Why Singapore for business?

Why Singapore for Business?

Singapore is home to many international businesses and companies of all sizes, with a liberal tax structure, world class infrastructure and strategic location, Singapore remains a key place globally to start a business.

Singapore was rated by the world bank organization in 2020 as the second best place to do business in the world based on a number of factors such as ease of opening a business, getting a location, access finance, dealing with day to day operations and operating in a secure business environment.

So what makes Singapore distinctive?

Corporate Tax

Singapore has a single-tier corporate tax system fixed at 17% on its chargeable income. Which implies that even if the Singapore-Resident Company is paying taxes on the profits, all dividends are exempt in the hands of shareholders from further taxation.

Tax exemption scheme for new start-ups – qualifying new companies can enjoy tax exemption of up to 75% under this scheme for the first three consecutive years of assessment.
Deduction of expenses incurred before the commencement of business (for new start-ups) – only revenue expenses incurred after your business commences are deductible for tax purposes. Qualifying business expenses incurred before your 1st dollar of business receipt would be tax deductible.
Capital gains tax – Generally, the gains derived from the sale of property in Singapore are not taxable as it is a capital gain.
Inheritance tax (estate duty) – Abolishment of Inheritance Tax as Singapore viewed wealth was generated in other ways such as by entrepreneurial means and such abolishment would attract high-net worth individuals who would invest and accumulate wealth in Singapore that eventually benefits the economy and society.

As of 2020, the Singapore Government concluded more than 80 comprehensive Double Taxation Agreements (DTAs) with another Jurisdiction (a Treaty Partner) so that Singapore Resident Companies can spell out the taxing rights for income arising from cross-border economic activities between the two Jurisdictions.

Singapore’s extensive networks of DTAs ensure that Singapore Companies doing business with or from Singapore will not face double taxation. Singapore Companies who do business with another jurisdiction without DTA may refer to Unilateral Tax Credit (UTC) which applies to foreign-based income that is received by Singapore Resident Company.

Strategic Location

The country’s strategic location remains one of the reasons why it has emerged as one of the premier commercial centres in the world. Since the country is located right at the heart of South East Asia, starting a business in Singapore implies that you stand a chance to gain easy access to the other parts of asia.

Here are the highlights of its strategic location:

Free Trade Agreement (FTAs) : The existence of bilateral Free Trade Agreements (FTAs) with major economies make Singapore an ideal destination for Investors who are looking for business opportunities in Singapore.

Over the years, Singapore has forged an extensive network of 14 bilateral and 11 regional FTAs in place which facilitates strong trade and commercial ties between participating countries, reducing and eliminating certain barriers to trade and investment between participating countries. FTAs provide Singapore-based businesses with access to preferential markets, free or reduced import tariffs, as well as enhanced intellectual property regulations.

Singapore – the Global Trading Hub: Over the years, Asia is expected to account for 60% of global trade flows, shifting the focus away from Europe and North America. Singapore, strategically located at the heart of Asia and in the middle of key trade flows, will be cementing its position as a global trading hub as 30% of Asia’s trade passes through Singapore.

Today in Singapore, numbers of world’s leading commodity trading Companies have established a presence in Singapore. In particular, a few of the leading commodity trading Companies headquartered in Singapore.

Olam International Limited – Singapore has been home for Olam’s headquarters since 1996 and currently, Olam has a processing facility in Singapore for production meant to serve for the Asia Pacific markets.
Wilmar International Limited – Asia’s leading agribusiness group and headquartered in Singapore since 1991. Wilmar ranked amongst the largest listed companies by market capitalization on the Singapore Exchange.
Trafigura Pte. Ltd. – Trafigura being the Asia Pacific headquarters, plays a pivotal role in supporting regional businesses in Asia Pacific and has become one of the key offices for the Group.
Cargill Group – Singapore is the regional hub for Cargill in Asia-Pacific. Four of Cargill’s business units comprising animal nutrition, energy, food ingredients and grains and oilseeds, are headquartered in Singapore.
Vitol Asia – Vitol Group offers refining, trading, shipping, and storage of crude oil and energy products. Vitol Asia operates as an energy and commodities Company serves clients worldwide and is headquartered in Singapore.

Financial Hub

As per the Global Financial Centres Index, Singapore is ranked fifth based on the competitiveness of financial centres. The centres placed ahead of Singapore are New York, London, Tokyo, and Shanghai. Notably, the list was prepared after assessing 29,000 financial centres from an online questionnaire combined with indices from the World Bank, the Organisation for Economic Co-operation and Development, and the China Development Institute in Shenzhen since 2015.

In present, Singapore has more than 200 Banks established their presences which are 111 Commercial Banks, 49 Merchant Banks and 45 Banks with Representative Office. All the Banks are categorized into different license types such as Local Banks, Qualifying Full Banks, Wholesale Banks, Offshore Banks, Merchant Banks which have helped the country by facilitating trades, corporate financing and infrastructure building.

