Numerous organizations that track the business friendliness of countries have consistently ranked Singapore very highly for the ease with which a new business can be started in the country. In 2016, the World Bank Group rated Singapore as the best country of the world in its “Doing Business”. This is Singapore’s tenth consecutive year at the top of this World Bank survey. This article looks at some of the key factors that make Singapore such an attractive place to incorporate and operate a business for both local and foreign entrepreneurs.
Singapore has received many accolades for its business friendly policies. These rankings have been awarded by well-regarded international organizations and they provide an independent verification of the country’s pro-business stance for the last several decades. These include:
- In 2016, for the tenth consecutive year, Singapore was ranked as the best country in the world for Doing Businessamong the 189 countries surveyed by the World Bank.
- In 2014, the Economist Intelligence Unit (EIU) ranked Singapore as number one among the 82 countries surveyed by EIU for its “efficient [and] open economy.” Singapore has received this ranking for seven consecutive years.
- The US-based Business Environment Risk Intelligence (BERI) research group awarded Singapore the highest ranking in 2014 on the productivity its workers.
- Forbes ranks Singapore as thethird wealthiest country in the world based on its per capita GDP.
- Singapore is ranked as 2nd best country for its Intellectual property protection in WEF’s Global Competitiveness Report 2014 – 2015 report.
- TheIMD World Competitiveness Yearbook in 2014 lists Singapore as among the least bureaucratic countries in the world (3rd worldwide, and 1st in Asia).
- According to Mercer’s 2014 survey on the Quality of Living Worldwide City Rankings, Singapore is Asia’s best city.
What Makes Singapore So Attractive
Several factors make Singapore a very attractive place for incorporating your new company. These include:
- A robust economy
- A rational tax system with low tax rates,
- Efficient process for incorporating and running a new company
- Strategic geographical location,
- Excellent infrastructure,
- Well-trained and productive workforce,
- Well-developed capital markets and financial system,
- No restrictions on repatriation of profits or import of capital,
- Strong adherence to the rule of law,
- Stable political and economic climate,
- Well-functioning government that is free of red-tape or corruption, and
- Excellent quality of life.
In the sections below, these advantages are explained in more detail.
A ROBUST ECONOMY
Singapore has a well-developed free market economy that is based primarily on trade, finance and manufacturing. Services account for 75% of the country’s GDP and employ 80% of its workforce.
The country has managed to achieve very low unemployment rate while maintaining low inflation. In 2014, the country grew at 2.8% and its per capita GDP in 2015 is estimated at more than $80k. Its gross national savings are nearly 50% of its GDP. It exports nearly S$500 billion worth of exports each year with the result that this country with only 5.25 million people has amassed the 10th largest foreign currency reserves in the world.
The country has no external public debt and a growing current account surplus. It has been actively investing its capital abroad. The state makes judicious use of its good financial condition – it funds housing, education, transport, and health care subsidy programs.
All of these attributes make Singapore a very robust and well managed economy. For a small country with limited natural resources to have achieved such a robust economy is a testament to the wisdom and planning of its founding leaders.
ATTRACTIVE TAX SYSTEM
Singapore has one of the world’s simplest and most rational tax system. It levies no tax on capital gains or on dividends received from a business. This makes the country particularly attractive to entrepreneurs who want to incorporate and build a new business.
Singapore uses a tiered tax system for both personal and corporate taxes. New firms receive significant tax breaks during their first 3 years reducing their tax rate to 0% for first S$100k of income. The corporate tax rate is capped at 17%.
Similarly, the personal tax rate starts at 0%, rises very gradually to a maximum of 20% for incomes above S$320,000. Corporate profits are not double taxed when they are passed to shareholders as dividends. In other words, dividends are distributed to shareholders tax-free. Finally, Singapore charges one of the lowest value added tax rates in the world.
AVOIDANCE OF DOUBLE TAXATION
Singapore has an extensive network of Avoidance of Double Taxation Agreements (DTAs) with over 50 countries. These agreements are designed to ensure that economic transactions between Singapore and the treaty country do not suffer from double taxation. Furthermore, Singapore provides Unilateral Tax Credits (UTCs) for the case of countries with which it does not have a DTA. Thus, a Singapore tax resident company is very unlikely to suffer from double taxation.
