5 Reasons To Incorporate Company In Singapore
Singapore had just celebrated its golden jubilee last year and it recalled its transformation from a third world port city in 1965 to the gleaming metropolis today. I saw how the pioneers were thanked and how the values for its success were recapped during the celebrations.
We have always been aware that this is a small city with no other natural advantage other than its geographic location and deep port. Hence it was imperative that companies were given compelling reasons to set up operations here. These reasons are a result of deliberate effort.
When Sir Stamford Raffles founded Singapore in 1819, all he needed to do was to declare the policy of no taxes and passing ships would stream into its harbour. Over the years, the environment changed and different incentives were crafted to attract companies here.
Today I offer you 5 main reasons for incorporating your own limited liability company here. Countries change over the years and these are the most current reasons for you to choose Singapore.
5 Main Reasons To Choose Singapore
While there are many reasons to choose Singapore as your country for company incorporation, I narrowed it down to these 5 main reasons. They are:
- Excellent Business Environment
- Low Taxes
- Quality of Life
- Strategic Business Location
- Strong Intellectual Property Protection
I would go on to expand on these 5 topics for you to understand what it is like to work and live in Singapore. Each market has its own unique characteristics. For instance, the availability of a large consumer market would obviously not be the appeal of Singapore. China and India would fit the bill better but you will have to overcome some hurdles before you can tap on these markets. Despite its small market of 5 million people, companies are flocking to Singapore and you are about to find out why.
Excellent Business Environment
The foundation of Singapore’s excellent business environment lies in the competent and corruption free People Action Party (PAP) government. Policies are set with the long term in mind and meant to benefit the nation instead of personal interests. Their competence was recently validated by the people. The PAP won the September 2015 general election with an overwhelming 69.9% of the vote
and they captured 83 out of 89 seats in Parliament.
This strong mandate would mean that the excellent business environment would continue to flourish in the foreseeable future. According to the World Bank, Singapore is once again ranked as the top country for doing business in the world. She is the best country when it comes to enforcing contracts, protecting minority shareholders and getting construction permit.
You can set up a company here within 2.5 days compared to 25.9 days in Asia. So if you want to move fast in Asia, start your business in Singapore first. This is also one of the few countries that allow you to incorporate your company online.
The latest labour study by Adecco Group, INSEAD business school and Human Capital Leadership Institute, the Global Talent Competitiveness Index (GTCI) 2015-2016, named ranked Singapore second globally in terms of global talent competitiveness.
Global talent are mobile especially the good ones. If you are a skilled engineer, your skills will be in demand anywhere in the world. Singapore ranked number 2 globally just behind Switzerland and number 1 for the region of Asia. This means that this is the most attractive destination for talents heading to Asia but you have to note that labour is not cheap in Singapore.
In other words, Singapore have strong political stability, is the easiest place in the world to set up business and also the most attraction destination for talents heading to Asia. This sums up its excellent business environment.
We all love to keep as much as we earn as possible. However taxes and death are the 2 certainties of life, the only question would be how much taxes would we be paying as a company and as an individual? Let us start with personal income taxes for residents and non residents. A tax resident is someone who have lived here for more than 182 days in a year. Below contains the latest tax rate for income earned in year 2016 by the Inland Revenue Authority of Singapore (IRAS).
Source: IRAS [Resident Tax Rate]
If you are not a resident, your income tax will start at 15% and all the way to 22%. For director’s fee, you will only have to pay 20% in taxes.
Source: IRAS [Non Resident Income Tax]
Based on the highest marginal personal income tax for residents for income earned in 2016, Singapore is just behind Hong Kong globally.
Despite the income tax rate hike from 20% to 22% for the highest earners for income derived this year, this is still the second most competitive place for you to earn and keep your income. If you earn less than $160,000 per year ($13,333/month on average), your tax rate is just 15% which makes it lower than Hong Kong.
For new companies, the accommodative environment allows the first $200,000 to be effectively tax free. You can also apply for another $30,000 in tax rate. If your company makes more than $200,000 of income, it would only need to pay 17% of corporate income tax.
With the various rebates and exemption, the effective tax rate for more than $200,000 of revenue is actually less than 17%.
The corporate tax rate compares favourably globally and it is just second to Ireland. While Singapore is not number 1 in both personal and corporate income tax, the fact that it is number 2 for both categories means that you are incorporating your company in lowest tax rate country overall.
