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As the financial hub is the Asia Pacific region, Singapore have a reputation for being able to attract large multinational corporations. Find out why do businesses come to the Republic for their Singapore Company Setup.

What is a Multinational Corporation?

A multinational corporation/ company (MNC) is a large organization that has operations in a number of countries. They are large companies that are managed by professionals who do not own the company.

MNCs are very important as they have a lot of influence & can provide many advantages. The advantages that they provide includes:

  • The increasing numbers in a nation’s employment, and their education.
  • MNC’s incorporation also increases the investment in the country which in return increases the development of industries in the country and investment capital for the host country.

Why MNCs come to Singapore?

With its ever-growing economy, and being the financial hub for the Asia Pacific region, Singapore has positioned itself in a pivotal role as a business epicenter within the heart of Asia. That is one of the major reasons why MNCs continue to favor Singapore as a preferred business destination for incorporating a Singapore company. Most MNCs stand to benefit from Singapore’s open business and business-friendly policies.

MNC companies from all over the world continue to uphold Singapore as an ideal location to establish and expand their businesses, and this overview continues to grow concurrently with Singapore’s internal and external advancement and progression. To encourage MNCs to come to Singapore and set up a base of operations, Singapore’s Economic Development Board offers these companies International Headquarters Incentives (IHQ) and Regional Headquarters Incentives (RHQ).

Companies who successfully get conferred with the RHQ status will reap the benefits of a concessionary tax rate of 15% for up to 5-years for all qualifying income which is derived from activities and business operations conducted in Singapore. Whereas companies who obtain the IHQ status, on the other hand, enjoy tax rates of 0 to 10%.

On top of that, Singapore has a progressive tax system. Designed with entrepreneurship growth in mind, its attractive and low corporate and personal tax rates are a big reason why MNCs continue to choose Singapore over any other country. Singapore also has an extensive network of free trade agreements and double taxation agreements, both of which help to facilitate and safeguard the interests of Singapore’s investors.

As Singapore continues to cement itself as one of the best places in Asia to incorporate a company, thanks to its strategic location, stable economy, tax relief, and equally stable political environment, and its top-notch infrastructures, Paul Hype Page & Co can predict there will only be more coming in the near future.

Multinational impact on economy

MNCs have a big impact on economic, political, environmental, and cultural force that can’t be avoided in present globalization. To put it in perspective, MNCs have an impact on the lives of billions of people every day, often in complex and indiscernible ways.

These companies can provide developing countries with many benefits. However, these institutions may also bring with them the codes of ethical conduct that serve to exploit the needs of these nations, rather than providing them with the critical support for economic growth and social development.

When an MNC invests in any country, their scale of the investment is likely to be in a significant figure. In this case, governments will often offer incentives to firms in the form of grants, subsidies and tax breaks to attract investment to come in big. This foreign direct investment (FDI) will have advantages and disadvantages for the host country that will be explained below.

MNCs employ huge number of people around the world and so are crucial to the global economy. These companies play a larger than life figure that their political influence goes as far reach as deciding where they locate.

Advantage of Multinational Companies

  • Creating job opportunities. Being a large corporation, they size of operation enables them to create more job for the lower income nation where the are situated in.
  • R&D in areas of interest. Oil exploration is a risky and costly affair and it could only be undertaken by firms with huge profit and deep pockets
  • Ensure standards kept. The success of a MNC is often due to consumers’ presences to buy goods and services where they can relate to. For instance, when you visit a foreign country, you know that having a meal at the local McDonald outlet will give something you are familiar with. This also is a practice done by many MNC around the world, where they keep a certain standard ay bay.
  • Foreign investments. MNCs engage in foreign direct investment. This helps create capital flows to poorer, or also even developing nations.
  • Business for SMEs. MNCs are usually new to a country, and by coming to the country, they tend to seek help from the locals. Since there are many SME companies, many MNCs rely on the expertise given by the SME. This creates business growth for the SME and economy growth for the country.
Multinational Companies

Disadvantage of Multinational Companies

  • Like most corporations, MNCs are often interested in profit at the expense of the consumer regardless who they are.
  • MNCs avoid tax through funnelling profit through the countries with lowest corporation tax rates.
  • Cash reserves – All if not most MNCs has cash reserves which is in overseas accounts. This just bring deadweights welfare loss as It is not being used for investment in the right area.
  • Their market dominance makes it extremely difficult for any local small firms to succeed, or even close some of them.
  • MNCs often contribute to pollution in the pursuit of profit.
  • Outsourcing at cheaper labour-cost economies has caused loss of jobs in the a more developed economy. This can be either good or bad, but it depends on how you look at a cup half full or half empty.

