Why Singapore? Taxes, taxes, taxes!

lobalization’s effects can be felt everywhere. Gone are the days where people needed to hop on planes to attended business meetings, and gone are the days where managers needed to be physically present to manage their teams. Today companies can move their doors to foreign and more profitable places where labor is cheaper, taxes are lower, and property has more value.

We at HireLabs have become big fans of Singapore, which is on its way to becoming the epicenter of the technological world. With companies such as IBM and Facebook opening offices there and many more companies joining their ranks, it is evident that Singapore is the place to be. In the 2009 Doing Business Survey, the World Bank ranked Singapore as the easiest place to do business. The World Economic listed Singapore as number one in having the most friendly and open economy and number three in the Global Competitiveness Report 2009-2010 (the full report on Singapore can be viewed here).
Aside from economic stability, Singapore has constructed a healthy tax system that is conducive to foreign businesses and interested parties. Corporate tax alone in Singapore is at an unbelievable low of 17 percent—with Malaysia, China, and Indonesia at 25 percent, India at 33.9 percent, and Saudi Arabia ranging from 20-85 percent, Singapore offers one of the lowest rates in Asia.
With an increase in foreign interest in Singapore, the government has devised laws to differentiate between resident and nonresident companies. They have implemented a different taxation system for companies that are considered resident (where the management and control of the business is conducted within Singapore as opposed to another nation). If the business simply has a satellite office in Singapore and conducts its major board meetings abroad, then it is considered nonresident and subjected to different taxes. For example, they may have to pay a withholding tax, or tax that a nonresident makes on income sourced in Singapore. According to Anglo Info Singapore, “if a person or a Singapore-registered company makes a payment of a specified nature to a non resident they are required by law to withhold a percentage of that payment and remit it to the Comptroller of Income Tax”. This percentage is usually capped at 15 percent of the gross income or, the total net income, depending on the choice of the nonresident.

Considering that Singapore is the foreign hub of technological advancement, the government has implemented tax laws that take into consideration foreign run companies that concentrate on the development sector. For example, they have a Double Tax Agreement (DTA) made solely for foreign based companies, to keep them from being taxed twice; once by their home country and once by Singapore. Guide Me In Singapore states, “Singapore has concluded tax treaties with more 50 countries and the list continues to grow. The treaties reflect Singapore's continual efforts to help businesses in relieving double taxation and to encourage and facilitate the trade and investment opportunities across-borders”. Countries that Singapore currently has a DTA treaty with includes, but is not limited to, Australia, Austria, Bahrain, United Kingdom, Philippines, Turkey, New Zealand, Malaysia, Canada, China, Pakistan, Egypt, and Sri Lanka. The Government of Singapore also has limited treaties with the United States, Saudi Arabia, and the United Arab Emirates, to name a few. These limited treaties tend to have different qualifications as to what a “foreign based company” is deemed. For example, the United States treaty states that a corporation is only eligible for DTA if “more than 50 percent of the value of the corporation's stock is owned, directly or indirectly, by individuals who are citizens of the United States or of another country which grants a reciprocal exemption to residents (both individuals and corporations) of the Republic of Singapore”.
According to Guide Me in Singapore, each treaty outlines various rules and covers a broad range of clauses and topics that are covered under the agreement. Some treaties cover topics such as the allocation of ‘airline or shipping profits’ and outline them as follows: “an enterprise of one country from the other country is entitled to either full or partial exemption. Where full exemption is provided for, this means that the air transport or shipping income will be taxed in the enterprise’s Country of Residence only”. Other treaties have clauses covering ‘source of directors' fees’ as “country in which the company paying the fee is resident. The full domestic tax rate would apply as there is no exemption or reduced tax rate” (a full list of clauses can be found at Guide Me Singapore).

In an effort to further enhance ad promote research, the government of Singapore has introduced a tax relief initiative known as the Productivity and Innovation Credit. Under this ordinance, the “Singapore Budget 2010 [will strive] to provide significant tax deductions, for investments in a broad range of activities along the innovation value chain” states the Inland Revenue Authority of Singapore. The credit will provide assistance in some of following areas: research and development, registration and acquisition of Intellectual Property Rights, investments in Automation, training of employees, and investments in Design (For more details on how to qualify for this tax credit, please visit Inland Revenue Authority of Singapore.)
The Republic of Singapore also has other tax break opportunities for businesses looking to set up shop in the country. The Development Board of Singapore (EDB) is also responsible for the following initiatives:

- Development & Expansion Incentive: Limited to the manufacturing of products that can economically benefit the country, this law provides up to 10 years of tax relief for businesses.
- Pioneer Industries: Suitable for a new and developing industry, this law provides tax relief of up to 15 years to companies that specialize in new industries and the development of industries that are not practiced on a large-scale basis

- Pioneer Services Companies: As an extension on the Pioneer Industries initiative, this law promotes the development and awareness of “unrealized sectors”, states Buzzle.com. This includes, but is not limited to, “any engineering or technical services, consultancy and research and development, computer related services, and several others”.

Singapore’s taxation system, paired with their strong economy and bustling market, has allowed the nation to become virtually ideal for foreign investors and businesses.

Geographically, the country is located near the ocean and between India, Malaysia, and China, making it ideal for import and export (for businesses) as well. Any company looking to open its doors in Asia must take a good, strong look at Singapore and the benefits it has to offer. What sets this nation aside from other Asian countries is that its government is aware of its lack of natural resources and has embraced this fact. Rather than crumbling under the pressures of what they lack, Singapore has made itself stronger by capitalizing on what it can offer foreigners—a stable economy, immense research, the latest technology, and a fantastic place to work!