In this page, you will learn why multinational firms are relocating their headquarters to Singapore. We will help you understand the benefits of such a move, including the tax incentives, the foreign-sourced income exemption, as well as Singapore’s extensive network of free trade agreements and double taxation agreements, among other factors.
With multinational firms such as Procter & Gamble and Kulicke & Soffa, announcing plans to move their headquarters to the city-state, Singapore company registration specialist Rikvin identifies the benefits firms stand to enjoy with such a move.
- Life Technologies, the world’s second largest player in the life sciences tools industry, established its Global Instrument Centre of Excellence in Singapore to address strong customer demand around the world. It is company’s only internal instrument manufacturing facility outside the US. The company will also move the manufacture of Ion Torrent’s personal genome machine to its Singapore centre.
- Kulicke & Soffa, the global leader in semiconductor assembly equipment, shifted its corporate headquarters from US to Singapore. The company recently announced its expansion plans for the Singapore headquarters with a new building in Serangoon.
- Nielsen, a leading global provider of information and insights into what consumers watch and buy, launched its innovation hub in Singapore. NielsenLAB, the first-of-its-kind innovation hub in Asia, will develop and leverage cutting-edge technologies and methodologies in neuroscience, shopper technology and measurement science to fuel consumer and market insights for companies working to reach consumers in Asia.
- Rohde & Schwarz, a family-owned global high-tech electronics company, is investing $85 million in Singapore’s economy over the next three years. Part of this investment includes the injection of $58 million to design and build its own global hub in Singapore – its first outside Germany.
- The Earth Hour movement – a global initiative led by the World Wide Fund for Nature (WWF) – also relocated its global headquarters from Sydney to Singapore recently.
- Procter & Gamble (P&G) has announced that it will be relocating its global beauty and grooming business from Cincinnati, US, to Singapore in a bid to tap the fast-growing Asia beauty market.
Singapore’s ascendancy from third-world to the first-world has been hailed as nothing short of a modern miracle, and rightly so. There is a strong infocommunications infrastructure, a stable political climate, a pool of skilled professionals and a strategic location. Moreover, Singapore government has initiated several business-friendly tax policies to further its claim as the location of choice for MNCs to set up regional headquarters and launch their operations in Asia Pacific.
“These include attractive corporate tax and personal income tax rates, ease of setting up and doing business, extensive network of tax treaties (FTAs and DTAs), absence of capital gains tax, and lower lending rates offered by banks in Singapore,” informed Satish Bakhda, Head of Operations at Rikvin.
Singapore has a progressive tax system that is designed to spur entrepreneurship and business activity. The corporate and personal tax rates start at 0% and do not exceed 20%.
In addition, Singapore offers every business that opts for Singapore company formation an automatic 400% tax deduction or option for a 60% cash payout each year for investments made via the PIC Scheme, short for Productivity and Innovation Credit scheme .
“More importantly, under the PIC scheme, the government incentivises entrepreneurs to acquire and register Intellectual Property Rights (IPRs). This is bolstered by the Republic’s strong focus on intellectual property protection, which is crucial in today’s competitive global business environment,” added Mr. Bakhda.
FTAs and DTAs
Singapore also incentivises foreign investments and company set-up by offering an extensive network of free trade agreements (20 FTAs with 27 economies) and avoidance of double taxation agreements (69 DTAs). “These agreements not only facilitate cross-border trade, but also safeguard the interests of Singapore’s investors and ensure that those who invest in Singapore will be able to reap maximum returns,” affirmed Mr. Bakhda.
Incentives for headquarter setup
Also, to encourage multinational companies to relocate their headquarters to Singapore, the Economic Development Board (EDB) offers regional headquarters (RHQ) and international headquarters (IHQ) incentives. Companies which are conferred the RHQ status enjoy a concessionary tax rate of 15% for qualifying income arising from headquarters activities and operations carried out from Singapore. Those awarded IHQ status enjoy even further attractive tax rates of between zero and 10%.
Regional headquarters which use Singapore as an international intellectual property (IP) holding location may claim writing-down allowance (WDA) for the cost of acquisition of the IP.
Foreign income exemption
Another benefit is that Singapore-based holding companies or headquarters can repatriate dividends from their directly held foreign subsidiaries to Singapore free of Singapore tax. Those whose foreign subsidiaries are engaged in substantive economic activities but are unable to meet the qualifying conditions for this tax exemption may apply for a specific exemption.
“This is because Singapore adopts a territorial basis of taxation. Foreign-sourced income is taxed only when it is repatriated back into Singapore. In addition, tax is not levied on foreign-sourced dividends remitted back into Singapore if – the dividends are received from a country with a headline corporate tax rate of at least 15%, some tax was paid in that country (such as withholding tax paid on the dividends or income tax paid on the profits out of which the dividends were paid), and the exemption is beneficial to the Singapore company,” added Mr. Bakhda.
In a bid to attract talent to relocate to Singapore, the government had introduced Not Ordinarily Resident (NOR) scheme in 2002. Individuals residing in Singapore, but with regional duties requiring them to spend at least 90 days a year outside the country, may apply for this scheme. Under this, their Singapore employment income is taxed on a time-apportionment basis for up to five years of assessment. This is subject to a minimum threshold tax rate of 10%.
As a testimony to all the above contributing factors, the recently-published Dun & Bradstreet Global Risk Indicator (GRI) has ranked Singapore as the third safest country in Asia Pacific for investors. Even in the 2011 BERI Report, Singapore was named as the city with world’s best investment potential. It was also the Globalization Index’s top third economy in foreign trade and investment in 2010.