Which is an ideal jurisdiction for company incorporation in Asia? Singapore and Hong Kong have been dominant players in the Asian region, vying for the position of “the best place to do business.” But the crucial questions are, which of these jurisdictions have an edge over the other? Is incorporating a business easier in Singapore or in Hong Kong?
Strategic location and attractive tax benefits make Singapore the most preferred location for the overseas companies to set up their business. Various options are – opening up a Branch Office, a Representative Office or a Subsidiary in Marina South . The country also has liberal immigration policies. If the company wants to set up their regional head quarters in Singapore they are also provided with Financial Assistance.
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A key determinant for setting up a business in Marina South is the tax regime in force. In this regard Singapore boast of being one of the lowest tax jurisdictions in the world. Detailed below is an overview of the tax system and Payroll Services in Singapore.
Tax jurisdiction Singapore: Taxes are levied on a territorial principle i.e. companies and individuals are taxed on Singapore sourced income. In addition, the Foreign sourced income (branch profits, dividends, service income, etc.) are taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%.
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A key determinant for setting up a business in a given jurisdiction is the tax regime in force. In this regard, both Hong Kong and Singapore boast of being one of the lowest tax jurisdictions in the world. Detailed below is a comparative overview of the tax system in Singapore Vs HK.
- Taxes are levied on a territorial principle i.e. companies and individuals are taxed on Singapore sourced income.
- Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%.
- Taxes are levied on the territorial principle i.e. only on income "derived from or arising in" HK and not on income sourced outside the SAR.
- No tax is levied on profits arising abroad, even if they are remitted to Hong Kong.
Corporate Tax Rate
- Singapore: Current corporate income tax rate - 18%. However, corporate income tax rate effective 2010 - 17%. Note: The effective tax rate is much lower - below 9% for profits up to SGD 300,000 and capped at 18% for profits above SGD 300,000
- Hong Kong: Current corporate income tax rate - 16.5%
Goods and Services Tax (known as VAT/Sales tax in other countries)
- Singapore: 7%
- Hong Kong: Nil
Capital gains tax
- Singapore and Hong Kong: Nil (Capital loss expenses are correspondingly not allowed as deductions)
Group relief for losses
- Singapore: Allowed
- HK: Not allowed
- Singapore: Interest, royalties, rentals from movable properties, management and technical fees, and director's fees paid to non-residents (individuals or companies) are subject to withholding tax. There is no withholding tax levied on dividends.
- Hong Kong: Royalties, rentals from movable properties, and fees paid to non-resident entertainers or sportsmen for their performances in Hong Kong are subject to withholding tax. There are no withholding taxes levied on dividends and interest.
Double Tax Agreements
- Singapore: More than 50 bilateral comprehensive tax treaties
- HK: DTA network of 37 treaties
- Singapore: 1 January - 31 December
- HK: 1 April - 31 March
Filing tax returns
- Tax returns along with audited accounts must be filed with the Inland Revenue Authority of Singapore by 31 October each year.
- Note: Dormant companies (i.e no accounting transactions for the financial year) and exempt private companies (not more than 20 shareholders and shares are not held by another company) with an annual turnover of less than SGD 5 million are exempt from audit requirements and can file unaudited accounts.
- Tax returns along with audited accounts must be filed with the Inland Revenue Department by 31 April each year. The auditor must be a member of the HK Institute of Certified Public Accountants and must hold a practicing certificate.
- Note: Dormant companies (i.e no accounting transactions for the financial year) and small corporations (i.e total gross income does not exceed HKD 500,000) are exempt from audit requirements and can file unaudited accounts.
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Business disputes are an inevitable fact of life. In a competitive world-be it with local business transactions or on the other side of the world in Singapore-business law is a necessary tool for running an enterprise. A small business attorney is often as much a partner to a corporation as are tax accountants, marketing consultants, and human resource recruiters.
In the U.S., business law is largely the same. Business laws are written to establish fairness and a means of resolving disputes. The process is orderly and predictable, even if the outcomes are not always assured. Following is the process your attorney guides you through in business-to-business litigation:
- ADR (Alternative Dispute Resolution) - This is a court-supervised approach to avoiding litigation, seeking to resolve the dispute in a speedy, efficient and inexpensive way. Both parties must agree to participate in this process.
- File the claim - Your attorney formally makes this filing to the court and the defendant, stating your dispute and asking for a specific settlement.
- Discovery - Both plaintiffs and defendants must be amenable to allowing business records to be examined by the other party in gathering evidence. Employees and agents may be required to provide testimony in advance as well.
- Proceed to trial - If pre-trial attempts at settlement are unsuccessful, the plaintiff and defendant must meet in court to make their arguments. The court will render its judgment at the close of the trial.
- Appeals court - If a matter of how the trial was conducted is in dispute, or new evidence surfaces that is germane, a higher court can rule on the judgment. At times, decisions can be reversed.
Note that the ADR approach comes with its own set of rules. Impartial, neutral parties that include mediators, case evaluators, and arbitrators must facilitate the discussions and resolution. The mediation focuses on needs and interests instead of rights and positions, whereas the settlement is ultimately voluntary. Non-binding arbitration results in rendering a decision, but either party can reject the decision and choose instead to pursue a trial in court.