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Doing Business in Singapore VS Hong Kong
The Best Service Platform
Hong Kong is the natural gateway for trade and investment to the vast market in Mainland China. Hong Kong’s geographical advantage as a launching pad to markets in Asia can be seen from its position as the world’s 11th largest trading economy. Hong Kong is recognized by business people worldwide to be the best service platform through which inward investors can reap the benefits of the manufacturing powerhouse of the world – the Greater Pearl River Delta. Indeed over 3, 800 overseas companies with businesses in the region including Mainland China have chosen Hong Kong as the place for their regional headquarters or offices. Hong Kong has always been and continues to be the preferred jurisdiction for structuring both China inbound and outbound investments. Last year (2016), close to 72% of investments into China were through Hong Kong, which far exceeded direct investments into China by any other country. Singapore, China’s second largest investor, accounted for less than 5% of China’s inbound FDI.
The 4th Largest Recipient of FDI in The World in 2016
According to the 2017 World Investment Report published by the UNCTAD, Hong Kong was the 4th largest recipient of FDI in the world in 2016, behind the United States, the United Kingdom and China. Furthermore, it is also the seventh supplier of FDI flows in the world. Hong Kong is one of nine developing countries listed in the 20 largest economies in the world. There are numerous advantages of doing business in Hong Kong, among which are a company can be opened in one or two week’s time in Hong Kong, there are no foreign ownership restrictions on Hong Kong company, no restriction on business scope and it is also an international transportation hub with excellent business infrastructure facilities. Hong Kong also has a very simple and Low Tax System where corporate tax is capped at 16.5% of profits, salaries tax is a maximum of 15%, tax is exempted for income not sourced in Hong Kong (offshore income), no capital gains tax, no withholding tax on dividends and interest and there is no sales tax or VAT in Hong Kong. There are still many other wonderful and feasible reasons why startups should choose to do business in Hong Kong. But at the end of the day, all of these reasons boil down to one thing and that is, setting up companies in Hong Kong means that you can expect the best of the best and the highest level of success, no matter what industry you belong to.
Famously Safe, Orderly, Green and Clean
A relatively young state having gained independence in 1965, Singapore has quickly become famously safe, orderly, green and clean, whilst boasting an enviable public transport system and an exemplary educational system. Prudent economic management, low taxes and first-class infrastructure all make it attractive for investment. Probably the biggest draw for doing business in Singapore is it’s investment environment. The national reserves are abundant enough to withstand 10 years of recession, the government consistently stays stable with one party in power and has one of the lowest corruption rates in the world. Supplementing the safe economy is Singapore’s incorruptible legal system, based on the English Common Law. Unlike many Asian regions, the law is ironclad and unbiased in Singapore. Contracts and agreements can be pursued with the proper channels and mitigations, thus making business arrangements much safer with less risk of flight.
Development and Facilitation Rather Than Control
According to the country’s Ministry of Finance (MOF), Singapore’s corporate regulatory policy focuses on “development and facilitation rather than control”. This has made Singapore the world’s easiest place to do business, as well as one of the busiest ports, leading oil refining and distribution centre, and manufacturing cornerstone for electronic components. It also has the world’s fourth largest foreign exchange market (Singapore Exchange), Asia’s second largest over-the-counter derivatives trading centre, and region’s leading commodities derivatives hub. The government is actively funding heavily in research development and deployment, test bedding and demonstration projects that are all followed by wide scaled adoptions. This is due to the progressive nature of Singapore and its hunger to be the most advanced city in the world. Finally, Singapore has one of the world’s simplest and most rational tax system. It levies no tax on capital gains or on dividends received from a business. This makes the country particularly attractive to entrepreneurs who want to incorporate and build a new business. Singapore uses a tiered tax system for both personal and corporate taxes. New firms receive significant tax breaks during their first 3 years reducing their tax rate to 0% for first S$100k of income. The corporate tax rate is capped at 17%.
For more information, please see our blog at incorporating your business in Singapore or Hong Kong?