Article by Dario Acconci, Managing Director–Business Development, Asia, Hawksford
For businesses seeking to expand and develop an Asian presence, Singapore offers a wealth of possibilities. From tax benefits, a highly skilled workforce, a just legal system, as well as the physical location, there is a myriad of reasons why Singapore serves as an ideal base for those expanding into Asia, one of the world’s fastest-growing economies.
Entering a new international market can be a risk-filled prospect, so it’s of the utmost importance to understand as much about the new business environment as possible before committing major time and resources to the venture.
Despite the potential risk, there is a high reward to be gained, particularly for businesses within the manufacturing industry, as the sector plays such a vital role in the Singapore economy. Representing 20% of the local GDP, the manufacturing industry receives a high level of support from the Government.
But what do companies need to know before expanding into Singapore?
Singapore presents many opportunities and benefits for foreign companies. To truly reap the benefits of the Singaporean business environment, it’s crucial to understand the benefits available. The principal advantages are the tax benefits, the people, the location, and the legal system.
Tax
Setting up in Singapore grants companies access to an extensive network of double tax agreements (DTA) with over 80 countries across the globe, which avoids companies paying double taxes, lowers withholding taxes, and offers an attractive tax regime.
As part of the favourable tax regime, Singapore does not apply tax on capital gains and dividends income, in addition to offering a lower corporate tax rate on taxable income, standing at a maximum rate of 17%, in gross contrast to the 30% federal tax rate in Australia.
People
What’s more, Singapore has a vast and skilled multilingual workforce, and the country boasts a reputation for having one of the most diverse and multicultural populations in the world. The reason for this being the country’s impressive immigration policies, which can also aid your company during the expansion period.
Location
Singapore’s geographic positioning means that most other Southeast Asian countries can be accessed by a short flight or journey, further facilitated by the country’s award-winning airports and seaports. The ease of access is particularly pertinent for manufacturers since ASEAN countries represent approximately 5% of global manufacturing (in value-added terms), presenting the opportunity for lucrative deals and exports to be made.
Legality
Another advantage held by Singapore is its legal system. With minimal legal red tape and quick processes, the Singaporean legal system is considered one of the least bureaucratic countries in Asia.
One notable policy provides robust intellectual property (IP) rights, established by the government to encourage innovation and creativity. In the case of manufacturing companies, they protect critical patents, copyright, designs and trade secrets.
What options are available when it comes to establishing a presence here?
As well as having many reasons why expanding companies should establish a presence in Singapore, there are several options for how you may want to do so, including establishing a subsidiary company, branch office, or representative office.
Setting up a subsidiary company is considered best for foreign small medium enterprises (SMEs). Subsidiaries are considered completely separate from the foreign parent and require one or more directors, and at least one must be Singapore citizen, permanent resident or employment pass holder. One of the biggest advantages is that subsidiaries will be treated as a local company meaning they can receive the same tax benefits and protection against liabilities.
Another option is to open branch office, which would be seen as an extension of the parent company, meaning they cannot benefit from the same regulations as local companies, or subsidiaries. This type of investment is recommended for medium to large businesses that perform specialised operations in international locations and intend to conduct a wide range of business activities in Singapore.
Alternatively, foreign companies may choose to set up a representative office (RO), which would allow them to explore the market or manage company affairs but must not conduct revenue-generating activity. The RO must be staffed from by a representative from the foreign company’s head office and may only operate for three years maximum. Establishing an RO is generally recommended for a company seeking to study the Singapore market before committing investment and resources to it.
How Hawksford can help
At Hawksford, we provide corporate, private client and fund services with over 500 team members around the world to support our clients. In addition to expert industry know-how, we have the local knowledge and experience to support your new venture.
Recently, we supported MetaSensing, a European developer of high-resolution radar sensor technology expand business operations into the Asia-Pacific market for the first time by first establishing their presence in Singapore. Calling on our specialised expertise we aided MetaSensing with incorporation and domiciliation in the new market, all the while ensuring that the company fulfilled their tax required and reaped the lucrative benefits of the market.
To find out more about doing business in Asia and our range of services, please download our Asia Guide here.
