Singapore and Hong Kong have been competing for supremacy as Asia’s “Best Place to Do Business” for decades. In addition to a number of other criteria, both regions have been enticing foreign investors with their tax-friendly laws, simple company incorporation processes, and first-rate infrastructure.

Singapore has quickly caught up to Hong Kong, eroding its supremacy in the region, despite Singapore having a longer history as a business hub than Hong Kong. Singapore has quickly and nimbly adopted business-friendly laws that continue to draw the majority of foreign investors to set up shop in Asia.

The question of whether jurisdiction is today more appealing cannot be answered in a simple, clear-cut manner that is both conclusive and black-and-white. Despite the fierce competition, some investors favour Singapore because of its high standard of living, robust infrastructure, and reliable service providers.

Some people pick Hong Kong primarily to access the North Asian and larger Chinese markets. Singapore is frequently chosen by smaller companies because it provides more alluring tax incentives and a more affordable environment than its competitor.

	Singapore	Hong Kong
Corporate Tax	0% (on Foreign Profits)	16.5%
Withholding Tax	0% (on Dividends)	16.5%
Time to Incorporate a Business	3 days	1 day

In this article, Singapore and Hong Kong are the two jurisdictions that are compared to examine the benefits and difficulties of establishing business operations. Location, political climate, economic environment, legal system, taxation policies, workforce productivity, quality of life, infrastructure setup, and general ease of doing business are all taken into account.

Location

• Singapore and Hong Kong are strategically situated in the center of Asia, making it possible to fly to most Asian nations in five to seven hours. However, Hong Kong is well placed on Mainland China’s southeast coast, abutting the mouth of the Pearl River Delta, if you need to access the Mainland Chinese market. Using Hong Kong as your base, you may go back and forth in a single day to Beijing, Shanghai, and other significant Chinese cities.

• You may easily travel to important cities in the Asia Pacific, North America, Europe, and the Middle East from Singapore’s Changi Airport and Hong Kong’s International Airport, two of the top airports in the world. Singapore is the top docking destination for trade since it has the busiest port in the world and the most extensive network of international port links. Hong Kong, on the other hand, is restricted to serving as the hub of all maritime activities in southern China. Singapore is now the busiest container port in the world, surpassing Hong Kong in recent years.

Ease of Conducting Business

• Singapore and Hong Kong have a reputation for being simple business establishment locations. In Singapore and Hong Kong, you can start a business in about three working days. Infrastructure facilities, including commercial space, are conveniently accessible. Regarding the protection of intellectual property, there are stringent laws and a number of dispute resolution options. Both nations attract international investment thanks to their straightforward and business-friendly tax systems. The relocation of foreigners who want to create businesses in Singapore or Hong Kong is made easier by an open immigration policy with suitable work visa requirements.

• Both nations frequently compete with one another in rankings for business-friendly environments. According to the World Bank’s “Doing Business 2015” report, Singapore stands out as the finest place in the world to conduct business in this regard. The time it takes to form a business in both economies is just three steps and one to three days. Singapore does far better than Hong Kong in terms of enforcing contracts (1 vs. HK’s 22) and registering real estate (17 vs. HK’s 59). It is hardly shocking that Singapore and Hong Kong are placed highly when compared to the Asian region’s 7 processes and 38 days.

Category	Singapore’s Ranking	Hong Kong’s Ranking	Source
World’s easiest place to do business	1	5	World Bank Report: Doing business 2015
Most Competitive Economy	2	7	World Economic Forum’s Global Competitiveness Report 2015–2016
Ease of Paying Taxes	4	3	PWC Paying Taxes 2011
Openness to Trade	1	2	World Economic Forum’s Global Enabling Trade Index 2010
Most Competitive Economy	3	2	2015 IMD, World Competitiveness Yearbook
World’s Freest Economy	2	1	Heritage Foundation’s Index of Economic Freedom

Living Standards

• While Singapore and Hong Kong compare favourably on the majority of metrics, Singapore actually outperforms Hong Kong in terms of quality of life. When moving from somewhere else, Singapore is thought to be easier to adapt to. A unique fusion of cultures and people creates a cosmopolitan lifestyle in the social and ethnic fabric. English is extensively spoken on the island, and the city is seen as modern and westernized. Mandarin or Cantonese continue to be the primary language of communication in Hong Kong despite the city’s primarily Chinese population.

