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Benefits and Challenges of Expanding to Singapore

Trường Lăng

July 22, 2022

News

Benefits and Challenges of Expanding to Singapore

Trường Lăng

July 22, 2022

Why grow your business in Singapore? Singapore is a desirable area to live and work in due to its favorable tax structure, impressive economy, and huge development potential for businesses.

Singapore, which had previously held the top spot on the ranking for several years running, was ranked by the World Bank as the second-best nation in the world for conducting business in 2020. Singapore was ranked as the world’s most globally competitive nation by the World Economic Forum in 2019. Singapore was listed by The Economist’s Intelligence Unit as well.

You should learn more about the specific advantages you may anticipate as well as some of the few drawbacks of conducting business in Singapore if you’re thinking about expanding to Singapore. Both are covered in this manual so that you may choose wisely for your business.

Benefits of relocating your business to Singapore

The key advantages of conducting business in Singapore are listed below.

1. A booming economy

The size of Singapore’s economy is one of the key arguments for expansion there. The strong and expanding economy of Singapore is primarily driven by commerce, finance, and manufacturing. The country’s workforce is largely employed in the services industry, which also contributes significantly to the nation’s GDP (GDP). The gross national income per person in Singapore was 54,530 dollars as of 2017, and the country’s GDP grew by around 3.4 percent in 2018 and 0.73 percent in 2019.

Singapore has a surplus rather than a deficit and has comparatively low rates of unemployment and inflation.

2. Favourable tax regulations

Singapore is well-known on a global scale as a business tax haven. Due to its low tax rates and restricted tax base, the nation is perfect for business growth.

You might be curious about the taxes in Singapore compared to the USA if you’re growing from the US. The fact that Singaporean businesses do not have to pay taxes on their profits from foreign sources is a notable distinction. Companies are required to pay taxes on all money earned, regardless of where it was obtained, in some nations, such as the United States. But in Singapore, businesses are only required to pay taxes on the money they made there. Singapore is a desirable alternative for global expansion due of this benefit.

Singapore does not impose a capital gains tax, in contrast to many other nations, notably the US. Businesses can sell their capital assets or investments without having to pay taxes on the proceeds.

In comparison to other nations, Singapore’s corporation tax rates are likewise quite low. The Inland Revenue Authority of Singapore offers a number of incentives that may allow some businesses to lower their corporate tax rate below the country’s flat rate of merely 17 percent.

Startup businesses have substantial tax advantages. Startups may be eligible for a tax exemption of 125,000 Singapore dollars on their first SG$200,000 in income for the first three years of their operations. A firm must have no more than 20 shareholders and at least one of them must own at least 10% of the company’s shares in order to qualify for this exemption.

Singapore’s favorable tax policy benefits some industries considerably more than others. Global trade firms, foreign banks, and offshore funds that meet the requirements can all benefit from generous tax exemptions or preferential tax rates.

Singapore’s low currency taxes are another reason why it attracts so many foreign businesses. Since there are no restrictions on currency repatriation in the nation, companies are free to transfer their funds into and out of Singapore dollars. Singapore differs from many other nations in this regard, where businesses transporting currency may be subject to taxes.

Individual employees in Singapore also pay comparatively little in taxes. Residents of the nation pay a progressive tax rate, with the highest tax bracket, which includes incomes over around $320,000 annually, having a rate of 22%.

3. Total foreign ownership of businesses

Companies and business branches are frequently required to have a predetermined number of local shareholders. Through this method, the local nation gains some influence over the business’ operations as well as a small portion of its profits.

However, a Singapore-incorporated corporation may have 100% foreign ownership. Due to the possibility of maintaining complete ownership and control over their new operations, this option makes Singapore an alluring location for business expansion for many multinational corporations.

4. A knowledgeable and skilled workforce

The workforce in Singapore is highly skilled, and its educational achievements are among the highest in the world.

The workforce in Singapore is highly skilled, and its educational achievements are among the highest in the world. The majority of Singaporean students receive large tuition assistance to their home institutions, and higher education is generally accessible.

Universities, polytechnic colleges, and art schools all have graduation rates that are more than 90%.

Singaporean students consistently place first in the world on international academic assessments, including taking the top spot on the Programme for International Student Assessment (PISA) and being responsible for all but one of the exams’ flawless results in 2016.

The depth and caliber of Singapore’s workforce are only increased by the country’s welcoming immigration policies. Singapore is a reasonably straightforward place to get a work visa because it attracts excellent specialists from all over the world.

5. Minimal deterioration

Singapore has severe anti-corruption laws, and taking a bribe will result in serious consequences. Public employees frequently earn substantial salaries, which reduces their motivation to ask for bribes or otherwise participate in corrupt practices.

As a result, businesses can conduct their operations with little threat of becoming bogged down in bureaucratic red tape or losing money to dishonest officials. Their businesses become more profitable and efficient, and they can trust in the laws and financial policies already in place.

6. Convenient market accessibility and a central location

Your company will have simple access to many other Asian markets if you conduct business in Singapore. Since Singapore sits in the middle of Southeast Asia, several of the continent’s biggest economies, such as Australia, China, Malaysia, and India, are easily accessible by plane.

