Singapore

Singapore is a reputable global financial center. The offshore banking and finance sector is backed by strong economic and fundamental institutions, making it an attractive base for financial institutions. The country is strategically located to bridge the time differences between the financial markets of the United States and Europe. Singapore enjoys a stable social, political and economic environment with a skilled workforce and supported by government incentives. Singapore’s foreign exchange market ranks fourth in the world, the fifth largest center for derivatives trading and ninth in terms of overseas lending. There are three types of banks in Singapore, these are: full banks, restricted banks and offshore banks.

Full banks may offer a variety of banking services as set forth in the Banking Law. Restricted banks can offer the same services as full banks, only they cannot open savings accounts for clients in Singapore dollars and deposits in fixed accounts of less than 250,000 in Singapore dollars for non-bank clients.

Singapore’s history as a world financial center dates back to 1973 when foreign banks began operating in the country, at which point the category of offshore banks was created. These banks can offer the same services as full and restricted banks, only their function is more limited. In the local market, offshore banks can only receive interest-bearing deposits from approved financial institutions. Also, they cannot open more than one branch.

In Singapore, offshore banks conduct business under separate financial reporting entities called Asian Currency Units (ACUs). ACUs may incur liabilities and hold assets and conduct all types of banking activities in other currencies, but not in Singapore dollars. There are a number of incentives available to ACUs; one of the most important is that the ACUs are subject to only 10% tax on profits compared to 27% that is applied to other entities. In addition, ACUs are not subject to the liquidity and reserve requirements that apply to other banks. The main function of the ACUs is to route capital from North America, Europe and the Middle East to the emerging markets of Asia.

Mauricio

On the other hand, Mauritius is an emerging global financial center. Offshore transactions are normally conducted in currencies other than the Mauritian rupee by non-residents. The offshore business is mainly focused on the areas of investment trading, holding and fund management. The island is gaining a reputation as a destination of choice for structuring offshore funds and investment vehicles. Regarding location, Mauritius is strategically located between Africa and Asia and is considered a gateway to Africa.

The history of offshore banking in Mauritius dates back to 1989, when offshore banks were allowed to set up operations in Mauritius. However, it was in 1992 that two acts of parliament were passed that paved the way for the growth of the financial services sector.

There are a number of factors that make Mauritius an attractive center for offshore financial activities including: exemption from withholding tax for interest bearing deposits and freedom from other regulations applied to domestic banks. Offshore banks are also exempt from the rules of the Exchange Control Act. Compared to Singapore, offshore banks are subject to a mere 5 percent versus 10 percent in Singapore. Banks are also free to repatriate your profits without additional taxes. These banks are also exempt from stamp duty on documents associated with offshore activities. They also have access to agreements to avoid double taxation that Mauritius has signed with more than 33 countries. Finally, offshore banks are also exempt from capital gains tax and inheritance shares are not taxed.