Large companies that monitor the company’s business-friendliness have generally recognized Singapore very highly for the ease with which to start a new business in the country. In 2016 the World Bank Group named Singapore as the nation’s finest country in its “Doing Business”.
This is the tenth consecutive year Singapore will be at the top of this survey by the World Bank. This article explores some of the main factors which make Singapore such an attractive place for local and foreign entrepreneurs to integrate and operate a company.
|Benefits of Doing Business in Singapore||The Drawbacks of Doing Business in Singapore|
|Well-developed Market Economy||Opening a Company|
|Simplest and Rational Tax System||Opening a Bank Account|
|Free from Double-Taxation||Tax Payments|
|no restrictions on the repatriation of profits||Shortage of Labour Force|
|Corruption free Regulatory Framework||Cultural Barriers|
Advantages of Doing Business in Singapore
- Strong Economic System
Singapore is a very well-developed market economy, mainly focused on trading, finance, and manufacturing. Services makeup 75% of the country’s GDP and employ 80% of its workforce. The nation has succeeded in achieving very low unemployment while sustaining low inflation.
The country grew at 2.8 percent in 2014 and its GDP per capita is estimated at over $80k in 2015. Nearly 50 percent of its GDP is its gross national savings. It exports nearly S$500 billion worth of products every year with the result that this country with just 5.25 million citizens has accrued the world’s 10th largest reserves of foreign currency.
- Favorable Tax System
Singapore has one of the easiest and most rational tax schemes in the world. It levies no tax on capital gains or dividends that a company earns. This makes the country especially appealing to entrepreneurs wishing to introduce a new company and develop it.
For personal and corporate taxes Singapore uses a tiered tax scheme. For their first 3 years, new businesses earn substantial tax cuts, lowering their tax rate to 0 percent for the first S$100k of income. The corporate tax rate is 17 percent lower.
- Taxes are Not Charged Twice
Singapore has broad Double Taxation Agreements (DTAs) Avoidance network with more than 50 countries. These agreements are structured to ensure that there is no double taxation to the economic transactions between Singapore and the treaty country.
In addition, Singapore offers Unilateral Tax Credits (UTCs) for countries it does not have a DTA. Thus, a business resident in Singapore tax is very unlikely to experience double taxes.
- Local Partners or Shareholders are Not Needed
Singapore requires a person to own 100 percent of a business incorporated in Singapore. No local partners or shareholders are needed. This allows you to start a business with the type of capital structure you want, and to divide its ownership to meet your investment needs.
In addition, there are no limits on how much money you can carry from your home country to invest in your business in Singapore. Singapore does not place any restrictions on benefit repatriation. No tax is levied on capital gains from a business’s selling. Similarly, no tax is levied on shareholder-paying dividends.
- Complicated Paperworks are Not Required
Singapore has one of the world’s most effective and red tape-free regulatory systems. Singapore ranked number one on the World Bank’s Ease of Doing Business survey for nine consecutive years.
The criteria for forming a business are simple and the process to do so is easy. In most cases, forming a new organization takes less than a day. Likewise, the criteria for annual enforcement are clear and lack redundant or complex documentation.
- Feasible Locations
The central position of Singapore in Southeast Asia makes this a physical and metaphorical gateway to the 3 billion people on the continent.
Some of the world’s most important economies are a short plane ride away (China, India, Malaysia, Australia). Singapore’s port is one of the world’s busiest and is listed as a major International Maritime Hub.
Singapore’s Changi Airport is a world-class airport that accommodates about 20 million passengers a year and offers convenient flights to almost every major city in the world.
- Amazing Infrastructure
Most of Singapore’s first-time tourists are shocked by the country’s world-class infrastructure. This involves the airport, highway system, subways, internet networks, commercial buildings, museums, hotels, and public parks throughout the world.
In the last decade, most of the infrastructure has been built so it’s really modern and fresh. This infrastructure, besides creating a friendly work atmosphere, also increases the efficiency of its enterprises.
Disadvantages of Doing Business in Singapore
- Incorporating a Business
It’s relatively easy to start a business in Singapore but trying to keep up with regulatory requirements is a common pitfall for several new businesses, particularly when they are not local.
New companies must register electronically with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+, where a name search can be performed and the company’s incorporation filing can be completed.
To log into BizFile+, it will need a SingPass ID, a Singapore Personal Assessment Password used to conduct government activities online.
- Problematic Company Directors
Under the Companies Act, every Singapore-based company is required to have at least one director residing in the country.
A local resident director who does not ensure that there is an annual general meeting and that the annual report is filed with the Accounting and Corporate Regulatory Authority (ACRA), will find that they are non-compliant and may be summoned to court.
- Tax Payment
Singapore has a territorial tax structure and Singapore Inland Revenue Authority (IRAS) administers certain forms of taxes. For paying taxes, businesses would need to register for a CorpPass or SingPass to enter the portals of the IRAS or the Central Provident Board.
Companies seeking a Singapore tax-residency certificate could be permitted to bring the “managerial and substantiation” test enforced by the IRAS.
- Operational Costs are Much Higher
The expense of establishing and setting up a business in Singapore is relatively higher than that in other countries in Southeast Asia.
The powerful Singapore currency is making it more expensive to pay workers locally. Small ground supply means office rental or retail space prices are twice as high as in neighboring Asian countries.
- Difficult to Trade Across the Borders
Historically Singapore has operated as a global trading hub and is one of the world’s most competitive regions for cross-border trade when it comes to prices.
However, it is necessary to remember that such products are prohibited from being imported into Singapore, and require the relevant government agencies to approve or provide a special license. Companies are now required to obtain an import license electronically and pay the duties or GST due at the port of shipment.
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Business, marketing, and blogging – these three words describe me the best. I am the founder of Burban Branding and Media, and a self-taught marketer with 10 years of experience. My passion lies in helping startups enhance their business through marketing, HR, leadership, and finance. I am on a mission to assist businesses in achieving their goals.