Entrepreneurs must decide where to operate in addition to selecting the best business entity. The success of a business depends on the location it chooses, thus it is essential to carefully consider the advantages, disadvantages, possibilities, and dangers of doing business in a certain market.
In this article, we give you an overview of the business climates in Singapore and France as well as the benefits and drawbacks of locating there.
This paper compares doing business in Singapore with France and offers data on the two nations based on a number of factors, including business climate, taxes, intellectual property protection, openness to trade, bureaucracy, and labor force.
| Singapore | France | |
| Corporate Tax | 0% (on Foreign Profits) | 26.5% |
| Withholding Tax | 0% (on Dividends) | 25% |
| Time to Incorporate a Business | 3 days | 2 weeks |
Business Environment
France is one of the most efficient and compliant nations when it comes to international trade, while Singapore has consistently been listed by the World Bank as one of the easiest countries in the world to start a business. In its 2018 Ease of Doing Business report, the World Bank placed France in 32nd place and Singapore in second.
The World Bank takes into account the following variables when assessing each nation based on how easy it is to do business there.
| Singapore | France | |
| Starting a business | 3 | 30 |
| Minority investor protection | 7 | 38 |
| Trading between countries | 45 | 1 |
| Contract enforcement | 1 | 12 |
| Tax payment | 8 | 55 |
And according to The Heritage Foundation’s 2019 Index of Economic Freedom report, Singapore is ranked second out of 180 nations, with increases in trade freedom and political stability. France, on the other side, comes in at number 72, with advances in both fiscal health and commercial flexibility.
Taxes
The following are Singapore’s and France’s corporate tax rates:
| Singapore | France |
| 17% | 26.5% |
IP Protection
It has been demonstrated time and time again that nations with robust intellectual property protection systems prosper the best. The “2018 Global Competitiveness Report” from the World Economic Forum ranks Singapore third worldwide in terms of IP protection, whereas France comes in at number ten.
International Competitivity
Singapore is the second-most competitive economy out of 144 economies in the World Economic Forum’s “2018 Global Competitiveness Report,” with France coming in at number 17. Some of the important metrics that went into the ranking are listed below:
| (Out of 140 countries) | Singapore | France |
| Most competitive economy | 2 | 17 |
| Intellectual property protection | 3 | 10 |
| Easy access to qualified personnel | 9 | 28 |
| Start-up costs for new businesses | 11 | 15 |
| Government regulation’s burden | 1 | 107 |
Trade Openness
According to the World Economic Forum’s “Global Enabling Trade Report 2016,” trading internationally is fairly simple in both Singapore and France. Singapore is ranked first in the study, while France is ranked thirteenth.
Bureaucracy
According to Transparency International’s “Corruptions Perception Index 2018” study, both Singapore and France are seen as having low levels of corruption and being reasonably clean. Out of 180 nations, France was placed 21st and Singapore was placed 3rd in the survey.
Labor Force
The following factors relating to employment were measured for Singapore and France by the World Economic Forum’s 2018 Global Competitiveness Report:
| (Ranking based on 140 countries) | Singapore | France |
| Digital literacy in the population | 6 | 63 |
| Easy access to qualified personnel | 9 | 28 |
| Cooperation between employers and employees | 2 | 99 |
| Easy access to foreign labor | 97 | 61 |
| Tax rate on labor | 75 | 140 |
Rankings by Nation: Singapore and France
| Year | Category | Singapore’s Rank | France’s Rank | Source |
| 2018 | Ease of Doing Business | 2 | 32 | World Bank, 2018 Ease of Doing Business Report |
| 2019 | Freest Economy in the World | 2 | 71 | Heritage Foundation’s Index of Economic Freedom |
| 2018 | Most Competitive Economy in the World | 2 | 17 | World Economic Forum, Global Competitiveness Report |
| 2018 | Nation with the lowest perception of corruption | 3 | 21 | Transparency International’s Corruption Perceptions Index |
| 2018 | Best Country for Business in the World | 8 | 21 | Forbes’ Best Countries for Business Index |
| 2016 | Country with the Most Open Trade | 1 | 13 | World Economic Forum, Global Enabling Trade Report |
The European Union (EU), a single market with 500 million customers who boast strong purchasing power, is mostly accessed through France. France, which is strategically situated in the center of Europe, serves as a gateway to the continent as well as the nearby Middle East and Africa.
