Why Do Foreign Companies Relocate to Singapore

Foreign companies relocate to Singapore for a numerous of reasons. On top of country providing some of the lowest tax rates, Singapore is also a key gateway to ASEAN countries. Singapore’s business-friendly policies also make Singapore an attractive destination for companies to set up and run business operations.

In the 2018 United Nations Conference on Trade and Development (UNCTAD), the latest data showed that global foreign direct investment (FDI) flows declined by 23% in 2017 to US$1.43 trillion. However, the FDI flows to developed countries as stable at US$671 billion showing no possibility of recovery from the 10% drop in 2016.

Despite this reduction in global FDI, Asian inflows increased to 33% in 2017 from 25% in 2016. The total flows in Asia amounted to US$476 billion with the largest recipients being Hong Kong, China and Singapore.

The figures are a clear sign that companies are seeking regions that show higher growth potential in satisfying the demands of their stakeholders. The fast-growing Asian economies, especially South-east Asian countries and China are providing to be profitable destinations for most countries. For instance, the total FDI inflows in China came second after the United States, amounting to US$136 billion in 2017 while that of Hing Kong amounted to US$104 billion.

Some interesting facts about business in Singapore

  • Singapore is one of the top countries that provides the lowest tax rates making it very attractive destination for foreign businesses.
  • Singapore has been ranked the third country in Asia and 5th in the top 20 host countries in FDI inflows
  • Tax on dividend income and capital gains is 0%.
  • Highest tax rate in Singapore is 17%.
  • Singapore has entered into double tax agreement (DTA) with more than 80 countries around the world.

Singapore is the Gateway to ASEAN

In the whole FDI equation, Singapore has been ranked the third country in Asia and 5th in the top 20 host countries in FDI inflows. The country has also established itself as the gateway to ASEAN, and a jurisdiction that businesses of all sizes prefer when setting their business operations in Asia. Let’s explore some of the reasons why business choose to relocate their business operations to Singapore.

Attractive Tax regime

The tax regime in Singapore can be described simple, attractive, and investor friendly. While the tax on dividend income and capital gains is 0%, the highest corporate tax rate is 17%. All foreign-sourced income is exempted from tax if it has been taxed in another country with a headline tax of more than 15%. In addition, post-tax dividends do not attract any withholding tax in Singapore. This regulatory framework provides a level-playing field for foreign investors, given that there are no foreign exchange control nor foreign ownership restrictions.

Extensive Double Tax Treaties

The country has entered into double tax agreement (DTA) with more than 80 countries around the world. DTAs have the benefits of avoiding double tax on businesses, preferential tax regime, and lower withholding taxes. These benefits help in reducing the tax burden for a company with a holding structure.

When combined with absence of dividends and capital gains tax, the extensive DTA network makes Singapore an attractive jurisdiction for al types of businesses.

Availability of Multilingual and Skilled Workforce

The business environment in Singapore boasts of a highly trained and skilled workers from all over the world. In fact, the country’s people are its richest resource. The large local pool of talent and the fast-paced innovative work environment reinforces Singapore’s reputation as having some of the most motivated and productive workers in the region. In fact, the IMD World Competitiveness Yearbook ranks Singapore as having one of the best workforces in the world.

The Singapore multiracial society promotes a diverse yet cohesive workforce. The country’s citizens originated from different racial backgrounds, building a capacity for a workforce that can provide multicultural and multilingual sensitive solutions.

Convenient Location with Superb Connectivity

The geographical location of Singapore is one of its strengths as a business destination. Singapore is strategically located at the crossroads of major shipping and trade routes of the world. This includes the main sea routes between China and Indian, which makes the flight to Southeast Asian countries only a few hours away.

The country has gained a reputation as a transportation hub due to its well-maintained infrastructure. Changi Airport, which is a key part of the countries sophisticate infrastructure has been award best Seaport in Asia consistently for 30 years.

The telecommunications network in Singapore is world-class. In the Global Information Technology Report 2016 by World Economic Forum, Singapore was ranked among the top leading economies in leveraging communications and information technologies as a way of boosting its competitiveness. The country was ranked among the two Asian countries that made it to top 10 of the report that analyzed 139 countries across the globe.

