A supportive corporate environment can frequently make a significant contribution to entrepreneurship success.

Australia and Singapore are two of the top destinations in the world to conduct business. When selecting a Launchpad for its subsequent enterprise, a company would need to take into account a few clear contrasts.

	Singapore	Australia
Corporate Tax	0% (on Foreign Profits)	30%
Withholding Tax	0% (on Dividends)	15%
Time to Incorporate a Business	3 days	5 weeks

This article evaluates the business environment in both jurisdictions, looking at things like taxation, workforce, and company incorporation.

Financial Overview

The Australian economy benefits from a competitive advantage in manufacturing basic goods like wine, beef, and dairy due to an abundance of natural resources. Professional services like education, travel, and logistics, in addition to other important exports like minerals and coal, also significantly contribute to Australia’s economic growth.

In contrast, Singapore has drove itself to innovate and rely on human capital in the course of its development due to a small land area and a lack of natural resources.

As a result, high-end manufacturing, engineering, biotechnology, and financial services now have a leading global economy. Singapore is Asia’s most competitive corporate nation and is strategically situated in the center of important Asian trade routes, where it can capitalize on demand from a market of 600 million people in the ASEAN economic region.

Environment for Business

Singapore has held the top spot in the World Bank’s ranking of the easiest nations to do business for the past ten years as a result of its exceptional performance in a number of areas of its business regulatory environment. Australia, on the other hand, came in at position 15. Here are a few quick contrasts between the two:

• Singapore ranks fourth in protecting minority investors, whereas Australia comes in at number 57.

• Second-placed Singapore and third-placed Australia in terms of contract enforcement

• Starting a business (Singapore) at number six and (Australia) at number seven.

According to the 2016 World Economic Forum Enabling Trade Index, Singapore continues to dominate the world in this area, with Australia coming in at number 26. The world’s top-rated border clearance procedures in Singapore received high scores for efficiency, predictability, and transparency.

Singapore and Australia both have a shared legal history that originated in the United Kingdom. Singapore’s laws on intellectual property protection and registration are comparable to those in Australia, despite Singapore’s slightly lower filing and renewal fees.

Workforce

The population of Australia, at 24 million, is roughly four times that of Singapore. Despite the fact that both labour forces are multicultural and multilingual, 47% of Singapore’s workforce has a degree or diploma, compared to 43% of Australian workers. As a result, whether your company is in Australia or Singapore, the local highly-educated labour will be advantageous.

Employees in Australia are only permitted to work a maximum of 38 hours a week under federal law. Employees are not permitted to work more than 12 hours per day in Singapore.

Additionally, the federal minimum wage in Australia is AUD 17.70 per hour. In Singapore, there is no set minimum salary for employees.

Business Language

Although there is no official language in Australia, the majority of people speak English. Furthermore, 1.3 million Australians speak a European language, and 2.1 million Australians speak an Asian language.

In Singapore, both business and domestic communication are primarily conducted in English. Most Singaporeans also obtain official education in their second languages, like as Malay, Mandarin, and Tamil, in accordance with their ethnic backgrounds.

Business Formation & Incorporation

In Australia, the two categories with the most registrations are subsidiary companies and registered foreign companies (branch offices), but in Singapore, the categories with the most registrations are private limited companies, subsidiaries, representative offices, and sole proprietorships.

Australia requires three steps for business setup, while Singapore just needs two for incorporation. These processes can be finished in a day in both nations.

A company that incorporates in both jurisdictions is also required to have one shareholder and one director. Depending on their residency status, the same person may fill both positions.

Requirements for Filing

Companies with operations in Australia and Singapore must produce and file annual financial reports with the appropriate authorities in each country. Annual tax returns must be submitted, and annual financial reports must be audited.

Additionally, most firms make quarterly payments made up of company and individual income taxes deducted from employee earnings via Australia’s Pay-As-You-Go (PAYG) tax collection system.

