Best country to start offshore company in 2021
There are many reasons why a business owner may choose to set up an offshore
company. Besides the prospect of a new regional market, business owners may
choose to set up an offshore company to take advantage of the more favourable
business condition in a different jurisdiction. This can come in the form of lower costs
of production such as lower wage requirements for workers and more favourable tax
rates, as well as better legal infrastructure such as asset protection from creditors
and enhanced property rights. Other factors also include greater access to the global
market and increased ease in hiring qualified workers of a certain skillset.
Taking into consideration all these factors, Singapore is an ideal location for offshore
companies. Due to its competitive tax rates, strong reputation as a credible and
reliable financial hub and the ease of company incorporations, Singapore is arguably
the best country to start an offshore company. Below are the reasons why Singapore
is the best country to setup offshore company.
1. Low tax rates
Singapore has a relatively low personal income tax and corporate tax rate compared
to other jurisdictions. Since Singapore’s tax regime operates on a territorial basis, all
resident and non-resident companies pay a flat corporate tax rate of 17% on profits
derived from business activities in Singapore. Income that is derived outside of
Singapore such as foreign-sourced income, foreign-sourced dividends and foreign
branch profits are not taxable. Capital income is also non-taxable in Singapore. In
addition, Singapore has numerous tax incentives for start-ups to encourage
company incorporation. In Singapore, a newly incorporated company will not have to
pay taxes on its first S$100,000 taxable income for its first three financial years.
50% of the next S$200,000 taxable income will also be exempted from corporate tax
for the company’s first three financial years.
Besides tax incentives for newly incorporated companies, Singapore offers tax
exemptions for companies in specific industries. For example, qualifying offshore
funds may be exempted from tax on certain types of income such as income derived
from dividends, bonds, shares, stocks, and securities.
2. Strong legal framework
Singapore has a strong and comprehensive legal infrastructure to support business
operations and ensure that firms conduct business fairly. With strict law enforcement,
high levels of transparency and a track record of low corruption, Singapore is an
attractive jurisdiction for offshore companies. Scoring 97.62% in terms of political
stability and absence of violence/terrorism in 2019 according to indicators measured
by the World Bank, Singapore is one of the most politically stable country in Asia that
has the least bureaucracy. Singapore also has a strong reputation for its
pro-business measures, generous start-up grants and efficient legal system. All
these factors help to minimise the cost and risk associated with setting up an
offshore company in a different jurisdiction.
3. Credible banking sector
Crowned one of the major financial centres in the world by the International
Monetary Fund (IMF), Singapore’s banking sector offers a wide range of options for
foreign business owners seeking to open a bank account with low capital
requirements. Not only does Singapore house many reputable local and foreign
banks, the banks in Singapore also offer many types of services such as local and
foreign currency deposit, wealth management services, internet banking, unit trust
and insurance products and forex trading.
4. Access to regional and global markets
Singapore has strong bilateral ties with many countries around the globe. Having
successfully negotiated free trade agreements with multiple countries and
organizations, Singapore currently has a total of 25 free trade agreements. This has
allowed Singapore to import and export goods and services to other countries with
minimal government tariffs, quotas, and subsidies. The free trade agreements also
protect companies’ intellectual properties and enable them quicker and easier
access to global markets.
5. Ease of doing business
According to the World Bank, Singapore ranks second in terms of ease of doing
business. Specifically, Singapore ranks first in terms of enforcing contracts, third in
terms of protecting minority interest and fourth in terms of starting a business. The
strict legislature framework and enforcement laws in Singapore have helped to
protect business owners from being exploited by creditors and other third parties.
This has made doing business in Singapore a relatively easy process.
6. Skilled labour force
Although the cost of labour in Singapore is not low, it is still relatively cheaper than
most Western countries. Singapore also has a skilled and educated labour force,
that is proficient in the English language. This makes it an attractive jurisdiction for
offshore companies because English is the most widely used language in the world.
In addition, labour productivity growth in Singapore is high and has been increasing
in recent years.
7. Provision of grants
Singapore offers a wide range of grants for companies incorporated in Singapore.
For example, the Research Incentive Scheme for Companies (RISC) is offered to
companies incorporated in Singapore that are planning to invest heavily in Research
and Development (R&D) activities in the science and technology sectors. Under the
RISC,companies will be eligible for co-funding monetary support of up to 30% of
qualifying R&D project costs. In addition, Singapore offers training grant for any
Singaporean companies that fully sponsor employees’ training courses. This is to
encourage companies to upgrade their workers’ skills so as to increase the overall
productivity of the labour force in Singapore.
Furthermore, in a bid to encourage companies to adopt IT solutions and equipment
to facilitate their business activities, Singapore also provides the Productivity
Solutions Grant (PSG) to businesses that have purchased or leased IT equipment in
Singapore. Besides the aforementioned monetary grants, there are many other
monetary concessions and incentives offered by the Singaporean government for
businesses operating in different sectors. If you are seeking to incorporate an
offshore company in Singapore, it is important to look out for the incentives that your
company is eligible for so that you can minimise costs.
Overall, Singapore is a favourable place to register offshore companies because of
its low tax rates, strong legal framework, credible banking sector, ease of company
incorporation, skilled labour, and provision of monetary incentives for new start-ups.
Singapore also has trade agreements with many other jurisdictions, thus providing a
greater outreach to different geographical markets. All these factors allow offshore
companies in Singapore to be exposed to a wide range of business opportunities at
a low cost.