The second-largest economy in Europe and the second-most sought-after location for foreign financial enterprises are both France. Paris is one of the world’s greatest asset management hubs, which enhances its influence in the region.
The EU is the largest recipient of foreign investments in the world and is home to a sizeable portion of those made by emerging economies. France received US$963.8 billion in cumulative FDI in 2011, ranking fourth globally behind the United States, China, and the United Kingdom.
While Paris Charles de Gaulle Airport is the largest freight hub and second-largest passenger airport in Europe, France’s ports of Marseille and Le Havre rank among the top ten European ports. The nation has one of the largest rail and road networks in the area, and its high-speed rail lines are among the best in Europe.
France’s top-notch logistics system offers vast connections to the rest of Europe and an undeniable advantage for exporters doing business there. The recovering Eurozone and growing demand from the UK and US are helping the French economy make significant strides toward recovery.
France and Singapore Economic Relations
Singapore is France’s greatest trading partner in ASEAN, while Singapore is France’s second-largest trading partner in the EU. The majority of French businesses in the region are situated in Singapore, where notable brands like Michelin, Renault, and Rémy Cointreau International have regional offices. After Japan, Singapore is the second-largest receiver of French investments in the area.
The mutual economic interactions between the EU and Singapore are expected to increase after the FTA is ratified. Both Singapore and its European counterpart have the strategic advantages to act as a launching pad into their respective regions, giving investors and businesses pursuing the markets a significant advantage. Significant tax benefits are offered by the avoidance of double taxation in the form of favorable withholding tax rates and foreign tax credits. Here is a summary of the Singapore-France DTA.
Singapore-France DTA
The DTA between the governments of Singapore and France was initially reached on September 9th, 1974, and it became effective on August 1st, 1975. It was changed once more in 2016, and the updated DTA became effective on 1 June 2016 with a start date of 1 January 2017.
An Overview
A quick description of the main aspects of the Singapore-France DTA is provided in the table below.
| Nature of Income | Normal Withholding Tax France | Normal Withholding Tax Singapore | Treaty Rate |
| Dividends | 30% | Nil | 5% or 15% |
| Interest | 0% | 15% | 10% |
| Royalties | 33.33% | 10% | 10% or 33.33% |
Scope of Application
Persons who reside in either one of the Contracting States or in both are subject to the DTA’s requirements. “Person” refers to any individual, business, or group of people that is regarded as an entity for tax reasons. All taxes levied on income on behalf of a Contracting State shall be subject to the DTA’s rules. The provision includes taxes on gains from the alienation of movable or immovable property, taxes on the whole amount of wages or salaries, and all other taxes imposed on total income or on components of income.
In the case of France, the provisions will encompass withholding tax and prepayments for income and corporate taxes as well as income tax and corporation tax. The agreement in Singapore pertains to income tax.
Residency
Any individual who is required to pay tax in a contracting state because of their domicile, residence, place of business (main office or headquarters), location of control and management, or another comparable factor is considered to be a resident of that state.
In the instance of a person who is a resident of both countries, the site of their permanent residence will decide their tax residency; however, if their permanent residence is located in both countries or in neither of them, the center of their essential interests will be taken into consideration.
The nationality of the person will be taken into consideration if they do not have a habitual abode in both countries. If the person is a national of both countries or none of them, the contracting states will decide the person’s residency by mutual agreement.
Where determining residency when a non-individual is a resident of both contracting states, the competent authorities of the contracting states shall agree upon the residency by taking into account all pertinent factors.
