Why Incorporate in Singapore?
Singapore has time and again been ranked as the world’s easiest place to do business by the World Bank. In the Doing Business 2016 report, the country sustained its top place among 189 countries. The city-state held on to its top rank as the most competitive economy in Asia in the World Economic Forum’s Global Competitiveness Report 2015-2016. It has also been consistently top ranked in Quality of Life survey by Mercer. Singapore is ideally the best place in this part of the world to live work and play. So what makes this relatively young island country devoid of any natural resources as the best place for business and investments? In other words, why choose Singapore for business?
The 700km2 city-state has a population of 5.5 million people. For the year 2015, the nominal GDP was S$402 billion and the Gross National Income amounted to S$383 billion. The Per Capita National Income for the year was S$69,283 (US$49,273). The unemployment rate has remained below 2% in the recent years.
The country is ranked as one of the most open economy in the world. It is a heavily trade dependent economy. With the exception of a handful of strategic sectors such as financial services, professional services and media sector all other industries are open to foreign investments. Singapore allows 100% foreign ownership.
Singapore adopts an aggressive foreign investment strategy and attracts inbound investments through the Economic Development Board (EDB), its investment promotion agency. The total inbound FDI Stock in Singapore as of 2015 amounted to S$1,255 billion. The US, Japan, British Virgin Islands, Cayman Islands and the Netherlands are the top five FDI Source countries. A predominant portion of the FDI remains with the Financial and Insurance Service Industry followed by Wholesale and Retail Trade and the manufacturing industry. The total outbound FDI stock of Singapore amounted to S$619 billion in 2014.
Services sector account for nearly 70% of the national GDP while manufacturing accounts for the remaining 30%. Singapore promotes high value manufacturing activities such as petrochemicals, semi-conductor, consumer electronics and transport equipments and machineries. Recently efforts are underway to nurture manufacturing activities in sectors with high growth potential such as life sciences, aeronautics and precision engineering. Services sector is the major employer of the country’s 3.5 million workforce. Wholesale & retail trade, financial and insurance services, transportation and storage and business services are the key industries within the sector.
Singapore relies heavily on external trade and pursues a free trade policy. It enjoys the world’s highest trade-to-GDP ratio. Except for a very few strategic goods which are subjected to duties, it is virtually a free port. China, Europe, Malaysia and the USA are the top trading partners. Singapore’s principal exports are petroleum products, food & beverages, chemicals, textile & garments, electronic components and transport equipment. Singapore’s main imports are aircraft, crude oil and petroleum products, electronic components, motor vehicles, chemicals, food & beverages and textile yarns & fabrics.
|BERI Report 2016 – City with Best Investment Potential||2 (World), 1 (Asia)|
|Doing Business 2017 – Easiest Place to do Business||2|
|Global Competitiveness Report 2016 – 2017 – Most competitive City||2|
|Global Innovation Index 2016||6 (World), 1 (Asia)|
|Global Competitiveness Report 2016-2017 – Best IP Protection||4 (World), 1 (Asia)|
|IMD World Competitiveness Report 2016 – Least Corrupt Country||7 (World), 1 (Asia)|
|BERI Report 2016 – Labor Productivity and Attitude||1|
Factors Favoring Business and Investment Climate
The country has surprisingly sustained its political stability despite being surrounded by neighbors with tumultuous political environment. The ruling People Association Party (PAP) has remained in power since the very beginning of Singapore as an independent nation. The political stability has paved way for a legislative landscape that prioritizes transparency, meritocracy and an inclusive development.
The political stability provides predictability and a sense of security for investors and businesses entering Singapore. The government is responsive to the evolving business and economic environment and constantly reviews regulatory frameworks and policies. It also maintains a politically neutral stand fostering a cordial relation with its regional and international counterparts. Policy continuity is key to attract businesses. Investors feel assured by the political stability and the resultant policy continuity and resilience of Singapore dollar.
Strategic Location and Connectivity
Singapore is located along the corridors of east and west. Singapore remains connected not only to the regional growth markets but has also forged strong ties with economies beyond Asia. Singapore is essentially a bridge to the opportunities that are on both sides of the globe. Singapore’s container port is one of the busiest ports in the world in terms of tonnage. The Changi Airfreight Centre is a 24-hour, one-stop hub for the storing, moving and repackaging of goods without the need for documentation and custom duties. This has drawn 20 of the world’s top 25 third-party logistics providers.
