Is Singapore the best alternative to the UAE for setting up a company?

Singapore, though distant, holds its allure – is it worth registering a company in this country today? Many of the answers contained in this article will help you make an informed decision. Is Singapore considered an offshore jurisdiction? Are there taxes and reporting requirements in Singapore? Does the territorial tax principle work in practice, and what is the actual corporate tax rate in Singapore? Can you run a business in Singapore entirely remotely and still benefit from using local banks, payment systems, and government programs? Is a company in Singapore a strong competitor to the UAE and other low-tax countries?

Singapore has all the prerequisites to become a true haven for easy and efficient business operations. However, this will become a reality only for those entrepreneurs who can study local rules from reliable sources and take into account the existing "pitfalls" that online advertising remains silent about.

In just the last 4 years, the experts at Antwort Law have helped clients open 60+ companies in Singapore. Such companies are actively used by a wide range of businessmen, from startups and individual entrepreneurs to global giants in all business sectors, including IT, trade, finance, or crypto companies. And we are pleased to share real-life tips with you, talking about the advantages of opening and running a business in Singapore.

Is Singapore an offshore jurisdiction, or not?

To dispel any intrigue, let's immediately clarify: as of today, Singapore is not considered an offshore zone in the classic sense. However, it has not lost several very useful characteristics that entrepreneurs are looking for when deciding to explore the "offshore" theme.

A brief look into the history of Singapore and an analysis of the "offshore" issue will help us better understand what this jurisdiction represents today as a country for doing business.

In the 2000s, Singapore was indeed listed as an offshore jurisdiction. But after a series of reforms, it has become an absolutely "white," transparent, and reliable country. Singapore is not included in the widely recognized offshore lists for 2023, neither in the OECD (Organisation for Economic Co-operation and Development) offshore list nor in the European Parliament's tax haven list.

Thanks to Singapore's well-thought-out policies, it has moved out of the influence of the three main characteristics of offshore jurisdictions while retaining the key advantages of this country for international businesses:

1) Formally, Singapore no longer falls under the main characteristic of all offshore territories – the exemption of non-residents operating as entrepreneurs in such territories from taxes or providing them with special tax privileges. Singapore operates a standard corporate income tax, with a rate of 17%. However, you are unlikely to have to pay it in full. There are other useful features of this tax, which we will discuss further, but it can be said with confidence that Singapore does not fall under this "main" characteristic of offshore jurisdictions.

2) If we look at a characteristic of offshore territories such as the absence of financial reporting, Singapore no longer falls into the category of offshore. Reporting in Singapore is submitted annually and is mandatory for all companies. The reporting requirements are in line with industry standards, and the cost of local accountants' work is quite competitive.

3) Anonymity in ownership of companies is also considered a characteristic of offshore jurisdictions. Singapore's company registry remains closed, but it is fully regulated by the regulator. This includes clear compliance procedures for all company owners and directors, and in 2017, a register of ultimate beneficial owners of the business was launched.

Moreover, Singapore's legislation recognizes the legal validity of nominee agreements, allowing business owners to use nominee services for their Singaporean companies without any concerns.

Thus, by using Singaporean companies for business operations, you can be completely unconcerned about your reputation because you will be operating through a "white," non-offshore jurisdiction. At the same time, you will gain the advantages that only offshore jurisdictions could  provide in the past.

There is corporate tax in Singapore, but is it necessary to pay it?

As a rule, the primary reason for businessmen's interest in registering companies in Singapore is the "absence of taxes." This is often promised by online advertisements, but as we already know, that's not the case. Singapore has a standard corporate income tax. The tax rate is 17%, but in reality, companies pay much less.

Let's take a closer look at the issue of corporate taxation in Singapore to understand how it actually works.

The very same advertising that promises "tax-free" status justifies it with the territorial tax principle in Singapore. While this principle does indeed exist, its practical application is radically different from what advertisements claim. It differs to the extent that it makes promises of tax exemption an outright manipulation.

For example, conducting activities outside Singapore with a company that has a director and/or an account in Singapore will not provide you with a 100% tax-free status. If you decide to use a company without any ties to Singapore, you risk losing the right to be considered a tax resident in this country. As a result, the tax rules of the territory where you are physically located and conducting your business will be applied to you. There are many other nuances that will prevent you from entirely avoiding corporate income tax in Singapore.

However, you can significantly and legally reduce the amount of taxes you pay by applying the mentioned territorial tax principle wisely. For most entrepreneurs, this can reduce the effective (real) corporate tax rate from the stated 17% to just 10%. This is one of the most favorable offers in the world, as it means that for every $1 million in profit, you will pay only $100,000 in taxes.

If you are just launching a startup in Singapore, you may receive even more favorable tax treatment. With relatively small profits, the effective tax rate can be as low as 5-8%. In the first year of your company's operation, you can expect full tax exemption for the first $100,000 in profit and an additional 50% exemption for the next $200,000 in profit. This reduced rate will also apply in the second and third years of your company's operation.

... Until recently, when comparing the tax advantages of the UAE and Singapore, the UAE was the clear winner. However, with the introduction of a 9% tax rate for local companies in the UAE, mandatory tax reporting, and the UAE's continued presence on the "grey list" of countries, the situation has changed significantly. With an effective tax rate for businesses within 10% and 5-8% for startups, Singapore is now one of the leading countries among both "white-listed" and "grey-listed" countries for doing business. In the competition between the UAE and Singapore, the scales often tip in favor of Singapore, especially considering additional advantages beyond the tax burden ... Vladyslav Makarenko, Managing Partner, Antwort Law

Documents and the Company Registration Procedure in Singapore

Singapore's favorable taxation is just the tip of the iceberg of advantages for entrepreneurs in this country. For example, there's the exemplary ease of registering and running a business.

