By Globalization Partners
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Why expand your company to Singapore? From its favorable tax code and impressive economy to its tremendous growth potential for business, Singapore is an attractive place to live and work.
In 2020, the World Bank rated Singapore the second-best country in the world for doing business, and the country had previously claimed the top spot on the list for several consecutive years. In 2019, the World Economic Forum named Singapore the most globally competitive country in the world. The Economist’s Intelligence Unit has also ranked Singapore first globally in this category from 2015 to 2019.
If you’re considering expanding to Singapore, you’ll need to know more about the specific benefits you can expect to gain, as well as some of the few disadvantages of doing business in Singapore. This guide discusses both, so you can make an informed decision for your company.
Advantages of expanding your company to Singapore
Here are a few of the main benefits of doing business in Singapore:
1. A thriving economy
One of the main reasons to expand to Singapore is its large economy. Singapore’s economy is robust and steadily increasing, relying primarily on trade, finance, and manufacturing for growth. The services sector in particular employs a considerable majority of the country’s workforce and accounts for much of the gross domestic product (GDP). As of 2017, the gross national income stood at 54,530 U.S. dollars per capita, and Singapore’s economic growth rate stood at about 3.4 percent in 2018 and 0.73 percent in 2019.
Singapore has relatively low unemployment and inflation rates, and it maintains a surplus rather than a deficit. The government carries out a vigorous foreign investment program and provides amply for its residents, offering subsidies for education, housing, transportation, and healthcare. All these indicators demonstrate stable, dependable economic prospects.
2. Favorable tax conditions
Internationally, Singapore is renowned as a tax haven for businesses. Its limited taxes and low tax rates make the country an ideal location for companies to flourish.
If you’re expanding from the United States, you may be wondering about the taxes in Singapore vs. the USA. One significant difference is that companies in Singapore pay no taxes on their foreign-sourced income. In some countries, like the U.S., companies must pay taxes on all income earned, no matter where they earned it. In Singapore, though, companies are subject to taxes only on the revenues they earned in Singapore. This benefit makes Singapore an attractive option for international expansion.
Unlike many other countries, including the U.S., Singapore has no capital gains tax. Companies may sell their investments or capital assets without paying taxes on the funds they receive.
The corporate tax rates are also relatively low in Singapore compared with those in other countries. The flat corporate tax rate is only 17 percent, and several incentives from the Inland Revenue Authority of Singapore can reduce the corporate tax rate for certain companies.
Startup companies gain additional tax benefits. For their first three consecutive years of business, startups may qualify for a tax exemption of 125,000 Singapore dollars on their first SG$200,000 of revenue. To be eligible for this exemption, a company must have no more than 20 shareholders, and at least one of the shareholders must hold a minimum of 10 percent shares.
Certain industries benefit even more from Singapore’s generous tax code. Qualifying global trading companies, international banks, and offshore funds can all receive lucrative tax exemptions or special concessionary tax rates.
Additionally, Singapore is highly attractive to international companies because of its minimal taxes on currency. The country enforces no limits on currency repatriation, so businesses may convert their funds into and out of Singapore dollars without penalty. This distinction sets Singapore apart from many other countries, where companies moving currency may face imposing taxes.
Taxes in Singapore are relatively low for individual employees as well. Residents in the country pay a progressive tax rate, with the rate set at 22 percent for the highest tax bracket, which includes incomes above about $320,000 per year.
3. Complete foreign ownership for companies
In many countries, companies and company branches must have a certain number of local shareholders. This practice gives the local country some control over the company’s operations and some share in the company’s successes.
In Singapore, however, 100 percent of an incorporated company may remain in foreign hands. This allowance makes Singapore an attractive expansion destination for many international companies because they may retain full ownership and control of their new branches.
4. A skilled and educated workforce
Singapore’s labor force is highly trained, and its educational attainments are some of the most impressive in the world. Higher education is widely available, and most Singaporean students receive sizeable tuition grants to their local institutions. Universities, polytechnic schools, and art institutes all maintain graduation rates above 90 percent.
Singaporean students consistently top the world standings in international academic testing, including ranking first in the world on the Programme for International Student Assessment (PISA) and accounting for all but one of the perfect scores on the 2016 International Baccalaureate (IB) exam.
Singapore’s favorable immigration systems only add to the depth and quality of its labor force. Obtaining a work visa in Singapore is relatively easy, so the country readily attracts outstanding professionals from around the world.
5. Minimal corruption
Anti-corruption laws in Singapore are strict — accepting a bribe incurs a stiff penalty. Additionally, public servants tend to receive high compensation and, therefore, have low incentive to solicit bribes or otherwise engage in corrupt activities.
As a result, companies can go about their business with minimal risk of becoming ensnared in bureaucratic red tape or losing revenues to corrupt officials. Their operations become more efficient and profitable, and they can have faith in the regulations and financial policies that exist.
6. Centralized location and easy market access
Doing business in Singapore allows your company easy access to many other Asian markets. Singapore is centrally located in Southeast Asia, so some of the largest economies in the region, including China, India, Australia, and Malaysia, are only a quick plane trip away.
