If you are wondering about Singapore vs Malaysia – Where to Incorporate? Our guide below explains all the key differences.
Malaysia has possibilities and capabilities across the entirety of the value chain, from production to distribution and technological know-how in the services industry. The nation attracts investors because of its developed infrastructure, cost-effective labour force, and pro-investor business regulations.
The first quarter of 2022 saw an increase in domestic and international demand of 5%, as well as a recovery in the labour market, with the unemployment rate falling to 4.1%, according to Bank Negara Malaysia.
The highly developed economy of Singapore enjoys stable pricing and a GDP per capita that is higher than that of the majority of developed nations. It had a GNI Per Capita of USD$ 64,010 in 2021.
Investors are welcomed in Singapore with a smooth conduit for their initiatives, from cutting-edge public infrastructure to practical internet platforms and open laws. Also, seven mutually reinforcing policies that will advance Singapore’s economy over the next ten years have been detailed by a Committee on the Future Economy.
SINGAPORE VS MALAYSIA – DIFFERENCES
According to the World Bank’s Ease of Doing Business Report 2022, Singapore ranks first globally in ease of doing business, while Malaysia ranks 29th.
Singapore’s top ranking is attributed to its highly efficient and transparent regulatory environment, streamlined procedures, and low bureaucratic red tape.
The country has made significant efforts to make it easier for businesses to start and operate by introducing measures such as online business registration and simplified licensing procedures.
Additionally, Singapore has implemented a robust legal system that upholds contracts and property rights, making it easier for businesses to conduct transactions and protect their interests.
On the other hand, Malaysia has made some improvements in recent years, but it still faces challenges in streamlining procedures and reducing bureaucratic red tape. Malaysia has introduced various reforms to improve the ease of business, such as reducing the time required to start a business and simplifying tax procedures.
However, the country still faces challenges such as dealing with construction permits, registering property, and enforcing contracts.
Overall, Singapore has a more business-friendly environment than Malaysia regarding the ease of doing business. Singapore’s transparent and efficient regulatory environment, combined with its robust legal system, makes it a top destination for businesses looking to establish themselves in the region.
While Malaysia has an advantage regarding the workforce the country has to offer, Singapore may have a favourable position in terms of its business environment.
In comparison to Singapore, Malaysia has a population that is at least 6.2% larger. Even though Singapore’s workforce focuses more on working in a future economy that is different and leaner, Malaysia offers those with higher education backgrounds, as almost 30% of Malaysia’s workforce has attained a tertiary education background.
Both nations have legal systems based on English Common Law and share a history of British colonisation. As a result, many regulatory commonalities facilitate easy cross-border business dealings. Yet, Malaysia has lagged far behind Singapore in updating its corporate rules and business regulations.
For instance, forming a firm in Singapore can be done in a day; however, in Malaysia, it could take several days. Singapore’s intellectual property protection system is one of the best systems in the world for protecting intellectual property, which has drawn many tech and innovation businesses.
The primary goal of the Singaporean government is to create legislation that promotes economic growth. In order to fulfil the evolving needs of the company and foster an atmosphere where operating a business is effective and simple, legislators closely monitor business developments and continuously improve legislation and administrative procedures.
For instance, Singapore streamlined the application procedure for construction permits, improved public access to land-related information, and improved inspection practices to make dealing with construction permits simpler.
Both countries offer the same types of legal entities for business incorporation, such as Private Limited Company, Limited Liability Partnership, Branch Office, Representative Offices, Subsidiaries, Sole Proprietorships, etc.
Both Singapore and Malaysia have simple procedures for forming a company. Yet, Singapore can finish the process in a day, whereas Malaysia needs two to three days.
Singapore only requires one resident director and one shareholder, whereas Malaysia mandates the appointment of two resident directors (citizens, permanent residents, or possessors of work permits) and two shareholders. A director and shareholder may both be the same or separate people in both situations.
When choosing a jurisdiction to incorporate, the existence of any language barrier is a crucial concern. Despite having high average literacy rates (96.8% in Singapore and 94.6% in Malaysia, respectively), the majority of Singaporeans speak English as their primary language. Malay is the official language in Malaysia. However, most people also know some basic English.
