With its recent economic reforms, India’s economy is among the fastest-growing in the world and offers a sizable market and a multitude of investment options. Singapore, on the other hand, is still regarded as one of the top and most reliable international financial centres in the world and a recognized capital market in Asia.
Although both countries have attracted a large number of international entrepreneurs and businesses, there are still significant differences that a company would need to consider when choosing a location for its next stage of growth.
| Singapore | India | |
| Corporate Tax | 0% (on Foreign Profits) | 34.94% |
| Withholding Tax | 0% (on Dividends) | 20% |
| Time to Incorporate a Business | 3 days | 14 days |
This article evaluates the business environment in both jurisdictions, looking at things like taxation, workforce, and company incorporation.
Financial Overview
India has gradually transitioned from a closed-door economy to an open one since the start of economic reforms in 1991. Indian strengths now include telecommunications, information technology, pharmaceuticals, and jewellery, and the country continues to rank third globally in the number of start-ups in the technology sector with over 4,750. Due to its growing population, the nation is a good market because it is a consumption-based economy at home.
Singapore is ranked as the 12th best country in the world for business by Forbes, with one of the most entrepreneur-friendly business environments in the world. India, however, came in at position 85. Along with 154,000 small and medium businesses, many international corporations have chosen to establish headquarters in Singapore. Modern public infrastructure, user-friendly web portals, and transparent laws are one of Singapore’s biggest draws for business organizations and investors.
Environment for Business
India is one of the world’s hardest countries to do business and is ranked #130 in the world despite efforts to make business operations simpler (such as a new computerized system for paying employee insurance payments and new methods for resolving commercial disputes) (World Bank Ease of Doing Business Report 2017). Singapore, however, came in second place.
Here are a few significant comparisons in a glance:
The World Economic Forum’s Global Enabling Trade Report 2016 ranked India 102nd in terms of facilitating cross-border trade, citing high costs and delays associated with domestic transportation, theft and crime, corruption at the border, and onerous import regulations. Singapore, on the other hand, took the top spot on the list thanks to its effective border controls and superior transportation options.
Both India and Singapore have common law legal systems, with British colonial authority having an impact on infrastructure. According to the World Economic Forum’s Global Competitiveness Report 2016–2017, Singapore is ranked fourth globally and first in Asia for having the best IP protection, while India was ranked 42nd.
Workforce
With 1.3 billion people, India boasts the greatest employable talent pool in the world. With half of its inhabitants being under 25, it likewise has a young population. Those under the age of 35 make up two thirds of the population. This suggests a growing middle class and a larger pool of consumers for goods and services. In average, labour expenses in India are cheaper than those in South East Asia.
In the modern Singaporean workforce, millennials—those born between 1979 and 2000—represent the largest generation. The quality of the workforce in Singapore is also rising; from 49% in 2007 to 55% in 2016, the percentage of PMET occupations (i.e., professionals, managers, executives, and technicians) has increased.
Business Language
Hindi and English are both widely spoken and are the two official languages of India.
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.
This makes both nations the top choices for businesses trying to develop internationally.
Business Formation & Incorporation
The following types of business entities can be incorporated in India:
Sole proprietorship, partnership, limited liability partnership, limited partnership, and private limited company are examples of business structures used in Singapore.
In India, incorporating a business typically takes 7 to 10 days, however in some circumstances it may take up to 6 weeks. In Singapore, incorporation can be completed in a single day.
A private limited company must have at least two shareholders and two directors in order to be incorporated in India. Companies can be incorporated in Singapore with just 1 Shareholder and 1 Director.
Requirements for Filing
Companies must conduct an Annual General Meeting (AGM) each year in Singapore and India. The first AGM must be held in both jurisdictions within 18 months of the company’s establishment date.
Similar to this, businesses are required to compile their accounts and have them audited at the conclusion of each fiscal year. The registrars in the relevant jurisdictions must later receive these reports.
Regulations for Immigration
There are two pertinent work visas in India: an employment visa, which is valid for up to five years, and a business visa, which permits stays of up to six months in India for commercial activities. However, to ensure a simple approval procedure, speak with a visa agent.