Singapore’s port is one of the busiest in the world, with some 36 million shipping containers passing through per year, and the airport sees heavy plane traffic as well. Singapore’s location and shipping and travel capacities mean you can source materials easily, get your products quickly to their final destination, and facilitate the robust relationships your business relies on.
Challenges to consider during expansion
Your company will also need to know the top challenges of expanding to Singapore. These are a few of the primary hurdles you may need to clear:
1. Incorporating and registering your business
If you choose to form a subsidiary-based entity in Singapore, the process is likely to be complex, expensive, and time-consuming. You will need to complete a significant list of required steps. These include registering with the Accounting and Corporate Regulatory Authority (ACRA), opening a bank account, filing for a tax number, developing a unique company seal, and registering for work injury compensation insurance, among a host of similar necessities.
Your company can streamline its handling of this challenge by electing to work with an Employer of Record (EOR) instead. When you partner with a reputable global EOR, you work with an established entity, so you can bypass many of these establishment requirements.
2. Obtaining construction permits and electrical accounts
If your company intends to break ground on a brand-new building or complex, be aware that obtaining a construction permit may require substantial time and energy. You will generally need to obtain written permission, gain approval for your structural plans, and get technical clearance. You’ll also need to consult with several regulatory bodies, including the Ministry of Environment and Water Resources, the Land Transport Authority, and the Commissioner for Workplace Safety and Health. This process takes about 35 days on average, according to the World Bank.
Once you’ve done that, you’ll also need to obtain electrical services, a process that generally takes about a month. Your company must establish an account and pay the relevant fees before connecting your new facility to the power grid.
3. Maintaining regulatory compliance
Singapore’s laws may differ from the laws you are used to in your home country. If you’re setting up a subsidiary-based enterprise, do your research and approach your expansion carefully to make sure you comply with all applicable regulations. You must maintain registration with the ACRA, have at least one local director who holds an annual general meeting for your business, and comply with the Common Reporting Standards (CRS). If you fail to meet these requirements, your business could face stiff penalties.
You’ll also need to learn to navigate the red tape associated with doing business in Singapore. A company that establishes a subsidiary-based entity needs to meet a list of requirements before operating legally. You’ll likely want to work with experts who can advise you on legal matters and help you manage the process most efficiently. When you partner with an EOR with an established entity in place, you don’t have to worry about many of the legal requirements that would apply if you set up a new subsidiary.
4. Keeping up with the competition
Singapore is famous globally for its favorable business climate. Many companies from countries worldwide take advantage of Singapore’s economic benefits by establishing new branches in the country.
If you decide to expand to Singapore, you’ll be competing with all these companies, as well as with thriving local businesses. You’ll likely need to rely on expert advice so you can recruit talented employees, entice consumers to take an interest in your products, and make the profits you need for success in this new market.
5. Working with labor shortages
On the one hand, Singapore has historically relied on international employees to power its workforce. That influx leads to enriched diversity and cross-cultural conversations in the workplace, and is often beneficial for businesses expanding into Singapore from abroad.
On the other hand, one of the political issues in Singapore affecting business is ever-tightening international labor quotas. These strict limits sometimes create labor shortages, posing challenges for companies that need to hire many qualified employees.
You’ll likely need to do some research into the numbers in your industry and how they change. In 2020, for instance, Singapore reduced the quotas for its construction, processing, and marine shipyard industries from 20 percent to 15 percent to reduce its reliance on international labor and promote opportunities for native Singaporeans.
How Globalization Partners can help
When you’re ready to expand your company to Singapore, Globalization Partners is here to assist you. We can help you navigate the challenges of expansion and reap the benefits of your hard work.
With Globalization Partners, you’ll gain business advantages like these:
- Streamlined, state-of-the-art employee management: At Globalization Partners, we use a powerful, completely automated, and AI-driven technological platform to manage your recruiting, hiring, onboarding, and payroll processes as efficiently as possible. These features save your company time and labor by taking over many day-to-day employee management tasks as you expand into Singapore.
- Easy, protected access: Our automated platform is cloud-based, so your company can access it easily from anywhere in the world on a laptop, desktop, or mobile device. You can get the information you need when you need it while keeping your sensitive data secure and private in the cloud.
- Enhanced regulatory compliance: Globalization Partners has a long-standing business entity and relationships in Singapore. We are well-versed in even the most minor legal nuances. When you work with us, you’ll gain the peace of mind of knowing your hiring and employment practices comply with all relevant labor laws.
- Boosted focus on critical matters: Overall, Globalization Partners shoulders the administrative, legal, and human resources responsibilities of attracting and managing new employees. When you let us handle the everyday details, you can focus your attention on your most significant challenges and most promising innovations in your new Singaporean market.
Build your international teams efficiently with Globalization Partners
As you get ready to expand your business and build international teams in Singapore, make Globalization Partners your source for comprehensive, trusted solutions. With our end-to-end technology platform, you can hire, onboard, and manage your team members without jumping through the registration and regulatory hoops associated with setting up a subsidiary. You’ll save time, streamline your operations, and enhance your focus on your core business offerings.