100% FOREIGN OWNERSHIP AND NO CURRENCY CONTROLS
Singapore allows a foreigner to own 100% of the stock of a Singapore incorporated company. You do not need any local partners or shareholders. This enables you to start a company with the type of capital structure that you desire and distribute its ownership to suit your investment needs. Furthermore, there are no restrictions on the amount of capital that you can bring from your home country to invest in your Singapore company.
Singapore imposes no restrictions on the repatriation of profits. No taxes are imposed on capital gains from the sale of a business. Similarly, no tax is levied on dividends paid to the shareholders.
Singapore does not impose any restrictions on the movement of foreign currency into or out of the country. This frictionless movement of funds across borders can provide extreme flexibility to a business. Compare the situation with countries such as China and India which impose huge hurdles to the free movement of foreign currencies.
EASE OF INCORPORATION AND OPERATION
Singapore has one of the most efficient and bureaucracy-free regulatory frameworks in the world. For nine consecutive years, Singapore has ranked number one on World Bank’s Ease of Doing Business survey. The requirements for incorporating a company are straightforward and the procedure for doing so is simple. It takes less than a day to incorporate a new company in most cases.
Similarly, the annual compliance requirements are simple and devoid of unnecessary or complicated paperwork.
SUPPORT FOR STARTUPS
The Singapore government adopts very pro-growth and innovation friendly policies. It provides many grants, tax incentives and in-kind assistance schemes to startups. Within certain preferred sectors, the government can also subsidize the labor costs of a new business. These benefits are available to local as well as foreign-owned businesses.
Over the last decade, Singapore has nurtured its venture funding community. It is now the premier venue in Asia for venture funds. By incorporating and locating your business in Singapore, you can avail yourself of access to these funding sources.
Most likely you have read about Singapore’s excellent education system and the high scores its students receive on global comparative standards. These students eventually become part of Singapore’s workforce and bring similar excellence to their work. Singaporeans have a reputation for being hardworking, rule-following, productive and highly educated.
In addition, Singapore’s liberal immigration policy brings global talent to the country. Singapore makes it easy for a foreign professional to obtain and maintain work visas or permanent residence (PR) status. Nearly a third of the country’s workforce is from abroad.
Singapore’s central location in Southeast Asia makes it a physical and metaphorical gateway to the continent’s 3 billion people. Some of the most important economies of the world (China, India, Malaysia, Australia) are a short plane ride away. The port of Singapore is one of the busiest in the entire world and is classified as a major International Maritime Center. Singapore’s Changi Airport is a world class airport that caters to approximately 20 million passengers every year and provides convenient flights to nearly every major city in world.
Most first-time visitors to Singapore are astonished by the world-class infrastructure of the country. This includes the country’s airport, highway system, subways, internet infrastructure, commercial buildings, museums, hotels and public parks. Much of the infrastructure has been developed in the last decade so it is very modern and new. Aside from creating a pleasing work environment, this infrastructure also improves the productivity of its businesses.
RULE OF LAW
Singapore recruits its “best and brightest” citizens into its civil service and pays them extremely well so that there is little temptation for corruption. If any official misconduct is discovered, Singapore has meted out harsh punishment for such corruption. As a result of these policies, the country now ranks as one of the least corrupt countries in the world. Furthermore, a modern regulatory framework provides strong protections for intellectual property, there is no expropriation of country’s wealth by its elites, and commercial courts function well to ensure that contracts are enforced.
Most entrepreneurs shudder at the thought of dealing with unscrupulous officials in Asian economies where “connections” or bribes are often the only way to get things done. Singapore is the exact opposite. The country has virtually no corruption because a) most government officials are very well paid, b) very harsh punishments are imposed for corruption, c) the country’s founder Lee Quan Yu set a very high bar for moral rectitude and led the country by example. So, if you incorporate a company in Singapore, you can be assured that you are not going to be at the mercy of corrupt officials; your business will succeed or fail on its own merits.
ENGLISH SPEAKING WORKFORCE
Nearly every young or middle-age Singaporean speaks English. Singaporeans are some of the most productive and well trained workers in the world. The country’s excellent education system produces a workforce that is good at what it does, yet on wages it is extremely competitive with other countries.
Singapore is perceived as an rule following, well-functioning, modern and honest country. This positive perception of the Singapore brand rubs on its businesses as well. By locating your business in Singapore, you will signal professionalism and quality to your customers, partners and suppliers. The first impression they will have of your business will be that of a professional, competent, honest, and well-run firm.