Assessing the ease of doing business in Singapore

The legal formalities that the owners of a business need to complete in order to incorporate their company in the market play a role in the business-friendliness of a country.

How lengthy the process is in terms of time taken and the amount of documentation required indicates the country’s proclivity to foreign investment and the growth of its economy.

While you can’t expect any country to just let people start their business without any formalities, there should be a healthy balance between stringent procedures and an easy incorporation process so that businesses feel that they are making the right decisions.

The tax laws for businesses within a country are a major incentive for entrepreneurs to incorporate their companies in that country.

Many countries tend to have harsh tax systems that do not help businesses thrive in a profitable manner. And in such cases, organizations seek better tax systems in different countries.

The tax benefits or deductions that a country’s government allows business corporations act as a major magnet for investment in the market.

Different types of businesses can gain different types of benefits due to the geographical location of the company. In some cases, you might benefit from lower competition from foreign businesses due to regulations.

And in other cases, you might be a business that deals with physical goods and you get better import and export capabilities helping you bring down the financial cost of operations.

The ease of doing business in Singapore also brings with it access to other Asian markets.

Sometimes even great businesses with excellent products and services struggle to thrive in a market due to the systems playing against their favor.

Existing within a developed capital market and the financial system helps in transparency and a high degree of regulation and oversight. This kind of developed system helps businesses in many ways including access to capital and investment opportunities. 

Comparison of incorporation time as well as the steps involved between different countries:

● Indonesia

The time taken to incorporate a business in Indonesia is anywhere from 2-3 months for a domestic business and 4-6 months for a foreign business. As a non-resident or citizen of Indonesia, there are additional requirements, laws, regulations, and approvals required for the incorporation of a business entity.

Depending on the type of business and the industry your company operates in, you might have to acquire additional permits. Another requirement is that foreign businesses must have one Indonesian Director who has at least 25% of the shares in the company. All of this makes establishing a business in Indonesia pretty time-consuming.

● USA

The average time to incorporate a business in the US is 2-4 weeks. It may be more depending on the state you’re registering your business in and the type of business you operate.

Apart from all the general documentation requirements, after the State level of approval, an Employer must also obtain their EIN (Employer Identification Number) from the IRS (Internal Revenue Service). This process takes an additional 1-2 weeks. 

● Australia

The average time it takes to incorporate a business in Australia is anywhere between 1-2 weeks. This is subject to the type of business you plan to establish and also the state or territory you operate in.

The application process involves paying all the fees required, having all the correct documentation, and providing them along with the company details to the Australian Securities and Investments Commission (ASIC).

● Singapore

Incorporating a business in Singapore can sometimes take less than a week. Depending on the type of business and all other permit requirements it might take 1-2 weeks.

The process of company registration in Singapore is done through Accounting and Corporate Regulatory Authority (ACRA). Singapore is well renowned for being an easy place to set up businesses in terms of enforcing contracts, permits, and other lenient policies.

The Corruption Perceptions Index by Transparency International ranks 180 countries and territories around the world based on the perceived levels of corruption on a scale between 0 (highly corrupt) to 100(very clean):

• Singapore at 85/100

• Australia at 73/100

• USA at 67/100

This is one of the major benefits of doing business in Singapore as you know that the process of incorporating and carrying out a business will be highly unbiased and you will get equal opportunity to start your company.

● Singapore

The ease of doing business in Singapore is complimented by the tax structure and system present in the country as it is a territorial system meaning that only income derived from Singapore is taxed to a business. 

The effective corporate income tax rate for the assessment year 2022 is 17%. Other types of tax such as GST at 7% and withholding tax might be applicable depending on the type of your business.

There are also several tax exemptions available to businesses such as:

PTE: The Partial Tax Exemption scheme is one where the business pays a low rate of 8.5% on the first S$300,000 of their income. Small and medium-sized companies are eligible for this.

SUTE: The Start-up Tax Exemption scheme is one where for the first 3 consecutive years of income tax assessment, a startup is eligible to claim 100% of the exemption for the first S$100,000 of their income.

There are many more exemption schemes available such as the Tax Exemption for New Start-up companies (TENS) scheme, Double Tax Deduction for Internationalisation (DTDi) scheme, Productivity and Innovation Credit (PIC) scheme, Mergers and Acquisitions (M&A) Tax Allowance, and Research and Development (R&D) Tax Incentive. 

