Why start a business in Singapore?
Table of Contents
Doing business in Asia is one of the promising options for entering new markets. International companies and investors decide to register a company in Hong Kong to have access to mainland China, and Singapore is the platform for entering Southeast Asia. Both Hong Kong and Singapore are Asian tigers, reflecting high rates of economic development. Moreover, geographically and for socio-political reasons, these two jurisdictions are well-positioned. However, as practice shows, lately, more and more entrepreneurs are interested in registering a company in Singapore.
Why start a business in Singapore? One of the reasons is the peculiarities of the jurisdiction, benefits of registering a company in Singapore:
- highly skilled workforce
- high level of banking
- the possibility of obtaining tax benefits if certain conditions are met
- the corporate tax rate is lower than in Hong Kong
- the powerful legal system of common law
- business regulation in Singapore has more loyal audit requirements
- a large number of treaties for the avoidance of double taxation.
With the continuing uncertainty surrounding Hong Kong and the barriers to entry north of the border for Western tech market players, the combination of these factors is putting Singapore in the lead.
Why start a business in Singapore? It is essential to understand that the economic and political directions of Hong Kong and Singapore are likely to change and turn over and over again. Singapore has become a strong competitor in the Asian market and has created a favorable environment for international business. As for Hong Kong, today, experts note that it has a lower attractiveness rating according to the results of most studies.
Starting company in Singapore
Before starting a company in Singapore and starting a conversation about the merits of jurisdiction, it is highly advisable to understand the terminology. The fact is that the definitions of a tax-free zone and an offshore paradise, often awarded to Singapore, are generally at least not entirely correct; more precisely, they are entirely wrong. Therefore, in general, it will not be possible to do without mandatory contributions to the budget.
Classic offshore jurisdictions really do not levy any corporate taxes, but taking into account the current trends in the economy, it is better not to bet on them; this is to blame for the trend that has emerged in recent years towards an increase in the level of control and a departure from the anonymous business, which is why companies registered in offshores are increasingly having problems with banking services.
Midshore is, in a sense, a compromise option. A short but precise formula can describe it. There are corporate taxes, but they are few, or they are low. Simply put, if you decide to open a company in Singapore, there will be pros and cons to this step. You will be relieved of the need to make a difficult choice between the company’s status in the eyes of partners and the chances of its survival in the short and medium-term.
Most of the keys in this country will help you answer why to start a business in Singapore.
Benefits of registering a company in Singapore
It will be difficult for the Singapore company formation to find a jurisdiction with a similar set of advantages in the South Asian region. Moreover, they are extremely rare in the world. Credit goes to Lee Kuan Yew, the father of the Singaporean economic miracle, who served as prime minister for 31 years. He turned the impoverished state, which had just gained independence, into one of the world leaders with favorable conditions for the Singapore company formation.
Benefits of registering a company in Singapore:
- Stable economic and political situation- Lee Kuan Yew’s methods effectively stifled any opposition but avoided the traditional pattern of the whole world of violence we will destroy, usually repeated every time after a change of power. Most interestingly, the oppressed residents have nothing against it.
- There is a developed transport and information infrastructure.
- Dependence on exports- You are probably already prepared to scribble angry letters and accuse the author of incompetence, but there is no mistake here. The lack of minerals initially allowed Singapore to focus on economic spheres for which, figuratively speaking, oil, coal, and metal are not needed.
- Favorable investment climate- The funds invested in the jurisdiction will surely pay off and begin to make a profit. There is almost no risk in this; the only question is timing.
- There is no exchange control.
- A developed financial services sector- In this case, you do not have to agree to hard conditions. With a well-designed business plan and minimal persistence, it is not difficult to get additional investments.
- There are no restrictions on the movement of capital.
- Profits earned exclusively in the territory of the jurisdiction are subject to taxation
- There is substantial fiscal relief for new companies.
- There are no fixed requirements for the authorized capital.