• Singapore has the lowest crime rates in the world, and foreigners continue to cite safety as one of the most appealing aspects of living there. Singapore is ranked as the city with the highest “Quality of Living” in the Asia-Pacific, according to a 2010 Mercer Human Resource Consulting poll.

• The health and nutrition of Singaporeans are among the best in all of Asia. Singapore actively supports a traffic-free, green, and healthy environment. The National Environment Agency reports that in 2010, the Pollutant Standard Index (PSI), which measures air quality, was good on 93% of the days and moderate on 7% of the days. On the other hand, air pollution and traffic congestion are severe in Hong Kong. Since of the air pollution, executives have started moving to Singapore because it is better for their families’ health.

• Singapore adheres to both eastern and western urban living standards when it comes to eating. Every Chinese regional cuisine is cherished in Hong Kong, which is frequently referred to as China’s culinary capital. Singaporeans frequently eat out, and compared to Hong Kong, it is thought to be more affordable.

• Singapore provides a wide range of housing options for expatriates to suit their needs, preferences, and financial constraints. When compared to other significant developed cities, rentals are still regarded as being reasonably priced. Residential rents in Hong Kong are far more expensive than in Singapore and are comparable to those in important global capitals like London and New York.

• The fact that Singapore’s cost of living is significantly greater than Hong Kong’s is a common obstacle mentioned by several expats. Many of them still favour Singapore, though, because of the chances it presents.

• Hong Kong expats make less money than Singapore expats, according to a 2011 study by ECA International, a company that conducts research on living conditions in the world’s top cities for corporations. This is despite the fact that both Singapore and Hong Kong have developed top-notch medical facilities, first-rate infrastructure, effective transport systems, and international schools and universities to serve the expatriate community. It now falls into a category where employers may want to consider increasing employee stipends.

Category	Singapore’s Ranking	Hong Kong’s Ranking	Source
Cost of Living	8	9	Mercer Human Resource Consulting, 2011
Best Quality of Living in the world	28	71	Mercer Human Resource Consulting, 2010
Best Asian City for Expatriate Pay	5	10	ECA International Expatriate Market Pay Survey 2011

Taxation

• For each entrepreneur, taxes are the top priority and one of the most important factors to take into account when deciding where to locate a firm. Singapore’s low effective personal and corporate tax rates are one of its distinctive benefits. Both areas use a tier system for personal income tax. Personal income tax rates in Singapore range from 3.5% for income under SGD 320,000 to 20% for income beyond SGD 320,000. Personal income tax, or salary tax, is charged in Hong Kong and ranges from 2% for income under HKD 120,000 to 17% for income over that amount. However, compared to Hong Kong, Singapore has a net effective personal income tax rate that is substantially lower. For instance, a Hong Kong resident making USD 65,000 would have to pay around USD 6,500 in personal income tax. In contrast, he would only need to pay about USD 4,000 in Singapore.

• Singapore currently has a flat headline corporate tax rate of 17%. In Hong Kong, corporate tax, or profits tax as it is also known, is fixed at 15% for unincorporated enterprises and 16.5% on assessable earnings for corporations. In order to make Singapore an attractive investment destination, corporation tax rates in Singapore have been falling down constantly. To retain Singapore’s competitiveness, the corporate income tax rate was decreased from 18% to 17% as of YA 2011.

• As is typical in many other jurisdictions, the headline company tax rate in Singapore does not always give an accurate picture of the effective corporate tax rate. Due to applicable tax benefits, depreciation regulations, and other factors, the effective rate is typically lower than the headline tax rate.

