Singapore is becoming a less exotic and remote business centre for European businessmen. The city-state located in the Far East offers excellent advantages for those wanting to form a company there, as well as for holders of Singapore bank accounts. The most important advantage in any circumstances is that the profits companies founded in Singapore earned in another country are exempt from taxation.
The main advantages of company formation and investment in Singapore.
- According to a survey from the World Bank, of all the countries in the World, Singapore is where it is the easiest to have a business.
- According to Forbes, Singapore is the third richest country in the World.
- Singapore is the “most globalised” country of the sixty most developed countries, according to a survey from Ernst & Young.
- Singapore is politically the most stable country in Asia.
- The best qualified employees are located in Singapore.
- The quality of life in Asia is the highest in Singapore.
- Profits earned in another country are exempt from taxation.
- The corporate tax rate is 8.5% up to SGD300,000, and 17% above it.
- Dividends and capital gains are exempt from taxation in Singapore.
- There are no property/death/inheritance taxes in Singapore.
- In Singapore, personal income tax can be 0%, but no more than 20% above an income of SGD300,000.
The location of Singapore alone guarantees its position as a business centre. In the heart of Southeast Asia, within a few hours’ flying time, 2.8 billion consumers are within reach. As an island country, it is not surprising that it commands a significant proportion of maritime trade. Its economy is so transparent and free of bureaucracy that company formation can be completed in one or two days, if all necessary requirements are met.
It is no coincidence that the country is an excellent choice for company formation and tax planning. Due to the low personal income tax rates and the very favourable burdens for companies, an increasing number of entrepreneurs are choosing Singapore as the centre of their business. The personal income tax rate starts at 0% and only reaches 20% at an income of SGD300,000. Corporate taxation is similarly effective, as the corporate tax rate is 8,5% up to SGD300,000, and 17% on profits above SGD300,000. The most appealing part of the simplified Singapore taxation is that profits after taxation can be paid out tax-free as dividends to shareholders, as dividends are exempt from taxation. Moreover, profits earned in another country are exempt from taxation, unlike classic offshore tax havens. Singapore has an excellent reputation internationally and is explicitly not an offshore haven. The value-added tax rate is very competitive as well, at only 7%.
The Singaporean tax exemptions are mainly aimed at supporting the activity of newly created companies in Singapore. Therefore, the first SGD100,000 in profit earned in Singapore is exempt from taxation until three years after company formation in Singapore. As income earned in a foreign country is exempt from taxation, this is an excellent condition for “offshore” company formation in Singapore. Companies in Singapore can legally account, so there is no issue of tax evasion or tax fraud. Singapore has signed more than thirty international tax agreements, with the USA, China, Japan, Canada, France and Germany, among others. Moreover, benefits provided for company employees (car rental, pension fund, etc.) can be deducted from the tax base as business costs.
Offshore company formation in Singapore requires at least one local director who has Singaporean nationality, a permanent residence permit or an EntrePass. Company formation can be remarkably fast if all necessary documents are available and the availability of the company name has been checked.
The accounting of Singaporean companies must be presented to the Singaporean Accounting and Corporate Regulatory Authority (ACRA) for the first time no later than 18 months after company formation, then every 12 months. Interestingly, an exemption from the compulsory audit can be granted depending on the revenue of the company. For instance if the company’s turnover is less than 5 million Singaporean dollars, the company does not have to conduct an annual audit, instead, as a less expensive solution, the accountant can also prepare a simplified declaration.
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