Licensed Warehouse Scheme
- a22162
- Jul 1
- 5 min read
Singapore Licensed Warehouse Scheme Explained
The Licensed Warehouse (LW) Scheme in Singapore is a crucial program administered by Singapore Customs. It is designed to enhance Singapore's position as a logistics and distribution hub by allowing approved companies to store imported dutiable goods with the suspension of Goods and Services Tax (GST) and Customs/Excise duties.
What are Dutiable Goods? In Singapore, dutiable goods primarily include:
Liquor
Tobacco
Motor Vehicles
Petroleum and Biodiesel Blends
How the Scheme Works: Conceptually, the LW Scheme extends the Free Trade Zone (FTZ) into a business's premises. This means that when dutiable goods are moved from an FTZ or imported via land checkpoints into a Licensed Warehouse, the duty and GST on these goods are suspended. Similarly, if dutiable goods are transferred between Licensed Warehouses, the duty and GST remain suspended. These taxes only become payable when the dutiable goods are removed from the Licensed Warehouse for consumption or sale in the local market.
Benefits of the Licensed Warehouse Scheme:
Duty and Tax Deferment:Â A major advantage is the deferral of Customs duties and GST until the goods are removed from the warehouse for local consumption. This significantly improves cash flow for businesses, especially those dealing with high-value goods.
Cost Savings:Â By suspending duties and GST, businesses can reduce their upfront costs and optimize their budget.
Enhanced Cash Flow:Â Deferring tax payments allows companies to utilize their capital more strategically for other business operations.
Flexibility in Inventory Management:Â Businesses can store goods for an indefinite period, allowing for better planning of distribution or re-export based on market conditions or demand.
Streamlined International Shipping:Â It simplifies logistics for importers and exporters, allowing goods to move across borders while remaining under customs control.
Security and Compliance: Licensed Warehouses are subject to stringent security and compliance protocols by Singapore Customs, ensuring the safety of goods and adherence to regulatory requirements. Many also offer value-added services like labeling, packaging, and distribution within the warehouse, further reducing operational costs.
Types of Licensed Warehouses: Singapore Customs offers three types of Licensed Warehouse licenses (Type I, Type II, and Type III) to cater to different business needs and complexities.
Eligibility and Requirements: To qualify for the Licensed Warehouse Scheme, companies generally need to meet the following criteria:
GST-Registered:Â Be a GST-registered trader with the Inland Revenue Authority of Singapore (IRAS).
Valid Customs Account:Â Possess a valid Customs Account with Singapore Customs.
Good Compliance Record:Â Have a proven record of good compliance and payment with both Singapore Customs and IRAS.
Designated Premises: The proposed licensed premises must be a storage-based facility with adequate security measures. The company must have legal authority and control over the premises.
TradeFIRST Assessment:Â Undergo a Trade Facilitation & Integrated Risk-based System (TradeFIRST) assessment by Singapore Customs and meet the mandatory criteria, achieving the minimum band required for the specific LW license type (e.g., "Standard" for Type I, "Intermediate" for Type II, "Enhanced" or "Premium" for Type III).
Accountability:Â Be responsible for the security, accountability, and control of all goods stored in the licensed premises.
Robust Inventory Control:Â Maintain accurate and updated inventory records with "track and trace" capabilities.
Compliance with Laws:Â Comply with the GST Act, Customs Act, Customs Regulations, and all specific terms and conditions of the LW license.
Assistance to Customs:Â Provide full assistance to Singapore Customs for any official activity, including investigations, periodic audits, and stock checks.
Application Process: The application process generally involves:
TradeFIRST Self-Assessment:Â Complete the TradeFIRST Self-Assessment Checklist.
Prepare Supporting Documents:
Latest Accounting and Corporate Regulatory Authority (ACRA) BizFile report.
Audited financial statements for the past 3 years.
Layout plan of the proposed licensed area, indicating entry/exit points and security features (CCTV, alarm systems).
Title deed or tenancy agreement for the premises.
Any other relevant supporting documents.
Online Application:Â Submit the application online through the relevant Singapore Customs portal.
