Why Singapore for Your Asia Strategy
The Republic of Singapore is a city state in Southeast Asia and a highly developed market economy, frequently described as ASEAN’s financial capital with exceptionally strong economic performance and a robust business environment. Singapore has earned the reputation as one of the best and easiest places to do business in the world. There are several contributing factors behind the efficiency of Singapore’s government and business sector. Let us explore some of the most important reasons on how Singapore has attained its position in the global market and why you should consider expanding your business to Singapore.
A primary advantage of Singapore is its ability to act as a centerpiece for the holding and management of regional assets. In addition to an independent legal system based on British law, Singapore is considered the financial capital of ASEAN and is an excellent starting point for companies to direct operations in China and to expand business activities in ASEAN countries such as Vietnam. Singapore is also one of the world’s leading centers for commercial arbitration, due to a geographically convenient location supported by excellent physical, legal and political infrastructure. Straightforward company incorporation and lean administration by corporate service providers such as Dezan Shira & Associates round off the advantages that Singapore offers international companies.
Singapore Tax Policies and Free Trade Network
Singapore’s tax system is internationally recognized as efficient and competitive, which allows foreign investors to enjoy low tax rates and numerous tax incentives. The country operates a single-tier, territorial tax system, which means that foreign-sourced income would not face additional taxes in Singapore. There is also no capital gains tax and no tax on dividends.
Businesses can benefit from Singapore’s vast network of DTAs and unilateral tax credits, which further allows Singapore companies to reduce or eliminate taxes on their foreign-sourced income.
For individuals, Singapore is able to attract quality talent from around the world by offering low personal income taxes, and individuals can also reduce their effective tax rates through incentives offered by the government.
Meanwhile, Singapore’s extensive number of FTAs, coupled with a transparent legal system and educated workforce, has been credited with accelerating the country’s transformation to a first-world economy.
The country’s 13 bilateral and 11 regional FTAs include some of the largest combined trade agreements in the ASEAN-China, ASEAN-India, and ASEAN-Hong Kong trade blocs — providing Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.
Read our article for an overview of important tax incentives: Why Use Singapore as a Base for ASEAN Expansion (aseanbriefing.com)
Singapore Tax Incentives
A multitude of Singapore tax incentive relief measures are available to help businesses reduce their overall tax bills. Many of these incentives are for taxpayers involved in specified industries or sectors which are deemed essential to Singapore’s economy.
Applicants must generally carry out high-value activities in the country and will be required to commit to spending on local employment as well as certain levels of local business spending. Such factors include the capacity for the company to contribute to the growth of research and development (R&D), the potential for the business to create a spin-off to the rest of the economy, and introducing or anchoring leading-edge technology, activities, and skills in Singapore.
Overview of Singapore tax incentive schemes for foreign businesses:
|Type of Incentive||Incentive Policy||Overview|
|Headquarter and internationalization incentives:||Tax exemption for start-up companies||75% tax exemption on the first S$100k (US$73,6k) of normal chargeable income (income taxed at prevailing corporate tax rates), plus 50% tax exemption on next S$100k (US$73,6k) of normal chargeable income.|
|Partial tax exemption for companies||75% tax exemption on the first S$10k (US$7,3k) of normal chargeable income, plus 50% tax exemption on the next S$190k (US$140k) of normal chargeable income.|
|Common corporate tax relief measures to help reduce tax bills:||International headquarters award||Concessionary tax rate of 5% or 10% on income for businesses that commit to substantive headquarter activities, such as managing, coordinating, and controlling their regional operations from Singapore.|
|Merger and acquisition scheme||Provides the acquiring company an M&A allowance of 25% of the qualifying acquisition value capped overall at S$10m, S$40 million per assessment year, S$80k in stamp duty relief, and S$100k in double tax deduction transaction costs.|
|Double Tax deduction for internationalization||Up to 200% tax deduction on expenses used for international expansion.|
|Incentives for manufacturing and services activities:||Pioneer certificate incentive||Eligible companies may receive a concessionary tax rate of 5% or 10% on income derived from qualifying activities, limited to five years.|
|Investment allowance||Businesses can enjoy a tax exemption of up to 100 of fixed capital expenditure incurred.|
|Incentives for finance and treasury activities:||Finance and treasury center||Finance and treasury activities derived income is taxed at a reduced rate of 8% (international treasury and fund management, investment and economic research analysis, and corporate finance and advisory services).|
|Financial sector incentive||Income derived from high-value-added financial sector activities such as equity market, derivatives market, and bond market transactions and services may be taxed at 5%, while other activities may qualify for a 13.5% tax rate.|
|Financial sector technology and innovation scheme||Co-funding to develop financial technology (Fintech) that enhances Singapore’s banking industry, with support of up to 70% for qualifying costs such as IP rights, technical software, manpower skilling, and professional services, among others.|
Contact us to assess your tax incentive eligibility, or read here for a more detailed overview: Why Use Singapore as a Base for ASEAN Expansion (aseanbriefing.com)
Singapore Double Tax Agreement Network
Singapore has one of the world’s most extensive DTA networks, attracting international businesses from a multitude of conventional and nuanced industries. The country has signed over 90 DTAs, which comprise of three types: comprehensive, limited, and exchange of information arrangements (EOIAs).
