FOCUS INTERNATIONALIZATION COUNTRY: SINGAPORE

In the previous article, https://bit.ly/3ZxQreA, a 360-degree representation of the lived experience in Singapore was provided: instead, here it is deemed useful to provide a little technical insight into topical economic aspects such as corporate governance, local taxation, private capital injection, and sustainability, in order to go into more detail about the economic content. 

CORPORATE GOVERNANCE AND LOCAL TAXATION

At the corporate level, the companies that are primarily incorporated in Singapore are Private Limited Companies, equivalent to our S.r.l. and S.p.A. corporations; they have the following main features:

• they are not publicly owned but can have a maximum of 50 shareholders;
• they have no corporate constraints related to the capital to be contributed and can be established 100% by foreign capital, unlike other nations in the Asian region;
• a local general director is required to assume the day-to-day and extraordinary management of the company; however, his or her role may be limited through power of attorney;
• a company secretary is required, who performs bookkeeping, meetings, assemblies and other bureaucratic and administrative tasks;
• audit is not mandatory for small and medium-sized companies.

Regarding Singapore taxation:

• direct taxation is 17 percent and up to SGD 250,000 of income is halved to 8.5 percent, as the tax system aims to encourage foreign investment and support economic growth in order to increase local competitiveness; not to mention that there are tax incentives for certain business activities, such as research and development, which can further reduce the effective tax rate; 
• Singapore is no longer classified as blacklisted by the Italian Internal Revenue Service;
• local tax compliance involves only a mid-year declaration, which assumes an advance payment and a final payment in December of the following year; the declaration is very simple and is designed for the taxpayer to talk and interact directly with the relevant tax authority, to the facts as if it were a self-declaration to be provided; 
• indirect taxation corresponding to VAT (GST, goods and service tax) is much lower than in Italy, i.e. it is at 7%; 
• as far as import and export are concerned, the Singapore area constitutes a practically free trade zone hub, as there are no duties except for some products, such as tobacco and alcohol; in fact, for this reason, the Singapore hub constitutes the first place of Italian exports to Asia, for a countervalue of more than € 2 billion as of 2021, with entire categories of products also transiting exclusively to be subsequently sorted to other markets, without even being cleared through customs; 
• lastly, the convention against double taxation stipulated between Italy and Singapore increases vis-à-vis the local territory the attractiveness of Italian companies, since the distribution of dividends made by an Italian company in favor of a permanent subsidiary in Singapore, whether an individual or a company, provides exclusively for an advantaged taxation of 10%.

CAPITAL INJECTION

In order to increase local appeal, the Singapore government has introduced various tax incentives with the intention of attracting foreign private capital; hence there is a large presence of trusts and family offices set up for the purpose of bringing capital into the nation advantageously. In detail:

• the trust, or trust fund, is a legal arrangement in which a trustee manages assets for the benefit of one or more beneficiaries, being responsible for both the management of the assets and their use, for the sole benefit of those designated parties. Singaporean trusts have the advantage of having complete tax exemption on various categories of profit, especially capital gains: for this reason, they are also a very attractive tool with respect to the Asian area in general, and are routinely set up for tax-free investment purposes, including for estate security or estate planning;
• a family office is a private company or group that manages the financial and administrative affairs of a wealthy family; it can include a wide range of services, such as investment management, tax planning, and succession planning. In Singapore it typically presents the corporate form of a holding company having a management purpose, normally with an endowed wealth fund: again, it is used to have full tax exemption (depending on the 15% threshold of theoretical global taxation that has already occurred on the various local entities, threshold related to blacklists, or that there has already been any kind of effective taxation on the company), except for specific individual cases of taxation by percentages, however, of little significance. Normally the family office is used to seek a visa in Singapore or structure in the country, as large local domestic investment banks have significant capital constraints. 

SUSTAINABILITY

Sustainability is a major issue for the Singapore government, which has established a number of goals and initiatives to address environmental and social challenges, such as pollution reduction, natural resource management, and sustainable development.

Indeed, at the environmental level, it has set ambitious targets for reducing carbon emissions and promoting clean energy, while also taking steps to increase energy efficiency and promote the use of renewable sources, such as solar and wind power; in addition, the local authority is also proceeding to invest in advanced waste management and wastewater treatment technologies. Finally, food sustainability is also a possible market for Italian companies since the Singaporean government has launched the "30x30 plan" by which it aims to have a sustainable and secure food supply by 2030, which is equal to 30 percent of the nation's needs: for this reason, already at present, many foreign companies in the sector are establishing themselves in Singapore to produce and export to the Asian area.

CONCLUSIONS

These small references, combined with the flexibility and dynamism of the country-system, with a much less structured bureaucracy than in other countries, give an idea of how attractive doing business in Singapore can be: certainly innovative start-ups, cosmetics, communication and information services, transportation, warehousing and storage services, agritech, food, healthcare and much of what is related to sustainability constitute profitable sectors of investment; notwithstanding, the great competitiveness and competition present in the area and therefore possible barriers to entry should be emphasized. 

Edited by: Luigi Alfredo Carunchio, Chartered Accountant and Statutory Auditor

You can download the article in PDF here

For more information:

luigicarunchio@valoreassociati.it