Are you thinking of expanding your business to Singapore? The remarkable economy, favorable tax code, and tremendous business potential make Singapore an attractive place to live and work. According to the World Bank, Singapore ranked second out of 190 countries in ease of doing business.
If you are considering expanding into Singapore, we outline what to expect in this guide, such as:
- Top 4 reasons to do business in Singapore
- Top 3 challenges of doing business in Singapore
- FAQs for doing business in Singapore
Singapore is a global air hub and is strategically located along the world’s major aviation routes. The nation has a highly educated workforce, a business-friendly environment, and stable economic growth, making it one of the best countries for international expansion. Recent business surveys and economic indicators confirm Singapore’s emergence and dominance as a favorable business location. Southeast Asia is a hotbed of global growth thanks to its robust trade infrastructure, bilateral agreements, and proximity. As a result, businesses get a good advantage by integrating into the international market.
Top 4 reasons to do business in Singapore
Singapore’s large, robust, and steadily increasing economy, which is mainly driven by trade, financing, and manufacturing, and a growing talent pool is one of the fundamental objectives for expanding there. In addition, a substantial section of the nation’s workforce is employed in the service industry, accounting for most of the gross domestic product (GDP).
Furthermore, the government of Singapore conducts a vigorous foreign investment program and provides generous subsidies for its citizens’ education, housing, transportation, and healthcare.
Suitable tax rates
Due to Singapore’s low tax rates and limited taxes, the country is internationally known as a tax haven. Companies here do not pay taxes on their foreign-sourced income when expanding from the United States. While companies in Singapore are only subject to taxes on the revenues they earn there, this makes Singapore a desirable option for foreign expansion.
Unlike other countries, Singapore does not tax the capital gains, which means that companies can sell their investments or capital assets without paying taxes on the funds received. The corporate tax rate here is one of the lowest in the world at 17%, and the Inland Revenue Authority of Singapore offers several incentives for certain companies to reduce the corporate tax rate.
Ease of starting a business
Registering a company in Singapore is quicker and easier given all the formal requirements, and the application is submitted correctly. Moreover, Singapore allows anyone to own a company, including foreigners. In most countries, it is a requirement for companies and branches to have a certain percentage of local shareholders, giving the government some control over the company’s operations and a share in its success.
However, Singapore allows 100 percent ownership to remain in foreign hands, making it an attractive location to expand because international companies can retain complete control and ownership. Singapore continues to attract businesses across the globe, from large multinationals to fast-growing start-ups; despite global economic headwinds, Singapore remains one of the world’s strongest economies.
Access to Talent
Singapore’s workforce is consistently among the world’s most skilled and educated; more than 30% hold a university degree, while another 15% have a diploma or professional qualification. Due to Singapore’s bilingual education policy, most Singaporeans speak English and at least one other language.
In recent years, a huge number of venture capital funds have popped up in Singapore, which has attracted billions in funding and produced unicorns in the start-up world. Human capital has been the one resource that has helped Singapore become the economic miracle it is. The country has consistently invested in education to create a highly qualified and productive workforce that has driven its growth.
Top 3 Challenges of Doing Business in Singapore
The significance of company directors
As stipulated by the Singapore Companies Act, every company in Singapore must have at least one director who is a Singaporean resident. Directors have fiduciary duties to the company and are responsible for ensuring that the statutory obligations are met, including filing annual returns with Accounting and Corporate Regulatory Authority (ACRA) and holding an annual general meeting.
The local authorities may impose monetary penalties for serious breaches or non-compliance with regulatory requirements. In severe cases, they may act against company officers (such as directors and secretaries).
High operating costs
Singapore is expensive to set up and maintain a business in. A company’s operating cost in Singapore is higher than in neighboring Southeast Asian countries because the strong Singaporean currency makes paying employees locally more expensive. Also, limited land supplies mean that rent for retail and office spaces in Singapore is twice as high as in bordering countries.
Rent for business premises is among the highest in the world, electricity is costly, and labor costs are high. Anyone moving a business from another country will quickly learn of this and immediately investigate ways to cut costs.
Obtaining work pass
The Ministry of Manpower has made obtaining a working pass more difficult for non-nationals who wish to reside and work in Singapore. A case-by-case assessment of each application is conducted based on the applicant’s academic qualifications, experience, suitability for the job, and the sector in which the prospective employer operates.
FAQs for Doing Business in Singapore
What are the different types of employment?
- Permanent Employment – Per the Employment Act of Singapore, permanent employment is regular and continual, lasting more than 14 days. The employment contracts must include essential conditions, such as working hours and notice period.
- Fixed-Term Contracts – A fixed-term contract ends at the expiration of a specific term unless renewed.
- Temporary Employment – Singapore’s Employment Act has no specific temporary employment provision.
What are the retirement requirements for employees?
Employers must enroll employees in retirement and savings plans covered under the Central Provident Fund (CPF). In addition, citizens and foreign workers can also contribute to a Supplementary Retirement Scheme (SRS).
Some examples of social insurance programs in Singapore are:
- Dependents’/Survivors’ Benefit – Upon the death of an employee, the Central Provident Fund of Singapore pays benefits to the named nominees and any savings that the deceased employee had in the Ordinary, Special, MediSave, or Retirement accounts as a lump sum.
- Life and Disability Insurance/Benefit – As part of its ElderShield program, the Central Provident Fund of Singapore offers severe disability insurance. People with a severe disability receive a monthly cash payout for up to 72 months without any registration or assessment. CPF members with MediSave Accounts will are enrolled in the program upon reaching 40 years of age.
What are Singapore’s tax rates?
- Corporate Tax Rate: The standard corporate tax rate is 17%.
- Value Added Tax (VAT): Goods and Services Tax (GST) is a value-added tax (VAT) levied in various nations. The VAT/GST rate in Singapore is 7.
What are the data privacy requirements?
The Personal Data Protection Act (PDPA) administers personal data protection.
Do I need a legal entity?
Legal entities are not mandatory, but a company may want to weigh the risks versus the rewards before establishing one. There are other options for companies wishing to conduct business in Singapore without forming a legal entity.
Singapore PEO services allow you to hire and pay employees without creating a legal entity. Select the candidate you wish to hire, and we take care of:
- Hiring and Onboarding
- Employment Contracts
- Recruitment and Staffing
- R. Compliance
- Global H.R. and H.R. Software
- Employee Benefits
- Global Payroll
- Global Mobility
As a Safeguard Global company, Global Upside assists businesses in expanding into Singapore with talent acquisition, human resources, accounting, payroll, tax, and professional employer organization (PEO)/employer of record (EOR) services. Additionally, we provide a comprehensive solution for setting up businesses, maximizing operations, and complying with Singapore’s laws.