We have put together a list of the top six reasons for setting up a business in Singapore.
Singapore, the second smallest country in Asia, is a city-state located at the southern tip of the Malay Peninsula. During the three decades between the 1960s and 1990s, the country underwent rapid industrialisation and maintained an exceptionally high growth rate which earns its recognition as one of Asia’s Four Little Dragons.
Today, Singapore has established itself as a global business hub. The country’s well-developed infrastructure, stable political environment, robust economy, and skilled workforce are just some of the reasons why many multinationals and foreign entrepreneurs chose to set up their businesses in Singapore.
This article examines the significant reasons why entrepreneurs and foreign companies should choose to set up their business in Singapore.
1. Strategic location with excellent connectivity
Centrally located in the heart of Southeast Asia, Singapore has access to a population of over three billion within a few hours of flight time. As a regional transportation hub, Singapore Changi Airport serves more than 100 airlines flying to some 380 cities in about 100 countries and territories worldwide. In 2019, more than 65.6 million passengers passing through the airport. It is also the main hub for many leading logistic firms such as UPS and FedEx. Singapore Changi Airport is named the World’s Best Airport by Skytrax for the eighth consecutive year in 2020.
As a global hub port and one of the world’s busiest ports, Singapore is classified as a premier International Maritime Centre. The port of Singapore is connected to some 600 ports in over 120 countries with 200 shipping lines while handling almost 15% of the world’s total container transhipment throughput.
In terms of telecommunication connectivity, Singapore has an internet penetration of 82%. With its excellent digital infrastructure and as an early adopter of business cloud services, the country ranked fourth in the Global Connectivity Index 2019.
2. Ease of doing business
Singapore has one of the most efficient and bureaucracy-free regulatory frameworks in the world. In 2020, Singapore has surpassed Hong Kong, ranking as the world’s freest economy based on the Index of Economic Freedom published by The Heritage Foundation. Singapore is also the world’s most competitive economy, based on the Global Competitiveness Report 2019 issued by the World Economic Forum.
In the past decade, Singapore has consistently been ranked as the easiest place to set up and run a business. According to the World Bank’s Doing Business Report 2020, Singapore is ranked second among 190 economies in the ease of doing business.
Unlike many developing countries in the region, the requirements of setting up a business in Singapore is very straight forward. With its hassle-free set-up processes, incorporating a company in the country takes about 2 to 3 days. The Singapore government also offers an online platform (BizFile) for anyone to incorporate a business instantly via the portal.
3. Leading financial hub in Asia
Singapore is not only a leading financial hub in the region, but it is also one of the largest financial centres in the world. The country’s foreign reserve is ranked the 10th in the world. According to the Global Financial Centres Index (GFCI) released in March 2020, Singapore is the world’s fifth-ranked financial centres in terms of competitiveness.
The country is home to over 100 commercial banks, 29 merchant banks and 40 representative offices of foreign banks. Its solid and sound banking sector offers a wide range of services and products including banking, foreign exchange, bonds, equities, derivatives, asset management and insurance.
Singapore is well-known as an innovation hub. It provides a favourable environment for businesses and financial institutions to adopt new technologies like crypto and blockchain. The GFCI ranked the country one of the top ten in terms of attractiveness to FinTech.
The Singapore Exchange (SGX) is the largest stock exchange in South East Asia, with over 640 mainboard listings and 215 catalyst listings. It is also the third-largest forex centre globally with an average trading volume of S$870 billion. SGX has a reputation as the region’s largest international REIT platform and the largest listing venue for international bonds.
4. Attractive tax regime
Singapore has a well-structured tax regime which is one of the world’s most straightforward. Individuals and companies only are taxed on income generated within the country as Singapore follows a territory-based taxation, no tax imposed on any foreign-sourced income.
Additionally, the Singapore government has signed Double Taxation Agreements with more than 80 countries, which prevents any Singapore tax resident company from being obliged to pay twice for the same taxable income in two different countries.
Singapore does not have capital gain tax, while dividends distributed to shareholders are also tax-free. The corporate tax rate is capped at a flat rate of 17% on the company’s chargeable income. The tax break is available for newly incorporated companies, the effective tax rate for the first S$200,000 income is at 6.22% for the first three years after incorporation.
The Singapore government introduced the Goods and Services Tax (GST) in 1994, and the 7% GST still stands as one of the lowest in the world.
Personal income tax in Singapore is subject to a tiered tax system, which starts from 0% and goes up to 22% for income above S$320,000. However, non-resident individuals are subject to a flat tax rate of 22%.
5. Extensive trade agreements
Singapore signed the first Free Trade Agreement (FTA) under the ASEAN Free Trade Area in 1993 aimed at liberalising trade through the elimination of tariffs and non-tariff barriers among the ASEAN members. In order to keep up with the ever-changing global landscape, the scope of FTAs has expanded to include other areas of interest such as e-commerce, intellectual property rights, competition, government procurement and dispute settlement. Today, the country’s network of FTAs includes 14 bilateral, and 11 regional FTAs are in force.
6. Friendly business environment for startups
Singapore has a reputation as a regional hub for startups. Other than offering grants, loans or tax incentives to startups, the Singapore government has introduced various initiatives and programmes to create a vibrant startup ecosystem for both local and foreign entrepreneurs.
In 2017, the Singapore government rolled out a major initiative – Startup SG. It is a one-stop source for entrepreneurs to gain access to loans, grants, funding and capability enhancement. The seven pillars of Startup SG include:
- Startup SG Founder provides mentorship and a startup capital grant of S$30,000 to first-time entrepreneurs with innovative business ideas.
- Startup SG Tech provides early-stage funding for the commercialisation of proprietary technology.
- Startup SG Accelerator provides funding and non-financial support to incubators and accelerators in strategic growth sectors.
- Startup SG Equity aims to catalyse more investments into Singapore-based deep-tech startups, whereby the government co-invests with a third-party investor.
- Startup SG Loan provides government-backed loans to startups to catalyse their growth opportunities.
- Startup SG Talent offers various schemes including EntrePass, T-Up, Global Ready Talent Programme and Tech@SG Programme, to help startups to attract talents.
- Startup SG Infrastructure provides startups with the spaces that they need to grow, experiment and flourish.
The above competitive advantages are just some of the major factors attracting businesses or entrepreneurs to operate or expand into Singapore. Nowadays, living quality has a substantial weight when business people consider where to locate their business. Singapore tops the rank in Asia with the highest quality of living, according to Mercer’s Quality of Living survey 2019. No wonder there are thousands of entrepreneurs moving to Singapore to set up or expand their business ventures.
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