Singapore’s four official languages are English, Mandarin, Malay, and Tamil.
Malay is Malaysia’s official language, with English as a second language.
As a result, while Malaysia has a greater skill supply than Singapore, investors could find it simpler to communicate with Singaporeans as English is their primary language.
Business incorporation procedures
- The chosen Company Secretary must submit the desired or suggested Company name using the MyCOID Portal. The application’s approval or denial by SSM is expected to take 1 to 3 working days. Upon its approval, the application for incorporation can be made.
- Following the approval of the name application, the company secretary has 30 days to submit the incorporation application to SSM. SSM will review the application and decide whether to accept it or reject it after at least 3 to 5 working days. Section 15 – Notification of Registration will be provided to the designated Company Secretary after the application is approved.
- If the business has a revenue of more than RM 500,000, it must register with the Royal Malaysian Customs to receive a Goods and Services Tax number. In two weeks, the number is created.
- In order to receive a tax ID, the business must also register with the Inland Revenue Board.
- The business must register with the Employee Provident Fund and the Social Security Fund if it is hiring local workers.
Refer to Malaysia company formation for more information.
- Before registering, a name search and authorisation must be acquired. The nominated Company Secretary submits the application online through Accounting and Corporate Regulatory Authority on the website of the Company Registrar. With a few exceptions where ACRA needs additional time to review the application, approval or rejection occurs on the same day.
- Within 90 days after the name has been approved, the incorporation papers must be submitted to the company registrar. This is possible online. An official email with the firm’s registration number is sent by the company registrar. The email serves as a Certificate of Incorporation.
- The business must apply for a Singapore Inland Revenue Authority (IRA) Goods and Services Tax number. This is applicable if the business anticipates having a yearly turnover of more than SGD 1 million.
Refer to Singapore company registration for more information.
Each calendar year, AGMs are required to be held in both nations.
The first AGM must be held in Singapore within 18 months following establishment.
In Malaysia, the first AGM must be held no later than six months after the end of the fiscal year or within 18 months of incorporation, whichever comes first.
Within one month after their AGMs, Singapore and Malaysian entities are required to submit their annual returns and audited annual accounts to their respective company registrars.
There are some exemptions to filing these returns:
- Exempt Private Companies (EPCs) in Singapore are free from these annual submission requirements if their annual turnover is less than S$5 million.
- These annual reports are not required for EPCs in Malaysia with fewer than 20 shareholders and no shares owned by another company.
Also, each jurisdiction’s inland revenue agencies must receive annual tax returns and audited accounts.
Both Singapore and Malaysia have a progressive tax system, which means that as income increases, so does the amount of tax that must be paid.
Earned or derived income from Singapore or Malaysia is included in chargeable income. Malaysia has higher income tax rates and a more complicated indirect taxation system than Singapore. For instance, revenue received from outside Malaysia is included in Malaysia’s chargeable income. Singapore, on the other hand, does not tax specific foreign earnings, even if they are credited to a Singapore bank account.
According to the World Economic Forum’s Global Competitiveness Report 2017–2018, Malaysia is rated 81 while Singapore is ranked 11 for the highest total tax rate in the world.
When a Singaporean business or individual pays a non-resident person or entity for goods or services, 10 to 17% of such income must be withheld and given to the Singapore IRAS (Inland Revenue Authority). Individuals or businesses who reside in Singapore are exempt from withholding tax.
In Malaysia, the withholding tax rate varies from 3 to 15% based on the types of income received (such as royalties and interest).
Tax Exemptions and Incentives
Annual incomes under S$100,000 are tax-free for the first three years to assist Singapore’s start-ups and new businesses in lowering their overhead expenditures. Also, there are government programs and incentives available to assist innovative businesses.
Additionally, resident businesses in Singapore are qualified for a partial tax exemption, which corresponds to an effective tax rate of 8.5% on taxable income up to S$300,000 per year. Taxable income beyond S$300,000 will be subject to the standard 17% corporate tax rate.