ACRA (the government agency in Singapore responsible for company registration) has one of the most advanced and efficient systems globally, allowing companies to be registered in Singapore in a single day. Of course, this can be done remotely and online. This not only saves time on formalities but also allows you to immediately start opening accounts or entering into contracts. You can precisely choose the date of company registration, which is highly valued by many Asian entrepreneurs, for whom numbers and dates hold great significance.

The document requirements have remained consistent over the years, and all forms and reports can be submitted quicklyand online. The efficiency of these processes is facilitated by licensed Singaporean company secretaries who submit all documents through their personal ACRA portal. The tax authority and ACRA are always responsive and available to address inquiries when needed.

Obtaining copies of corporate documents, notarizing any forms, or ordering certificates of tax residency for companies is cost-effective and doesn't require much time. In 2021, Singapore joined the international Apostille Convention, significantly simplifying the notarization process for documents intended for use in other countries.

... When comparing the ease of business registration and operation in the UAE and Singapore, there are several interesting points to note. In Singapore, you can remotely register a company without any additional conditions or the need to visit. In the UAE, the process is significantly more complex. As a general rule, you cannot remotely register a local company in the UAE, and only individuals who have previously visited the UAE and have the appropriate stamp in their passport can remotely register companies in free zones in the UAE. Moreover, the issuance and notarization of many documents in Singapore are much simpler, faster, and less expensive than in the UAE. In reality, the difference in the cost of issuing and notarizing many documents in Singapore and the Emirates can be measured in four digits! ... Maryna Makarenko, CEO, Antwort Law

State Support Programs for Businesses in Singapore

Singapore has an extensive system of state support for businesses. We won't describe all the existing support and development programs in Singapore, but we'll focus on the most popular ones. And before delving into the descriptive part, it's worth noting that all the mentioned programs are genuinely operational.

For larger entrepreneurs looking to expand their existing businesses in Singapore, the state has established the Economic Development Board (EDB) agency.

Startups, on the other hand, can apply for grants through Enterprise Singapore. Significant opportunities are available to companies with high-tech products, but startups from various industries should also consider applying.

For IT entrepreneurs and those in the R&D sector, programs related to intellectual property protection are attractive, offering the opportunity to expand intellectual property rights for products and technologies globally at favorable rates through the Madrid Protocol.

... In Singapore, there are convenient relocation programs that residents of the CIS countries can participate in. Among the most popular ones are: 1) Employment Pass – a work visa for highly skilled professionals, managers, directors, and company founders. It allows you to live and work in Singapore for 1 to 2 years and then apply for permanent residency. You can also bring family members with you. One of the conditions for obtaining it is a specific salary level for such employees, starting at 5,000 Singapore dollars. By obtaining an Employment Pass, you automatically become a tax resident of Singapore, where the progressive personal tax rate is one of the most favorable in the world. 2) S pass – a work visa for medium-skilled employees. This program has limited quotas for each company, and employees must earn at least 3,000 Singapore dollars. 3) Entrepreneur Pass (EntrePass) is designed for entrepreneurs... Lidia Ivanova, International Lawyer, Antwort Law

Banks and Payment Systems in Singapore

Every businessman dealing with foreign companies knows the value of quality banking. Today, the ability to open an account in the country of your company's registration has become a luxury for many. Singapore, however, undeniably provides this opportunity. Of course, there are several conditions to meet, but we at Antwort Law proudly state that every one of the 60+ companies we've helped set up in Singapore over the past 4 years has one or even several bank accounts opened in Singapore.

Digital banking services and a convenient banking system are the norm in Singapore. Local banks allow for multi-currency accounts and transactions to various countries around the world. DBS, Anext, Green Link Digital Bank, OCBC, and Trust Bank are considered top-tier banks for opening business accounts in Singapore. There are also a wide variety of payment systems that are ready to service a wide range of business types.

Singapore has no legislative restrictions on the movement of capital to and from the country. A pleasant factor is the absence of exchange controls. Singapore also offers preferential financing programs, including special loans and credit risk insurance for businesses.

As a member of the Financial Action Task Force (FATF), Singapore is obligated to take measures to combat money laundering. Singaporean banks have reasonable requirements, but this gives them a competitive edge among all global banks. You can always clarify their requirements and meet them if you stay in touch with your bank manager. Singaporean banks offer the flexibility of maintaining communication with your banker and responding to their requests remotely through any convenient means of communication, even pre-approving necessary transactions online.

Should You Register a Company in Singapore?

Singapore has long ceased to be an offshore jurisdiction and is now considered a "white-listed" jurisdiction with an impeccable reputation. It has rightfully become one of the most advantageous countries for conducting businesses in IT, innovation, trade, manufacturing, and especially for promising startups from any field.

Registering a company in Singapore is not only a strategic decision to optimize your tax burden but also a step towards receiving state support for your business. Singapore offers entrepreneurs a unique combination of low taxes, a high degree of transparency, and a business-friendly state and banking system. With these compelling advantages and the introduction of a 9% corporate tax rate in the UAE, Singapore has become a serious competitor to the United Arab Emirates.

Consider Singapore as the country to register your business, and the experts at Antwort Law will be happy to answer all your questions. Our staff is physically located in Singapore and is ready to guide you at every stage of your project implementation. Schedule a consultation with us, and we will prepare a step-by-step plan for registering and supporting your business in Singapore.

Diana Gulevskaya

Partner
Antwort Law