In light of the uncertain economic outlook this year, more multinational companies will continue to look for ways to minimize cash outflows by keeping operations lean and reducing tax payments where possible. Choosing a business- and tax-friendly jurisdiction can prove to be rewarding for firms with an international presence or global aspirations in the long run. Hence, Singapore company registration specialists, Rikvin, is optimistic that Singapore will continue to be a prime location for setting up a holding company.
A holding company is a firm that is set up specifically to 1) centrally manage the finances of a group’s subsidiaries, 2) hold or pool shares of a group’s subsidiaries and 3) receive dividends of the subsidiary companies and declare them to the group.
Singapore has long been seen as a highly-competitive and stable economy. Its business-friendly processes and advantageous tax policies have also contributed to its consistent top ranking as the easiest place to do business worldwide. Therefore, and in the face of the intensified fiscal crisis riddling the Eurozone this year, setting up a Singapore holding company would be a prudent investment for any discerning entrepreneur or key decision maker for years to come.
Commenting on the observation, Satish Bakhda, head of Rikvin’s operations said, “The global nature of business operations today presents a compelling case for setting up a holding company. A holding company gives a business leader clarity and peace of mind as it allows him to have a bird’s eye view of and track his group’s assets and shares. This macroscopic view in turn allows him to better grasp where the avoidance of double tax payments are possible. In the long run, a group could potentially save significantly in tax payments.”
A Singapore holding company, like all Singapore-registered companies, enjoys extensive tax benefits borne out of Singapore’s healthy bilateral relations with various economies as well as its simple domestic tax structure.
For one, Singapore has established a wide network of 69 comprehensive and seven limited Avoidance of Double Tax Agreements (DTAs). It has also inked 20 Free Trade Agreements (FTAs) with 26 trading partners and is in the process of negotiating eight more with economies like Canada and Mexico. These agreements not only pave the way for uninterrupted movement of business personnel and goods; they also extend tax privileges such as doing away with erroneous double taxation across borders.
Secondly, a Singapore holding company stands to benefit from the absence of capital gains tax in Singapore. This means that capital gains achieved from the sale of its investments in or outside of Singapore are tax exempt. Furthermore, many DTAs identify the taxing right on such capital gains to the holding company jurisdiction; if Singapore exempts capital gains from taxation, then the Singapore holding company need not pay taxes on the capital gains gotten from the sale of shares or investments.
Additionally, outbound dividends declared to foreign shareholders are not subject to the Singapore withholding tax. Singapore holding companies may also repatriate capital gains from overseas divestitures to their parent companies or group without being subject to taxation in Singapore.
Last but not least, having a Singapore holding company means having the ability to tap low corporate tax. At 17%, the Singapore corporate tax rate is one of the lowest in the world. It also comes with various tax incentives such as the partial exemption scheme on the first S$300,000 of normal chargeable income and concessionary tax rates under the regional headquarters scheme.