Companies participating in promoted activities or creating promoted products in Malaysia are given Pioneer Status, which entitles them to a tax exemption of up to 70% of statutory revenue, for a term of five to ten years. The Investment Tax Credit, which is given based on the capital expenditure expended on purchasing industrial structures or plant and machinery for the purposes of the aforementioned activities and goods, is another incentive.
Both Malaysia and Singapore impose taxes in accordance with the territorial concept, meaning that businesses are subject to taxation on sources of income found inside each country.
Unless the income was previously subject to taxes in a jurisdiction with headline tax rates of at least 15%, foreign-sourced revenue (including branch earnings, dividends, service income, and other types of income) does not become taxable until it is repatriated into Singapore.
Except for businesses in the banking, insurance, aviation or sea transport industries, resident corporations in Malaysia are exempt from income tax on foreign-sourced income repatriated into Malaysia.
|Corporate Tax||17%(Eligible new start-ups are given full exemption on their first $100,000 for the first 3 years)||24%|
|Branch Tax||17%(Partial exemptionon first $300,000)||24%|
|Capital Gains Tax||-||0-30%|
|Income Tax||0% - 22%||0% - 28%|
|Withholding Tax- Dividends- Interests- Royalties||0%15%10%||0%15%10%|
|Double Taxation Relief||Yes||Yes|
|Foreign-Sourced Income Tax||May be taxable if received or deemed received in Singapore||No(Except for income from banking, insuranceor air/sea transport)|
Singapore is a small country with a population of just over 5.7 million people, but it has a highly developed and open economy that attracts a significant amount of foreign investment. Malaysia, on the other hand, has a larger population of over 32 million people and is a more diverse economy with a mix of manufacturing, services, and resource-based industries.
Infrastructure and resources
As a small city-state, Singapore focuses its resources on maintaining a highly skilled workforce, a robust public transportation system for easy accessibility, and a high level of dependable internet connectivity.
Malaysia is larger than Singapore by a factor of about 460 and inherently wealthier in natural resources, including natural gas, rubber, and palm oil. This may be advantageous if your company needs these natural resources, but it comes at the cost of poorer infrastructure.
The organisations governing Malaysia business in Singapore are:
- The Malaysian Investment Development Authority (MIDA)
- Singapore Malay Chamber of Commerce & Industry (SMCCI)
The analysis mentioned above confirms Singapore’s superior position as a commercial jurisdiction over Malaysia. Singapore has become one of Asia’s most business-friendly nations by realigning its tax policy, making it simpler to register a company, eliminating red tape, fostering an innovative economy, assembling a strong labour force, and providing a high standard of life.
Ease of Foreign Investments
In Malaysia, if a foreigner wants to hold more than 30% shareholding in a company undertaking restricted business activities, they must get approval from the foreign investment committee. Otherwise, foreigners are allowed to have 100% ownership.
In Singapore, a foreigner can own 100% of a company without obtaining any permission.
Before beginning employment, all foreigners who plan to work in Singapore or Malaysia must have a valid work pass.
Foreign executives, managers, and professionals may be awarded Employment Permits in both jurisdictions. Owners of Employment Passes are entitled to a minimum monthly income of up to RM 5,000 in Malaysia and S$3,600 in Singapore, respectively.
For the EntrePass in Singapore, a professional visit pass, a short-term social visit pass, or a temporary employment pass in Malaysia, foreign business owners who wish to launch and run a new enterprise in these nations may apply.
