Why Indian Startups Incorporate a Singapore Company?
Can Indians Incorporate a Company in Singapore?
Yes, any Indian or Indian business can establish a new company set up in Singapore. They are allowed to own 100% of the shareholding in a Singapore company. Why are Indians moving to Singapore?
Singapore is a rule-abiding, almost corruption-less, trading economy. On the other hand, Indian business owners have to suffer corruption and cronyism. They also have to deal with the License Raj.
How to Start a Company in Singapore?
Indian individuals and businesses must hire a registered filing agent for their new company set up in Singapore. They also need to fulfil the following requirements.
Pre-Incorporation Requirements
- Initial Paid-Up Capital: Minimum initial paid-up capital of S$1
- Local Director: At least one local director (Singapore Citizen, Singapore Permanent Resident or EntrePass holder)
- Shareholder: At least one and a maximum of 50
- Registered Local Office Address: A registered physical office address in Singapore
- Company Secretary: Hire at least one company secretary within 6 months from the incorporation date
Register a Company Name With ACRA
Register a unique and meaningful company name with ACRA that is free of copyright issue.
Incorporation Documents
- Company name registered with ACRA
- Description of business activities
- Registered local address of the company
- Details of shareholders, directors, company secretary
- Foreign Entrepreneurs: A copy of their passport and proof of residential address (overseas)
- Foreign Companies: Company Constitution, Certificate of incorporation
Apply to ACRA to Incorporate Company in Singapore
Apply to ACRA, submit all relevant documentation. Foreigners cannot self register their Singapore company. Your appointed agent can visit BizFile+ portal to register your Singapore company online.
Key Reasons that Makes Singapore Marketplace Attractive
- Company income tax rate for local Indian companies is 30%. Singapore applies a flat rate of 17%.
- In India, dividends are taxed, and Singapore does not.
- Indian capital gains tax ranges from 15-20%. In Singapore, it is 0%.
- Indian GST ranges from 5%-28%. In Singapore, it is 9%.
- Singapore has far supportive startup ecosystem.
- Singapore ranks 2nd for the Ease of Doing Business indicator in World Bank Report 2020. India ranks at 63rd position.
- In Global Competitiveness Report 2020 Singapore ranks at 4th position, India ranks at 43rd position.
- Singapore has signed a number of tax treaties that allow Singaporean companies to avoid double taxation during cross-border trade.
- India has strict rules governing FDI, foreign exchange, import and export of certain products and machinery, etc.
- The restrictions lead to less productivity and waste of resources.
Singaporeans have a different approach to startups. Its sovereign wealth fund, GIC, backed Flipkart’s Singaporean startup company. Other companies too, have benefited in terms of foreign investments after moving to Singapore. Joyful Frog Digital Incubator has assisted at least a dozen Indian companies.
VC firms and PE groups like to invest in Singapore-based Indian startup. This allows them to exit without paying Indian taxes on capital gains. They also get to reduce taxes on profits through dividends. When such a startup makes a profit, it can save 15% taxes on dividends giving tax-free loans to the parent or foreign shareholder.
Registering a holding company in Singapore and then, your startup in India is cost-effective.
Expanding an Indian Business Abroad
- An Indian business can incorporate a company in Singapore to expand abroad. Funds saved through tax-free capital gains and dividends can be reinvested without a tax penalty. This is not the case for an Indian company.
- Countries welcome investments coming from Singapore and scrutinize that from India, which delays the process.
- International deal-makers rely on Singapore’s legal system for resolving disputes.
Holding Company for India-based Business
A holding company buys and holds the shares or assets of its subsidiaries or other companies. The holding company contains its parent’s risk by using subsidiaries. It also divides the company ownership among various parties.
A holding company can save taxes for its or the subsidiary owners. They can achieve by:
- Segregating tax losses or profits
- Obtaining tax incentives through a subsidiary
- Transfer pricing between the subsidiaries
- Tax residency of a subsidiary
Why MNCs Invest Through Their Singapore Subsidiaries?
Singapore signed a bilateral tax treaty with India in 2005. Under the provision of Limits of Benefits, a foreign shell company listed in the Singapore Stock Exchange and with annual expenditure on Singapore operations in excess of S$200,000 in two years can enjoy the capital gain tax exemption.
Export of Products or Services from India
A Singapore company registered by Indian parent can act as the distributor of its parent’s products or services. It can leverage the India-Singapore trade treaties for the products and funds transfer between the two countries.
This company can invoice the foreign customer and remit the collected payment in part or full to its Indian parent. Optimizing transfer pricing for the products, services, or management fees allows the parent and subsidiary to optimize their taxes.
Importing Foreign Products into India
Indian import company can also incorporate a company in Singapore to acts as its representative and to manage all transactions with foreign suppliers.
IP Transfer Pricing Optimization
An Indian company can optimize its IP’s value by holding it in a Singapore company. The parent pays its Singapore subsidiary to the IP assets and licenses. Singapore tax rates are favourable to IP-based companies. The sale of these IP assets is subject to a 0% capital gains tax.
Appointing Foreign Staff for Indian Business
Hiring international executives through Singapore subsidiary is beneficial to Indian businesses. They can offer efficient after-tax take-home pay and benefits package to new employees. The appointee is then deputized for the Indian operation.
Easy International Travel
An Indian passport holder on a Singapore work visa has to face less travel restrictions than an Indian passport holder. Singapore subsidiary of an Indian business can acquire a work visa their employees or owner.
Managing Wealth of an Indian HNWI
A Singapore-based company acting as a family office manages a family’s wealth and assets. It can ensure their safe transfer from one to another generation. It also manages the acquisition, growth, and disposal of these assets.
A family office can also provide legal and tax advice to the family. It assists in a family trust set up, property, and estate management. It can find better insurance, opportunities for children’s education, medical services, and lifestyle services. These families can benefit from the Global Investor Program (GIP) to acquire immediate permanent residency in Singapore.
