Having a Singapore Holding Company for Business Expansion to Asia.
From start-ups, SMEs, to multi-national companies, Singapore offers a wealth of opportunities for commercialized business. Singapore is an ideal location to establish a holding company because of the low corporate tax rate, tax incentives, and network of tax treaties. As a Certified Public Accounting and Consulting Agency, Paul Hype Page can help your company grow and take advantage of the savings and double tax agreements available to Singaporean holding companies. Our team of experts will assist you at every stage of the transition, from company formation and incorporation to visas, compliance, and taxation.
One-tier corporate tax system
Singapore’s tax regime is arguably the most competitive in the world. The one-tier corporate tax system ensures all profits are taxed at a corporate level, with no withholding tax on dividends. If revenue is sourced from a foreign country, companies do not pay a capital gains tax. The corporate income tax is 17%, however, for small to midsized companies, it is as low as 4%. Under modest conditions, resident companies are exempt from tax on foreign-sourced income. We at Paul Hype Page Management will prepare and file all documents necessary to qualify for such tax incentives and others granted by the government or by the Singapore Income Tax Act.
Credible holding jurisdiction
Around the globe, Singapore has a reputation as a credible holding jurisdiction. Under 70 tax treaties, Singaporean holding companies experience lower withholding tax rates on income gained on dividends, interest, and international shipping. For this reason, many multinational companies select Singapore as their business headquarters. Additionally, businesses that derive profits from foreign markets, engage in e-commerce or operate in the United States, choose Singapore as their preferred location.
Aside from the low corporate income tax rate, available tax incentives, and established network of treaties, additional benefits exist for Singapore holding companies that establish themselves as a headquarters, a global trader, or a regional holding company. For example, a company headquarters offering services in intellectual property management, business planning and development, procurement and distribution, and research and development, may be remunerated for services provided within Singapore. Under the IHQ tax incentive, companies pay 0%, 5%, or 10% concessionary tax. For global traders, the concessionary tax rate is 5% to 10%. Regional holding companies generate investment income passively, by holding shares in foreign subsidiaries.
How cost-effective is a regional holding company in supply chain management? To answer this question, consider two scenarios. Business A establishes a holding company in the U.S. and derives $100 revenue, in India. Company A pays 30% withholding tax in India and an additional 5% in the U.S., under the 35% corporate tax rate. Business B establishes its holding company in Singapore and earns the same amount of revenue, $100, from business in India. Under the Singapore-India DTA, Company B pays 15% withholding tax. Company B then utilizes a foreign tax credit and pays an additional 7.5% in Singapore. In sum, Company A pays 35%, while Company B pays 22.5% of its revenue. Company B is at a greater advantage and can reinvest additional profits toward growth in foreign markets. Although a simplified example, the answer is clear, a multinational company will save money by establishing a holding company in Singapore.
Singapore’s free-market approach is well respected for its transparency. If companies wish to qualify for the foregoing tax benefits, companies must provide proof of tax substance. The physical location of the business office and the location of assets, both tangible and intangible, are considered. Within each jurisdiction, the number of employees, business risks and decisions, and corporate functions are weighed. We at Paul Hype Page Management will analyze your business situation and work with you to develop a plan that works into your business goals and budget.
Paul Hype Page Management is different from other service providers. We not only incorporate, but we also help in running initial company operations. In addition to our year-round services, our firm offers a Corporate Management Package. During the initial 6 to 12 months of business in Singapore or Malaysia, we will assist you in all your business needs. Our goal is to make the transition both easy and prosperous for you and your company. Additionally, our services allow you to accurately estimate your initial investment cost and save on relocation costs, such as office renovation or recruitment. Whatever stage, structure, or location your business may be, partners at Paul Hype Page Management are well-positioned to grow your business by establishing a holding company in Singapore.
Tax Planning for Supply Chain Management
Effective supply chain management is key to developing a resilient, strong, and competitive manufacturing company. Singapore, with its double taxation network of treaties, offers a favorable tax regime for supply management. Manufacturing companies of all forms profit from incorporating in Singapore. To illustrate, consider tax planning for conventional, contract, and toll manufacturers. Singapore’s tax regime is structured so that manufacturing companies can keep a low operating margin, a high inventory turnover, and a consistent return on invested capital. At Paul Hype Page Management Services, we act as an accounting, incorporating, and consulting firm. We analyze data and advise our clients on how to shift business functions, assets, and risks between companies and locations.
Conventional manufacturers owning the fixed assets, the raw materials, the work in progress, and the finished goods associated with the production, prefer to incorporate in Singapore because of the low effective tax rate and tax incentives. When planning for taxes, corporations expect to pay no more than 17%. However, companies involved in the research and development of commercial products or the development of manpower may pay less. The favorable incentives preserve income, income that can then be reinvested and returned at a higher rate.
Aside from providing a favorable tax scheme, Singapore is a maritime nation and home to an international airport. Singapore has the infrastructure necessary to move products and increase inventory turnover. In Singapore, manufacturers enjoy easy access to Asian and Indian markets. A direct export is taxed at a zero rate, and indirect export is taxed at the general sales tax rate of 7%.
In a contract manufacturing agreement, both the agent and the principal experience a lower operating margin in Singapore. Supply goods are taxed at 0%, reducing the operating cost for manufacturing agents. As a result, principal companies enjoy a lower transfer price of goods. Under the Maritime Sector Incentive and the Approved International Shipping Enterprise Scheme, maritime shipping companies are exempt from profit tax. Savings in operating costs for shipping companies are transferred to the principal in a reduction of cost for the product shipment.
In many nations, companies engaged in toll manufacturing run the risk of double taxation. Double taxation occurs when a company establishes permanent residence in more than one country. In Singapore, a principal company is a permanent resident if it oversees manufacturing or otherwise creates a relationship in which the agent is dependent. In other countries, permanent residence is more strictly defined. In Singapore, laws are written to prevent double taxation. In addition, Singapore’s network of treaties offers further protection from double taxation.