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
Although there are other applicable surcharges of up to 10%, India’s progressive personal income tax rates can reach a maximum of 30%. However, Singapore’s progressive personal income tax rate tops out at 22%.
Dividend distribution tax is a tax that corporations in India pay on the dividends they give to its shareholders.
In India, there is a 15% dividend distribution tax. 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 incomes are the last taxes paid.
Corporate Tax
In India, corporate income tax is assessed at a fixed rate of 25%, with an additional 5% assessed if a company’s yearly revenue exceeds 1 crore rupees (or S$210,000).
Singapore offers businesses a top corporate tax rate of 17% on their chargeable income.
Tax Exemptions & Incentives
In some circumstances, resident corporations in India are permitted to deduct dividends from other resident firms. The use of venture funds and venture capital businesses is also subject to certain rules.
The first S$100,000 of chargeable income for newly registered Singaporean enterprises is completely exempt from taxes for the first three years.
Withholding Tax
Companies in India are liable to a withholding tax of up to 40% when they pay non-residents. For instance, while withholding tax on interests is 20%, it is 40% and 30% on payments made by businesses and individuals, respectively, for services. However, resident corporations’ dividend payments are not subject to taxation.
The withholding tax in Singapore ranges from 10% to 17%. For instance, while service fees are subject to the current corporate tax rate, interests are subject to a 15% withholding tax.
Foreign-Sourced Income
Singapore only taxes foreign-sourced money when it is transferred there, but Indian businesses are taxed on their global profits whether they are transferred to India or not.
| TAX | SINGAPORE | INDIA |
| Corporate Tax | 17% (For the first three years, new businesses who qualify receive a full exemption on their first $100,000 in revenue) | 30% (resident companies) 40% (non-resident companies) |
| Branch Tax | 17% (Partial exemption on first $300,000) | 40% |
| Capital Gains Tax | – | 15-20% |
| Income Tax | 0% – 22% | 0% – 30% |
| Withholding Tax Dividends Interests Royalties | 0% 15% 10% | 10% 10% 10% |
| Double Taxation Relief | Yes | Yes |
| Foreign-Sourced Income Tax | Taxable if received or judged to have been received in Singapore | Taxable |
| GST | 7% | 5-28% |
Country Rankings at a Glance
| YEAR | CATEGORY | SINGAPORE’S RANK | INDIA’S RANK | SOURCE |
| 2017 | Ease of Doing Business | 2 | 130 | World Bank, Ease of Doing Business Report |
| 2016 | Ease of Doing Business | 1 | 130 | World Bank, Ease of Doing Business Report |
| 2015 | Ease of Doing Business | 1 | 142 | World Bank, Ease of Doing Business Report |
| 2015 | World’s Most Competitive Economy | 3 | 44 | IMD, World Competitiveness Yearbook |
| 2015 | World’s Freest Economy | 2 | 128 | Heritage Foundation’s Index of Economic Freedom |
| 2014-2015 | World’s Most Competitive Economy | 2 | 71 | World Economic Forum, Global Competitiveness Report |
| 2014 | Country Most Open to Trade | 1 | 96 | World Economic Forum, Global Enabling Trade Report |
| 2014 | Country with Least Corruption Perception | 7 | 85 | Transparency International’s Corruption Perceptions Index |
| 2014 | World’s Best Country for Business | 8 | 93 | Forbes’ Best Countries for Business Index |
| 2014 | Best Country in the World to Live In | 3 | 20 | HSBC’s 2014 Expat Experience Report |
| 2010 | Ease of Paying Taxes | 4 | 164 | PWC, IFC, World Bank’s 2011 Paying Taxes Survey |
| 2010 | World’s Best Labour Force | 1 | – | BERI’s Labour Force Evaluation Measure |
| 2010 | Most Efficient Bureaucracy in Asia | 1 | 10 | Political and Economic Risk Consultancy Survey 2010 |
| 2010 | Best Place for Asians to Live | 1 | 27 | ECA International’s 2010 Location Ratings System |
| 2010 | World’s Lowest Risk City for Employers | 3 | 59 | Aon Consulting’s People Risk Index |
| 2009 | Country with Lowest Tax Misery | 11 | 43 | Forbes Tax Misery and Reform Index |
As a Final Thought
Although caste was officially abolished in India in 1949, international investors still find it difficult to comprehend.
