Singapore offers foreign investors competitive access to the Asian market due to its favorable taxation policies and strategic location within Southeast Asia. Several free trade agreements with neighboring Asian nations are available to Singaporean businesses, in addition to over 80 double taxation avoidance agreements.
Besides being a stable political and economic hub, Singapore is also an important financial center in ASEAN. International business and trade standards are mirrored by Singapore, such as those offered by the World Trade Organization and the Organization for Economic Cooperation and Development.
Although COVID-19-related risks continue to affect Singapore, it has emerged resilient as a direct gateway to the global market. The manufacturing and wholesale trade sectors are still strong, while the information and communications and finance industries are also healthy, driven by the increasing demand for digital solutions and payment processing services.
Business opportunities, government incentives, and trade relations benefits make Singapore an excellent choice for companies looking to establish a holding company, branch office, or regional headquarters.
We spoke with Eugene Lim, Co-Founder, Principal of WTS Taxise, and took a deeper look at the advantages and challenges of doing business in Singapore.
Conventus Law: How has doing business in your jurisdiction changed in recent years?
WTS Taxise: Singapore has always been a business-friendly jurisdiction – it was ranked 2nd in the World Bank’s ‘2020 Ease of Doing Business Report’ and has consistently achieved high rankings in the World Economic Forum’s Global Competitiveness Report. While the Covid-19 pandemic has affected Singapore’s economy in recent years, the Singapore Government’s rapid and effective response to the pandemic have cemented its place as one of the most attractive business friendly and efficient jurisdictions globally.
As Singapore recovers from the pandemic, the growing number and influx of regional headquarters, and increasingly, Single Family Offices (“SFOs”), shows that there is still strong demand for Singapore as a business destination.
CL: What makes foreign companies choose Singapore over other jurisdictions?
WTS Taxise: Singapore has several factors which make it a highly attractive jurisdiction for foreign companies: 1) it has a business friendly environment – political and social stability, an efficient legal system and supportive government infrastructure and polices; 2) it is strategically located in the heart of Southeast Asia allowing to act as the gateway to a growing regional market; and 3) Singapore has a multitude of free-trade agreements and avoidance of double taxation agreements (“DTAs”) with many countries comprising about 60% of the world’s GDP.
These factors, along with Singapore’s whole-of-government approach, make Singapore a favourable place for foreign companies to do business.
“Additionally, foreign companies doing business in Singapore gain access to Singapore’s extensive DTA network, which provides certainty on their taxable presence in Singapore. There is also a wide range of tax incentives and grants available for businesses in Singapore.”
Eugene Lim Asia Pacific Chief Operations Officer, WTS Global Co-Founder, Principal, WTS Taxise
CL: How extensive are the Singapore double tax treaties?
WTS Taxise: Singapore has an extensive double tax treaty network comprising DTAS, limited DTAs and various Exchange of Information Arrangements with over 100 jurisdictions.
“While Singapore has a business-friendly environment, businesses still do face some challenges in their operations. For instance, Singapore has a strict foreign labour / immigration policy which could pose difficulties for foreign companies who seek to employ foreigners for their business activities in Singapore. Singapore also has regulations on finance, fintech and crypto products, which companies looking to carry out such businesses in Singapore must carefully navigate and understand before beginning operations.”
Eugene Lim Asia Pacific Chief Operations Officer, WTS Global Co-Founder, Principal, WTS Taxise
CL: What entry options are available to Foreign Companies, and what are their tax implications?
WTS Taxise: Foreign companies have various options to do business in Singapore. They can incorporate a Private Limited Company; set up a Limited Liability Partnership, a Branch, or a Representative Office (“RO”). Singapore applies a modified territorial basis of taxation, which means that effectively, only Singapore sourced and foreign sourced income received or deemed received in Singapore is taxed in Singapore. Singapore charges tax on a preceding year basis and all taxpayers must file tax with the IRAS within 3 months from the end of the financial year. This includes branches and ROs.
Additionally, foreign companies doing business in Singapore gain access to Singapore’s extensive DTA network, which provides certainty on their taxable presence in Singapore. There is also a wide range of tax incentives and grants available for businesses in Singapore.
CL: Are there challenges in doing business in Singapore?
WTS Taxise: While Singapore has a business-friendly environment, businesses still do face some challenges in their operations. For instance, Singapore has a strict foreign labour / immigration policy which could pose difficulties for foreign companies who seek to employ foreigners for their business activities in Singapore. Singapore also has regulations on finance, fintech and crypto products, which companies looking to carry out such businesses in Singapore must carefully navigate and understand before beginning operations. Finally, the recently announced carbon tax rate hikes makes Singapore less suitable for energy intensive low value-add businesses and industries.
CL: Singapore came in second in the World Bank’s “2020 Ease of Doing Business Report”. To what extent do tax regulations contribute to this outcome?
WTS Taxise: The World Bank’s Doing Business Report looks at a multitude of factors in deciding its ranking, which include: 1.) Starting a business; 2.) Dealing with construction permits; 3.) Getting electricity; 4.) Registering property; 5.) Getting credit; 6.) Protecting minority investors; 7.) Paying taxes; 8.) Trading across borders; 9.) Enforcing contracts; and 10.) Resolving insolvency.
In that regard, Singapore has clear tax regulations, and the Inland Revenue Authority of Singapore (“IRAS”), along with tax advisors such as Taxise Asia LLC, provide helpful guidance to businesses with their tax matters to ensure that businesses operating in Singapore have certainty on their tax positions.
