Key Benefits of Business Setup in Singapore

At MBG Corporate Services- a leading market entry consulting firm for business setup in Singapore, we bring you a comprehensive, in-depth two-part series on how to start a business in Singapore. In part 1, we look briefly into the economy of Singapore and why it makes for a compelling choice to Indians and other foreign entrepreneurs for a business set up in Singapore. Part 2 will cover the process of company formation in Singapore.

 

Overview of the Singapore economy:

Singapore has a highly developed, successful, and a free-market economy. It enjoys an open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. Additionally, unemployment is very low.

Singapore’s economy grew 7.2 percent in 2021, which is broadly in line with the government’s official projection and rebounding from the recorded 5.4 percent contraction in 2020. Its annual Gross Domestic Product (GDP) growth has been the fastest since 14.5 percent expansion in 2010 when the economy emerged from the global financial crisis.

Singapore has attracted major investments in advanced manufacturing, pharmaceuticals, and medical technology production and will continue efforts to strengthen its position as South-East Asia's leading financial and technology hub.

Key benefits of business setup in Singapore:

Singapore’s innovation ecosystem consists of high-quality infrastructure with a growing pool of dynamic start-ups & companies, well-trained talent, and strong government support. This is a key attraction for global businesses. The following attributes have made Singapore one of the most preferred destinations for businesses to register, establish and grow.

• Ease of doing business: Singapore is ranked 2 among 190 economies in the ease of doing business, as per the latest World Bank annual ratings. The ease of doing business is expected to stay at the constant of 2 even in 2022 and the future as it has in the past years.
• Hub of innovation: Singapore was ranked as number one for innovation among Asian nations, according to the recent Global Innovation Index, and also holds the global position for innovation input with quality capital and research as a key pillar. Meanwhile, Singapore’s size and strategic location make it an ideal hub for new products and services before rolling them out to the rest of Asia and beyond.
  • Singapore’s success in innovation has a huge contribution from the R&D, driven by ample government support and partnerships within the private sector. Under the Singapore government’s Research, Innovation and Enterprise (RIE 2020) plan, $19 billion (US$13.9 billion) is to be invested in the country’s R&D capabilities, entrepreneurship, and enterprise innovation over the next five years.
  • Alongside the Fintech industry in Singapore has seen great areas for room to experiment with new business models to meet the needs of the dynamic economy with a lightly regulated environment. This regulatory sandbox approach ensures that businesses in Singapore are empowered to take calculated risks without many restrictions.
  • Over the years, the close-knit entrepreneurial community of start-ups, accelerators, and venture capitalists has emerged in dedicated innovation hubs. These are a part of JTC Launchpad@ one-north, a 6.5-hectare site set up in 2015 to provide a conducive environment for companies to grow. It facilitates collaboration between academia and industry.
• Strong economic relations: Singapore is a signatory of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and a party to the Regional Comprehensive Economic Partnership (RCEP) negotiations with nine other ASEAN members plus Australia, China, India, Japan, South Korea, and New Zealand. In 2015, Singapore formed, with the other ASEAN members, the ASEAN Economic Community. The benefits of such strong economic relations lead to liberty of trade and access to diversified markets for business growth.
• Developed infrastructure: In a constantly dynamic and modernizing world, Singapore’s government has constantly revamped and developed its infrastructure and facilities to meet the demands of the economy, entrepreneurs, and businesses of the future.
• Complete foreign ownership for companies: There is no particular requirement for local shareholders while setting up a business in Singapore. In Singapore, 100 percent ownership can be in the hands of foreign entrepreneurs. International companies can retain full ownership and control of new branches or their newly established entities.
• Tax incentives: It is one of the most business-friendly countries in the world, with large tax incentives, easily understood compliance requirements, strong diplomatic policies and 74 Double Taxation Agreements (“DTAs”), 21 Free Trade Agreements (“FTAs”), 41 Investment Guarantee Agreements (“IGAs”), Economic Partnership Agreements (“EPAs”) to expand market reach.
• Legal scenario: The strong respect for the rule of law, and developed Intellectual Property (IP) protection laws are crucial and extremely attractive for entrepreneurs looking to invest here. Anti-corruption laws are pretty strict.
• Corporate Tax: All companies in Singapore have taxed a flat corporate tax rate, with no differential taxes for different goods and services. This means that the corporate tax paid is the final tax with no additional taxes imposed on dividends. For business setup in Singapore, there are a variety of tax benefits that foster and nurture businesses and regional expansions.

Two examples of such taxes would be the Global Trade Program (GTP) and Regional Headquarters Award (RHQ):

• The GTP grants a concessionary tax rate to foreign corporations who earn income from qualifying commodity derivatives or freight derivatives. The GTP & RHQ are governed by the Economic Development Board and require every business to meet the minimum requirements set by it.
• The RHQ, for example, grants a concessionary tax of 15% on incremental income from qualifying activities, for companies that choose to base their international or regional headquarters in Singapore. It comes with a set of qualifications to be cleared before being able to avail its benefits.

Flourishing industries in Singapore:

The largest industries of Singapore that drive the economy include the manufacturing sector that contributes 20-25% of the country’s GDP. Key industry clusters in the Singapore manufacturing industry include electronics, chemical, logistics, and transport engineering.

Close behind is the financial services industry, which enjoys stable growth with over 200 banks in the country and is a regional hub of choice for many financial services firms. It facilitates the transfer of knowledge, processes, skills, and technology between global, regional, and domestic markets.

Alongside, the industries that have taken a strong foundation are construction, hospitality, food services, biomedical, thermal power, transportation and logistics, healthcare, wholesale and retail trade.

Expanding your Indian company in Singapore or business setup in Singapore for Indian entities:

More than 8000 Indian companies already have a hold-in Singapore for regional markets. Singapore also wants to join Indian businesses in technology-driven areas to grow in the South-East Asian markets. The outward Indian FDI to Singapore is globally one of the highest, making it one of the top destinations for Indian investments. Major sectors inviting Indian investments are IT, real estate, manufacturing, construction, renewable energy, and pharmaceuticals.

Some of the Indian companies in Singapore with a major foothold are Tata Communications, TCS, Mahindra Satyam/Tech Mahindra, Infosys, Reliance, and Wipro amongst others.

Having a great foothold across Singapore by Indian companies, one can feel absolutely confident to invest in such a stable, thoroughly developed, and strong economy with zero corruption.

Get in touch with us if you are wondering how to start a business in Singapore. Our experts not only help with company formation in Singapore but also add value post business setup with other business advisory services related to Audit, Accounting & Bookkeeping, Legal, Taxation, Technology, and Risk Advisory.

To know more about our services, you can find us at Business Setup In UAE