, interest and finance and treasury services are given to a company conferred the OHQ status. The objectives of our study are as follows: a. to evaluate the effectiveness of the OHQ scheme in drawing companies in the electronics industry to site their regional headquarters (HQ) in Singapore; b. to identify the other factors necessary to attract the siting of HQs in Singapore; c. to assess the impact of the OHQ scheme on approved companies' operations; d. to accumulate responses from the companies on the importance of the OHQ tax incentive and suggestions for improvements to the scheme. The study focuses on the electronics industry as it is an industry actively promoted by the Government. Furthermore, with a shift of production bases to surrounding Asian countries, electronics firms are looking to Singapore to site their headquarters and R&D centres. From our findings, we have concluded that the OHQ scheme itself is not an important factor of consideration for electronics firm to site their HQ here. However, on acquiring the OHQ status, the 10% concessionary tax rate on management fees seems to be the most important benefit under the scheme. One of the current developments is the new Japanese tax legislation that may affect the OHQs of Japanese firms. Our study tries to evaluate the impact of this new legislation and suggests ways to mitigate the negative effects on the OHQ scheme. However, the full effects of this legislation has yet to be seen. Other countries like Malaysia have also come up with similar OHQ schemes. In order to remain a step ahead of its competitors, Singapore must constantly improve and upgrade the factors like infrastructure, skilled labour which companies consider as important for siting their HQs.
Final Year Project (FYP)
Nanyang Technological University