Of all, 3 of the Singaporean Banks ranked as the 3 largest Southeast Asia Banks by its total assets:

DBS Bank Ltd
Oversea-Chinese Banking Corporation, Limited (OCBC)
United Overseas Bank Limited (UOB)

DBS Bank Ltd. is a Singaporean multinational banking and financial services corporation that was set up by the Government of Singapore to take over the industrial financing activities. Today, DBS operates in 17 markets with the Bank regional network spanning more than 250 branches across 50 cities, ranked as the largest Southeast Asia Bank by market capitalization.

Singapore’s transparent legal framework supporting its political and economic stability has shaped its transformation as a global financial hub. It has been successful in establishing its prominence as one of the Four Asian Tigers in spite of limited resources and land. The country boasts of other diversified and specialized industries that include mechanical engineering, biomedical sciences, chemicals, petroleum refining, and electronics. Its disciplined workforce remains one of its strongest assets.

World-class infrastructure

The country has demonstrated rapid financial growth, with an exceptional record in a survey of over 200 cities, assessed for quality of education, healthcare, transport, recreation and several other factors.

As per the Global Financial Centres Index considering Top 15 countries by area of competitiveness – Infrastructure – Singapore ranked among the top 3 right after New York and London.

Singapore’s constant investment in the tech sector has also added to the country’s world-class infrastructure. The country enjoys a prime location at the crossroads of the biggest markets of Asia, an efficient regulatory regime, low taxes, and robust investment opportunities. The Government has combined a pro-business framework with heavy tech investments to promote digital infrastructure and talent development in information and communication technology.

The Government is continuing to invest in developing the country’s infrastructure in order to maintain the highest in the world, reflecting high levels of investment supported by years of political stability and general economic prosperity. 5 main categories form part of Singapore Infrastructure projects for next 10 years consists commercial, residential, transport, attractions and military.

Of all the categories of infrastructure development in Singapore, the development of transport networks, in particular, with the aims to expand the length of the country railway network (Mass Rapid Transit MRT), increasing the density so that eight out of ten households will be within ten-minute walk from a train station.

Thomson-East Coast MRT line – Fourth automatic, driverless and fully underground system line in Singapore that is 43KM long.
Cross Island MRT line – The addition of new line with 50km line spanning across Singapore.
Changi Airport Terminal 5 – Singapore Changi Airport was voted by customers as the World’s Best Airport for eight consecutive times at the 2020 World Airport Awards. As such, development of Terminal 5 is essential and expected to handle 150 million passenger movements per year, up from the current 82 million passengers.

Business-friendly environment

Singapore has retained its place as second best for the ease of doing business, generally have sound business regulations with a high degree of transparency, on a World Bank ranking while New Zealand continues to top the rankings. The studies reforms in 10 areas of business activities in 190 economies, including issues such as obtaining construction permits, getting electricity connections, access to credit, paying taxes, cross-border trade and enforcing contracts.

Accessibility to credit is 1 of the important conditions in promoting a business friendly environment. Various funding options made available for Singapore Companies which consisting the following as important section:

Singapore Government Grants for Small Medium size Enterprises (SME) and Startups – The Startups and SME are powerhouses of Singapore as it employs almost two-thirds of the Singaporean workforce. Government Agencies work through a list of Trade Association and Chambers who support respective grants to enable the local businesses in capability upgrading and internationalization.
Early Stage Venture Fund (ESVF) – Is an initiative under the National Framework for Innovation and Enterprise, to seed funds with selected venture capital firms to invest in Singapore-based earlier-stage technology start-ups.

Establishment of Early Stage Venture Fund by Singapore National Research Foundation as Singapore views Innovation an important part of real estate investment strategies. As the country that is named World’s Third Most Innovative City stands only behind San Francisco and Tokyo, its high ranking is supported by significant levels of foreign domestic investment and a rapid-growing start-up scene. As the country bears testimony to the confidences in the opposition as an innovative ecosystem, especially in the area of fintech, attract number of Innovation labs open in Singapore:

Paypal Innovation Lab – First outside the United States, aims to foster innovation, research and development, entrepreneurship, talent and expertise in Singapore.
Citi Innovation Lab – Uses new web, mobile, supply chain and analytics technologies to engage Citi’s institutional clients more innovatively and create most effective products and solutions for the clients.
KPMG Digital Village – Created to bring corporates, start-ups, investors and government bodies together, focuses on fintech, healthtech and logistics
Thomson Reuters Labs – Singapore – First Thomson Reuters Labs in Asia aims to collaborate with customers, tech startups, universities and the Singapore Government to roll out products and solutions for professional markets in the Asia Pacific region.
Microsoft Technology Centre – a place for collaborative workshops for Microsoft customers.

Starting a business in Singapore as a foreigner offers you the stability and comfort when investing into your company overseas. Singapore has done well in supporting businesses and welcoming foreign investments for the past decades and has witnessed an influx of high net worth individuals migrating here.