Setting Up Corporate Headquarters In Singapore: Benefits For Indian Companies.

Legal News & Analysis - Asia Pacific - India - FDI

Asia Pacific Legal Updates

 

27 September, 2016

 

Setting Up Corporate Headquarters In Singapore: Benefits For Indian Companies.

 

Introduction 

 

In the World Bank report, “Doing Business 2015,” Singapore was ranked as the world’s easiest place to do business. Located in the heart of Southeast Asia, with one of the world’s busiest ports and a world-class international airport, one is able to enjoy smooth connectivity from Singapore to all parts of Southeast Asia, as well as other global destinations. Singapore is also widely recognized as one of the least bureaucratic and most competitive places for doing business. To incorporate a company in Singapore takes merely one to three business days. 

 

We would like to highlight the following areas that may be of interest to Indian companies when considering the establishment of an international outpost. By incorporating in or relocating their corporate headquarters to Singapore, Indian companies will likely be able to enjoy a competitive advantage in terms of some of the options open to them, as well as take advantage of a solid platform for international expansion.

 

Financing

 

Businesses in India typically obtain funding through borrowing monies, whether from banks or non-banking financial companies (NBFCs) (debt financing) or through raising funds via private investors or proceeding with an initial public offering (equity financing). Obtaining financing through either means can be cumbersome and often involves substantial paperwork and processes. Debt financing can be obtained in Singapore at significantly lower interest rates through multiple sources, such as the government, financial institutions or private equity funds. Equity financing in Singapore will allow Indian companies easier access to the many private equity funds set up in Singapore and/or Singapore’s well-regarded stock market, the Singapore Exchange. Please see below some of the differences between India and Singapore in relation to raising funds.

 

Obtaining Financing in India

Obtaining Financing in Singapore

  • Debt financing typically limited to banks and/or NBFCs.
  • Relatively high interest rates for obtaining debt financing
  • Debt financing will involve substantial amounts of paperwork.
  • Foreign investment still restricted in various sectors, limiting the pool of potential investors.
  • Debt financing available from not only banks but also private lenders, such as private equity funds.
  • Relatively low interest rates for obtaining debt financing.
  • Relatively simple processes for obtaining financing from banks.
  • No restrictions on foreign investments.
  • The Singapore Government actively seeks businesses to either incorporate in Singapore or move their headquarters to Singapore. Various funding schemes are available, including cash grants, incubation schemes, tax incentive schemes and debt and equity financing schemes.

 

Taxation

 

Depending on the nature of the business carried on by a company, it may qualify for various tax rebates/incentives granted by the Singapore Economic Development Board (EDB), which is the lead government agency for planning and executing strategies to enhance Singapore’s position as a global business centre. Furthermore, tax rates in Singapore are relatively low, and tax filing is an easy and streamlined process. Set forth below is a table with the current rates for taxation in Singapore.

 

Form of Tax

Rate of Taxation

Corporate

17 percent

Capital Gains Tax

Exempt

Withholding Tax

  • Dividends – Exempt
  • Interest – 15 percent
  • Royalties from patents, know-how, etc. – 10 percent
  • Branch remittance – Exempt

Individual Tax Rate

Varies from 0 to 20 percent depending on individual income

Goods and Services Tax

7 percent

 

By contrast, in addition to having a more complex tax system due to different central and state level taxes, companies in India have to pay a higher corporate tax rate of 30 percent, and dividends are not tax exempt.

 

Labour Laws

 

Multiple central and state statutes govern employment in India, some of them containing fairly restrictive provisions, such as the requirement to obtain government permissions to lay off staff in certain instances or providing notices to employees should their job scope or nature of work need to be changed. Labour laws in Singapore are crafted to ensure cooperation between employees and employers with minimum disruption of business. Furthermore, Singapore employment laws largely govern only the employees who are paid under a certain threshold. For professional employees and/or managers, subject to immigration issues, the employee-employer relationship is often governed solely by contract.

 

Duane Morris Selvam LLP

 

For further information, please contact:

 

Wei Chern Tham, Director, Duane Morris & Selvam 

[email protected]