Permanent Establishment
A “Permanent Establishment” (PE) is a fixed place of business where an enterprise conducts all or a portion of its operations. PE contains sites like an office, a factory, a workshop, a farm, a plantation, a drilling rig, and locations where natural resources are extracted, such a mine, a quarry, an oil well, etc. Only if a building site, assembly, or installation project lasts longer than six months does it qualify as a permanent establishment.
The supervision of a construction site or a construction, installation, or assembly project that is being done in the other State by an enterprise of a contracting state that has been operating there for more than six months shall be considered a PE.
Storage facilities used for specific functions, such as displaying, delivering, processing, etc., would not constitute a PE. Maintaining a fixed location only for the purpose of engaging in preparatory or auxiliary tasks will also not qualify as physical activity.
A PE will not be created if a broker, general commission agent, or other agent with independent standing is hired to conduct business in one of the contracting states.
An agent is deemed to be a PE if their activities are dedicated entirely or almost entirely on behalf of the business, if they are acting on behalf of a business and regularly exercise their authority to conclude contracts, secure orders, or maintain and deliver stock of goods or merchandise on their behalf in a contracting state. However, if the agent’s operations are auxiliary in nature, they won’t qualify as PEs.
It is not enough for either firm to be considered a PE of the other for it to be a resident company of one contractual state that is managed or under the control of a resident company of another contracting state.
Important Provisions
Dividends Tax
A resident of one Contracting State may be taxed on dividends paid by a resident corporation to a resident of another Contracting State. However, it can be subject to taxation in the Contracting State where the company is based that is disbursing the dividends. But the tax charged shall not exceed:
If the beneficiary has a PE in the contracting state where the company providing the dividends is a resident and the dividend received is inextricably linked to that PE, this clause does not apply. Such dividend income associated with a PE will be regarded as a business profit and subject to the appropriate tax treatment.
The DTA also states that any withholding taxes permitted by the legislation of the other Contracting State may apply to such profits, but they may not exceed 15% of one-third of the PE’s profits after the corporate tax has been paid on those profits.
Interest Tax
Interest that is generated in one Contracting State and given to a citizen of another Contracting State may be subject to taxation in that other State. If the beneficiary is the interest’s beneficial owner, the interest may also be subject to taxation in the Contracting State where it arises. 10% of the gross amount cannot be levied in tax.
Regarding interest derived from another Contracting State, the government of a Contracting State and certain government entities shall be exempt from tax in that other State.
Interest earned in a Contracting State on loans and debentures given to an enterprise conducting industrial business there and received from a resident of another Contracting State is exempt from taxation in the first-mentioned Contracting State.
Industrial undertakings include manufacturing, assembling, processing, construction & civil engineering, ship-building, breaking & docking, energy & water supply, mining & mineral works, plantation, agriculture, fishery & forestry, and other activities specifically designated as industrial undertakings. These businesses must receive the competent authority’s approval.
If the beneficial owner of the interest has a PE or fixed base in the contracting state where the payer resides and the interest paid is inextricably linked to such PE or fixed base, the aforementioned requirements will not apply. The provisions are also not applicable if interest occurs in the contractual state where the payer resides.
The interest, however, is considered to arise in the other contracting state if the payer has a PE in the state where the beneficial owner resides and it is paid in connection with an obligation relating to that PE.
The treaty’s provisions will only apply to the amount of interest that would have been paid otherwise; any additional amount will be taxed in accordance with the laws of each Contracting State if the amount of interest paid exceeds that amount.
It should be emphasized that in the absence of the DTA, there would be a 15% withholding tax imposed on foreigners who receive interest from Singaporeans. The withholding tax on interest paid to non-residents is not levied in France, though.
