DOING BUSINESS AND PAYING TAXES IN SINGAPORE
Starting a Business in Singapore
According to the joint study of the World Bank and the International Finance Corporation concerning the terms and conditions of doing business in various countries, Singapore has been named number one for several years. The survey took into consideration the timeframe within which a new business starts or shuts down, the cost of such procedures, terms and time it takes to apply for a credit or licence, the taxation system, a developed infrastructure that would allow for more successful business development, etc.
As we can see, Singapore is indeed a perfect place to do business. Let us have a detailed look at the prerequisites for a successful start-up.
Singapore’s government machinery is smooth running, quick, efficient and free of corruption. Registration of a new company takes from a couple of hours to a couple of days. Applications for various licences and permissions are mostly done online.
Another advantage of doing business in Singapore is the use of the English language, which is employed not only as the language of international communication, but is one of Singapore’s official languages. It facilitates striking deals with businessmen from around the globe. Another language in which business is performed in Singapore is Chinese.
One more important thing to know is that most of the large- and medium-sized companies in Singapore adhere to the western tradition of business administration. For this reason alone, about 7,000 transnational companies have chosen Singapore as their regional headquarters in order to strengthen their positions in other Asian countries. A state-of-the-art, 24-hour communications system allows for these companies to efficiently carry out transactions in any country in the world.
Singapore’s economic policy is designed to attract foreign investments, using tax rate reductions and tax benefits as incentives.
The income tax rate for companies based in Singapore is 17 per cent. However, these companies pay tax only if their taxable income exceeds S$300,000 a year. Should their taxable income be less than this figure, the income tax rate is dropped to half the amount – nine per cent only.
To bring in more investors and to support businesses, Singapore’s government offers full tax exemption to new companies. Under some conditions, a tax exemption is also allowed on the first S$100,000 of taxable income during the first three years of a company’s operation.
Effective as of June 2003, there is a one-tier tax system in Singapore, in accordance with which corporate income tax is final, and shareholders are exempt from paying taxes on dividends, payable to them from the corporate income. Besides, there is a zero tax rate for growth income and capital realisation.
In Singapore, a territorial principle of taxation applies. This means that income tax is paid only when profit has been gained in Singapore or been transferred to Singapore from the overseas branches of a company.
To stir up foreign trade through the lowering of export-import tariffs on goods and services, Singapore has established Free Trade Agreements with several countries, such as the USA, Japan, New Zealand and India. Singapore has also signed and ratified the Avoidance of Double Taxation agreement with a umber of countries, Russia being one of them.
By Zlata Sheve