Dario Acconci, managing director - business development, Asia, Hawksford, outlines what companies need to know before expanding into Singapore, and what options are available when it comes to establishing a presence.
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Singapore
For businesses seeking to expand and develop an Asian presence, Singapore offers a wealth of possibilities. From tax benefits, a highly skilled workforce, a just legal system, as well as the physical location, there is a myriad of reasons why Singapore serves as an ideal base for those expanding into Southeast Asia, one of the world’s fasting growing economies.
Entering a new international market can be a risk-filled prospect, so it’s of the utmost importance to understand as much about the new business environment as possible, before committing major time and resources to the venture.
Despite the potential risk, there is high reward to be gained, particularly for those in medical field. Since the turn of the century, the medtech market in Singapore has been growing rapidly, contributing S$13.3 billion to country’s economy in 2018, a stark increase from S$3.1 billion in 2008.
But what do companies need to know before expanding into Singapore?
Singapore presents many opportunities and benefits for foreign companies. To truly reap the benefits of the Singaporean business environment, it’s crucial to understand the benefits available. The principal advantages are the tax benefits, the people, the location, and the legal system.
Tax
Setting up in Singapore grants companies access to an extensive network of double tax agreements (DTA) with over 80 countries across the globe, which avoids companies paying double taxes, lowers withholding taxes, and offers an attractive tax regime.
As part of the favourable tax regime, Singapore does not apply tax on capital gains and dividends income, in addition to offering a lower corporate tax rate on taxable income, standing at a maximum of 17% in comparison to 25% in the UK.
People
Another advantage Singapore presents is the availability of a skilled multilingual workforce. In 2021, the National University of Singapore was rated best in Asia for medicine studies, evidencing a highly skilled talent pool which presents huge potential for medical companies looking to expand. What’s more, Singapore boasts a reputation as having one of the most diverse and multicultural populations in the world. The reason for this being the country’s impressive immigration policies, which can also aid your company during the expansion period.
Location
Singapore’s geographic positioning means that most other South East Asian countries can be accessed by a short flight or journey, further facilitated by the country’s award-winning airports and seaports. Strategically positioned in the middle of the major trade and shipping routes between India and China, a base in Singapore grants companies access to lucrative trade deals. For medical companies, this is especially pertinent since China is the world’s fourth largest medtech exporter, meaning there is a lot of proximal potential.
Legality
Another advantage held by Singapore is its legal system. With minimal legal red tape and quick processes, the Singaporean legal system is considered one of the least bureaucratic countries in Asia.
One notable policy provides robust intellectual property (IP) rights, established to encourage innovation and creativity. This protection is particularly helpful for medically innovative companies seeking to develop new technologies.
What options are available when it comes to establishing a presence here?
As well there being many reasons why expanding companies should establish a presence in Singapore, there are several options for how you may want to do so, including establishing a subsidiary company, branch office, or representative office.
Setting up a subsidiary company is considered best for foreign small medium enterprises (SMEs). With 95% of medtech companies in Europe being SMEs, establishing a subsidiary company would likely be your most recommended option.
Subsidiaries are considered separate from the foreign parent and require one or more directors, and at least one must be Singapore citizen, permanent resident, or employment pass holder. One of the biggest advantages is that subsidiaries will be treated as a local company meaning they can receive the same tax benefits and protection against liabilities.
Another option is to open branch office, which would be seen as an extension of the parent company, meaning they cannot benefit from the same regulations as local companies, or subsidiaries. This type of investment is recommended for medium to large businesses that perform specialised operations in international locations and intend to conduct a wide range of business activities in Singapore.
Alternatively, foreign companies may choose to set up a representative office (RO), which would allow them to explore the market or manage company affairs but must not conduct revenue generating activity. The RO must be staffed from by a representative from the foreign company’s head office and may only operate for three years maximum. Establishing an RO is generally recommended for a company seeking to study the Singapore market before committing investment and resources to it.