Regulations for Immigration

You can apply for a skilled visa if you are a worker whose abilities are required in Australia. If not, people typically enter Australia on a subclass 457 working visa, which permits a stay of up to 4 years (or 12 months for newly-established Australian businesses). In addition, for the duration of the visa’s validity, the person must possess and maintain a minimum level of health insurance.

Foreign professionals, managers, and executives who earn a minimum monthly salary of S$3,600 in Singapore may be granted an Employment Pass. Additionally, foreign business owners who intend to launch and run a new enterprise in Singapore can apply for the EntrePass.

Income Tax

The world’s lowest effective tax rates are available in Singapore. Singapore’s progressive tax rate finishes at 22% while Australia’s personal income tax rate is progressive up to 45%.

Singapore prevents double taxation of its investors by utilizing a one-tier corporate tax structure. Since shareholders won’t be taxed on dividends paid by a resident firm, taxes paid by businesses on their chargeable income are the last taxes paid.

When after-tax profits (for example, $700 paid to a shareholder) are dispersed as dividends in Australia, the dividend statements also include a separate “franking credit” (for example, $300 worth of credit), which represents the amount of tax the firm has already paid. The whole amount ($1000) of the dividends must be reported by stockholders on their personal tax filings. A shareholder would typically pay $190 in tax on the dividend under a 19% income tax rate.

However, because the business has already paid $300 in taxes, the shareholder would receive a credit or refund for the $110 difference.

Corporate Tax

While Australia’s corporate tax rate is 30%, Singapore offers businesses a headline corporate tax rate of 17% on their chargeable income. Tax Incentives & Exemptions

Corporations with an aggregated group revenue of less than AUD 20 million are eligible for a 43.5% refundable tax offset under Australia’s R&D tax incentive program, whereas bigger companies are eligible for a 38.5% non-refundable tax offset up to an eligible expenditure ceiling of AUD 100 million. Additionally, numerous tax benefits are offered by particular states.

Newly registered businesses in Singapore are entitled to a complete three-year tax exemption on their first S$100,000 in chargeable income. Small business organizations in Australia are eligible for a corporate tax rate of 28.5% if their annual revenue is under AUD 2 million.

Withholding Tax

A 10 to 30% withholding tax is applied to dividends and interest payments made to non-residents by Australian resident corporations.

The withholding tax in Singapore ranges from 0% to 17%.

Foreign-Sourced Income

Profits from both Singapore-based and overseas businesses that are sent to Singapore are included in resident companies’ chargeable income. Profits made and kept outside of the country are not subject to taxation.

However, resident businesses in Australia must pay corporation taxes on all earnings earned, whether inside and outside the country. Therefore, businesses that receive money from foreign sources must disclose it on their tax forms.

TAX	SINGAPORE	AUSTRALIA
Corporate Tax	17%  (For the first three years, new start-ups who qualify receive a 100% exemption on their first $100,000 of revenue)	30%
Branch Tax	17% (First $300,000 subject to a partial exemption)	30%
Capital Gains Tax	–	30%
Income Tax	0% – 22%	0% – 45%
Withholding Tax DividendsInterestsRoyalties	0% 15% 10%	30% 10% 30%
Double Taxation Relief	Yes	Yes
Foreign-Sourced Income Tax	If received or perceived received in Singapore, it can be taxable.	Yes
GST	7%	10%

As a Final Thought

Australia is the thirteenth largest economy in the world, whereas Singapore has fast developed to become one of the top financial hubs on the planet. The disadvantage is that Australia’s income tax rates are higher than those in most other countries for both businesses and individuals.

Singapore clearly beats Australia as a preferred investment site, whether it is due to its business-friendly government or its outstanding connectivity to the world’s rising markets.

A guide for Australian businesses establishing themselves in Singapore

Are you the owner of an Australian business with plans to grow in Singapore? What you should know is as follows.