Thinking of incorporating in Singapore? Let’s get started.

E A S I E R • F A S T E R • B E T T E R

Ways in Which the Government of Singaporean Can Help Singaporean Companies Establish As Multinational Corporations outside Singapore.

Availing more support for Small and Medium-sized Enterprises (SME)

  • The Singaporean can increase the grants to SMEs that are venturing abroad in order for them to cover costs incurred during researching of foreign markets.
  • They can assist SMEs in the process of conducting market research in foreign lands by availing them a list of consultants accredited to assess foreign markets and associated regulations.
  • They can also help them find potential international partners.

Branding

The Singaporean government can assist in promoting upcoming brands and helping them get the necessary recognition in the potential foreign markets. The government can appreciate the effort, risks, time, and resources that these companies put into developing their brands. It can do so by putting in place a tax incentive for brands with Singaporean origin who have gone offshore.

Umbrella schemes

The good news is that the Singaporean government has already availed several schemes that support expansion overseas. This ranges from information resources, tax concessions to the development of manpower.

In summary, below is a list of Multinational Corporations that have set up in Singapore:

List of some of the MNCs that have set up a base in Singapore

3MErnst & YoungKentucky Fried ChickenSATS
AccentureExxonMobilKPMGSchneider Electric
AXAFar East OrganizationMapleTree GroupSeagate
Bank of America Merrill LynchFraser & NeaveMarina Bay SandsSembcorp
BNP ParibasGeneral ElectricMayBankShell
CapitaLandGreat EasternMcDonald’sSiemens
CaterpillarGlaxoSmithKlineMedtronicSingapore Airlines
CitibankHewlett-PackardMicron Semiconductor AsiaSingtel
Continental AutomotiveHSBCNovartisStandard Chartered Bank
Dairy Farm InternationalIBMOCBC BankStarhub
DBSInterContinental Hotels GroupPanasonic Asia PacificUOB
DeloitteJohnson & JohnsonPricewaterhouseCoopers 
Deutsche BankJP MorganChaseProcter & Gamble 

Multinational Corporation in Singapore FAQs

Is there any benefit to the Singaporean government when companies become Multinationals Corporations?2020-11-23T11:54:24+08:00

The Singaporean-based Multinationals in foreign countries gives the Singaporean government recognition and publicity among those foreign governments. Also, the companies are a source for Singaporean citizens who find employment with such companies. 

What are the Challenges encountered when running a multinational corporation in Singapore?2020-11-23T11:53:55+08:00
  • Getting electricity: it will take you close to a month to get an electric connection because of the process involved.
  • Culture: Singaporean culture emphasizes relationships. Therefore to do business, you need to first work tirelessly on building relationships and this could take time.
  • The process of implementing contracts and liquidation is longer compared to other countries.
Do foreign Multinational Corporations have unlimited incentives?2020-11-23T11:53:26+08:00

No. The incentives and tax concessions have a limit. This is because Singapore desires to have strong Singaporean companies establish headquarters in Singapore. 

Can Singaporean company owners become multinational corporations?2020-11-23T11:54:04+08:00

Yes. However, this is not so prominent among Singaporeans because the tax regime is more beneficial to those who sell successful brands or acquire such as opposed to development. Therefore once a Singaporean company sees itself successful, it opts to sell. An example is the Raffles Hotel or Tiger Beer. A company that buys a brand is entitled to tax amortization as opposed to one that develops a brand of its own. 

Having multinational corporations outside Singapore can help these businesses diversify common risks and lower production or service costs. 

2021-03-31T11:48:13+08:00December 15, 2018|0 Comments
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