Quality Of Life
When you start a business in a country, you are also going to spend a considerable amount of time in the country at least until it is stable. Hence it is only sensible that you find a country that can give you the best possible quality of life.
Singapore is considered as the best country for expats to stay in from Expat Insider’s 2015 survey. Expats valued Singapore for its high level of personal safety, political stability and peacefulness. This allowed them to focus on developing their business and to build their family.
Her central location in Asia and top notch Changi International Airport means that expats can spend their weekends overseas for a short holiday. This quality of life ranking can be volatile from year to year as preferences and priorities change but Singapore has consistently stayed in the top 10.
In other words, you will find it enjoyable to stay here and so would your talented employees whom you need to bring your business to the next level. This is definitely a win-win solution.
Strategic Business Location
The geographic location of Singapore shielded it from natural disasters such as earthquake, tsunami and cyclones that would periodically strike at its neighbours. The only real natural threat would be flooding due to excessive rainfall due to her location at the equator. This had been eradicated with careful city planning and the construction of canals, rivers and dams.
She is also a vital port in the international trading route for shipping and air transport. It is the busiest transshipment port in the world which means that you can manufacture and sell your goods to anywhere in the world with ease. Singapore had built upon its geographical advantage with critical infrastructure to achieve the following accomplishments:
- Global & Asian hub for commodities product in agri-commodities, energy & chemicals and metals & minerals.
- 30% of physical Asian trading
- World largest bunkering port
- Home to 80% of global commodities and trading firms with more than US$1 trillion in turnover.
- 35% of these companies have at least 1 of their C-suite located here and you have a strong network of buyers and sellers.
These are reasons enough for you to setup your trading firm in Singapore. If your business need financing, there are 500 financial institutions for you to choose from and 35% of Asian trades are financed here. Besides being a shipping hub, Singapore is also a financial hub for your business.
Singapore had signed the Trans Pacific Partnership (TPP) and Asean Economic Community (AEC) last year. The TPP is the largest free trade agreement in the world which covers 40% of the global economy. Tariffs and non tariff barrier to entry would be removed once it is ratified. For more details about the TPP, you can read this
opens up the 600 million market for Singapore among 10 nations in South East Asia. It allows for freer flow of trade and investment with ASEAN as a single market and production base. In other words, if your focus is on ASEAN, you can take advantage of Singapore’s superior factors as your regional headquarters.
Strong Intellectual Property Protection
We are living in the era where knowledge is more important than production. Goods are getting increasingly cheap as automation and robotics reduce labour demand and increased productivity in manufacturing. The real value lies in researching the knowledge to create the better robot and billions of dollars are being invested in research.
Hence if you are in an industry that relies heavily on intellectual property than it would be in your interest to set up your company here. Singapore has strong safeguards for your intellectual property. Your chief defender would be Mr Daren Tang, Chief Executive Officer of the Intellectual Property Office of Singapore (IPOS).IPOS
is a statutory board under the Ministry of Law.
IPOS is the administrator and enforcer of intellectual property rights in Singapore under the IPOS Act. Singapore’s intellectual property legal (IP) framework
would cover patents, trade marks, registered designs, plants varieties protection, copyright, geographical indications and the layout-designs of integrated circuits. IP can get highly technical and you can approach the IP Academy
to learn more about IP. IP Academy was created to deepen and broaden Singapore’s IP capabilities and awareness so that businesses can innovate with assurance.
As you can see, Singapore has a strong and robust framework for intellectual property protection. However Singapore is not resting on its laurels and it looks to the future with its IP Hub Master Plan
to guide its future implementation.
While not the best worldwide, Singapore consistently ranked in the top 10 of 4 different measures of IP effectiveness. If you look at the table carefully, you will realize that this is the top Asian country for IP effectiveness.
Don’t you find it ironic that the more things change, the more they stay the same. IP didn’t matter in the industrial era but it is vitally important in today’s digital age. Hence Singapore adapted to make itself attractive to the world.
This is just my perspective and since I am a Singaporean, you have to take my words with a pinch of salt and do your own due diligence first. It would cost you $385 for the do it yourself option all the way to $5000 if you engage a professional incorporation company. This is a guide where you can have more information about incorporating a company in Singapore.
Kai Kiat ONG writes as guest blogger for Zyngel.