Multinational corporation/ company (MNC) is commonplace in a globalised country like Singapore. To register for a business in Singapore, whether a MNC, SME or start-up, there are certain requirements that one needs to know.
What is a Multinational Corporation?
A multinational corporation/ company (MNC) is a large organisation that has operations in a number of countries. They are large companies that are managed by professionals who do not own the company.
Advantages of Multinational Companies
MNCs are very important as they have a lot of influence & can provide many advantages. The advantages that they provide include:
1. Creation of jobs
Being a large corporation, they will require human resources. This creates more jobs for the country they operate in.
2 . Ensure standards are kept
The success of a MNC is due to consumers’ preferences to buy goods and services where they can relate to.
If you’re visiting a McDonald’s overseas, it gives a sense of familiarity – this is done to ensure standards are kept.
3. Rise in foreign investments
MNCs engage in foreign direct investments (FDIs). This helps to create capital flows to poorer, or even developing nations.
4. Business for SMEs
MNCs are usually new to a country and often engage SME companies in the location to support their operations. This creates business growth for SMEs and overall economy growth for the country.
5. Scale of investment for host country
When an MNC invests in any country, their scale of the investment is likely to be in a significant figure. 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 for the host country.
Disadvantages of Multinational Companies
While there are advantages to MNCs, we also need to understand the disadvantages of MNCs.
Registering A Business in Singapore
Whether you’re a MNC or a SME, there are 4 ways to expand and establish a business in Singapore. The types of business structures are listed below:
The first way to register a business in Singapore is through the incorporation of a branch. A branch is an extension of the foreign head office company engaging in core activities.
The next business structure used for business registration in Singapore is a subsidiary. A subsidiary is a private limited company whose majority shareholder is a foreign company.
3. Representative Office
The third type of business registration in Singapore is a representative office. A representative office is a temporary set-up with no legal status and cannot engage in any operations that generate profits.
4. Related Company
The last and most common type of structure when it comes to Singapore business registration is related company. A related company is the shareholder can be the same for a local and overseas entity (under a separate legal entity).
Reasons Why MNCs and SMEs are Setting Up a Business in Singapore
Singapore has been a hotspot for many businesses and entrepreneurs. Here are the top 3 reasons why they set up a business in Singapore:
1. Strong, competitive economy
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.
2. Company setup incentives
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%.
3. 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.
How Singapore Companies Can Establish Themselves as a Multinational Corporation?
Aside from bringing MNCs and foreign investors into Singapore, the government are also helping local companies to go global.
There are grants and schemes that are initiated to bring Singaporean companies overseas as first step to establishing a MNC status.
1. Market Readiness Assistance (MRA) Grant
Aimed for business expansion, the MRA grant is created for local Singapore companies to take the leap into other jurisdictions. The grant covers 3 key areas and capped at S$100,000 per new market.
- Overseas market promotion
- Overseas business development
- Overseas market set-up
2. Strategic Brand and Marketing Development Grant
The strategic brand and marketing development grant is to help local companies to strengthen their branding. This is a crucial step before taking your business into new countries as businesses need to have a good foundation for access.
3. Market Access Grants
Under the market access support, local businesses can tap on 3 key grants:
- Mergers & Acquisitions (M&A)
- Pilot Project & Test Bedding
List of some of the MNCs that have set up a base in Singapore
|3M||Ernst & Young||Kentucky Fried Chicken||SATS|
|AXA||Far East Organization||MapleTree Group||Seagate|
|Bank of America Merrill Lynch||Fraser & Neave||Marina Bay Sands||Sembcorp|
|BNP Paribas||General Electric||MayBank||Shell|
|Citibank||Hewlett-Packard||Micron Semiconductor Asia||Singtel|
|Continental Automotive||HSBC||Novartis||Standard Chartered Bank|
|Dairy Farm International||IBM||OCBC Bank||Starhub|
|DBS||InterContinental Hotels Group||Panasonic Asia Pacific||UOB|
|Deloitte||Johnson & Johnson||PricewaterhouseCoopers|
|Deutsche Bank||JP MorganChase||Procter & Gamble|
Is there any benefit to the Singaporean government when companies become Multinationals Corporations?
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.
- 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.
No. The incentives and tax concessions have a limit. This is because Singapore desires to have strong Singaporean companies establish headquarters in Singapore.
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.