Singapore is a great place for Australian businesses wishing to expand into Asia and beyond due to its strategic location in South East Asia, business-friendly economic policies, and a long history as a Regional Business Hub.

Singapore is ranked as one of the three business-friendliest nations in the world by the World Bank Group while also having one of the most competitive economies in the world. Singapore is one of only a handful of Asian nations where foreigners can open a second branch and conduct business without too many restrictions. Timothy Charlton, president and founder of the business information company Charlton Media Group, stated that this is why he decided to open an office in Singapore.

Here are some things you should know if you run an Australian business and want to open an office in Singapore:

Operating a Business in Singapore

Singapore’s steady economy explains why the city-state constantly ranks highly in international business reports. Since 1995, Singapore has had no foreign debt. It also boasts a robust GDP ($297 billion as of the end of 2016) and favourable exchange rates (1 SGD to 0.76 USD as of April 2018).

A national focus on services, human capital, and innovation, which makes up for the nation’s relative lack of land and natural resources, is responsible for the stability of the Singaporean economy. Singapore serves as a major regional hub for both established sectors like manufacturing, logistics, and finance as well as up-and-coming ones like clean energy, healthcare, and aerospace.

Australian businesses that incorporate in Singapore also profit from a range of business-friendly laws and regulations, including the Global Investor Programme (GIP), low blanket tax caps for individuals and corporations, and step-by-step guidance provided by Singaporean government departments and regional corporate service providers.

Obtaining Work Permits for Singapore

There are various sorts of Singapore work visas for which you may be eligible. The ones that concern Australian businesses and workers the most are:

• Employment Pass (EP) – designed for professionals in managerial, executive, or specialty professions who make at least S$3,600 per month (AUD 3,543). For first-time pass holders, EPs are good for 2 years; subsequent renewals are valid for 3 years apiece.

• PEPs (Personalized Employment Passes) are designed for senior managers and executives making at least S$18,000 per month in monthly salary (AUD 17,712). PEP holders are free to switch employers at any time, and the pass is valid for three years.

• The Most Important Permit for Business Founders and Entrepreneurs, the EntrePass grants you permission to launch a company in Singapore. For this pass, there is no minimum wage requirement; nevertheless, candidates must have a strong business plan and/or a successful track record in business.

Obtaining a Working Visa for your Spouse

There are also special passes available for Australian business owners or employees who want to relocate their families to Singapore.

• Dependant’s Pass (DP) – for spouses and unmarried children

• Long Term Visit Pass (LTVP) – for common-law spouses, step-children or handicapped children, parents, and fiancées

• Letter of Consent (LOC) – meant for DP/LTVP holders who want to work in Singapore and have already obtained an offer

The Singapore – Australia Double Tax Treaty

In order to avoid double taxation of income, this article gives a general overview of the extensive bilateral tax treaty between Singapore and Australia. The most recent protocol was signed on September 8, 2009, and it became effective on December 22, 2010.

An Overview

A brief summary of the main elements of the Singapore-Australia DTA is provided in the table below.

Topic	Treaty provisions
Scope of DTA	Australia tax residents as well as Singapore tax residents.
Taxes covered by the DTA	In relation to offshore developments, income tax and petroleum resource rent tax.
Real Estate Income	Taxable in the country where the property is situated.
Business Profits	Taxed in the nation where the business is located.
Airline/Shipping Profits	Taxed in the nation where the operator resides.
Dividends	15% of the total dividend income is subject to Australian tax on dividends received by shareholders in Singapore from an Australian corporation.Exemption from Singapore taxes on dividends received by shareholders who reside in Australia from a Singapore company.
Interest	Taxed in the nation where the interest income is generated at a reduced rate of 10%.
Royalties	10% less tax is levied on royalties in the nation where they are earned.
Personal/Professional Services Income	Taxed in the nation where the services are rendered. Tax exemptions are available in specific circumstances (see below).
Pension & Annuity	Taxed in the recipient’s country of residence.
Government Payments	Government officials who are paid are subject to taxation by the relevant government unless they are citizens or permanent residents of the nation where the services are rendered.
Student Trainee payments	In the nation where they are pursuing their studies, payments provided to visiting students overseas for their education, training, or maintenance are exempt from tax.

