A business’s future and prosperity depend on the jurisdiction it chooses, therefore making the right choice is crucial.
When selecting the ideal business environment for your company, factors like political and economic stability, financial and physical infrastructure, company and labour laws, taxation system, legal environment, intellectual property protection, availability of human resources, cultural fabric, and language are crucial considerations.
We give a general summary of the main distinctions between conducting business in China and Singapore in this article.
Singapore
China
Corporate Tax
0% (on Foreign Profits)
25%
Withholding Tax
0% (on Dividends)
10%
Time to Incorporate a Business
3 days
2 – 6 months
Environment for Business
According to the World Bank’s “Doing Business 2018” report, Singapore is the second-easiest place in the world to conduct business. China comes in at number 46 in contrast. The following are some of the major elements that each nation’s rating was influenced by:
(Ranking based on 190 countries)
Singapore
China
Starting a business
3
28
Minority investor protection
7
64
Tax payments
8
114
International trade
45
65
Contract enforcement
1
6
Singapore was ranked eighth on Forbes’ list of the “Best Countries for Business” in 2018. China came placed at number 49 when compared to other countries. Singapore performed highly in a number of categories, including technology (#4), property rights (#6), investor protection (#6), and trade freedom (#1).
On the other side, China has also made significant advancements since the last study in categories like tax burden, investment protection, and red tape.
Taxes
Based on chargeable income, the corporate tax rate in Singapore is a flat rate of 17%. The basic corporate income tax rate in China is 25%, however it can be further reduced to 15% for eligible businesses that participate in sectors that the Chinese government supports.
Both Singapore and China use a progressive income tax system. With China’s income tax rate ranging from 3% to 45% and Singapore’s income tax rate ranging from 0% to 22% based on chargeable income.
IP Protection
According to the World Economic Forum’s (WEF) “2018 Global Competitiveness Report,” Singapore has the third-best intellectual property protection laws in the world, whereas China is ranked #49 for IP protection.
Singapore was placed #6 for property rights in Forbes magazine’s 2018 assessment of the “Best Countries for Business,” whereas China was ranked #52.
International Competiveness
China was ranked #28 and Singapore’s economy was placed #2 globally in the World Economic Forum’s “2018 Global Competitiveness Report” out of 140 nations. Access to capital, political unpredictability, corruption, an ineffective government bureaucracy, tax laws, and a lack of infrastructure are a few of the things that hurt China’s capacity to compete economically. The best institutions in the world, however, were found in Singapore, which ranked first for its efficient labor and goods markets, low levels of corruption, and government efficiency. The infrastructure and level of complexity of the financial markets are second to none.
According to the 2019 Index of Economic Freedom published by the Heritage Foundation, Singapore has the second-freest economy in the world. Singapore received a higher score for economic freedom due to its effective regulatory environment, competitive tax system, lack of corruption, transparency, and efficiency of services, highly flexible labor market, equal treatment of foreign and domestic investors, and a highly effective legal system. China improved over the previous assessment in areas like property rights, government honesty, judicial effectiveness, and business freedom, placing #100 in the Index.
Trade Openness
According to the World Economic Forum’s “2016 Global Enabling Trade Index,” China is placed #61 and Singapore has the most open economy in the world. Singapore outperformed China in terms of working environment and border administration, and China and Singapore both have excellent infrastructure rankings.
Burdensome procedures and tariff obstacles for both import and export are some of the most frequent trade-related issues that both countries encounter.
Bureaucracy
Singapore was listed by the World Economic Forum as having the highest level of public trust in politicians and as having the sixth-highest rate of corruption. According to the same criteria, China was ranked #47 and #66 in its “2018 Global Competitiveness Report.”
On Transparency International’s “2018 Corruptions Perception Index,” Singapore came in at number 3, while China came in at number 87.
