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 Outram . 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.
Best CPA Accounting In Central, SG
A key determinant for setting up a business in Outram 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 CPA Accounting 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%.
IRAS PIC Grant scheme, a Huge Boost for Small Logistics Companies
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.
Lower Costs - Simplify and Outsource Your Accounting Services
A lot of people who do not understand business will tend to ignore accounting of the business. So why use accounting or accountancy for business?
I have a close friend (with an accounting background) who is married to a man who sells computer components and DIY desktops. She was working in an events management company at first, but because their marriage was on the rocks, she decided to resign from her job to help out with her husband's business.
At first, the computer business was getting less than 20,000 dollars profit per month, but since her entry into the business, the profit began to grow monthly. It eventually exceeded 300,000 dollars profit within her first year of taking over the business. When I asked her how she did it, she answered that all she did was to make sure the accounts was recorded daily. She also ensured that costs were kept under tight control.
Most important of all was that the husband / wife relationship grew as well.
My friend's story taught me a lesson. In running the day-to-day operations of a business, it is necessary to keep track and document all your income and expenses. If marketing and sales activities are always the top priority in any business, then accounting and bookkeeping statements will come as the second most important element.
I have been reading books about entrepreneurs outsourcing accountants and bookkeepers for their business transactions, and this decision has given them a great amount of extra time to focus on the marketing and sales aspects of the business.
Do not even try to Do-It-Yourself by getting accounting software especially so if you do not understand accounting. Even if you do understand accounting, you will not be able to focus on growing you business.
By engaging an outsourced accounting or bookkeeping firm, you will be able to cut down a lot of your costs. At the same time, a third party outsourced firm will be able to verify your business transactions for the whole work year, thus further decreasing the cost in auditing services.
Always have the attitude of outsourcing and not the DIY mentality. While we must try to be an all-rounder in our business, we must also acknowledge the fact that we are not always able to do everything. Instead, delegate tasks that are not directly generating in income to the business.
This is the new generation of doing business - knowing where exactly costs can be easily reduced.
In summary, if you do not take the time to properly analyse your accounts, you will be unable to assess how your business is doing.
With proper bookkeeping to ensure that every transaction is properly filed, you can be assured that generating a quarterly profit/ loss statement and monthly cash-flow statement will be easy and most important of all, accurate and up-to-date.