Besides the physical connectivity in terms of extensive air network and sea routes, the cosmopolitan culture amidst a rich Asian heritage makes it easy for investors and businesses to use Singapore as a springboard to the regional markets and beyond. The country, besides the pro-business policies has concluded an extensive network of agreements with its regional and international counterparts – With 20 Free Trade Agreements (FTA), 82 Avoidance of Double Taxation Agreements (DTA) and 41 Investment Guarantee Agreements (IGA) Singapore is an ideal choice for trade and investment holding companies. Singapore has a strong legacy as an entre port for traders, but now it is essentially so for any business targeting the burgeoning Asian markets.
Attractive Tax System
This is one of the main reasons of why choose Singapore for business.
Singapore follows a territorial taxation policy, whereby profits made in foreign jurisdictions are not subjected to tax unless they are received in Singapore. Its Single tier taxation policy exempts the profits distributed as dividends from further taxation; hence shareholders enjoy tax-free earnings from dividends. The headline corporate tax rate is 17% but for companies whose profits are less than S$300,000 the effective tax rate is only 8.5%. It is far competitive than the Asian average of 22.6% (2015). It must be noted that qualifying companies in finance, shipping, insurance, pioneer sectors enjoy further concessions on the tax rate. Attractive concessions are also available to Operating Head Quarters and Finance and Treasury Centers.
The personal tax rate in Singapore is also highly attractive. It is tiered and the first S$20,000 taxable income is tax-free. Chargeable income above S$20,000 is subjected to a progressive rate, which is capped at 22% for taxable income exceeding S$320,000. There are substantial reliefs available to qualifying individuals. The tax rate of 22% on the high-income earners is still considerably lower than the Asian average of 26.9%.
Singapore also levies a consumption tax called Goods and Services Tax (GST). Presently at 7% the GST it is one of the lowest in the region that has an average rate of 12.4%.
Trusted Legal System
Singapore legal system scores well in terms of transparency, fairness, efficiency and integrity. Singapore upholds the rule of law and therefore the sanctity of the judicial system remains uncompromised and well respected around the world. While Singapore’s legal system has heavily adopted from the English common law, it has evolved over the years and has undergone several amendments to remain relevant to the changing realms of commercial and business practices. Singapore is gaining ground as an international legal hub with much of commercial arbitration being shifted to the Singapore International Arbitration Center. With the setting up of International Commercial Court and International Mediation Center, Singapore’s dispute resolution facility will get reinforced further.
Robust IP Protection
Singapore’s role as a Startup hub is attributed to the strong Intellectual Property (IP) regime. It is ranked top in the Asia and second in the world. Singapore in its drive to nurture an innovation-driven economy has built a robust regime for the entire spectrum for IP that includes patents, trade marks, copyright, registered designs, plant varieties protection, geographical indications, trade secrets and layout-design of integrated circuits. The country has gained reputation as a tax-efficient IP management hub because of the several allowances and concessions available for qualifying R&D expenses. For this reason Singapore remains the top choice for setting up an R&D base for not only large multi-nationals but small startups as well.
Pro-Business Regulatory Framework
Setting up a business in Singapore is really a breeze. Unlike other countries in the region and beyond where the incorporation process is long-winded, in Singapore the company incorporation process can be completed in less than two days. The regulatory framework acts as an enabler for businesses in general to ensure compliance to standards and prevention of illegal activities. All relevant licenses can be obtained online and the process is very transparent and straightforward. In summary, ease of doing business is why choose Singapore for business.
World-class Talent Pool
The workforce in Singapore is highly efficient at all levels and are highly productive. The English-speaking workforce is highly competent for meeting the demands of international and regional businesses. They are IT savvy and constantly update themselves. The government, in collaboration with industry and educational partners, has several programmes to upgrade the skills of the workforce to meet the evolving demands of businesses. In addition to the local workforce, the government has a merit-based immigration policy that helps businesses to recruit international talent to fill the gaps. Besides allowing international talent at professional, managerial, executive and technical (PMET) levels to be employed in Singapore under the Employment Pass schemes the doors are also open to skilled international workers under the S-Pass scheme.
Singapore through years of careful planning has fostered an ecosystem where enterprises can gain synergies. It offers a rich commercial ground where not only large multinationals but also small and medium-size companies can thrive on a symbiotic relationship. It has gained reputation as a hub in Asia. Enterprises across the entire value chain for any given sector are present and prosper in Singapore. As a financial, logistics and services hub in the region it has a comprehensive infrastructure for any business.
Great quality of Life
Along with its clean and green environment it features diverse recreational facilities to suit myriad interest. Be it nightlife, nature, travel, food, sports or arts there are several options available. The educational and medical facilities are top class, the crime rate is low, public transport is exceptional therefore you can be assured of a good standard of living for your family.
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