Here’s a summary table of the advantages and challenges of incorporating a business in Singapore vs Malaysia:
|Tax benefits||✔️ Low corporate tax rate and various tax incentives||✔️ Favorable tax system, but not as competitive as Singapore|
|Ease of doing business||✔️ Efficient and transparent business environment||❌ Bureaucratic government, slower process|
|Access to funding||✔️ Thriving startup ecosystem with various funding opportunities||❌ Funding opportunities not as abundant as in Singapore|
|Strategic location||✔️ Gateway to Asia-Pacific region with access to large market||✔️ Growing economy with large consumer market|
|Low cost of living||❌ Higher cost of living compared to Malaysia||✔️ Lower cost of living, lower business operating costs|
|Abundant resources||❌ Not as rich in natural resources||✔️ Abundant natural resources such as oil, gas, and minerals|
|Government support||✔️ Government initiatives to support startups and entrepreneurship||✔️ Government initiatives to support small businesses and entrepreneurship|
|Talent pool||❌ Small population, competition for talent is high||✔️ Larger talent pool, lower competition for talent|
|Stringent regulations||✔️ Strict regulations, heavy penalties for non-compliance||❌ Less stringent regulations|
|Corruption||❌ Low corruption, but still a concern||❌ Corruption is a concern|
Reach out to us at Relin Consultants for more information.
What is the corporate tax rate in Singapore and Malaysia?
Singapore’s corporate income tax rate is still one of the lowest in the world, ranging from 0% to 17%, making it one of the lowest in the world. Other advantages include comprehensive tax treaties with more than 50 nations, giving businesses a competitive edge over other nations.
Malaysia’s corporate tax is higher – from 18% through to 24%.
Is Singapore and Malaysia in any double tax agreements?
A double tax treaty has been signed by both nations. However, it should be noted that either party may choose to end the agreement at any time if they feel it is necessary.
Which country is more developed, Singapore or Malaysia?
While Malaysia benefits from a vast natural endowment and Singapore almost has no natural resource reserve, Singapore had a much higher GDP per capita than Malaysia (more than 50% higher). These differences would have important influences on the different performances in structural change in the two countries.
Does Singapore and Malaysia have the same time zone?
Yes, UTC+8 is the same time zone for both nations. This makes conducting business in both nations easy and convenient.
Can Singapore companies operate in Malaysia?
Yes, a Singaporean company can operate in Malaysia. However, there are certain requirements that need to be met in order to do so legally.
Firstly, the Singaporean company needs to register with the Companies Commission of Malaysia (CCM) and obtain a business registration certificate.
The company needs to obtain the necessary permits and licenses to operate in Malaysia. This may include a work permit for any foreign employees, a license for the specific business activity, and any other permits or licenses required by Malaysian law.
Is Singapore tax higher than Malaysia?
The tax rates in Singapore and Malaysia differ depending on various factors such as income level, type of income, and residency status.
In general, Singapore has a higher tax rate than Malaysia for individuals and companies. Singapore’s individual income tax rates range from 0% to 22%, with the highest rate applicable to income above SGD 320,000 (as of Year of Assessment 2023). In contrast, Malaysia’s individual income tax rates range from 0% to 30%, with the highest rate applicable to income above MYR 2,000,000.
For companies, the corporate tax rate in Singapore is a flat rate of 17%, while in Malaysia it ranges from 20% to 24%, depending on the company’s annual taxable income.
Where are wages higher Malaysia or Singapore?
In general, wages are higher in Singapore compared to Malaysia due to Singapore’s higher cost of living and its status as a developed economy with a highly skilled workforce.
According to data from the International Labour Organization, the average monthly wage in Singapore in 2020 was around SGD 4,684 (approximately MYR 14,400), while in Malaysia it was around MYR 3,300. However, it’s important to note that wages can vary widely depending on the industry, job role, and level of experience.
Which is better between Singapore and Malaysia?
Deciding between Singapore and Malaysia to start a business depends on various factors, including the industry, target market, business objectives, and personal preferences.
Singapore is known for its ease of doing business, strong legal system, stable political environment, and well-developed infrastructure. It has a highly skilled and educated workforce, a strong financial sector, and a favorable tax regime with various incentives for businesses. These factors make Singapore an attractive destination for businesses looking to establish themselves in the Asia-Pacific region.
On the other hand, Malaysia offers a lower cost of living and a more diverse economy with opportunities in various industries, including manufacturing, tourism, and technology. Malaysia also has a strategic location in Southeast Asia, with access to a large consumer market and proximity to other fast-growing economies in the region.
Ultimately, the decision between Singapore and Malaysia will depend on the specific needs and goals of the business.