For instance, after independence, the government has designated a specific proportion of government posts for members of lower castes.
However, upper castes have recently objected to this. When considering conducting business in India or Singapore, one should also be aware of the difficulties posed by poor infrastructure, bureaucracy, and regulatory complexities.
The Avoidance of Double Taxation Agreement (DTA) between Singapore and India is briefly examined in this article. Please take note that the information is only intended to serve as general guidance and is not a substitute for professional advice.
A DTA between Singapore and another jurisdiction prevents residents of the other jurisdiction from being taxed twice on income earned in the first jurisdiction. A DTA also outlines Singapore’s and her treaty partner’s taxing rights with regard to various forms of income resulting from cross-border business transactions between the two jurisdictions.
The agreements also include provisions for tax exemptions or reductions on specific categories of income.
Singapore-India DTA
The main components of the Singapore-India DTA are outlined in the table below in an easy-to-read manner.
| Topic | Treaty provisions |
| Scope of DTA | Tax residents of Singapore and tax residents of India. |
| Taxes Covered by the DTA | Income Tax |
| Income from Immovable Property | Taxable in the nation 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 gross dividend income is taxed by India on dividends received by stockholders who reside in Singapore. – Singapore tax exemption for dividends received from a Singapore corporation by Indian residents. |
| Interest | 15% taxed in the nation where the interest income is earned (i.e. source country). may also be taxed in the country of the beneficiary. |
| Royalties | 10% of the royalty revenue is taxed in the nation where it is earned (i.e. source country). may also be taxed in the country of the beneficiary. |
| Fees for Technical Services | 10% of the income is taxed in the nation where it is earned (i.e. source country). may also be taxed in the country of the beneficiary. |
| Directors’ fees | Taxed in the nation where the business paying the fees has its headquarters. |
| Personal/Professional Services Income | Taxed in the nation where the beneficiary resides. Tax exemptions are available in specific circumstances (see below). |
| Employment Income | Taxed in the nation where the employment is performed. Tax exemptions are available in specific circumstances (see below). |
| Income of Artists and Sportsmen | Taxable in the nation where the actions are carried out. Tax exemptions are available in specific circumstances (see below). |
| Non-government Pension & Annuity | Taxed in the nation where the beneficiary resides. |
| 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. |
| Payments made to Visiting Students or Trainees | The foreign country where a student or business apprentice is studying or receiving training is exempt from taxation on any overseas payments made for their maintenance or education. |
| Payments made to Visiting Teachers or Researchers | In the country they are visiting and providing their teaching services or conducting their research in, payments made to visiting teachers or researchers for those services are not subject to tax. |
| Method of Relieving Double Taxation | In India: Relief by deduction In Singapore: Tax credit relief |
Scope of DTA
Tax residents of Singapore and India are covered by the tax treaty regulations. However, it should be noted that a phony company that claims to be a citizen of one of the participating nations is not eligible for the Protocol’s benefits.
Any legal entity that meets the definition of “resident” but has minimal, none, or no genuine and ongoing business activity in the contracting state is considered a shell corporation.
A resident of a contracting nation is considered to be a shell corporation if, in the 24 months prior to the date the gains arose, its total annual operating expenses in that contracting country were less than S$200,000 or Rs. 50,000,000 as the case may be.
Taxes Covered by the DTA
Income Taxation on Immovable Property
Immovable property income is taxable in the country in which it is located, whether it be through direct use, letting, or any other type of usage. This comprises a company’s real estate income as well as income from real estate utilized to conduct business operations.
The definition of immovable property is determined by the law of the nation where the property is located. Keep in mind that moveable property does not include ships and airplanes.
Business Profit Taxation
An enterprise’s business income or profits are taxable in the nation in which the enterprise resides. The earnings or revenue earned from that permanent establishment alone will be subject to tax in the other contractual country, however, provided the enterprise conducts business in that contracting country through a permanent establishment located there.
Income Taxes on Air Transportation and Shipping
A resident of one contracting country is only required to pay taxes in that nation on profits made from operating ships or aircraft in international traffic (i.e. country of residence of the operator).