An annual license fee is payable upon issuance of the license, which is based on the projected potential duty or the average past monthly duty of the dutiable goods stored.
How Bestar can Help
Applying for and maintaining a Licensed Warehouse (LW) Scheme in Singapore involves navigating complex regulations, extensive documentation, and stringent compliance requirements from Singapore Customs. This is where engaging Bestar can be invaluable. Here's how we can help:
1. Pre-Application Assessment and Feasibility:
Initial Feasibility Study:Â Bestar can assess if the LW scheme is truly beneficial for your specific business model, operational volume, and the nature of your dutiable goods. We'll help you understand the potential cost savings and operational benefits.
Eligibility Assessment:Â We will review your company's profile, existing operations, and systems against the stringent LW eligibility criteria. This includes checking your GST registration, Customs Account, compliance history, and premises suitability.
License Type Recommendation:Â Based on your needs (e.g., export ratio, volume, multiple locations), we can advise on the most suitable LW license type (Type I, II, or III), which has different requirements and benefits.
2. TradeFIRST Preparation and Enhancement:
Gap Analysis:Â The TradeFIRST assessment is a critical hurdle. Bestar can conduct a thorough gap analysis of your current procedures, systems, and security measures against the TradeFIRST Self-Assessment Checklist criteria.
Process Improvement:Â We will recommend and help you implement necessary improvements to your inventory management systems, internal controls, security protocols (CCTV, access control), and documentation to meet TradeFIRST requirements.
SOP Development:Â They can assist in developing or refining Standard Operating Procedures (SOPs) for all Customs-related activities, such as goods receipt, storage, removal, and discrepancy reporting, ensuring they are compliant with LW scheme requirements and TradeFIRST. This is crucial for demonstrating robust internal controls.
3. Application Management:
Document Preparation:Â The application requires a significant amount of detailed documentation (ACRA BizFile, audited financial statements, layout plans, tenancy agreements, etc.). Bestar can guide you through gathering, preparing, and organizing all required supporting documents accurately and completely.
Application Form Completion:Â We will assist in accurately completing the LW application forms and the TradeFIRST self-assessment checklist, minimizing errors that could lead to delays or rejections.
Liaison with Customs:Â Acting as a liaison, we can communicate with Singapore Customs on your behalf, responding to queries, scheduling on-site assessments, and facilitating smooth communication throughout the application process. This saves you time and ensures timely responses to Customs' requests.
4. Post-Licensing Compliance and Optimization:
Ongoing Compliance Support: Once licensed, maintaining compliance is paramount to avoid penalties or license revocation. Bestar can provide ongoing advice on adhering to LW license conditions, including proper record-keeping, timely declarations, and managing security requirements. We can also keep you updated on changes in Customs regulations.
Audit Preparation:Â We can help your company prepare for routine or ad-hoc Customs audits by conducting pre-audit reviews and even mock audits to identify and rectify potential issues before an official inspection.
Training:Â We can conduct training for your staff on LW scheme requirements, permit declaration procedures through TradeNet, and overall compliance best practices, ensuring your team is well-versed in their responsibilities.
Operational Efficiency:Â Beyond compliance, Bestar can advise on optimizing your LW operations to maximize the cash flow benefits, minimize administrative burden, and integrate the scheme seamlessly into your supply chain.
5. Specialized Expertise:
Interpretation of Laws:Â We possess in-depth knowledge of the Customs Act, GST Act, and other relevant legislation impacting LW operations, providing accurate interpretations to ensure your practices are legally sound.
GST Implications:Â We can provide specific guidance on the GST implications of your LW operations, including proper accounting for GST deferrals, zero-rated exports, and local consumption.
Risk Management:Â We can help identify potential risks related to non-compliance and establish robust internal controls to mitigate these risks.
In summary, engaging Bestar for the Licensed Warehouse Scheme in Singapore can significantly streamline the application process, enhance your chances of approval, ensure ongoing compliance, and help you maximize the financial and operational benefits of the scheme. Our expertise saves time, reduces the risk of errors and penalties, and allows your business to focus on its core activities.