Tax on Royalties
The other Contracting State may tax royalties that are generated in one Contracting State and given to a resident of another Contracting State. In consideration for the use of, or the right to use, any copyright patent, trade mark, design or model, plan, or artistic, literary, or scientific work, such as cinematograph films and cassettes for television or radio, etc., one may collect royalties of any sort. When the aforementioned property is used in a Contracting State, royalties are presumed to have arisen there.
But royalties paid for the use of, or the right to use, a copyright of a literary or artistic work, including cinematograph films and films, television or radio tapes, or for information related to a commercial experience, may also be taxed in the Contracting State in which they arise and in accordance with that State’s laws.
If the amount of royalties paid exceeds what would have otherwise been paid due to the special relationship between the payer and the recipient, the treaty’s provisions will only apply to that amount, and any additional royalties will be subject to taxation under the laws of each Contracting State.
If the beneficiary of the royalty has a PE or fixed base in the contracting state in which the payer resides and the royalty paid is inextricably linked with such PE or fixed base, the rules must not apply.
Capital Gains Tax
Gains from the sale of real estate may be subject to taxation in the Contracting State where the property is located. Gains from the sale of moveable property connected to a PE or a fixed base in another contractual state that were obtained by a resident of one of the contracting states may be subject to taxation in the other contracting state. Gains from the sale of such a PE or the permanent basis itself may likewise be subject to taxation in the other state.
Gains made by a resident of a Contracting State from the transfer of moveable property related to the operation of such ships or aircraft, or of ships or aircraft operated in international traffic by an enterprise of that Contracting State, are taxable only in that Contracting State.
Gains from the alienation of any assets or property that are not protected by this rule are solely subject to taxation in the state where the alienator resides. The gains may, however, be subject to taxation in the other contracting state if the property is utilised there.
Gains from the sale or exchange of shares or analogous interests in a business or real estate cooperative whose main assets are real estate may be subject to taxation in the Contracting State where the real estate is located.
Capital gains are not taxed in Singapore. For the purposes of corporate income tax, capital gains are classified as ordinary income in France and are taxed accordingly.
Accounting for Business Profits
Unless the firm conducts business in the other Contracting State through a PE located there, the profits of a Contracting State enterprise are exclusively taxable in that State. However, the other Contracting State may only tax the fraction of the profit that can be directly attributed to the PE.
The profits of the PE shall be determined as if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a PE.
All expenses and deductions that could reasonably be attributable to the PE and deductible if the PE were an independent enterprise shall be allowed for the purpose of determining the profits of the PE.
Profits are not due to a PE just because they purchase products for the enterprise.
Treatment of Related Businesses
Associated enterprises are those that are directly or indirectly involved in the management, control, or capital of an enterprise of another Contracting State by an individual or individuals from that enterprise.
As a result, the profitability and revenue of the associated companies will be impacted. The terms and conditions of operations and transactions between associated enterprises will differ from those made between independent enterprises.
The DTA stipulates that in the case of associate enterprises, the contracting governments may presume taxable income that would have accrued otherwise if the parties were independent and tax the enterprises in accordance with that determination.
If the related enterprise condition hadn’t existed, all earnings that would have accrued to the enterprise would have been included, and the tax would have been imposed on those profits.
Treatment of Shipping and Air Transportation Income
Profits earned by a business within a Contracting State through the use of ships and airplanes in international traffic are exclusively taxable there.
The rules apply to the portion of ship or aircraft operating profits obtained by a contracting state entity through membership in a pool, a joint venture, or an international operating agency.
Treatment of Property Income
A resident of one Contracting State who receives income from real estate located in another Contracting State may be subject to taxation in that other State. This clause shall also apply to the income from an enterprise’s movable property and the income from movable property used for the performance of independent personal services.
The agreement must include provisions for income from the direct use, letting, or use of immovable property in any other way. Properties as defined by the law of the contracting state in which the property is located shall be included as “immovable property.” It shall also include the rights to receive variable or fixed payments in exchange for the right to work or exploit mineral deposits and other sources of natural resources.
