This article holds all the answers to the question Singapore vs Hong Kong Where to incorporate?
The World Bank’s Ease of Doing Business category presently has Singapore and Hong Kong in first and second place, respectively. The two nations are seen as Asia’s worldwide financial and economic hubs of the future. Its neighboring nations, including India, Indonesia, Thailand, and Vietnam, have also looked up to them for potential investments.
SINGAPORE VS. HONG KONG – WHERE TO INCORPORATE [COMPARISON]
COMPANY REGISTRATION REQUIREMENTS
A business must have a minimum of 1 and a maximum of 50 shareholders, who may be domestic or foreign citizens; both domestic and foreign ownership of 100% of the shares is permitted. Individuals or business entities may be shareholders. A shareholder and a director may be the same person or distinct people. At least 18 years of age is required for shareholders in both Singapore and Hong Kong.
The minimum issued capital in Singapore must be at least S$1. In Hong Kong, there is no minimum share capital requirement.
A firm may at any time inject more cash to increase its share capital.
In both Singapore and Hong Kong, one minimum and an unlimited number of directors are permitted. Directors may be either residents or non-residents. A director must be at least 18 years old and cannot have any malpractice charges or be in bankruptcy. The directors are not required to also be shareholders.
In Singapore, a company must have at least one Singapore-resident director.
Singapore citizens, permanent residents, or holders of employment passes are all considered to be Singapore residents. Directors of corporations are not allowed.
In Hong Kong, there is no need for resident directors. Along with individual directors, nominee corporate directors may also be appointed. At least one director must be a natural person.
A certified company secretary must be appointed by the company. The secretary must reside in Singapore and be a natural person.
In Hong Kong, it is also necessary to appoint a certified company secretary. A person or a business can serve as secretary. If the secretary is a person, they must reside in Hong Kong; if they are a company, they must have their registered office or place of business there.
In both Singapore and Hong Kong, a local address must be given as the company’s registered address in order to register a corporation. A PO Box is not acceptable as the registration address; it must be a real address.
Before the company can move on with incorporation, the company name needs to be approved by the Accounting and Corporate Regulatory Authority (ACRA) in Singapore or the Companies Registry in Hong Kong.
Two government fees must be paid when forming a business in Singapore:
Name approval charge of S$15 (about US$11) and company registration fee of S$300 (about US$215)
The applicant must pay the following government fees when forming a business in Hong Kong:
HK$1,720 (about $292 USD) Application fee, business registration fee, and levy payment.
- The applicant can formally start doing business and opening a corporate bank account once the company has been registered.
- Both nations have top-notch banking infrastructure.
- Banks in both nations do not see high volumes of foreign business transactions as a red flag due to their global customer bases.
- Due to its high banking fees and minimums, Singapore used to be the more expensive option, but in recent years, Hong Kong banks’ prices have also been progressively rising.
- An in-person meeting is typically required to assess the business before opening a corporate bank account. But, an increasing number of banks, particularly in Singapore, offer video conference meetings with bank officers so the applicant can open an account without going to the location.
- For non-residents, creating a bank account in Hong Kong can be notoriously challenging (especially when compared to Singapore).
- If the applicant has all the necessary paperwork and are familiar with the procedures, opening an account in both nations often takes non-locals two to three weeks.
|Tax system||Territorial tax system + tax on certain foreign-source income that is subject to tax on remittance to Singapore.||Territorial tax system.|
|Number of double tax treaties||88 DTAs||44 DTAs|
|Corporate income tax||17%. However, the actual tax rate is typically lower because Singapore-resident corporations can take advantage of a number of tax breaks and benefits.|
|75% tax exemption on the first S$100,000 of taxable income and||8.25% on assessable profits up to HK$2 mln. and|
|additional 50% exemption on the next S$100,000 of taxable income.||16.5% on any part of assessable profits over HK$2 mln.|
|Goods and services tax||7% (only businesses that exceed S$1 million in annual taxable turnover are required to register).||None.|
|Capital gains tax||None.|
|Withholding tax||Dividends — none.||Dividends — none.|
|Interest — 10% of the gross interest amount paid to non-residents who do not operate businesses in Singapore.||Interest — none.|
|Royalties — 10% on gross royalty paid to non-resident with no business operation in Singapore.||Royalties — 16,5% on either 30% or 100% of gross royalty depending on qualifying conditions.|
|Foreign-sourced income tax||Technically, foreign profits that are transferred to Singapore by Singapore-resident corporations are taxed.||None.|
|However, if such gains were taxed abroad, they are often not taxable in Singapore under the tax treaty or foreign tax credit program.|
ANNUAL COMPLIANCE REQUIREMENTS
Similar regulations apply to general meetings in Singapore and Hong Kong companies. Unless they have decided not to hold one by passing a shareholders’ resolution, they are required to hold annual general meetings (AGMs) of their shareholders. In such a situation, all issues typically resolved at the AGM may be accomplished through the adoption of written resolutions.
