As ASEAN continues to integrate, Singapore’s importance as the entry point for investment into the ten-member grouping with a combined market of 600 million people is likely to increase.
In this article, we aim to answer some of the most commonly asked questions regarding Singapore as a hub for the management of regional operations throughout ASEAN.
With 60 comprehensive DTAs in place and zero percent withholding tax of its own on dividends, Singapore allows companies to remit profits from production centers at a lowered rate, and then to pass profits on to a parent company without further reduction
Why has Singapore risen as a destination for the management of ASEAN expansion?
A myriad of factors contributed to making Singapore among the most attractive economies for investment in Asia.
Effective administration of regional operations, integrated supply chain and minimized tax obligations allow Singapore to easily outcompete traditional holding-company locations such as Malaysia and other fellow ASEAN members, in our view.
What is the benefit of routing investments through Singapore?
Companies operating in ASEAN might find that the cost of transferring profits back to their home country has increased in the absence of up-to-date Double Taxation Agreements (DTAs).
By contrast, with 60 comprehensive DTAs in place and zero percent withholding tax of its own on dividends, Singapore allows companies to remit profits from production centers at a lowered rate, and then to pass profits on to a parent company without further reduction.
What are the options for corporate establishment in Singapore?
In our opinion, setting up a private limited establishment in Singapore is the most effective option for administering operations throughout ASEAN. Other options such as representative offices, publically listed companies, and joint ventures are also available for foreign investors.
The structure of the private limited establishment allows companies owners to maintain full control of regional operations, but limits their liability in case of a conflict with subsidiaries in third-party states.
What steps are involved when establishing a company in Singapore?
Companies investing in Singapore must first obtain approval for the company’s name, which should not be identical to a name that already exists.
Secondly, all private limited companies are required to appoint a director, company secretaries and auditors. The next thing on the list is to set up an office within Singapore’s city limits.
They then must formally register with the Accounting and Corporate Regulatory Authority.
While specific companies might face additional licensing or need to submit further documentation, all companies are subject to a variety of compliance requirements, including holding the first annual meeting within 18 months of incorporation.
What are some common licensing requirements that investors might face upon entry into Singapore?
Depending on the nature of the work that a company wishes to conduct within Singapore, additional documentation and licensing may be required. Among the most common ones are Business Activity License required for most firms operating within the country and Occupational License required for professional services such as lawyers, accountants and securities traders.
Other documents include a Compulsory License required for specialized fields such as travel agencies, school and employment agencies and a Certificate of Corporate Residency which is required for companies seeking to tap into Singapore’s DTAs.
How can firms in Singapore offset their international taxation?
Currently those incorporated within Singapore and holding a Certificate of Residence (COR) will be able to choose between two methods, the credit method and the exemption method, in order to offset their international taxation.
Under the credit method, Singapore will typically grant a foreign tax credit (FTC) to an entity that has paid taxes on business profits derived in the source state. The entity can then offset that FTC against its tax liability in Singapore.
Under the exemption method, business profits that have already been taxed in the source state will typically be exempted from taxation in Singapore altogether.
About the Author
Dezan Shira & Associates is a specialist foreign direct investment practice that provides advisory services to multinationals investing in emerging Asia. This first appeared in ASEAN Briefing, and was re-edited for clarity and conciseness. For further details or to contact the firm, please visit www.dezshira.com.
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