Workforce
In order to compare Singapore and China’s labor markets, the World Economic Forum’s 2018 Global Competitiveness Report examined the following factors:
(Ranking based on 140 countries)
Singapore
China
Digital literacy in the population
6
45
Ease of finding skilled personnel
9
44
Cooperation between employers and employees
2
52
Easy access to foreign labor
97
36
Labour tax rate
75
139
At-a-glance Country Rankings: Singapore and China
Year
Category
Singapore’s Rank
China’s Rank
Source
2018
Ease of Doing Business
2
46
World Bank, 2018 Ease of Doing Business Report
2019
Freest Economy in the World
2
100
Heritage Foundation’s Index of Economic Freedom
2018
Global Competitiveness
2
28
World Economic Forum, Global Competitiveness Report
2018
Country with the lowest perception of corruption
3
87
Transparency International’s Corruption Perceptions Index
2018
Best Business Country in the World
8
49
Forbes’ Best Countries for Business Index
2016
Country with the Most Open Trade
1
61
World Economic Forum, Global Enabling Trade Report
As a Final Thought
In addition to having easy access to markets in the South East Asia area and mainland China, Singapore is regarded as the ASEAN gateway and is a good location for businesses to establish themselves.
Setting Up a Company – Singapore vs China
For the majority of entrepreneurs, choosing an appropriate offshore location for business setup and operation is a key choice. The jurisdiction’s foreign ownership policy, the process and timeline for forming a company, the minimum statutory requirements and compliance, and other important elements should all be taken into account.
This article contrasts the regulations for setting up businesses in China and Singapore.
Foreign Ownership
Singapore permits foreign business owners to form Singapore private limited companies with 100 % foreign ownership ownership. The range of commercial activity that a company may conduct is unrestricted.
China permits foreign businesspeople to establish a totally foreign-owned enterprise, commonly known as a wholly owned limited liability company (WFOE). However, businesses can only engage in “encouraged” business activities, not “restricted” or “prohibited” activities.
Statutory Minimum Requirements
A local registered address (residential or commercial), at least one local resident director (a Singaporean citizen, a Singapore permanent resident, or a foreigner holding an employment pass, entrepreneur pass, or dependent pass), a local resident and qualified company secretary (must be a natural person), a minimum of one and a maximum of fifty shareholders (natural persons or corporates), and a minimum paid up capital of SGD 1.00 are all necessary for incorporation in Singapore.
In order to establish a WFOE in China, foreign business owners must adhere to the following rules: a local registered address (only commercial; not residential); a minimum of one and a maximum of fifty foreign shareholders (individuals or corporations); a legal representative; a general manager; and, if the company forms a board of directors, a minimum of three and a maximum of thirteen directors. The latter requirement does not apply to directors who are Chinese citizens or local residents (depending on the nature of business and local authorities requirements).
Procedure for incorporation
Singapore’s company registration process is entirely computerized and may be finished electronically in only one day. The approval of the company name and the submission of the incorporation paperwork are the only two main processes in the formation of a company. Following incorporation, the business can register with the tax office, create a corporate bank account, and submit an application for a business license (if necessary).
Incorporating a business in China requires a number of complicated and time-consuming steps, including presenting a project proposal, getting approval for the company name, submitting a feasibility study report, completing incorporation documents, and getting a business license. The business must open a corporate bank account, register with the tax office, receive a foreign exchange registration certificate, register with the neighborhood statistical bureau and financial bureau, among other things, after it has been incorporated.
Incorporation Time-line
Incorporating a Singaporean company only requires a few formalities and may be finished in under 24 hours.
In China, establishing a business requires dealing with multiple governmental agencies, and the clearance process can take two to three months.
Annual Filing Obligations
In Singapore, an Annual Return and an Income Tax Return must be filed annually with the Companies Registrar and the Singapore Tax Department, respectively. Audited accounts are not required to be submitted with returns for small businesses.
Companies in China are required to file income tax returns to the tax department on a monthly, quarterly, and annual basis in addition to audited financial statements. A WFOE must also deliver an audited annual report for yearly inspection to various government agencies. No business is exempt from the obligation for an audit.
Corporate Taxes
For profits under $300K in Singapore, the corporate tax rate is roughly 8.5%, and for income beyond $300K, the rate is steady at 17%. GST is now 7%.
WFOEs are subject to much higher taxes in China. The corporate tax rate is currently set at 25%. Certain small businesses may be eligible for lower rates of 20% or 15%. (certain technology companies). For businesses with a yearly revenue of more than CNY 1.8 million, the VAT rate is 17%; for all other businesses, it is 6%.
As a Concluding Point,
Singapore offers superior opportunities to China for business establishment and operation. In comparison to China, Singapore is easier to set up a business in because to its “restriction-free” foreign ownership policy, one-day company incorporation, minimum statutory compliance, and low taxation.
