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.
It's also worth noting that the profit of a Singaporean company is subject to tax at only one level – at the company level. This means you will pay the tax only once, and there is no additional tax when distributing dividends, which is also a significant advantage.
In summary, it can be unequivocally stated that the territorial tax principle does not automatically exempt your profits in Singapore from taxes. However, by intelligently applying this principle and other tax advantages in Singapore, you can achieve a significant reduction in the tax burden on your business.
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.
What else should you know about registering and running a business in Singapore? According to the World Bank's "Doing Business" ranking, which assesses the ease of doing business (including the simplicity of registration), Singapore ranks second in the world. In our opinion, this is thoroughly deserved.
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.
Private investors and funds are also eager to invest in Singaporean businesses. This is due to two main reasons: the flexible legislative framework for investment and the high level of intellectual property protection and development. Investors are attracted to Singaporean startups because they enjoy maximum protection from the government and the law.
Thanks to an efficient government apparatus and powerful state business support programs, Singapore has created a thriving business ecosystem. Whether you are a startup or an established business, an investor or an owner, in trade or IT, Singapore has provided the most favorable conditions for every business.
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.