• When compared to the corporate tax rate applicable in Hong Kong, the effective tax rates for small-to-mid size Singapore enterprises are much lower if these tax deductions are applied to the taxable income. For Singapore private limited firms, the effective corporate tax rate is regulated at 17% for profits under SGD 300,000 and SGD 17% for profits over SGD 300,000. However, newly established Singapore corporations enjoy a 50% tax break on the following S$200,000 in profits after the initial S$100,000 in profits is earned for three straight years. The government has modified its partial and full tax exemption programs for start-ups with effect in 2010, enabling them to take advantage of either Corporate Income Tax (CIT) rebates or SME cash incentives.

• In order to promote foreign investment and the expansion of the targeted industries in Singapore, the government of Singapore has also implemented a number of industry-specific tax incentives. This tax system promotes the establishment of businesses here and enables SMEs to grow.

Quality of the Workforce

• Both Singapore and Hong Kong have highly educated, skilled, and trained labour forces. Hong Kong can take pride in having a local talent pool that is experienced and entrepreneurial and that is aware of the business culture of the rapidly expanding Mainland cities. Due to the nation’s connection to China, the majority of the workforce prefers to communicate in Cantonese and Mandarin despite the fact that corporate settings often use English. Singapore, on the other hand, has a distinct advantage over Hong Kong in terms of its workforce, which is international, well educated, professionally qualified, predominantly English-speaking, and technically adept. Being a knowledge-based economy and a global hub on many platforms, the nation draws the top worldwide talent in the sector.

• Furthermore, compared to other Southeast Asian countries, Hong Kong is thought to have greater personnel costs. As a result, a lot of companies prefer to establish themselves in Singapore where they can hire English-speaking staff for reasonable prices.

Category	Singapore Ranking	Hong Kong Ranking	Source
Most Competitive Economy	3	2	IMD World Competitiveness Yearbook, 2015
Reliance on professional management	5	23	World Economic Forum’s Global Competitiveness Report 2015–2016
Cooperation in labour-employer relations	3	12	World Economic Forum’s Global Competitiveness Report 2015–2016
Pay and productivity	3	2	World Economic Forum’s Global Competitiveness Report 2015–2016

Political Environment

• The Political and Economic Risk Consultancy assessed Singapore as the second-most politically stable nation in Asia in 2010, behind Hong Kong. With more businesses choosing to establish operations here, Singapore’s standing as a global commercial hub has been bolstered by its stable and pro-business governmental environment. The Singaporean government is known for its transparency, high moral standards, rigorous adherence to the law, efforts to combat corruption, development of market-friendly policies, and effective implementation of such policies.

• With the exception of international and defence issues, Hong Kong is a Special Administrative Region of the People’s Republic of China and enjoys a great degree of autonomy. Hong Kong continues to operate under its current political, economic, and judicial systems, as stated by the Sino-British Joint Declaration (1984) and the Basic Law. One China, Two Systems is a common term used to describe this arrangement. The city’s allure is based on its free market ideals, pro-business government, and political stability. It is also noted as having one of the world’s cleanest economies.

Category	Singapore Ranking	Hong Kong Ranking	Source
Asia’s most stable political system	2	3	Political & Economic Risk Consultancy, Asian Risk Prospects 2010
The country with the highest level of public trust in politicians	1	19	World Economic Forum’s Global Competitiveness Report 2015–2016
Transparency of government policymaking	1	3	World Economic Forum’s Global Competitiveness Report 2015–2016
Burden of government regulation	1	3	World Economic Forum’s Global Competitiveness Report 2015–2016
Wastefulness of government spending	3	14	World Economic Forum’s Global Competitiveness Report 2015–2016

Economic Environment

• Singapore has positioned itself as the most competitive Asian nation thanks to robust commerce and investment. Exports of machinery and electronics are the main drivers of the economy, with financial services and tourism also playing a significant role. The aggregate GDP per capita of Thailand, Malaysia, Indonesia, and the Philippines is double that of Singapore. 2010 saw a 14.5% increase in Singapore’s GDP, although the annual inflation rate remained moderate at 2.1%. Its main economic advantages include a steady positive surplus, little foreign debt, and high government revenue. Singapore is also the world’s fourth-largest foreign exchange trading hub.

