10 Reasons Why Tiny Singapore Is Far More Startup Friendly Than USA or Hong Kong
Still believe Silicon Valley is the best place for your internet startup? Except your status, think about taxes, registration paperwork, dealing with authorities, visas for your staff, cost of living, infrastructure… And now imagine you get an opportunity to wring more out of your startup!
We will show you why a tiny Singapore can thrash the U.S. and even high-tech Hong Kong on every step of running a business.
This is probably the most important thing entrepreneurs want to know before launching a startup in any country. Singapore offers extremely low corporate and personal taxes. Personal income tax is 3.5-20% for salaries over 230,000 USD. In Hong Kong, for example, the rate is lower, but taxation starts from 15,480 USD. Corporate tax in Singapore will depend on the income: for incomes lower than 222,000 USD the rate would be below 9%, while for incomes above this benchmark, it is fixed at 17%.
Corporate tax in Hong Kong would be 0.5% lower, but in Singapore you still win because its government introduces tax exemptions which lower the corporate tax significantly. The government supports newly-setup private limited companies and let them enjoy their first 100,000 SGD (74,000 USD) tax-free and next 200,000 SGD with discount of 50%.
All you have earned inside your startup (private limited company) isn’t subject to capital gains tax: you can freely enjoy the profit that was already taxed on the corporate level. In the U.S., all your incomes (including capital gains) would be taxed at the rate increasing from 15% (for all incomes below 50,000 USD) to 35% (for incomes over 18 million USD). As you can see, in Singapore you win on every level of income.
Singaporean government pampers SMEs and introduces different taxes for every specific industry in order to lure more entrepreneurs to the country. What is more, there are many other ways to decrease or even (in some cases) compensate the corporate tax completely and increase your business effectiveness in the same time. For example, if you invest in training your staff, buy new equipment, make a worthy research or just do something to improve your intellectual property protection, the government can offer you various tax deductions, cash bonuses and payouts to cover your startup’s expenses.
Here is an interesting fact: according to global tax survey, counting and managing taxes takes a Singaporean businessman approximately 82 hours yearly. When it comes to his American fellow, he/she would spend up to 170 hours yearly doing the same stuff. Simple and affordable tax modes lure investors and entrepreneurs especially from Europe where such tax perks would sound simply outrageous.
2.) Ease of Running a Business
According to World Bank’s report for 2014, Singapore proudly takes the cake being called the “the world’s easiest place for doing business.” And despite the speed of incorporation here and in Hong Kong is similar (only a couple of days), Singapore still surpasses Hong Kong in international trading (#1), property registering (#14 vs #57 in HK) and insolvency solutions (#2 vs #16 in HK).
In running a business in Singapore, everything starting from choice of business entity and ending with paying corporate taxes is easy and transparent. Paperwork for filing taxes is minimum, the same as for hiring or firing staff. Singaporean government treats an entrepreneur as a customer, not as an enemy.
3.) Visa Solutions
Singapore government has developed quite straightforward procedures of getting visas. Employment pass is considered to be the most optimum visa solution as it fits both directors and professionals. Obtaining EP is a matter of days here despite it still requires wise strategizing. EP became harder to get since the government introduced new rules: raised the salary benchmark (it’s 3,300 SGD / 2,450 USD now) and enforced employers to consider local manpower first. A foreign company that hires only foreign staff isn’t welcome by the government, so you will need to test Singapore talents first and then, if you can’t find a fit, you can pass on to hiring foreigners. There will be no problems if you are looking for developers, media specialists or designers because the Singaporeans aren’t gurus in that stuff. All brainy developers migrate to the Valley, so you can easily bring your own to Singapore.
If you need to come to SG before brewing your startup (or 6 months after it), you will need to get an EntrePass. It is harder as you will need to prove innovativeness of your startup and argue your own entrepreneurial merits as well as to verify your paid-up capital (at least 50,000 SGD). If you aren’t sure you’ll be able to move to Singapore as an entrepreneur, you can apply for EP (only after establishing your startup) and get there as director.
4.) Investment Magnet and IP Protection
Singapore can boast not only world’s third index of GDP per capita 82,762 USD) that leaves the U.S. and Hong Kong far behind, but also its exports (electronics and machinery), low inflation, and high government profits. Singapore is world’s number-one investment destination. It lures people with big money with its stable political and economic environment and restriction-free import (and repatriation) of incomes.
Taxes are profit-friendly and allow investors not only bake their “cake,” but also take it home. To achieve such results, the government introduces tougher control criteria. Since 2009, coming to Singapore as an entrepreneur entails additional requirements: you must involve 3rd party Venture Capitalist or an accredited angel investor who are ready to funnel their resources (over 100,000 SGD/ 74,230 USD) in your new startup and register your intellectual property with a respectable Singapore-based IP institution. Singapore boasts Asia’s premium intellectual property protection, so it’s the best environment for safe development of your new brand.
