Located in a tropical climate, Singapore has 5,350,000 residents and 4 official languages. In addition to these particular circumstances, Singapore is one of the most well-organised states and most important financial centres in the world, with surprisingly low criminality and one of the highest per capita GDPs. According to the 2013 World Bank report, Singapore offers the most favourable conditions for entrepreneurs looking to start up a company. The study takes into account not only aspects of taxation but also simplicity of administrative procedures and the protection offered to investors.
The most frequent form of corporation is the limited liability company, the so-called Private Limited and the Exempt Private Limited. For companies belonging to the latter category, there are also administrative simplifications (e.g. they are not required to have their annual accounts audited). A company can only be an Exempt Private Limited company if its shareholders are purely private individuals and the number of shareholders does not exceed 20. For Singapore companies, it is mandatory to have a local director, a company secretary and a local office. Anyone can be a shareholder (even another company), and there are no requirements as regards minimum share capital.
The corporate tax rate in Singapore is 17%, however, a company’s income is fully exempt from taxation where two conditions are fulfilled. One of these is that the income has to come exclusively from abroad, i.e. not from Singapore. Thus, if the company has a foreign partner, the income received from the foreign partner is exempt from taxation. The other condition is that the income from abroad does not enter Singapore. The easiest way to fulfil this latter condition is to have the revenues of the company be paid into a foreign bank account.
In addition to the tax exemption described above, it is important to highlight the fact that Singapore has concluded agreements with more than 70 countries on the avoidance of double taxation. Thus, with careful tax planning, further tax benefits can be gained, not only in international commercial transactions but also where holding companies are concerned; furthermore, due to their mutual tax agreements, numerous countries do not regard Singapore as an offshore location.
As a result of the above, it is clear that Singapore provides a unique environment for the setting-up of companies and can also at the same time act as a tax haven in such a way as to ensure that international recognition of the companies registered there is beyond doubt.
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