Scope of the DTA

• The DTA is applicable to Australian and Singaporean tax residents.

Taxes Covered by the DTA

• Singapore has an income tax.

• Income tax plus petroleum resource rent tax in Australia with regard to offshore projects.

Determining What a Permanent Establishment Is

A permanent establishment (PE) is a fixed place of business through which a firm conduct all or part of its operations. Typical permanent establishments include places of management, branches, offices, factories, workshops, locations for the exploitation of natural resources, etc.

Real Estate Income

In the nation where the property is located, income from real estate is taxable. Included in real estate property are

• Leasing of land;

• a right to receive variable or fixed payments in exchange for the right to exploit mineral, oil, or gas deposits, quarries, or other locations for the extraction or exploitation of natural resources; any other interest in land, including a right to explore for or exploit mineral, oil, or gas deposits or other natural resources;

• income derived from real estate owned by a business; and

• income derived from real estate utilized to carry out business operations.

Business Profits

Only the nation in which an enterprise has its residence is allowed to tax its profits. The business is subject to taxation in both the contracting nation and the country where its permanent establishment is located if it conducts business there.

However, take note that the tax obligation for the contracting country only extends to earnings made by the permanent establishment there.

Airline or Shipping Profits

A resident of one of the contracting nations who derives income from operating ships or airplanes is solely subject to taxation there (i.e. the country of residence of the operator).

Despite the aforementioned rule, income from the operation of ships or aircraft that are restricted to locations in the other contracting country are subject to taxation in that nation (i.e. the source country).

Airline or shipping profits includes:

• Earnings from membership in a pool service, a joint transit operating organization, or an international operating agency.

• Interest on money held in one of the contractual nations by a resident of the other contracting country when those funds are used to operate ships or aircraft—other than those that are only used in the first-mentioned country—in any other context.

• Profits from operations of ships or aircraft confined shall be treated as derived from the carriage by ships or aircraft of individuals, livestock, mail, goods or merchandise shipped in one of the contracting countries for discharge at another place in that contracting country, or at one or more structures used in connection with the exploration for or exploitation of natural resources situated in waters adjacent to that contracting country.

Dividends

• Shareholders who reside in Singapore but receive dividends from an Australian-based company are subject to a 15% Australian tax on the total amount of dividend income.

• Singapore tax is not applied to dividend income received by Australian residents from Singapore-resident companies or Malaysian-resident companies with a profit source in Singapore.

• Note that if the recipient of the dividend income has a permanent establishment in the nation where the company paying the dividend is based and that the holding giving rise to the dividends is in fact connected with a trade or business conducted through that permanent establishment, the aforementioned reduced tax rate or tax exemption will not be applicable. In these situations, the dividend will be regarded as permanent establishment income.

Interest

• In the country where the interest income originates, or the source country, it is taxed at a lower rate.

• Australian citizens will be subject to Singapore tax at a reduced rate of 10% on the gross amount of interest if they receive interest income from Singapore. Similar to this, Australian taxation will be levied at a rate of 10% on the gross amount of interest paid to Singapore citizens who receive income from Australia.

• If the resident of one of the contracting countries who is beneficially entitled to the interest has a permanent establishment in the other contracting country and the debt giving rise to the interest is effectively connected with a trade or business conducted through that permanent establishment, the above tax rate on interest does not apply, it should be noted. When interest income is generated in conjunction with a permanent establishment, it is regarded as business income generated by the permanent establishment and is taxed as such.

