Singapore has abolished Estate Tax, inherited during the British era, with immediate effect (15 Feb 2008).
The move is set to encourage Singapore to become an attractive wealth-management centre for building up wealth by Singaporeans and foreigners.
In his budget speech, Singapore Finance Minister Tharman Shanmugaratnam said:
“Estate duty is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time. It was especially relevant at the time when the bulk of wealth comprised land that was passed down through the family. But these days, wealth is being created in many more ways, and by a wider group of entrepreneurs.
“Wealth is also being managed today on a global basis. Proponents of removing estate duty have therefore argued that removing it would encourage wealthy individuals from all over Asia to bring their assets into Singapore, thus supporting the growth of the wealth management industry.
“Ordinary Singaporeans have also argued that having worked, paid taxes on their income and property, and built up their savings, they want to be able to pass it on to their families. Some incurred estate duty when their estates receive large life insurance payouts upon their deaths.”
Exemption from estate duty had applied to the first $9 million of residential properties and the first $600,000 for non-residential assets. While the Government did consider raising the $600,000 limit so estate duty would have less effect on middle and upper-middle-income estates, this would further shrink an already narrow tax base and render the tax less effective.
Shanmugaratnam added: “Removing Estate Duty would not just be a practical or expedient measure but one that on balance will be in our collective interest. If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth.”
Singapore’s remaining tax on wealth is now on property and this would be retained. “You cannot tax-plan it away. It also does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones,” he remarked.