- There is minimal risk of double taxation.
- If the company is exempt from taxes, there is no need to go through an audit procedure.
Cons of the Singapore company formation
The pros and cons of this step need to be fully analyzed to start a company in Singapore. With the undoubted pros you just figured out, now it’s time to talk about the cons. They are much less numerous, but their existence should be remembered.
Disadvantages of starting a company in Singapore:
- All information about the company, including data on the director and shareholders, is stored in the unified state register. There is nothing critical in this, but for some types of business, this is undesirable. You should also consider the risk of information falling into the hands of your competitors or ill-wishers. On the other hand, KYC/AML compliance would not have been possible otherwise.
- For the Singapore company formation, a director is only an individual and a local resident.
- The secretary is also required to be a resident of Singapore.
- The company is required to have a local auditor.
- There are annual meetings of shareholders and directors.
It is easy to see that it is quite possible to get around some of the shortcomings (for example, get a work visa and become a director yourself). Others can be called so with a certain stretch. Therefore, if you are planning a starting company in Singapore, the pros and cons of the sum of the characteristics make such an enterprise extremely profitable.
Why register an offshore company in Singapore?
Starting an offshore company in Singapore offers several benefits.
Reduced tax liabilities. Taxes are one of the main considerations for setting up an offshore company. One of the unique advantages of Singapore is its simplicity and low tax rates.
- Low corporate and personal tax rates characterize Singapore’s taxation system;
- measures of tax incentives and reduction of the tax burden;
- no tax on the increase in the market value of capital;
- no tax on dividends;
- a territorial single-tier taxation system and the presence of a broad network of countries with which tax agreements have been concluded.
Since taxation in Singapore is geographically based, taxes are applied to income earned by a company in Singapore or foreign-sourced income earned in Singapore. Suppose Singapore-sourced income from a foreign source meets certain qualifying conditions. In that case, it is exempt from taxation in Singapore, and income from a foreign source that is not transferred to Singapore is exempt from taxation in Singapore. Singapore has a one-tier tax policy, which means that dividends can be paid to shareholders without paying tax after tax on income at the corporate level. The corporation tax rate is around 8.5% on profits up to SGD300,000; beyond that, a flat rate of 17% comes into effect. In addition, your new company will not pay SGD100,000 tax on the first taxable income for each year of the first three years after tax registration if the company has a maximum of 20 shareholders, of which at least one shareholder is an individual who owns at least 10% of the shares.
The image of a trustworthy company. Since Singapore is not a tax haven, the registration of an offshore company in Singapore gives it a high reputation as a legal entity that inspires confidence. If the offshore company is registered in Singapore, the interested parties will take your business seriously.
Ease of registering an offshore company. Singapore is often recognized as the easiest place to do business in the world. The Singapore company formation is fast and efficient without red tape. The registration procedure is fully computerized and consists of only two stages of the approval of the company name and the filing of registration documents. Both procedures can be done online, and usually, an offshore company can be registered in Singapore in 1-2 days.
Liberal foreign property policy. Singapore has an open and liberal policy regarding foreign property. If you wish to establish an offshore company in Singapore, you will not face restrictions on the types of business activities permitted. In all sectors of the economy, it is allowed to have a 100% foreign shareholding. Shareholders can be both individuals and corporations. In addition, foreigners wishing to register an offshore company in Singapore do not require prior approval from the Singapore regulators.
Political stability. The Political and Economic Risk Council considers Singapore the most politically stable country in Asia and the least bureaucratic country in Asia. The Singapore government is renowned for its impeccable integrity and business approach. It is often described as rational, pragmatic, transparent, and non-corrupt. Moreover, Singapore is characterized by a transparent, healthy, and efficient legal system. In trade, protection of intellectual property, labor resources, etc., clear rules and regulations apply. As a result, the risk associated with setting up and operating an offshore company in Singapore is minimal and practically nil.