Conducive Working Environment

Singapore’s strong economy and political stability makes it one of the most prosperous countries in Asia. Expatriates with families find the country an attractive destination because of its cosmopolitan ambience, wide range of facilities, convenience of public services, and stable political environment. In addition, Singapore offers a diverse variety of entertainment and dining, world-class hotels, tropical gardens, internationally recognised education institutions, and highly-developed infrastructure. The quality of life in the country is high and has been consistently been validated by surveys, including the Mercer’s Quality of Living Survey. The warmth and friendliness of Asian people, blended with a modern lifestyle qualifies Singapore as one f the best places to work, live, and study.

Friendly Immigration Policies

The immigration policies in Singapore allows foreigners to relocated and set up businesses in Singapore with ease. Several visa schemes are available for qualified working professionals and entrepreneurs. This is in line with the government aim of attracting foreign investments and augmenting the local workforce with skills from across the globe.

Efficient Legal System

The legal system in Singapore is efficient and clear in application. The system was inherited from the British, but it has evolved and continue to grow to reflect the country’s current cultural, commercial and economic climate. The legal system has absorbed aspects of common law and best practices from other legal systems that have already matured.

Singapore is considered the least bureaucratic nation in Asia with its legal system receiving global recognition for its integrity and efficiency. Business in Singapore benefit from the lack of red tape and operations that slow down businesses like slow legal processes or bribery. Access to law in Singapore is considered a fundamental economic value that is harnessed and cherished to enhance the country as a leading hub and a premier business center in Asia. The country’s commerce legal system is celebrated for its impartiality and fairness, which makes it a suitable choice for resolving disputes, especially arbitration and mediation in Southeast Asia.

Exceptional IP Protection Regime

The protection of intellectual property (IP) is one of the best in Singapore due to the strong IP infrastructure and trusted legal system. The IP policy in Singapore is attuned to encourage innovation, growth and creativity. The 2017-2018 World Economic Forum’s Global Information Technology Report recognized Singapore IP protection regime as the leading in Asia. Still, more initiatives are being implemented by the government with the aim of improving the IP landscape further and build Singapore to become Asia’s IP hub.

Best Place to do Business

Singapore is considered one of the most attractive business destinations by top institutions that monitor worldwide business and economic activity. World Bank ranked it 2nd as the 2018 World’s Assisted Place to Do Business. In addition, the World Economic Forum ranked Singapore 3rd in its Global Competitiveness Index, while PwC ranked the country as Asia’s leading city in 2016 Cities of Opportunity Study.

Entry Options Available for Foreign Companies

One of the ways m which foreign companies set base in Singapore is setting up a brand office. A branch office is treated as a registered legal entity in Singapore, but an extension of the foreign company. This means that the liabilities of the brand extend to the parent company and its income is not eligible for tax incentives and exemptions that are available for resident Singapore companies.

Setting up a subsidiary company in Singapore is the most preferred option for small to midsize companies that wish to establish their business operations in Singapore. This option enables foreign companies to own 100% of the companies incorporated in Singapore. The option is tax efficient and effective in protecting the parent company against liabilities.

Setting up a representative office (RO) is another option for companies that wish you explore Singapore business environment before committing any large-scale investment of committing to any business venture.  The RO is a temporary business setup that lacks legal persona and cannot engage in any business activities or tradition. The purpose of setting up RO is to conduct feasibility studies or market research.

Concluding remarks

Despite the economic challenges being experienced on a global front, Singapore remains to be an attractive destination for investment. Its strategic location on the world map, network of double tax treaties, innovative business environment, rich pool of talented workforce, wide range of business opportunities, and its political and economic stability are just some of the reasons foreign companies are relocating to Singapore.

How MAM Corporate Solutions can help?

Its critical to consult market-entry specialists like MAM Corporate Solutions to ensure that businesses relocate to Singapore smoothly and no costly mistakes are made from start to finish. We have years of experience and we are always up-to-date with latest regulations in Singapore. At MAM Corporate Solutions, we help businesses with registration of the legal entities in Singapore, application for import licenses, accounting, tax and all other legal compliance in Singapore.

Contact MAM Corporate Solutions

If you need help to establish a legal entity in Singapore or want to develop your Singapore-entry strategy, Contact us here or provide below as much detail about your inquiry as possible to receive the most relevant response.

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    Thanks to the efforts of the MAM Corporate Solutions team, we can now sell our products under the banner of the incorporated company. We appreciate how the MAM Corporate Solutions’ team is responsive and informative. The team’s best asset is their consistent communication.

    Damara Tiyas
    Chief Operating Officer, New Santara Global