• The aforesaid tax rate will only apply to the agreed-upon amount and not the excess amount paid if the interest paid exceeds the amount that both parties may have agreed upon in the absence of the special relationship between the borrower and lender.

• Interest earnings on bonds, securities, debentures, or any other type of debt are referred to as interest income.

Royalties

• In the country where the royalty revenue originates, or the source country, it is taxed at a lower rate.

• Australian citizens who receive royalties from Singapore are subject to a 10% Singapore tax, which is a reduced rate compared to other countries. Similar to this, Australian taxation will be levied at a rate of 10% on the gross amount of royalties for Singapore citizens who receive income from Australia.

• Notably, the resident of one of the contracting countries who has a permanent establishment in the other contracting country and the information, right, or property giving rise to the royalties is effectively connected with a trade or business carried out through that permanent establishment, the above tax rate on royalty income does not apply. When royalty revenue is generated in conjunction with a permanent establishment, it is regarded as business income generated by the permanent establishment and is taxed as such.

• The aforesaid tax rate will only apply to the agreed-upon amount and not the excess amount paid if the amount of royalties paid exceeds the amount that both parties may have agreed upon in the absence of the special relationship between the payer and the recipient of the royalties.

• Payments made in connection with the: are referred to as royalty revenue.
  • Utilize of or right to use any patent, design, model, plan, secret formula, procedure, trademark, or other similar property or right; industrial, commercial, or scientific equipment; or copyright (other than a literary, dramatic, musical, or artistic copyright). Or
  • information about professional, academic, or commercial experience.
    • Payments for the use of, or the right to use, motion picture films, tapes for use in connection with radio broadcasting, films or video tapes for use in connection with television, or payments related to the operation of mines, quarries, or the exploitation of natural resources are not included in royalty income.

Personal or Professional Services Income

Income from either personal or professional services is taxable in the nation where the services are rendered. Under the following conditions, such income will not be subject to taxation:

• The person stays in the nation where the services are being provided for no more than 183 days.

• Not the country where the services are being rendered, but the other contracting country, is where the employer resides.

• A permanent establishment (in the nation where the services are rendered) of an organization from the contractual country is not responsible for the individual’s payment.

• Please take note that the remuneration or other revenue received by public entertainers is not excluded from the aforementioned exemptions (such as stage, motion picture, radio or television artistes, musicians and athletes).

• The jurisdiction in which the corporation paying the fees has tax laws that apply to directors’ fees.

• An individual residing in one of the contracting nations will not be subject to taxation in the other contracting nation on income earned from a job held while traveling internationally aboard a ship or aircraft.

Pension and Annuity

Pensions and annuities are taxed in the recipient’s home country. Note that a pension paid to a person by the governments of Australia or Singapore in recognition of services provided in the performance of official duties is exempt from this rule.

Government Payments

• Singapore tax is not applied to payment (other than pensions) that the Australian government pays to anyone for services provided on its behalf, unless that person is a Singapore resident and is not an Australian citizen.

• Except in situations where the individual is an Australian resident and not a Singapore citizen, remuneration (other than pensions) provided by the Government of Singapore to any individual for services rendered on behalf of the Singapore Government is exempt from tax in Australia.

• Please take note that the aforementioned rules do not apply to revenue received in connection with a Government business operation (i.e. a trade or business carried on by a Government for purposes of profit).

Payments Made to Trainee Students

Students from one contractual nation who are presently studying or training in another contracting country are not subject to taxation in the other contracting country on funds received from abroad for maintenance, education, or training.

Exchange of Information

• When necessary, the tax authorities of the contracting nations shall exchange tax data.

• The shared information will be kept private and will only be shared with parties involved in the assessment, collection, enforcement, or prosecution of the taxes covered by the DTA (including any court or tribunal).

• Any commercial, business, industrial, or professional trade secret or commercial procedure will not be disclosed.

Please visit the IRAS website for further information on the specific provisions covered under the tax treaty between Singapore and Australia.