● Australia

The corporate tax rate in Australia is 30% for businesses with an annual turnover of 50 million AUD or more. For businesses with an annual turnover of less than 50 million AUD, the tax rate is 27.5%. 

Businesses must also pay Goods and Services Tax (GST) and payroll tax. The GST tax rate in Australia is 10%. Payroll tax is a state-specific tax in Australia that is different based on the state you operate in and is charged on the wages you pay your employees. Aggregated group turnover of less than AUD 20 million is entitled to a 43.5% refundable tax offset.

Australia also has some tax incentives and reliefs. Companies can get R&D tax incentives for eligible research and development activities. 

● USA

The federal corporate income tax rate for businesses in the USA is 21% for the assessment year 2022. But depending on the state you operate in, you will also have to pay an additional 0-12% corporate tax. 

Your business may also be liable to pay other types of taxes such as payroll tax, sales tax, and property tax. The tax system in the USA is considered to be pretty complex and compliance can be a cumbersome process.

It is also more costly to businesses as it’s a worldwide tax system rather than a territorial system meaning regardless of where your business earns money, you will have to pay income tax on it. You can get an R&D tax credit if your research and development activities meet the criteria. This incentivizes investments in innovation.

The legal framework in Singapore is very business-friendly as they have implemented many schemes and policies to help businesses:

● The Enterprise Development Grant (EDG) gives financial aid to SMEs for their development and growth.

● The Capability Development Grant (CDG) is for funding support in specific areas like innovation, internationalization, and productivity. 

● The Market Readiness Assistance (MRA) Grant supports local Singapore businesses to assist them in expanding their operations overseas.

● The Startup SG program provides a slew of benefits to companies such as networking opportunities, funding, mentorship, and access to other resources.

● The Jobs and Skills Package was an initiative launched by the Singapore government in recent years to support workers and businesses through funding and training opportunities who were affected by the COVID-19 pandemic.

● The Automation Support Package (ASP) is a program that helped businesses automate processes within their business and improve productivity.

There are different eligibility criteria for all the schemes and policies mentioned above for which a business should take help from a professional advisor.

Singapore is in a geographically favorable business location as it is surrounded by many other countries to do business with. It is well-positioned in emerging markets of Asia and ensures good connectivity and relations with foreign entities.

Singapore has a consistently growing economy with a stable political environment and quality of life for people and businesses to thrive within. Over the years it has also become an attractive tourist spot for its rich culture mixed with a modern way of living making it a very appealing destination for people from around the world.

Establishing a business in Singapore also gives you opportunities to access foreign talent & productive workforce residing in the country who are willing to grow their career. 

Now after reading this articles, If you have decided to start your business in Singapore, it's advisable to engage a reliable incorporation service provider for a smoother experience. Explore our article on the best incorporation service providers to make an informed choice.

● Corporate cards

You can issue unlimited virtual cards to manage all online transactions and issue one physical card per employee to manage offline and online expenses. These corporate cards enable the ease of doing business in Singapore by giving your employees the flexibility to spend freely while your finance team still maintains control over these expenses by setting custom spending limits for each card. 

● Multicurrency account

Volopay’s multicurrency business account lets you hold money, send money and receive payments via 60+ currencies in over 100 countries. This is especially helpful for companies dealing with foreign vendors. You get to save money by reducing your FX charges by loading your currency wallet once instead of incurring FX charges for each payment to a vendor. 

● Expense management

Whether it is expenses made through a physical corporate card, a virtual corporate card, or a multicurrency business account, you get to see and manage all expenses on a single platform.

Additionally, you also get to control the expenses through spending limits on cards and approval workflows for money transfers through the business account. This ensures that there is no chance of overspending or accidental expenses. 

● Faster accounting

As a Volopay user, all your company expense data is on our platform. For accounting purposes, we have seamless native integrations with leading accounting tools in the market including Netsuite, Xero, Quickbooks, Deskera, MYOB, Tally, Zoho, and more!

The best part is that even if we don’t have a native integration with the accounting software your company uses, you can still easily export and sync the data on Volopay with your accounting software thanks to the Universal CSV feature.