A Guide to Singapore Holding Companies
When it comes to outbound investments, there is no other place in the world quite like Singapore. It is by far the most preferred jurisdiction by investors who are keen to set up a holding company in Singapore or companies in Singapore, and here is why.
What Makes Singapore Holding Companies the Best Option
As a vehicle for investment purposes, companies from all over are keen to set up a Singapore holding company for their Asia Pacific business investments. Companies from the United States are especially keen to do so because of the strong bilateral ties which both Singapore and the US share. The relationship was strengthened even further when the Singapore Free Trade Agreement was signed in 2004, which not only helped to enhance the trading volumes between both these countries, but it also helped Singapore boost its traction as a major investment destination. The free trade agreement helped to put Singapore on the map.
Since the signing of the agreement, Singapore now become the third largest recipient of US foreign direct investments in the world, behind Australia and Canada. With over 1,500 US-based companies currently operating in Singapore, the increased economic engagements will only serve to further boost Singapore’s growth and importance in the years to come. Thanks to its strategic location, Singapore holding companies have become the most preferred option in all of Asia, thanks to the economic connectivity, sound legal framework, tremendous favorable reputation and the world class infrastructure.
Singapore’s taxation system is another primary reason why Singapore holding companies are the preferred choice. When US-based companies receive a dividend in US holding companies, those dividends will be subjected to a 35% federal corporate tax rate. However in Singapore, subject to the conditions stipulated in the Foreign Sourced Income Exemption Scheme, all foreign sourced dividend incomes will be exempted from tax in Singapore, which is a huge incentive for investors to want to come and setup a holding company in the country.
Yet another significant advantage that Singapore has as a hub for holding companies is the redeployment of earnings to other regional economies. Why this is an advantage is because it can be done without directing the earnings into the United States where it could potentially attract tax liabilities. Singapore also has a comprehensive network of Double Taxation Agreements (DTAs) with other countries, which is yet another benefit investors will be able to leverage on.
Approximately 300 US-based companies or more have already made Singapore their regional headquarters because of the related support services which allows companies to enjoy concessionary tax rates on either a global or regional basis. If the companies meet the required conditions, they will be able to enjoy a concessionary tax rate of 15% for about 3 years (plus an additional 2 years), which will depend on any incremental qualifying income that is received from abroad.
A Singapore Holding Company Is the Ideal Choice
For US-based company especially, Singapore is the perfect destination to set up a holding company. With its business friendly environment, world class infrastructure and one of the best tax frameworks in the world, Singapore is the best place for any investor to enhance their business and their presence in Asia.