Why Indian Entrepreneurs Should Consider Doing Business in Singapore
Neeraj Agarwal
I Neeraj Agarwal, am a Fellow Member of ICAI, practicing under the banner of M/s AAN & Associates LLP, a firm based out of Banglore Mumbai.
I am also registered under Insolvency and Bankruptcy Board of India as a Registered Valuer for valuation of Security or Financial Assets (Passed in Feb 2020)
I am also holding Bachelor of Commerce (B. Com) degree from Calcutta University (Passed in 2011).
I have corporate working experience in Wipro. After working in Wipro for a short period I started my practice in late 2013 and have been in practice so far for the last 10 years. I have also completed a Certificate Course by ICAI on IND-AS in 2020. I have also cleared Social Auditor Exam conducted by NISM.
I have been inducted as a Special Invitee to the Sustainability Reporting Standard Board, ICAI for the FY 2023-24.
Shiva Kumar U
commerce graduate and aspiring CPA with a solid background in accounting and finance. Enthusiastic about leveraging academic expertise in practical settings and adding value to a forward-thinking organization.
Introduction
Singapore, renowned for its robust economy, strategic location, and business-friendly policies, is a prime destination for entrepreneurs worldwide. Indian businesspersons looking to expand their ventures can find numerous opportunities in this dynamic city-state. This article provides an overview of the steps, benefits, and considerations for an Indian person looking to do business in Singapore.
Benefits of Doing Business in Singapore as an Indian Citizen
- Strategic Location: Situated in the heart of Asia, Singapore offers excellent connectivity to major markets in the region.
- Business-Friendly Environment: Ranked highly for ease of doing business, Singapore provides a stable and transparent regulatory framework.
- Tax Advantages: Competitive corporate tax rates, numerous tax treaties, and various incentives make Singapore an attractive destination for businesses.
- Skilled Workforce: A well-educated, multilingual workforce is readily available.
- High Quality of Life: Modern infrastructure, a safe environment, and a high standard of living enhance the attractiveness of Singapore for expatriates.
Taxes and Rates While Starting a Business as an Indian Citizen
If you are an Indian citizen doing business in Singapore, understanding the tax obligations is crucial. Here is an overview of the key taxes and tax-related considerations:
- Corporate Income Tax Flat Rate: The corporate income tax rate in Singapore is a flat 17% on chargeable income. Various tax incentives can reduce the effective tax rate.
- Start-up Tax Exemption (SUTE): Newly incorporated companies enjoy tax exemptions on the first SGD 100,000 of chargeable income for the first three consecutive years.
- Partial Tax Exemption (PTE): Established companies receive partial tax exemptions on chargeable income up to SGD 200,000.
- Withholding Tax Payments to Non-Residents: Certain payments to non-residents are subject to withholding tax.
- Double Taxation Agreements (DTAs): Singapore has DTAs with many countries, including India, to avoid double taxation. These agreements can reduce tax liabilities by allowing tax credits or exemptions in one country.
- Property Tax: Property tax is based on the annual value of the property, which is the estimated gross annual rent if it were rented out.
Difference in Tax Rates Between India and Singapore for Running a Business
| Tax Type | Singapore | India |
|---|---|---|
| Corporate Income Tax | Flat rate of 17%. Tax incentives such as the Start-up Tax Exemption (SUTE) and Partial Tax Exemption (PTE) can reduce the effective tax rate. | Base corporate tax rate of 25% for domestic companies with a turnover up to INR 400 crore (~SGD 72 million). For other companies, the base rate is 30%. Additionally, there is a surcharge (ranging from 7% to 12%) and a health and education cess of 4%. |
| Goods and Services Tax (GST)/Value Added Tax (VAT) | GST is levied at a flat rate of 8%. | GST rates range from 0% to 28%, depending on the goods or services. Common GST rates include 5%, 12%, 18%, and 28%. . |
| Capital Gains Tax | No capital gains tax. | Long-term capital gains and short-term capital gains. |
Challenges Faced While Doing Business in Singapore as an Indian Citizen
Starting and running a business in Singapore offers significant opportunities, but there are several challenges:
1. Regulatory and Compliance Requirements
Legal Compliance: Understanding and adhering to Singapore’s regulatory requirements can be complex. This includes company incorporation, statutory reporting, and compliance with local laws.
Licenses and Permits: Depending on the industry, obtaining the necessary licenses and permits can be time-consuming and may involve detailed documentation.
2. Work Pass and Employment Regulations
Employment Pass: To work in Singapore, foreign entrepreneurs need to obtain an Employment Pass or an EntrePass, which requires meeting specific criteria and complying with immigration regulations.
Local Workforce: Hiring and retaining skilled local talent can be competitive and expensive, especially in specialized fields.
3. Taxation and Financial Management
Complex Taxation Rules: Navigating Singapore’s tax regulations, including corporate tax, GST, and withholding tax, can be challenging. Ensuring compliance with tax laws and taking advantage of incentives requires careful planning
Transfer Pricing: Ensuring that intercompany transactions comply with transfer pricing regulations can be complicated.
4. Banking and Financial Services
Opening a Bank Account: Foreign entrepreneurs may face challenges in opening a corporate bank account due to stringent banking regulations and requirements.
Access to Credit: Securing financing or credit may be more challenging for foreign-owned businesses, especially for start-ups.
5.Legal and Contractual Issues
Legal Framework: Familiarity with Singapore’s legal framework, including contract laws and dispute resolution mechanisms, is essential for protecting your business interests.
Intellectual Property: Ensuring that intellectual property rights are adequately protected and enforced can be crucial, particularly for businesses with innovative products or technologies.
6. Market Entry and Competition
Market Penetration: Gaining market entry and establishing a brand presence in a competitive market like Singapore can be challenging and may require significant investment in marketing and customer acquisition.
7. Cost of doing Business
High Operating Costs: Singapore is known for its high cost of living and doing business. This includes expenses related to office space, utilities, and salaries.
Competitive Market: The business environment in Singapore is highly competitive, which can pose challenges in terms of market entry and maintaining profitability.
Addressing these challenges proactively can help Indian entrepreneurs successfully establish and grow their businesses in Singapore.
Conclusion
Doing business in Singapore as an Indian citizen presents both opportunities and challenges. Singapore’s favorable business environment, characterized by low corporate tax rates, no capital gains tax, and a strong regulatory framework, offers significant advantages for entrepreneurs.
However, Indian entrepreneurs must navigate challenges, such as compliance with local regulations, managing a competitive and high-cost market, and understanding taxation complexities. Careful planning, market research, and leveraging professional services are key to success.
With the right preparation and strategy, Indian entrepreneurs can thrive in Singapore’s business landscape, capitalizing on its role as a gateway to the broader Asian market.