Foreign Direct Investments (FDI) in Singapore

Gateway to Asia

Singapore’s strategic location boasts high level of connectivity in Asia, including easier access to the largest consumer market in the world – China. As the business and financial hub in Southeast Asia, Singapore is the perfect place to kickstart your business before expanding into the rest of Asia.

Simplicity of company incorporation

Singapore has business-friendly laws and regulations. If you have prepared all the relevant documents for your company incorporation, the registration process can be done within the day – check out our incorporation checklist to get you started!

Low corporate tax rate

Another key reason why you should opt to invest in Singapore is because of its low corporate tax rate of just 17%. This rate is actually one of the lowest in the world!

Tax incentives

What’s more? Besides its low corporate tax rate, there are plenty of tax incentives for foreign and local business in Singapore, such as tax exemption of your first S$100,000 for the first three years, avoidance of double taxation, and more. You can find the list of incentives in our article here.

Talented Workforce

Singapore’s work force is one of the most talented in the world, backed by the high standards of its education system. It also comprises expatriates from various countries; The diversity enables the country to be more than capable of tackling international functions.

Resilient environment

The pandemic has brought a need to invest in economies that are resilient. The Singapore government has done a great job in maintaining and controlling the outbreak and is on track to recover from the downturn. Confidence from foreign investors is restored, and this is reflected in the record high FDI in Singapore since 2008.

High Value-added Sectors

The financial and technological infrastructures are very well developed, with a stable banking system underpinned by the nations focus on transparency, efficiency and accountability. In fact, Singapore is known as a global financial hub!

Trade agreements

If you didn’t know by now, Singapore is very pro-business. With many trade agreements in place to facilitate business activities, it makes it very promising for foreign businesses to expand their operations in Singapore or set up a company here.

Attractive personal income tax rates

Beyond just setting a company in Singapore, many business owners will choose to live and work here because of its low personal income tax rates at a maximum of 24%.

High level of security, stability and safety

Known as one of the most politically stable countries in the world, it boosts a secure and comfortable environment for locals and foreign investors. The low crime rate is also a key factor in choosing to live and work in Singapore

Export Driven Economy

Being a small nation state, Singapore is highly dependent on trade with other countries. This dependency makes it vulnerable to economic conditions.

Limited Freedom of Speech

Singapore is widely considered to be an authoritarian state, as freedom of the press is suppressed to a large extent in Singapore. According to Reporters Without Borders (RSF), Singapore is ranked 160^th for its World Press Freedom Index. However, unlike other authoritarian regime, Singapore makes little attempt to block political content.

Aging Population

Facing the same problem as other developed countries, Singapore has an aging population and low birth rates. This may lead to a decline in economic productivity down the line.

Singapore Government Treasury Bills

For investors who are looking at short-term investments of up to 1 year, the Singapore Government Treasury Bills offer such an investment with very low risks as it is one of the few AAA-rated economies in the world. The payments are on its 6-month or 1-year treasury bills.

Bonds between 2-30 years are also made available by the Singapore Government. In general, these bonds often garner a higher return than a 1-year treasury bill. However, the risk is higher as it has a longer maturity period.

Singapore Savings Bonds are among the most common investments in which foreign investors invest. If investors do not redeem the bond, the rates will increase until the 10th year, recognising the fact that investors are holding for a longer term.

The CPF Top-Ups provide opportunities for investors to earn interest on their funds. These funds are supplied by the government and offer return rates at a minimum of 4% per annum. There is also usually an additional 1% interest rate to be earned by the investor.

Fixed Deposits

Fixed deposits serve as a way for investors to earn returns on their money after this money has been deposited in a savings account. Most banks in Singapore offer promotional rates that favour foreign investors.

The advantage of investing in a unit trust can be seen in the reduced investment risk as well as the ability to have professionals managing all funds and personal finances. Investment in a unit trust may also help foreign investors to maximise their profits which they have made in Singapore.

Financial Services and Banking

Banking activities are tied to conditions based on the licenses issued. For example, banks licensed as “Wholesale banks” are not allowed to operate retail banking facilities denominated in Singapore Dollars (SGD).

Media

Media companies are subject to laws which strictly prohibits foreigners from owning a majority stake.

Newspaper companies can only take the form of public companies limited by shares, and this is only in the form of ordinary or management shares. The latter is only available to Singaporeans or approved corporations. The director of the company must also be a Singaporean citizen.

For broadcasting companies, foreign investors cannot own more than 49% of the shares (with voting power), and prior regulatory approval is required before a person can become a substantial shareholder or receive funds from a foreign source.

Legal Services

While foreign law firms may offer services in international law and local law as permitted, they are subjected to threshold requirements. There are limits on the ratio of regulated foreign lawyers to Singaporean lawyers, and restrictions on directorships, partnership interests or shareholdings with a Singapore Law Practice.

Land Ownership and Real Estate

Specific restrictions on foreign ownership apply to certain types of residential property and land. For example, they are not allowed to buy government housing unless they have a fiancé, fiancée, or spouse who is a Singapore Citizen.

For controlled sectors, the government takes a consultative approach between the regulatory authorities, stakeholders and foreign investors.