• One of the most dynamic economies in the world, Hong Kong is based on the ideas of free entrepreneurship, free trade, and open markets. The GDP has grown at an average yearly rate of 5% in real terms during the past two decades because to the strong economy. Foreign ownership limitations, foreign exchange controls, and limits on inbound and outbound investment are all absent. A solid banking system, almost no public debt, a powerful judicial system, sufficient foreign exchange reserves, and a capable and strictly enforced anti-corruption administration are just a few of Hong Kong’s economic advantages.

Category	Singapore Ranking	Hong Kong Ranking	Source
World’s Most Competitive Economy	3	2	IMD World Competitiveness Yearbook, 2015
World’s Freest Economy	2	1	The Heritage Foundation, Index of Economic Freedom, 2016

Legal Environment

• Singapore is a popular location for business activities because of its effective and dependable legal system. There are unambiguous laws governing things like piracy, e-commerce, immigration, and intellectual property. The country’s court system can often be relied upon to provide an impartial trial, particularly in cases involving commerce. There are several dispute resolution options available to assist organizations resolve conflicts quickly and affordably.

• Hong Kong’s success is dependent on the application of the law. The law treats everyone equally. English common law is used most frequently in Hong Kong, which has a separate legal system from Mainland China. Since establishing its International Arbitration Centre in 1985, Hong Kong has grown to be one of the world’s leading arbitration jurisdictions, similar to how Singapore has. The least violent cities in the world, Singapore and Hong Kong are both secure places to live.

• To satisfy the expanding needs of enterprises, Singapore and Hong Kong have both been taking steps to enhance their infrastructure. The world’s top airports and busiest ports are located in both regions. All major centres in the relevant regions are connected by effective and affordable transportation services. The desired Exhibition and Convention Centre is being contested by Singapore and Hong Kong. Furthermore, significant industrial and business parks have expanded in each region.

• One of the most technologically advanced telecommunications networks in the world is found in Singapore and Hong Kong. Almost all residential and commercial buildings have access to broadband. Due to Hong Kong’s open marketplaces, there are several, fiercely competing Internet and mobile service providers. Over 98% of households in Hong Kong and 99.9% of households in Singapore have access to broadband Internet.

Category	Singapore’s Ranking	Hong Kong’s Ranking	Source
World’s Most ‘Network Ready’ country	1	14	World Economic Forum’s Global Information Technology Report 2015
Infrastructure and Digital Content	19	28	World Economic Forum’s Global Information Technology Report 2015
Gov’t success in ICT promotion	3	30	World Economic Forum’s Global Information Technology Report 2015
ICT use & gov’t efficiency	2	24	World Economic Forum’s Global Information Technology Report 2015
Best Quality for Port and Air Transport Infrastructure	2,1	5,3	World Economic Forum’s Global Competitiveness Report 2015–2016
Best Quality of Overall Infrastructure	2	1	World Economic Forum’s Global Competitiveness Report 2015–2016

Final Impressions

Hong Kong is no longer the only destination in Asia to conduct business as Singapore has established itself as a formidable challenger.

In addition, Hong Kong is no longer as alluring as it once was. It has a low quality of life and a high cost of living, it is harder to get qualified labour at reasonable prices, English usage is falling, and the corporate community is concerned about the future political stability of the area. Singapore, Hong Kong’s main rival, has addressed all of these issues and is even luring investors with hefty tax advantages.

Most studies place Singapore ahead of Hong Kong, and it is quickly rising to the top spot as a business travel destination.