Comprehensive DTAs provide relief from double tax for all income types between the two signatories. Limited DTAs, however, only provide relief from income generated from air transport and shipping, and EOIAs are provisions for the exchange of tax information.
The tax reliefs under each DTA treaty differ for each country and typically cover:
- Tax on royalties;
- Tax on dividends;
- Tax on capital gains;
- Tax on interests;
- Shipping and air transport;
- Directors’ fees;
- Independent and dependent personal services;
- Students; and
- Income from immovable property.
Contact us to assess your tax incentive eligibility, or read this article for more information about how to avail the benefits of a Singapore DTA: Why Use Singapore as a Base for ASEAN Expansion (aseanbriefing.com)
Singapore Free Trade Agreements
Despite regional players maintaining strong FTA networks, they are not as extensive as Singapore’s. Due to these factors, the country will continue to be the default location for businesses looking to expand into Southeast Asia and neighboring regions.
The country’s 15 bilateral and 12 regional FTAs include some of the largest combined trade agreements in the ASEAN-China, ASEAN-India, and ASEAN-Hong Kong trade blocs — providing Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.
There are two types of FTAs: bilateral (agreements between Singapore and a single trading partner) and regional (signed between Singapore and a group of trading partners).
Contact us to apply for Tariff concessions for exporting goods from Singapore, or read more here: Why Use Singapore as a Base for ASEAN Expansion (aseanbriefing.com)
Setting up a Company in Singapore
Singapore’s efficient business environment is demonstrated by the ease with which foreign investors can incorporate a business in the country. Registering a company can take as little as one day provided all the files are in order.
Prior to establishing a company, investors need to decide the type of business structure that suits their needs. There are five types of business structures in Singapore:
- Sole proprietorship (one owner);
- Partnership (two or more owners);
- Limited partnership;
- Limited liability partnership; and
- Private company limited by shares.
Incorporating a business in Singapore is efficient and cost-effective and can be broken down into several simple steps.
- Step 1: Company name approval
- Step 2: Document preparation
- Step 3: Incorporation
Contact us for more information on Singapore business structures and the step to incorporation: Why Use Singapore as a Base for ASEAN Expansion (aseanbriefing.com)
Why work with Dezan Shira
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing market entry, legal, accounting, tax, HR, technology, and operational advisory to international investors.
A team of dedicated business advisory managers providing consultation and operational support in English, German, and many more languages
Solutions for our clients from a range of industries focusing on actual business needs and providing integrated solutions across several service lines.
Strong partner network including governmental and business organizations across Asia to provide value-added services, advice, and contacts
We are a pan-Asia, multi-disciplinary professional services firm, providing market entry, legal, accounting, tax, HR, technology, and operational advisory services tailored to help businesses and investors manage the unique hurdles of international business, across jurisdictions, and in each market.
International accounting standards are applicable in Asia, but still vary greatly in practice. We provide local expertise on country-specific accounting issues to help you manage your investment.
Business intelligence is a critical component of the decision making process when considering where and how an investment into Asia should be made. Our pan-Asia team can help your business with its strategic direction.
Minimizing risks to realize opportunities is a unique challenge in Asia. Our team integrates local legal and financial expertise to help our clients de-risk their investments.
HR and Payroll
Managing personnel in Asia requires a robust approach to local regulations and customs. Our services are designed to help foreign invested companies with compliance and best practices.
Tax laws and regulations throughout Asia are continuously being updated and refined. Our team of professionals is accustomed to navigating this fast-paced environment.
We understand that Asia’s Information Technology (IT) environment is unique and encompasses the need to understand different languages and software. Our advisors can help you find solutions.
Contact Our Experts
Since its establishment in 1992, Dezan Shira & Associates has become one of Asia's most versatile consultancies with more than 600 lawyers, accountants, auditors, HR professionals, business intelligence and technology experts, delivering fully integrated services from more than 35 global offices. Our Singapore leadership team:
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