Singapore, the small island lying off the Southern tip of Malaysia, has witnessed much success in attracting capital to its shores.
Boasting a Gross Domestic Product (GDP) per capita of USD 50,000, it leaves an indelible impression on businessmen and investors as the jewel of Asia, outstripping its larger and better-endowed neighbours in terms of economic success. And make no mistake; the country has some tricks up its sleeve that has brought about this achievement, and it is far from the pure and corruption-free image Singapore presents itself to be.
To most business owners, the key considerations when setting up a company are the jurisdiction’s low tax rates, its reputation and modern banking facilities. These are crucial prerequisites that are fundamental to a company’s operations and they determine whether a business owner would choose to set up a company in a particular country.
Based off the chart on the left, you can see that Singapore’s corporate tax rate is kept at a nominal 17%, which makes it one of the lowest in the Asia region. Compare this to the average of 25% corporate tax rate in the Asia-Pacific region and the Organisation for Economic Co-operation and Development (OECD) average of 25.5%, what you have here is a country charging tax haven-like rates.
Yet as compared to Singapore, well-known tax havens such as the Marshall Islands and British Virgin Islands (BVI) are offering near zero tax rates to the companies incorporated there. So why not incorporate there?
Well, it is largely known that governments are keeping a close watch on businesses based there. Substantial paperwork and legal processes are required for companies dealing with their counterparts based in these havens, and this generates a lot of red tape restrictions and financing hassles. With many countries breathing heavily down the neck of businesses transacting with these companies, incorporating in a prominent tax haven is not as beneficial as it seems.
This brings us to the next topic: in today’s business environment, a company’s reputation makes or breaks the company.
Through a simple Google Search, any information is now made obtainable. By affiliating a company with Singapore, it leaves a distinct impression of an efficient and corrupt-free business on clients and suppliers dealing with the company. These are the huge intangible benefits a Singapore-based business can reap, giving a competitive edge over other companies based in other countries.
Now, top that off with modern banking facilities that Singapore banks offer. The technology-adoption rate in this small island is on par with that of Japan, South Korea and the United States, so it brings about huge advantages to local businesses with multi-national operations. Currency exchange and fund transfer between businesses and their clients or suppliers can be easily and quickly carried out. It smoothens out the all-important cash flow that is crucial to all companies.
Depending on the type of business and the services offered by the company, business owners must choose carefully.
Suiting an import-export company to a country with a large tax-treaty base is such an example. Singapore is just one of the many options available, but it has proven itself to be a strong overall candidate when it comes to being pro-business, by signing more than 80 tax treaties and being part of various partnerships, such as the Trans-Pacific Partnership (TPP).
The consequences of setting up a company in a less than ideal jurisdiction will hit business owners the hardest when they find themselves tied up in dealing with legal restrictions and facing high operation costs. It makes the decision of finding the right country to do business from at the start, a major determinant of the company’s future. For more information on setting up a company in Singapore or in any country, please do drop us an email or call us. We would not hesitate to assist you in setting up a company or a bank account.
Healy Consultants Group PLC is a corporate services firm providing international clients with a range of company formation and corporate advisory services. Headquartered in Singapore, the firm has an exceptional knowledge of Singapore company registration and Hong Kong company registration. Visit our website for detailed information on the firms services.