Around 36 million shipping containers pass through Singapore’s port each year, making it one of the busiest in the world. There is also a lot of airplane activity at the airport. You can readily obtain resources, transfer your goods promptly to their final location, and support the strong relationships on which your firm depends thanks to Singapore’s location and shipping and travel capabilities.

Problems to take into account during expansion

Additionally, your business needs to be aware of the biggest difficulties in growing in Singapore. The main obstacles you might have to overcome include the following:

1. Registering and incorporating your business

The procedure of creating a subsidiary-based entity in Singapore will probably be difficult, expensive, and time-consuming. You must finish a lengthy list of prerequisite tasks. These include, among many other related requirements, signing up for work injury compensation insurance, opening a bank account, applying for a tax number, creating a distinctive company seal, and registering with the Accounting and Corporate Regulatory Authority (ACRA).

By choosing to deal with an Employer of Record (EOR) instead, your business can streamline the way it handles this difficulty. Since you collaborate with an established organization when you engage with a respected worldwide EOR, you can often get around these requirements for establishment.

2. Getting electrical accounts and building licenses

In general, you’ll need to secure written authorization, get your structural pans approved, and get technical clearance.

If your company plans to break ground on a new building, you should attend that obtaining a building permit may require lots of time and effort.  Obtaining written permission have to be completed to get approval for your structural plans, and get technical clearance. Your company will like need to consult with the advice and comments from several regulatory bodies including the Ministry of Environment and Water Resources, the Land Transport Authority, and the Commissioner for Workplace Safety and Health. According to the World Bank’s research, this process takes about 35 days on average.

After finishing all steps, you’ll also need to get electrical services which the process takes about a month. The company must establish an account and make payment of the relevant fees before connecting your new facility to the power grid.

3. Ensuring law compliance

Singapore’s laws have some differences from the laws you are used to in your home country. Do your research carefully and thoroughly on the applicable regulations to ensure you comply with the laws if you have plans to set up a subsidiary.

Besides, you need to make sure registration with the ACRA, have at least one local director who holds an annual general meeting for your business, and complies with the Common Reporting Standards (CRS). Complying with this condition is very important because if you do not meet many of the requirements, your business could face stiff penalties.

You’ll also need to learn to navigate the red tape related to doing business in Singapore.  To meet all requirements before operating legally, you could consult with experts who can give you some useful advice in terms of legal matters. Thanks to this, you manage the process most efficiently. When you work with an EOR who is an established entity in place, you could make sure that you understand legal matters and gain peace of mind regarding legal requirements when you set up a new subsidiary. 

4. Keep up with the competition

The business environment in Singapore is known globally for its many opportunities and advantages. Many companies and businesses from countries around the world have chosen this country to set up new branches in this country to take advantage of the existing and potential economic benefits of Singapore.

If you intend to expand into Singapore, you will face fierce competition not only from these strong foreign companies but also from thriving local businesses. Therefore, if you want to employ talented employees and attract customers interested in your product, you will likely need to work with experts, asking for their advice and experience.

5. Dealing with labor shortages

If you plan to expand to Singapore, you will work with employees who are from other countries. Singapore has historically relied on international staff, leading to diversity in the workforce and cross-cultural conversations in the workplace. This diverse workforce brings benefits for businesses expanding into Singapore from abroad.

However, ever-tightening international labor quotas cause difficulties for businesses working in Singapore These strict limits related to political issues sometimes result in labor shortages and challenges for companies that need to recruit a large number of qualified employees.

Besides,  you will likely do some surveys, research, and analyze numbers in the reality and their change. For example, in 2020, Singapore reduced the quotas for its construction, processing, and marine shipyard industries from 20% to 15% to reduce its reliance on international labor and create chances for native Singaporeans.

How Globalization Partners can help

Whenever you are ready for your plan of expanding to Singapore, Globalization Partners will support and help your company. We can help you cope with challenges regarding expansion and create opportunities even when you face the challenges.

Working with Globalization Partners, you will likely get some advantages as follows:

  • Streamlined, state-of-the-art employee management: At Globalization Partners, we use a completely automatic system of employee management with an AI-driven technological platform to monitor and manage effectively your processes including recruiting, hiring, onboarding, and payroll. These outstanding features can help your company save time in terms of management because you can take over and work on many tasks at the same time every single day.
  • Easy, protected access: No matter where you are, you completely access our automated platform as it is cloud-based. It is easy to access by any equipment such as a laptop, desktop, or mobile device. This platform also ensures your sensitive data and private information are in the cloud.
  • Enhanced regulatory compliance: Globalization Partners has many years of experience and long relationships in Singapore. We know thoroughly about legal matters in Singapore. As a result, the companies work with us, you will not be worried whether your hiring process or employment use complied with all relevant labor laws or not.
  • Boosted focus on critical matters: The main task of Globalization Partners related to the administrative, legal, and human resources responsibilities of attracting and managing new employees. If your company has the department to help you manage and monitor this process, you can focus your attention on your most significant challenges and run your own business in the new market.

As you get ready to set up a subsidiary and build international teams in Singapore, working with Globalization Partners, you will use comprehensive, trusted solutions. With our end-to-end technology platform, you can save time and energy in terms of hiring, onboarding, and managing your team members. Moreover, all legal matters and requirements are ensured and complied with according to Singapore Laws, which helps you focus on innovations, and utilize all chances in a new Singaporean market. 

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