Benefits of Starting a Holding Company in Singapore
- Posted by Lee Bon
- On 30.03.2017
Singapore offers pleasant conditions for companies containing smaller firms which are called Subsidiaries. For this reason, the holding is often mixed up with the parent company. Their legal status is very similar: they both hold major parts of the stock in their Subsidiaries, bear responsibility for the Subsidiaries’ activities, and get significant tax benefits, but the difference is that unlike the parent company, the holding is rather virtual: it is created solely for “holding” purpose and doesn’t has its own business activity . Setting up such holdings is very easy and beneficial in Singapore, and allows entrepreneurs to reduce their expenses and competition dramatically. Let’s look at the reasons why business tycoons opt for Singapore when it comes to setting up a holding company.
Purchasing a related company helps a holding to decrease the cost of production of certain products, eliminate competition, expand the assortment of their goods and services and get tax benefits. Affiliation with a larger company helps the Subsidiary to save on taxes:
1. Double taxation is an evil for the holdings of the U.S. but not Singapore: the country has signed an agreement of avoiding double taxation with over 70 countries. Conditions of such agreement may be different for various countries, but if the country-source of dividends is in the list, you will avoid paying the further tax on the same dividends here in Singapore. What is more, the withholding tax deducted by the country-source from dividends earned by the Singaporean holding company in this country is lower.
2. Even if your country-source doesn’t have a double-taxation agreement with SG, you still are able to claim the overseas tax credit after paying the overseas tax abroad. This strategy helps most holdings avoid paying taxes on the same dividends in SG. Moreover, your holding company can get personalized tax exemptions if you apply for this matter at the Ministry of Finance.
3. Singapore has a programme that helps headquarter holdings providing services and support for the subsidiaries to get corporate tax incentives for a certain amount of revenue if such holdings fulfil special criteria.
4. If your holding business and its Subsidiaries get approval in Singapore and meet certain criteria, you can be sure that your income earned from selling shares of your Subsidiaries will be considered as the capital gain, not a taxable corporate income. And the capital gain isn’t taxed in SG.
5. The Singapore corporate tax is one of the lowest in the world – 17%, and the government takes care of reducing it further. For example, a special tax scheme for Private Limited companies allows them to get the first 300k SGD of revenues with the discount of 50-100%. If your company invests in innovations and training, the government gives additional discounts.
6. After the holding pays its corporate tax, shareholders can get their dividends without paying the capital gain tax.
7. Government doesn’t control foreign exchange and sets no restrictions for the foreign ownership.
The money your holding company saves on avoiding double taxation and extremely low corporate tax can be funnelled into developing and growing your business.
Steady economic climate
Singapore is a politically steady country that has a very strong investment profile. The government attracts overseas investors, comes up with innovative investment programs, incubates new companies, and acts as the co-investor itself.
Protection of your personal assets and intellectual property
There are many legal entities available for incorporation, but the Private Limited Company works the best for setting up the holding. It acts as a separate legal entity that is liable before the law on its own behalf and limits the liability of the founders to the holding’s share capital. This way your individual assets are protected in case of legal prosecutions, debts, and so on. What is more, Singapore has one of the best Asia’s intellectual property protection systems that guarantees the safety of your trademark. For Singapore, such IP safety isn’t an option but a strict requirement.
Streamlined and totally computerized, business registration procedure takes a couple of days in Singapore (after your packet of documents is prepared and polished). The government sets no limits for the initial holding’s share capital and no restrictions concerning this capital’s “nationality”: it can be absolutely foreign and as little as 1 Singaporean dollar. In SG, you can enjoy a fair attitude to your business achievements and avoid suffering from red tape and waiting in the queue for your turn to come.
An entrepreneur doesn’t have to arrive in SG for registering his firm – he can manage the process from his home country via the internet and using services of company incorporation agency like our team. You only need to provide us with basic data about your business, and then you can sit back while we prepare your papers and handle the registration. Finding an appropriate office space (your incorporated holding needs to have a specific Singaporean address) and choosing the proper name for your company that would meet the country’s criteria is also a piece of cake if you rely on a professional.
Effective and quick business procedures
The government works on simplifying business procedures and making them more transparent. Singapore has one of the most streamlined and simple filing systems in the world, as well as its advanced technologies stamped out any possibility of red tape and corruption. Singapore is praised for the second best Asia’s employment relationships.
Effective visa solutions for foreign staff
The government doesn’t oblige the holding’s overseas director to shift to SG, but 1 Singaporean director must be appointed in the very beginning (it can be replaced later). Setting up a holding in SG, you can relocate your key staff there on comfortable work visas (your staff cannot work in the country without an appropriate work pass). The executive has a couple of visa options that allow him not only to work in Singapore and grow his business but also pursue the country’s permanent residence one day. Entrepreneurs who have an outstanding business profiles and are able to form the paid-up capital worth at least 50k SGD and involve venture/angel investors who would funnel at least 100k SGD into your holding, can get the EntrePass, the right to arrive in Singapore well before registering the holding, and the full power of running the company from inside. The option of EntrePass is open for the holding’s director only before or 6 months after the incorporation.
If the holding’s director cannot qualify for the EntrePass, he can shift to SG using the Employment Pass, but only after the holding is already incorporated. For getting the visa, the holding must hire its director, and they both need to meet general criteria which are basically simpler than those of the Entrepreneur Visa.
When it comes to relocating key professionals to your new holding in Singapore, the challenge may hide in local manpower policy that protects the privilege of the locals for getting the job in the first place: you must prove that the foreigner will do the job better than his/her Singaporean counterpart. Despite the strict government’s requirements, it is still possible to get the visa for the needed professional. But as the Singapore boasts the world’s most motivated and productive workforce (according to the BERI’s report), you will be able to find the needed talents right on the place. The local manpower is very intelligent and possesses advanced knowledge in business.
If you decide to set up your holding in Singapore, you get everything you need for a thriving business right on the place. Incorporating in Singapore isn’t only faster and easier, but also it is more profitable. If combined together, all these benefits paint a unique incorporation landscape that isn’t likely to repeat somewhere else on the planet. It has its shades, but enlisting an incorporation backup helps to eliminate all difficulties.