Investing in India? Check These Singapore Tax Benefits!
Singapore is now the biggest foreign direct investment source that enters India, which strengthens business connections between them. There is a common history, ethnography, and culture between these two countries. Both can be traced back their social norms and values to the South Asian Indo-Chinese cultural patrimony. For a long time, they were under the British colony and achieved independence at the same time.
Despite gaining independence at the same time, Singapore and India’s business environment are very different. Singapore follows rules, is free from corruption, and has a market-based economy. India has a lot of corruption and partiality. Therefore, they have very different business environments and tax systems.
That is the reason why a lot of Indian businessmen wanted stronger economic ties with Singapore. Aside from an attractive market, Singapore is a more pleasant place to live in and the work culture is healthier.
Find out more about Singapore tax benefits for investing in India now:
Foreign Direct Investment (FDI) in Singapore
In the two years that have passed, Singapore’s foreign direct investment has more than what comes from Mauritius.
Last fiscal year, the FDI that India attracted from Singapore was $14.67 billion, and only $8.24 billion from Mauritius. This data is based on the records of the Department for Promotion of Industry and Internal Trade (DPIIT).
Singapore has beaten Mauritius with its policies of making business easier, with a simplified tax regime and a lot of private investors. The tax haven status of Mauritius is the primary reason why it dominates India investment inflows.
Main Reasons Why Singapore Attracts Businesses
- The corporate tax rate for India domestic companies in Singapore is below 17%, while it is 30% in other countries.
- In India, they get taxed for the dividend distribution. In Singapore, double taxation is avoided and the shareholder’s dividends do not get taxed.
- India applies a capital gains tax at 15 to 20% which penalizes entrepreneurship and taking risks. There is no capital gains tax in Singapore.
- India has a value-added tax ranging from 5 to 20%, but in Singapore, it is fixed at 7%.
- There are significant tax advantages in India, but in Singapore, they are very friendly to start-ups.
- India ranks #77 in the world for ease of doing business, and Singapore is #2.
- Singapore has a wide network of tax agreements with many countries so that Singapore companies avoid double taxation with other countries.
Considerations to Make if You Invest in Singapore
Singapore’s workforce is one of the most qualified that is mixed with a lot of expatriates, making It very flexible, diverse, and open to international contributions
Well-developed High-Value Sectors
The ICT, pharmaceuticals, finance, and chemistry are stable and established in Singapore. They also have the excellent financial infrastructure with a solid banking system, transport, and telecommunications.
Ideal Business Location
Singapore is in a strategic location, near developing markets in the Middle East and Asia. It is also in the crossroads of the shipping routes, making it an important international and regional trade hub.
Good Tax System Singapore Tax Benefits for Investing in India
In order to draw in more FDI, Singapore works hard to keep an attractive tax system with reductions and controlled loan conditions and other incentives for investment.
US Companies Must Invest in India Through a Singapore Regional Holding Incorporation
If the US wants to enter India, a company can invest directly, but with the taxation in India, this is not a very wise move. That is because profits from a subsidiary in India might be considered taxable by the USA. This is so that the profits would probably be routed through the main US company first.
Other reasons why multinationals incorporate a holding company:
- Give enough efficient ownership and overseas control of businesses.
- Gain a foothold in foreign markets.
- Isolate the business units that limit liabilities and make future mergers, disposals, and acquisition easier.
- Different taxation policies benefits.
- Tax exposure is managed on gains that arise from selling assets.
- Lessen or take out the withholding tax on repatriation of profits.
Indian Companies with Singapore Registration
There are Indian startups that, even if they operate in India, have a registered holding company in Singapore that benefit from more opportunities for funding. These companies also follow stable economic policies with a friendly business and tax environment.
Singapore is a hub for startups, large businesses, and international trading and logistics companies because of its nice location.
Foreign Companies Incentives in Singapore
Singapore is a way for Indian companies to widen their ASEAN trade and investment. Singapore is also an international financial centre and an Asia-Pacific shipping and aviation hub.
- It is not compulsory to hire locals in Singapore, and their government pays 50% of the salaries of national employees. This leads to lower operational costs of the firms that are registered in Singapore.
- There is no export duty in Singapore. In India, the import duties are only applicable to petroleum products, tobacco, and certain luxury goods.
- Singapore does not have to apply retrospective taxes, which can be concerning for investors who want to do business in India.
Exporting Products or Services Coming From India
An Indian business that serves foreign clients can have fewer red tapes linked with their operation if they incorporate with a company in Singapore. The Singapore company (SINGCO) becomes the Indian company’s distributor of their products and services. The treaty between Singapore and India will monitor the easy transfer of products and funds between these countries and between SINGCO and the India parent.
The international dealings are controlled by SINGCO, which includes the invoicing, and payments collection from foreign clients. SINGCO will remit a portion of these payments to the company in India periodically. Considering the easy rules of import and export in Singapore and limitations of receiving income from abroad, this structure can make the overall business operations a lot simpler. In addition, with the correct pricing transfer setting for products, owners can improve their tax strategy.
Importing Foreign Products From India
An Indian import-oriented firm (IMPORTCO) is able to create a subsidiary in Singapore, and SINGCO will become its international representative and take care of all transactions with the international suppliers. This minimizes the red tape in India that IMPORTCO would have to deal with if it directly deals with foreign suppliers. The treaties between India and Singapore facilitates a hassle-free transfer of imported products, and the funds between them and between SINGCO and IMPORTCO.
Intellectual Property Transfer to Singapore is Easier
When you transfer intellectual property (IP) from a company in India to its company in Singapore, the company in Singapore, the company in Singapore may own with better taxes applied on their profit from that sale.
What are the disadvantages of FDI?
- Since it is internationally very open and voluntary, the national economy depends on exports and it is susceptible to the economic state of its major trading partners and global economies.
- Similar to all developed countries, the country that faces an ageing population and “soft” growth pushes the country to look for new growth drivers.
- It is becoming harder to get a work permit in Singapore, and the island needs manpower for the technology sectors in their country.
- There is a lack of transparency in the Singaporean dollar administrative incentives and non-internationalism, which has become the difficulties in investment.
- Even if Singapore has a free port, they do not grant tariff protection for industrial businesses.
- Singapore applies high taxes on tobacco, alcohol, petroleum products, and automobile.
- The semi-public companies’ preponderant role might limit the investments in specific sectors.
Currency Risk Management for Businesses Based in India
Indian businesses that must receive or pay in a different currency have a heavy currency risk if the foreign currency target moves against the Rupee. Since the India Rupee is very volatile, this is risky. It can be avoided by using strategies or future options, but those can be expensive. Another approach is for businesses to hold assets in a less volatile currency like EURO, USD, SGD, or GBP. This reduces the Indian Rupee volatility.
Measures of the Government to Limit or Motivate FDI
Singapore allows foreign investment and has tax benefits that businesses can take advantage of after they register with the Economic Development Board. In addition, the government is still supplying the national economy with investments from the public. For instance, transportation infrastructure construction or programs that encourage transfers for the future economy.
Three years ago, Singapore spent billions to improve productivity and innovation in their country in 23 industries under the growth sector. The main challenge of FDI is that the country still has a monopoly on specific sectors. Government-related enterprises play a huge role in the economy and investment.
The Singapore tax benefits attract many businesses, especially those that are based in India because of the treaties between them. You can ask the assistance of 3E Accounting for all your needs for Singapore tax services, so you can maximize your benefits.