Singapore: A Greener Pasture for the Indian Companies
The World Bank’s latest report shows that India has improved its ranking in Ease of Doing Business indicator by 12 positions. Thanks to reforms initiated by Prime Minister Modi, now, it is placed at 130th position.
However, the same report awards Singapore the top ranking for the same indicator. It is one of the important factors why investors and entrepreneur from all over the world beeline to setup a company in Singapore.
India, on the other hand, has just started to untangle itself from the Permit Raj. It has a long way to go in becoming an ideal place for the entrepreneurs. It still needs to streamline rules and regulations to facilitate easy merger and acquisition transactions and initial public offerings.
The Indian authorities also need to encourage early-stage investing to support the new breed of domestic entrepreneurs.
Singapore as a Business Destination
For the last 10 years, Singapore has consistently ranked as the number one country in Ease of Doing Business indicator. It also ranks as the second-most competitive economy in the world. Its geographical location is conducive for its functioning as the entrepot and in generating a huge amount of foreign trade.
Singapore has framed strong Intellectual Property protection laws. They offer ample protection to the entities having innovative business ideas and to those who are in research and development.
Concessionary Tax Rates under Regional Headquarters Award Scheme
Singapore authorities run a very aggressive campaign to attract foreign corporate. They offer schemes such as Global Trade Program (GTP) and Regional Headquarters Award (RHQ) to these entities.
The Indian businesses are taking advantage of these provisions and are shifting their bases to Singapore. Under the RHQ scheme, they get the concessionary tax rate of 15% on income from qualifying activities.
Registering an Indian Subsidiary Company
However, Singapore has no large domestic market and most of these corporate enter the Indian market by registering an Indian subsidiary company. As per the DTA between India and Singapore, the dividend paid out by the subsidiaries to their Singapore holding companies is exempted from the tax.
It leaves the subsidiaries in a position to tap the Indian talent pool of engineering and technical professionals in the cost effective manner.
Treaties Conducive for Cross-Border Trade
In addition, more than 74 Double Taxation Agreements treaties (DTAs) that the Singapore has in place helps them immensely in cross-border trade.
This island nation further increases their market reach with the 41 Investment Guarantee Agreements and 21 Free Trade Agreements / Economic Partnership Agreements that it has signed with its trading partners.
(FTC) Foreign Tax Credit Scheme
Companies registered in Singapore also qualify for the tax credits after they have paid their taxes in India under the Singapore’s FTC scheme. Singapore corporate having a number of subsidiaries can take benefit of FTC pooling to reduce their tax liabilities on the foreign remitted income.
Singapore Corporate Tax
Singapore has an undeniable advantage over Indian economy as its corporate tax ranges from 0% – 17% and the Indian corporate tax ranges from 33.063% – 43.26%. Singapore also offers many tax incentive, rebates, and exemption schemes which bring effective tax paid by the Singapore local companies to 8.5% – 9%.
Moreover, the Singaporean authorities provide huge support to its start-ups by exempting their initial chargeable income of S$100,000. Even, existing companies gets 30% of rebate in the corporate tax. The consumption of goods and services in Singapore is uniformly taxed at the rate of 7%.
Singapore’s political stability, liberal tax policies, state-of-the-art infrastructure, pro-entrepreneur environment, transportation links with the emerging markets, and reliable communication networks makes it an irresistible business destination for the ambitious business entities.