Singapore’s advanced infocommunications infrastructure, stable political climate, pool of skilled professionals, strategic location and business-friendly tax policies have attracted over 7,000 multinational companies (MNCs) to establish operations in the Asia Pacific via Singapore.
The latest among these is GM, which has moved its international HQ from China to Singapore.
Rikvin recognizes the following as salient reasons why multinational corporation should set up headquarters in Singapore:
1) INCENTIVES FOR HEADQUARTERS
To encourage multinational companies to relocate their headquarters to Singapore, the Economic Development Board offers regional headquarters (RHQ) and international headquarters (IHQ) incentives. Companies which are conferred the RHQ status enjoy a concessionary Singapore tax rate of 15% for up to 5 years for qualifying income arising from activities and operations carried out from Singapore.
Those awarded the IHQ status enjoy more attractive tax rates of between 0% 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.
The Republic has adopted a territorial basis of taxation, which means 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.
2) ATTRACTIVE TAX SYSTEM
In addition, 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%. There is no capital gains tax. In addition, the government 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 Productivity and Innovation Credit (PIC) scheme.
“More importantly, under the PIC scheme, the government motivates 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,” said Mr. Satish Bakhda, Head of Operations at Rikvin.
3) NETWORK OF TRADE AGREEMENTS
Singapore also offers an extensive network of free trade agreements (over 20 FTAs with 27 economies) and avoidance of double taxation agreements (71 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.
4) GLOBAL TRADER PROGRAMME “GTP”
Singapore Government offers an opportunity for high-growth medium-sized international trading companies that are keen to choose Singapore as their regional base for trading activities to be considered for the concessionary tax rate for an initial, non-renewable 3-year period. During this period, the companies can establish and develop their regional or global trading network, with Singapore as their base. Once the companies are able to demonstrate sustainable growth projections that are in line with the requirements of the GTP, such as a minimum turnover and local business spending, they can apply for the 5 year renewable GTP scheme after the initial 3 year pear period.
5) FOREIGN TAX CREDIT POOLING (“FTC”)
Singapore has introduced the new FTC system for resident taxpayers by allowing the pooling of FTC on foreign income received, if certain conditions are met.
To qualify for the FTC pooling system, your foreign income must meet all of the following conditions:
- Income tax must have been paid on the income in the foreign jurisdiction from which the income is derived;
- The headline tax rate of the foreign jurisdiction from which the income is derived is at least 15% at the time your foreign income is received in Singapore;
- There must be Singapore tax payable on your foreign income; and
- You are entitled to claim for FTC under sections 50, 50A or 50B of the ITA on your foreign income.
The FTC pooling system provides greater flexibility to resident taxpayers in FTC claims, thereby reducing their Singapore tax payable on the remitted foreign income.
6) NOT ORDINARILY RESIDENT PROGRAM OR “NOR”
Finally, for making relocation to Singapore attractive for top professionals, there is a Not Ordinarily Resident (NOR) scheme. Individuals normally 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.
Singapore is easily one of the most financially stable jurisdictions on the planet. Located at the heart of Asia, Singapore is hub for the region’s commercial activities. Companies leveraging upon the country’s natural connectivity to surrounding markets have set up headquarters to oversee their activities in Asia and beyond. It has the most attractive effective corporate tax rates compared to most developed countries. In comparison, it’s tax rates are roughly twice that figure in the US, and over thrice that figure in Western Europe.
“In view of the array of incentives to firms and its employees, headquarters in Singapore may be one of the best business decisions ever made by the multinationals. If you look objectively, it makes all the sense in the world to move to Singapore. Rikvin is committed to helping companies achieve that status,” affirmed Mr. Bakhda.
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