5.) Cost of Living
If compared to other huge business hubs like Hong Kong or New York, Singaporean prices are much lower for everything: housing, insurance, public transport, and food. 1.5-2 k USD per month are typically enough for middleclass entrepreneur to happily live in Singapore. Your expenses would increase if you would like to buy property in Singapore, but having cheap rent and always available transport, there is little need in buying a car or an apartment.
In Singapore, you can get decent and affordable healthcare. The insurance which costs around 400 USD yearly will cover you up to about 500,000 USD. And it’s only your own expenses. We don’t even start talking about your startup’s expenses. Doing a startup in, for example, Silicon Valley will cost you incommensurably more because there you will have to pay more for status things.
6.) Location and Transport
Singapore has a very winning location in the very centre of Asia. It is home to distinguished Changi Airport (which consolidated its reputation of “the best airport in the world” in 2015 World Airport Awards report) that is famous for its incredible landscape design, pool on the rooftop, astonishing vertical “wall” garden, cinemas, fitness centres, showers, top-notch hotels, Skytrains that connect different terminals and even a 4-story slide. It is definitely a place where layovers turn into delights. Commercial Singapore is connected with the world by the planet’s most extensive and the busiest international port. This might interest you if your business depends on shipping operations.
The city wins more and more trust with its low traffic and green environment. Here you won’t be strangled in constant traffic jams and dirty public transport typical for big cities. Whatever type of transport you choose, “airy” and uncrowded feeling is what you are about to experience. Travelling by taxi is safe, and you shouldn’t be afraid of overcharge which often happens with foreigners in other developed countries.
Singapore is the Asia’s most liveable city according to ECA International. In their survey, they analysed life indices based on expat experience. The country is famous for its cosmopolitan (cross-cultural) lifestyle; that’s why people who arrive here find the adaptation very easy. Western spirit is felt here and English is spoken everywhere, which is very advantageous for foreign business. Unlike in Hong Kong which is faithful to Chinese mentality and Mandarin language, in Singapore your startup has more chances to reach out to English-speaking customers all over the world. Even when it comes to Asian cuisine, Singapore is more moderate due to combining both east and west tastes.
In Singapore, family values are very strong, and they often define job orientation. There are many rules what you aren’t allow doing in Singapore: to chew a gum, not flush public toilets and have sex with same sex partner – just to name a few. These rules that may sound weird for decaying Europe still don’t impact your or your business’ welfare.
8.) Startup Mindset
The Singaporeans are very conservative, though honest and foreigner-friendly. They are very hard-working, and here a huge mental gap between American and Asian approach to startups is seen. The Americans value entertaining component of the startup: free snacks or games at the working place. The Singaporeans don’t need such incentives; they just sit down and do their job. They are able to focus on the goal and work hard for achieving it without wasting time on playing.
The Americans have venture blood running in their veins, and they are culturally more prone to startups. The Singaporeans aren’t likely to initiate startups especially venture ones: only a mere handful of people would choose a risky and less trodden path. Nevertheless, the mentality of trading island respects every initiative – even the one that ends with a failure.
The situation is different also on the investor’s end. In Singapore, investors are more open to new and potential ideas and are more prone to believe in you and entrust you huge sum of money, while the American investors prefer only sound deals. Plus in Singapore you may found lots of alternative funding methods (angels, private banking clients) that hardly work in the U.S.
9.) Legal Landscape
Singapore is country where the law awes. Unbelievable country’s breakthrough into the first world from the third one was possible thanks to the law that is enforced everywhere here. Everybody in Singapore is equal before it. It results in incredibly low crime rates and safety for your business (your money loves silence) and your life. You won’t shake in your shoes while going through the park at 2 am here.
Singaporean government protects intellectual property and labour force and controls e-commerce, immigration to Singapore and salaries providing impartial legal proceedings. If your employee gets injured at the working place, you won’t be sued for astronomical amount of money like it would happen in the U.S. But what is even more comforting is that all legal procedures are simple and free of corruption and red tape here.
The only thing that may disappoint you is that Singaporean government isn’t likely to pass anticompetitive legislation that would favour your sector or allow lobbying your business interests.
10.) Local Workforce
Singapore has cherished a generation of intelligent and highly skilled labour force geared towards effective business. The same as in U.S., you won’t have communication issues here because the manpower and locals are increasingly English-speaking which means no language barriers for your startup. The situation is much complicated if you decide to bring your startup to such business hub as Hong Kong. Labour force is basically Mandarin-(or Cantonese-)speaking and more expensive there.
If compared to Singapore, the U.S. and Hong Kong drop behind in many important categories: Hong Kong hardly speaks English, has higher cost of living and unaffordable prices for qualified labour force, while the U.S. shocks with monster taxes, prices and complicatedness.
In the same time, Singapore invents new outrageous tax incentives and simplifies business procedures to consolidate its status of startup magnet.
About the Author: Roman Yarovyi is PR and Communication Manager for One Visa
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