Shipping and air-transport income includes:
Income from passengers, mail, livestock, or cargo transported by sea or air by the owners, lessees, or charterers of the ships or aircraft, including profits from:
Income Taxation on Dividends
The recipient’s country of residency may impose taxes on dividends given by a corporation that is a resident of one contracting nation to a resident of the other contracting country. However, such dividends may also be subject to the following taxes in the nation of origin:
It should be noted that the provisions above regarding dividend income do not apply if the recipient of the dividend income:
a) has a permanent establishment in the country where the company paying the dividend is resident;
b) performs independent personal services from a fixed base that is located in the country where the company paying the dividend is resident, and that the holding giving rise to the dividends is effectively connected with that permanent establishment; or
c) has a fixed base that is located in the country where the company paying the dividend is resident.
In these situations, the dividend income will be regarded as either income from a permanent establishment or income from performing personal services, and it will be taxed appropriately.
Income from shares or other corporate rights that is subject to the same taxation treatment as income from shares is referred to as dividend income.
Interest Income Taxation
Interest that is earned in one contracting nation and given to a citizen of another contracting nation may be taxed there. However, such interest may also be subject to the following taxes in the nation of origin:
If the recipient of the interest income:
a) has a permanent establishment in the country where the interest income arises; or
b) performs independent personal services from a fixed base that is located in the country where the interest income arises, and that the debt giving rise to the interest is effectively connected with that permanent establishment or fixed base, then the aforementioned provisions regarding interest income do not apply.
In these situations, the interest income will be taxed in accordance with whether it is considered to be income from a permanent establishment or income from performing personal services.
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.
Revenue from government securities, income from bonds or debentures, including premiums and prizes attached to those securities, bonds, or debentures, as well as any other debt claims, whether or not they are secured by a mortgage, are all considered to be interest income.
Royalty Taxation
Fees for Technical Services are subject to Tax.
Director’s Fee Taxation
The other contracting country will tax any directors’ fees or other comparable payments that a resident of one contractual country receives while serving as a director of a corporation based there. In other words, directors’ fees are taxable in the nation where the firm receiving the fees has its registered office.
Professional Services Income Taxation
Income from personal or professional services received by a resident of one contractual nation is only subject to taxation in that contracting country, unless one of the following applies in which case the income is also subject to taxation in the other contracting country:
Along with the independent work of doctors, surgeons, lawyers, engineers, architects, dentists, and accountants, professional services also encompass independent literary, artistic, educational, and teaching activities.
Employment Income Taxation
Salaries, earnings, and other remuneration related to employment will be taxed in the nation where the employment is performed. However, in the following situations, the employment income will be taxable in the recipient’s home country rather than the contracting country where the employment is performed:
Taxation of Artists’ and Sportsmen’s Income
Artists (i.e., performers in theatre, film, radio, or television, or musicians) and athletes will pay taxes in the nation where their work is done. However, such revenue will be taxed in that other contracting country if the activities are supported entirely or largely by public funds of that country rather than the one where the activities are undertaken.
Taxation of Pension and Remuneration for Government Service
Non-Government Pension and Annuity Taxation
Taxation of Payments Made to Trainees and Students
The following are exempt from taxation in the other contractual country for students and business/technical apprentices who are citizens of one contracting country and are currently traveling to the other contracting nation purely for education or training:
Taxation of Payments to Academics and Researchers
Residents of one contracting country who are currently visiting another contracting country solely for the purpose of teaching or conducting research at an educational institution are not subject to taxation in the other contracting country on any money paid for such teaching or research. This visitation can last up to two years.
Note that if a person’s primary motivation for conducting research is for their own personal gain, then this rule does not apply to their research revenue.
Taxation of Associated Businesses’ Profits
Any profits that would have accrued to one of the enterprises but for the conditions, may be included in the profits of the other enterprise when an enterprise of one contracting country participates directly or indirectly in the management, control, or capital of an enterprise of the other contracting country and conditions are imposed between the two enterprises in their commercial or financial relations that differ from those which would be made between independent enterprises.
Capital Gains Tax
Note: Capital Gains Tax has been eliminated in Singapore.
Relief from Double Taxation
Exchange of Information
Please visit the IRAS website for further information on the specific provisions covered under the tax treaty between Singapore and India.
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