Best Countries For Business Expansion From A Corporate Tax Perspective

Business expansion has been on the cards for many SMEs in Singapore, especially after the pandemic. Some of the many reasons why company expansion is seen as the perfect solution moving forward are risk diversification, growing consumer base to drive revenue, and finding ways to reduce business operating costs.

Based on our experience, we have seen a lot of Singapore-based companies seeking new opportunities to Asia Pacific. The countries most sought after are:

Here in this article, we will highlight what every business owner should consider when they expand overseas, as well as comparing these jurisdictions and sharing the best-fit industries for each country.

Introducing the MRA (Market Readiness Assistance) grant, your ticket to turbocharging your business’s international success! Designed exclusively for vibrant Singapore-based small and medium-sized enterprises (SMEs) like yours, the MRA grant is the ultimate boost you’ve been waiting for.

The MRA grant is available to apply now till 31 Mar 2025. Each application is limited to one activity per overseas market. A new market is defined as any country outside Singapore where the company has not generated S$100,000 in overseas sales in each of the last 3 preceding years.

Expanding your business beyond Singapore can be daunting, given the unpredictability and risks that come with it. Some of the factors to consider when choosing your next business destinations are:

The combination of these factors will ideally guide your decision on where would be the best country to set up and expand your business.

Expanding your business into a new jurisdiction means you have to understand the tax regulations and system. No business owner should decide on a jurisdiction before getting an idea on how tax-efficient the jurisdiction is for the business.

Let’s compare the corporate tax rates for each country that are the most popular for Singapore business owners.

Most of the top Asia jurisdictions have a lower-than-average corporate tax rate when compared globally, making them attractive for Singapore businesses.

To attract foreign direct investments, countries are offering tax-related benefits and incentives for businesses and entrepreneurs to expand into their jurisdiction. This is a good way for businesses to assess the tax efficiency.

1. Malaysia
The Malaysia government has set out 3 tax incentives under the categories of:

• Tax exemptions
• Allowance related to capital expenditures
• Enhanced tax deductions

For manufacturing, service, and trading companies, here are the tax incentives:

Financial services companies can enjoy the following:

• Full income tax exemption is available on to Islamic banks licensed under the Islamic Financial Services Act 2013. All income earned from Islamic banking activities conducted in international currencies will be exempted
• A complete income tax exemption is also applied to management fees received by resident fund management companies which have been established according to Islamic principles for the management of funds of foreign and local investors.

As the government are accelerating digitalisation in the country, tech companies under the MSC Malaysia Status are entitled to many benefits, including 5-year tax exemption.

You can find more information on Malaysia’s tax incentives & tax reliefs here.

2. Hong Kong

Specific industries like financial services and shipping are eligible for Hong Kong tax incentives. Qualifying debt instruments that are issued after 1 April 2018 will be exempted from tax.

Another area where companies can tap on tax incentives is for R&D expenses. There 2 types of deductible expenses:

• Type A – 100% standard tax deduction
• Type B – two-tierd tax reduction at 300% for 1st HKD 2 million and 200% for remaining amount

3. Indonesia

In Indonesia, some companies are eligible for a tax reduction, called the tax holiday, which exempts companies from the corporate income tax due for 5 to 20 years from the start of operations for investment plans at IDR 500 billion.

50% corporate tax reduction will also be granted for the next 2 years after tax holidays.

4. Vietnam

Depending on the sectors, locations, and size of the investments, the Vietnam government has outlined a preferential tax rate initiative of 10% and 17% for 15 years and 10 years respectively.

Some of the industries that fall into this preferential tax initiative are:

• Education
• Health care
• Technology
• Environmental protection
• Infrastructure development
• Software production

Another tax incentive is the tax holidays. Eligible companies can enjoy 100% tax exemption for a set period of time and another period where they will be charged at 50% of the corporate tax rate.

5. Thailand

Similarly, Thailand has tax incentives that are very attractive to exports and imports companies in these industries:

• Agriculture, bio & medical
• Advanced manufacturing
• Basic & supporting industries
• Digital, creative & high value services
• R&D & core technology development

The tax incentive system in Thailand can be complicated with different categories of exemption under 6 groups – A1 to A4, and B1 to B2. Eligible companies can enjoy up to 13 years of corporate tax exemption.

R&D activities are also eligible for Thailand tax incentives for up to 13 years with no cap.

As a Singapore company looking to expand overseas, you will not be charged twice on your chargeable income for corporate taxes. This is because Singapore has double tax agreements will multiple countries globally.

These include the countries in comparison, except for Hong Kong. All your income sourced from these countries will not be taxed in Singapore.

Aside from tax-related considerations, Singapore business owners also need to factor in the ease of operating their business in the particular jurisdictions. Some business activities may not be welcomed or there are imposed restrictions.

This is where business licenses come to play. While most companies do not require a business license to operate, certain sectors and industries will need proof of official license from the governing bodies before you can kick start operations.

Here are some industries that require business licenses in the countries mentioned above.

The list above is not exhaustive, you can reach out to us directly to discuss the nature of your business and we can advise accordingly when it comes to business licenses application.

Licenses can take an extremely long time to get full approval. It is best to understand the timeline for each license that your business is required to apply for before your company expansion.

While there are definitely more factors to consider before sanctioning your business expansion, these are some of the key factors to decide on which jurisdictions to expand into. Every business has different priorities, and it is best that you consult a local expert who have more industrial insights.

If you are a Singapore-registered company with minimum 30% local shareholding, good news – you are entitled to the Singapore Market Readiness Assistance (MRA) grant that supports your business expansion with funding of up to S$100,000 per new market.

Reach out to us to discuss potential MRA grant opportunities or expansion into Asia Pacific & Japan.