Singapore ranks among the best countries in the world to do business, thanks to a highly efficient and transparent regulatory regime. For Canadian exporters, this small but dynamic economy offers plenty of opportunities, not only within Singapore, but also throughout the rest of Asia.
Singapore is Southeast Asia’s second-largest foreign direct investment destination for Canadian companies.
This small country, which has an annual GDP of $307.87 billion US, imports more than $1.3 billion in Canadian merchandise annually.
Singapore has the second-busiest port in the world, thanks to its strategic position as the gateway to Asia.
Learn more from these market experts:
“Singapore really is a great place for business. If you want to live the expat life with all the conveniences of a modern country, then you want to be in Singapore.”
How would you describe Singapore’s business environment?
Singapore really is a great place for business. If you want to live the expat life with all the conveniences of a modern country, then you want to be in Singapore. If you want to set up a business here, you’ll like the fact that everything is transparent; if you follow procedures closely it is very easy to set up a business. You don’t have to deal with the grey side of kickbacks and such things.
The cost of doing business can get in the way. This can sometimes be a shock for foreign companies, when they find out that Singapore is a very expensive place to do business. Singapore is not for everybody. If you need to access a huge amount of real estate space, this is not the place to house your operations. If you’re looking for low-cost labour or need easy access to raw materials to support upstream or midstream processing, this is not for you.
So what type of business operation would thrive here?
It really depends on the sector you’re in. A high-tech, capital-sensitive business that needs access to the finance market will want to be in Singapore, which is a hub for financial services, venture capitalists and private equity players. If you’re in the business of security – cyber security, physical security, surveillance – then you’ll likely thrive in Singapore. Security is a fairly recent growth area. We’re seeing Singapore attracting very high-calibre security companies that offer cutting-edge technology.
“…most people don’t enter Singapore to sell just to this market; they use Singapore as an entryway to Southeast Asia, if not Pan-Asia.”
Although it’s a wealthy country, Singapore has just 5.5 million residents. What makes Singapore an attractive export destination?
Singapore is a fairly well developed market, and there are opportunities for all kinds of products and services. But most people don’t enter Singapore to sell just to this market; they use Singapore as an entryway to Southeast Asia, if not Pan-Asia. It’s very easy to set up a company here and it’s very efficient in terms of logistics.
Any examples of how companies use Singapore as a portal to the rest of the region?
Australian and Southeast Asian companies tend to set up in Singapore first and then set up satellite offices in Indonesia, Thailand and Myanmar. A lot of transactions in terms of banking and investments are often executed in Singapore. Also legal transactions and arbitrations often use Singapore as part of the resolution mechanism. A lot of court processes in the region are very onerous and very slow; a quicker way to conclude arbitration is in a neutral place like Singapore.
What resources are available to Canadian companies that want to set up operations in Singapore?
There are several government organizations that can help. The Monetary Authority of Singapore has a business development or business promotion wing that’s happy to work with financial firms looking to locate or grow in this market. The Singapore Economic Development Board is another stop; they have a host of programs related to employment, investment and other issues related to setting up shop here. The chambers of commerce can be helpful, and of course the Trade Commissioner Service has representatives that have specific expertise in certain industries.
“If you’re submitting a tender for government projects, they’ll usually want to see the track record of the bidder. … by forming a branch office, the Canadian company can use its track record to show that it can be relied upon to do the work specified in the tender.”
What key issues impact foreign companies exporting to Singapore?
Importation of goods is a key compliance issue. Generally all goods are subjected to goods and services tax, and must go through customs clearance. For a company to clear customs, they have to use a Singapore company, which must apply to Singapore Customs to activate a pass code. Another way to get goods through customs is to appoint or engage a freight forwarder based in Singapore, which will take care of the documentation. But there still needs to be a Singapore company to activate the account.
What business structures are the most advantageous for foreign companies setting up in Singapore?
If a Canadian company wants to set up a subsidiary company in Singapore, they will have to so do by way of a private company limited by shares. Canadian companies also have the option of registering a branch in Singapore. But if a Canadian company wants to invite investors at the Singapore level, then a branch is not the way to go because it cannot have shares. Also, in Singapore, branch offices are required to have their accounts audited each year and its head office accounts must be filed with the Singapore authorities. Once this is done, the account is in the public domain. So the head office in Canada is subjecting their documents to the public domain in Singapore, which is another drawback.
Any advantages to setting up a branch office?
If you’re submitting a tender for government projects, they’ll usually want to see the track record of the bidder. If you’re a newly incorporated Singapore company, you won’t have a track record. But by forming a branch office, the Canadian company can use its track record to show that it can be relied upon to do the work specified in the tender.
“Singapore tax laws apply equally to resident companies, non-resident companies and branches of foreign companies when regarding the method of taxation or the rate at which tax is charged.”
Double taxation can be concern for exporters. How does Singapore address this issue?
Tax treaties entered into by Singapore are based on the Organisation for Economic Co-operation and Development (OECD) model. The tax relief pattern is a combination of territorial taxation and exemption of foreign income, unless received in Singapore. Presently, comprehensive double taxation agreements for the avoidance of double taxation have been concluded with several countries, including Canada.
What types of corporate entities are covered by this tax treaty?
Singapore tax laws apply equally to resident companies, non-resident companies and branches of foreign companies when regarding the method of taxation or the rate at which tax is charged. Non-resident companies have the same obligations and rights under the Act, are entitled to claim all of the deductions provided in the Act and generally enjoy the same privileges as resident companies. To attach liability to a non-resident company in Singapore, it is necessary to establish that it is carrying on a trade or business within Singapore.
Can you expand on that last point?
A trade carried on with Singapore will not expose the non-resident to tax here. All of the relevant facts have to be reviewed to decide the question whether a person is carrying on a trade within Singapore or with Singapore.
“Find out the business dealings of your customers and partners. They may be located in Singapore but interacting regularly with officials in another country.”
Singapore is among the world’s least corrupt countries, but does that mean corruption is a non-issue?
Corruption typically isn’t a problem with Singaporean officials; you won’t encounter a lot of government staff asking you for money to process paperwork or to let your goods through customs. However, Singapore is a location for a lot of expat offices. Other countries have their headquarters there, and there are a lot of third parties working with these expat offices. These third parties are typically the ones causing problems, and where the corruption usually takes place.
How do these third parties cause problems?
Typically, you’ll have agents who tell companies they can help them get business in, say, Myanmar or in Vietnam and that they can make things happen quickly. They’ll ask for money and tell you not to ask any questions. The problem is you don't really know very much about these agents and how they are managing to open the doors that other people can’t easily open.
How can Canadian companies protect themselves from corrupt operators in Singapore?
First, don’t make an assumption that, because a country is low on the (Transparency International) Corruption Perceptions Index, you don’t have to worry about corruption in that market. Make sure you do an integrity due diligence and be willing to ask those tough questions about bribes being paid and how people do business. Find out the business dealings of your customers and partners. They may be located in Singapore but interacting regularly with officials in another country.