The company must hold its first AGM within 18 months of its incorporation date in both jurisdictions. Thus, it must hold the AGM each calendar year; however, the time between two AGMs cannot be longer than 15 months.
Examining the company’s financial statements is one of the AGM’s main goals.
Financial statements that comply with the Singapore Financial Reporting Standards (SFRS), which are comparable to the International Financial Reporting Standards (IFRS), must be prepared and presented at the Annual General Meeting (AGM) by all corporations each year.
Statements should be audited. Unaudited financial statements may be prepared by small and inactive businesses if they meet certain requirements.
The financial statements include the following documents:
- Report of Directors
- Auditor’s Report (if necessary)
- Statement of Comprehensive Income
- Statement of Financial Position
- Cash Flow Statement
- Statement of Shareholder’s Equity
- Corresponding Notes to Financial Statements
A Hong Kong-registered corporation is also required to maintain an accurate record of all accounting transactions. The Hong Kong Financial Reporting Standards must be followed when recording all financial transactions in the accounting records. The AGM should annually approve the statements.
An audit of the financial accounts should be performed by a Hong Kong Certified Public Accountant. The exemptions apply to small businesses that fit certain requirements.
Financial statements that have been audited must contain:
- Directors’ Report
- Accountant’s Report (if necessary)
- Comprehensive Income Statement
- Financial Position Statement
- Cash Flow Statement
- A comprehensive income statement and
- an equity change statement
FILING OF ANNUAL RETURN WITH THE COMPANIES REGISTRY
According to Singaporean law, all businesses must submit their annual returns to ACRA within 30 days of the AGM.
Within 42 days on the date of its incorporation, a Hong Kong company must submit its Annual Return to the Companies Registry.
An annual return is a collection of documents that, in both jurisdictions, includes the fundamental information about the company as follows:
- Company name and registration number
- Registered office address
- Share capital
- Principal activities
- Registered office address
- Details of company officers (directors, secretary)
- Shareholder details, share capital, etc.
- Annual financial statements
FILING OF ANNUAL TAX RETURN
The applicant must submit an annual tax return to Singapore’s Inland Revenue Authority, which is the department in charge of tax collection.
Your income, business earnings and losses, other deductions, and information regarding your tax refund or tax liability are all reported in the document.
Two submissions are required for annual tax returns in Singapore:
- Estimated Chargeable Income that must be filed within 3 months of the company’s financial year-end
- Corporate income tax return, which must be filed by November 30 for paper filing or by December 15 for electronic filing.
Each and every Hong Kong company is required to complete and submit the Profits Tax Return (PTR) to the appropriate state agency, the Inland Revenue Department. The PTR contains the same fundamental data that Singapore does.
The PTR must be submitted by newly incorporated businesses no later than 18 months after the date of incorporation, and then every 12 months after the first tax return is submitted.
REGISTER OF CONTROLLERS
All businesses in Singapore are required to keep an internal register of controllers, which is a confidential company document, and to regularly update the information in the central, confidential register of company controllers.
An individual or organization that has “substantial interest” or “significant control” in a business is referred to as a controller. It typically refers to a person who owns more than 25% of the issued shares.
An internal significant controllers register is required for every Hong Kong-incorporated firm.
The majority of the time, controllers are also shareholders who own more than 25% of the issued shares.
The data to be kept in the register is similar to what is required in Singapore both for individual and corporate controllers.
ADVANTAGES OF COMPANY INCORPORATION IN SINGAPORE
- Singapore offers a range of business incentives to companies, including tax incentives, grants, and subsidies. These incentives are designed to encourage companies to invest in the country and to help them grow their businesses.
- Singapore is located in a prime location in Southeast Asia, making it an ideal gateway to the rest of the region. Its strategic location and excellent transportation infrastructure make it a popular hub for business activities in the region.
- Unlike many other countries, Singapore does not require all companies to undergo an annual audit. Instead, companies that meet certain criteria, such as having an annual revenue of less than SGD 10 million or having fewer than 20 shareholders, are exempt from audit requirements. This can save companies both time and money.
- Singapore has a well-developed financial ecosystem, with a range of financial institutions, venture capitalists, and angel investors. In addition, the government offers a range of financial assistance schemes for startups and existing businesses, such as grants and loans.
- Singapore is home to many reputable banks, including local banks as well as international banks with a strong presence in the country. The banking sector in Singapore is known for its stability, efficiency, and innovation, making it a great place for businesses to conduct their banking activities.
- Singapore is a multilingual society, but English is widely spoken and is the language of business. This means that companies can easily communicate with their employees, customers, and partners in English, which can help to reduce communication barriers and streamline business operations. In addition, Singapore has a highly skilled and educated workforce, which can be a valuable asset for businesses operating in the country.