Accounting for Personal Income
Salaries & Wages
Unless the employment is performed in the other Contracting State, salaries, wages, and other comparable payments received by residents of a State for employment are solely taxable in that State. If the employment is carried out in this manner, the pay may be subject to taxation in the other State. Even though the employment is performed in a different Contracting State, the receiver is solely liable for taxes in the first state stated under the following conditions:
Director’s Fees
A resident of a Contracting State who receives directors’ fees and other comparable payments while serving on the board of directors of a business that is based in another Contracting State may be subject to taxation in that other State.
Artists & Sportspersons
Income earned by a resident of one State through his own activities as an entertainer, such as a musician, actor, radio or television artist, or athlete, and performed in another State may be subject to taxation in that other State.
However, if such revenues are earned for operations carried out in a contracting state and are in large part supported by public funding from the government, a political subdivision, a municipal authority, or a statutory body of that Contracting State, this clause must not apply.
Pensions
Any pension or annuity that a resident of one Contracting State receives from another Contracting State is solely subject to taxation in the first Contracting State.
Teachers, Professors and Researchers
An individual who, immediately prior to the visit, resides in a Contracting State and who, upon invitation, travels to another Contracting State for a period of time not exceeding two years solely for the purpose of teaching, conducting research, or both at any university, college, school, or other similar public institution in that other Contracting State, shall be exempt from the foregoing.
Students & Trainees
Students and trainees who are temporarily present in another contracting state as a student at an accredited university or other comparable institution, as a recipient of a grant, award, or allowance from a government agency, a charity, a place of worship, or another similar organization, or as a business apprentice are exempt from paying taxes in the other state on all remittances, grants, and remuneration received from abroad.
A person who lives in one Contracting State before traveling to another Contracting State for the sole purpose of study, research, or training while there is exempt from paying taxes if they receive a grant, allowance, or award from a charitable, scientific, educational, or religious organization or as part of a program for technical assistance that one of the Contracting States has entered into.
A resident of a Contracting State who travels to another Contracting State for up to twelve months solely as an employee or under contract with the second-mentioned Contracting State or one of its enterprises for the purpose of gaining technical, professional, or business experience is also exempt from the tax of the other Contracting State on wages and remittances received.
Double Taxation is Eliminated
When income is taxed in both Contracting States, the DTA offers relief from double taxation.
As long as the credit does not exceed the portion of the Singapore tax chargeable that was calculated prior to the credit being granted, French tax payable with respect to income derived from France will be allowed as a credit against the Singapore tax payable with respect to income derived from France in the case of Singapore residents. Singapore shall take into account French corporate tax payable by that company in respect of its income from which the dividend is paid in the case of dividend income paid by a French company to a Singapore resident, directly or indirectly owning a 10% share in the dividend paying French company.
However, the credit shall not exceed that portion of the Singapore tax chargeable, as computed before the credit is given.
For inhabitants of France, all income from Singapore, excluding dividends, royalties, interest, director’s fees, and earnings from the entertainment industry is exempt from French tax. However, France retains the power to evaluate the thusly included items of income when computing the resident’s tax rate.
On dividends, interest, royalties, director fees, and the income of artists and athletes, a credit can be taken against French tax that must be charged against Singapore tax that must be paid. In the case of dividends, the beneficiary French resident must own at least 10% of the Singapore Company that pays the dividend in order to be eligible for credit.
Conclusion
The trade and investment are expected to pick up after the ASEAN Community is established and the EU-Singapore FTA is ratified. Due to their infrastructure, strategic locations, and connections, France and Singapore will both prove to be key players in their respective unified markets. The DTA between the two nations will encourage trade and investment activities even more.
Please visit the IRAS website for further information on the specific provisions covered under the tax treaty between Singapore and France.
Send us your questions.
We will reply in less than 24h.
Thank you, we will contact you shortly!
Thank you, we will contact you shortly!