DISADVANTAGES OF COMPANY INCORPORATION IN SINGAPORE
- Depending on the type of income earned by the company and the country of origin of the income, the company may be subject to remittance taxation. This means that the company will have to pay tax on income earned outside of Singapore that is remitted or brought into the country. However, this tax is only applicable to certain types of income, such as foreign-sourced dividends, branch profits, and service income.
- If the company makes payments to non-resident individuals or entities, it may be required to withhold a certain percentage of the payment as withholding tax. This is to ensure that the non-resident individual or entity pays tax on their income earned in Singapore. However, this withholding tax is usually only applicable to certain types of payments, such as interest, royalties, and management fees.
- Singapore requires every company to have at least one director who is a resident of Singapore. This means that the director must be a Singapore citizen, permanent resident, or holder of an employment pass. This requirement can be challenging for companies that do not have a local presence or do not have someone who meets the criteria to act as a director.
ADVANTAGES OF COMPANY INCORPORATION IN HONG KONG
- Hong Kong offers a territorial tax system, which means that companies are only taxed on profits earned within the city. This means that if a Hong Kong company earns profits from overseas operations, it can file for offshore claim status and avoid paying tax on those profits in Hong Kong. This can result in significant tax savings for companies with global operations.
- Hong Kong has a value-added tax (VAT) system called the Goods and Services Tax (GST). However, the GST rate is zero, which means that companies do not have to pay any GST on their goods or services. This can make Hong Kong an attractive location for companies engaged in international trade.
- Compared to Singapore, the cost of incorporating a company in Hong Kong is relatively low. Additionally, the ongoing operational costs, such as rent, utilities, and labour, are also generally more affordable than in Singapore. This can make it easier for companies to establish and maintain a presence in Hong Kong.
- Hong Kong offers a range of programs to support startups and entrepreneurs. For example, the StartmeupHK Venture Programme provides funding and mentorship to early-stage startups. Additionally, the Hong Kong government offers various work visa schemes to attract and retain top talent from around the world, which can be beneficial for companies looking to hire foreign workers.
DISADVANTAGES OF COMPANY INCORPORATION IN HONG KONG
- Hong Kong has experienced political unrest in recent years, which has created uncertainty for businesses operating in the city. The ongoing protests and civil unrest have led to disruptions in business operations and supply chains, which can be challenging for companies to navigate.
- While Hong Kong offers a favorable tax environment and low business costs, it may not provide sufficient business incentives for companies compared to other countries in the region. For example, countries such as Singapore and South Korea offer significant government support and incentives for companies investing in research and development, which can be attractive for companies in certain industries.
- While English is an official language in Hong Kong, there is a shortage of English-speaking manpower in certain industries. This can make it difficult for companies that require English-speaking employees, such as those in the finance and technology sector.
Reach out to us at Relin Consultants for further assistance.
What are the advantages of incorporating a business in Singapore?
- Singapore has a favorable business environment with a transparent legal system and a strong rule of law.
- Singapore has a highly developed infrastructure, including a world-class airport and seaport, making it a hub for international trade and commerce.
- Singapore has a low corporate tax rate of 17%, with various tax incentives and exemptions available for businesses.
- Singapore has a skilled and educated workforce, with a high standard of living and a multicultural society.
- Singapore has a strong reputation for being a safe and stable country, which can help to build trust with customers and investors.
What are the advantages of incorporating a business in Hong Kong?
- Hong Kong is a gateway to China and other markets in Asia, making it an ideal location for businesses looking to expand into the region.
- Hong Kong has a simple and straightforward tax system, with a low corporate tax rate of 16.5%.
- Hong Kong has a highly developed financial sector, with a range of financial services available for businesses.
- Hong Kong has a strong reputation for being a business-friendly and efficient city, with a high degree of economic freedom.
- Hong Kong has a well-educated and skilled workforce, with a high standard of living and a strong work ethic.
Which location is better for startups?
Both Singapore and Hong Kong have strong startup ecosystems and offer various resources and support for startups. However, Singapore is often seen as a better location for startups due to its supportive government policies and programs, including grants and tax incentives. Singapore also has a strong startup community and a well-established network of investors and mentors.
Which location is better for established businesses?
Both Singapore and Hong Kong offer many advantages for established businesses, and the choice may depend on the specific needs and goals of the business. However, Hong Kong is often seen as a better location for businesses looking to expand into China and other markets in Asia due to its proximity and strong business connections with these markets.
What are the costs of incorporating a business in Singapore or Hong Kong?
The costs of incorporating a business in Singapore or Hong Kong can vary depending on the type of business, the size of the company, and other factors. However, both locations have relatively low registration and incorporation costs compared to other major cities in the region.
How easy is it to set up a business in Singapore or Hong Kong?
Both Singapore and Hong Kong have straightforward and efficient processes for setting up a business, with relatively low regulatory barriers. Singapore has an online platform called BizFile+ that allows businesses to register and manage their operations, while Hong Kong has an online platform called e-Registry.