Company Incorporation: Singapore vs Hong Kong

 Over the past few decades, Singapore and Hong Kong have attracted global entrepreneurs with their pro-business policies, world-class infrastructure, and ease of doing business. Although Hong Kong has a longer history as a business hub, Singapore has quickly caught up with Hong Kong’s dominance in the region. Both countries are similar in many ways, and yet, individually possess competitive advantages over the other.

This guide sets out the features and advantages that each city may have in terms of economic and political situations, company incorporation, tax efficiency, and many other relevant factors.

Economic and Political Environment

Singapore’s economy is characterized by excellent finance and a high degree of openness, with the country heavily dependent on international trade. Although there was a slowdown in 2020 due to the Covid-19 pandemic (as experienced by most countries in the world), the economic situation in Singapore is gradually improving. The latest IMF forecasts expect a strong rebound of 5.2% in 2021 and a stabilization of 3.2% in 2022.

Meanwhile, the current economic recovery in Hong Kong has been uneven, and overall economic activity remains below pre-recession levels, as the pandemic, social distancing requirements, and travel restrictions continue to weigh on certain segments of the economy. Nevertheless, the country’s economy is starting to recover in the first quarter of 2021, with real GDP continuing a sizeable 7.9% year-on-year growth, led by strong growth in goods exports.

In terms of the political situation, Singapore was ranked first as the most politically stable country in Asia in 2019 by The Global Economy. Meanwhile, Hong Kong was ranked 22nd, influenced mainly by widespread protests in response to government plans to allow extradition to Mainland China.

Company Incorporation

Company incorporation requirements don’t vary too much in the two jurisdictions. However, according to the World Bank’s 2019 “Ease of Doing Business” index, Singapore was in 2nd place, while Hong Kong was in 3rd.

To aid in this exploration, the table below provides a comparison of the company incorporation and compliance requirements in Singapore and Hong Kong.

* A private limited company is the most common form of company incorporation in Singapore and Hong Kong.

The Singapore government advises entrepreneurs who want to incorporate their companies in the city-state to engage services of professional firms. Biz Atom can provide you with all-out assistance, from business registration, a nominee director, company secretarial, a registered address to corporate bank account opening, accounting, and tax services.

For more information about how company incorporation is like in Singapore, please refer to:

A Complete Guide on Company Registration in Singapore

Tax Regime

While incorporation requirements in Singapore and Hong Kong are not much different, Singapore’s main edge over Hong Kong lies in its taxation policies.

In general, both Singapore and Hong Kong follow the territorial tax system, meaning only income actually generated inside the countries is liable to tax. However, Singapore’s tax system is slightly different as it also uses the remittance base. That means foreign income is tax-free until it is transferred into the country. In addition, the government also supports business entities with the Foreign Sourced Income Exemption (FSIE) scheme, making it easy to do business in Singapore.

Below are some differences between Singapore and Hong Kong’s tax policies.

Banking Facilities

The banking industry plays a vital role in the economies of Singapore and Hong Kong. Both countries have an orderly and healthy financial system with the majority of the world’s strongest banks.

Singapore 

Singapore has an extensive system of more than 150 banks, 5 of which are locally incorporated, and the rest are foreign banks. Most of the banks provide world-class and reputable corporate bank account facilities.

Singapore also offers a wide range of services that meet multifaceted demands for individuals and companies. These services include multiple currencies, internet banking, checking accounts, savings accounts, debit and credit cards, wealth management services, and more. 

A high level of flexibility and convenience starts from applying to open a bank account, as many banks in Singapore allow clients to set up their offshore bank accounts remotely. In addition, as a global financial center, Singapore is the top choice for most offshore investors worldwide. OCBC, RHB, Citibank, DBS, UOB are some of the leading banks that you can consider opening your offshore account.

Hong Kong

Hong Kong is also a major international business and financial hub with the highest ‘=08uconcentration of banking institutions in the world, covering 75 of the 100 largest banks with an integrated network of institutions that have international standards. HSBC, DBS, Hang Seng Bank, Standard Charter Bank are some of the banks in Hong Kong that you can consider.

However, Hong Kong is known to have complicated bank account opening procedures (especially compared to Singapore) for non-local residents.

Workforce

According to the 2019 Global Competitiveness Report, Singapore was ranked first while Hong was ranked seventh in labor market efficiency. 

Singapore has many highly educated and trained employees from both local and foreign universities. Not only English, but Singaporeans can also communicate fairly in Chinese, Malay, and Tamil. Not to mention the fact that most of the population is bilingual. Known for building everything from the right know-how and being an international hub with multiple platforms, Singapore attracts the global’s top talents into its industries.

In Hong Kong, employees usually speak good English even though they are more comfortable speaking their primary language – Cantonese or Mandarin – daily. However, labor costs are considered to be higher in Hong Kong. Hence, many businesses prefer to set up operations in Singapore for its more affordable workforce.

Immigration Policy

In terms of immigration, both Singapore and Hong Kong provide open immigration policies with work visa provisions suitable for foreigners wishing to establish their companies in these jurisdictions.

Although Singapore has tightened its overall immigration slightly recently, the city-state keeps encouraging the immigration of highly skilled and innovative foreign investors and employees willing to set up their businesses or work within its territory. Depending on their respective criteria, those who meet the qualifications can start a company or be employed under a different type of work permit. You can read about work passes available in Singapore here.

 Turning to Hong Kong, citizens of about 170 countries and territories can make visa-free visits to the country for 7 to 180 days. In addition, short-term visitors may enter Hong Kong on a visitor visa to negotiate business and sign contracts. Apart from that, the government has also introduced suitable work visa provisions to meet the needs of business owners who want to move to Hong Kong or those who want to hire foreign professionals to work for their companies, or those who wish to migrate to the country for legitimate employment purposes.

Quality of Life

According to Numbeo.com, Singapore is ranked 8th, while Hong Kong is ranked 21st in the world in terms of the quality of life index.  Singapore citizens enjoy one of the highest health and nutrition levels in Asia. The country promotes a clean, green, and healthy environment, free from traffic jams. The city-state’s pollution index is low at 32.95. In contrast, Hong Kong experiences high levels of air and water pollution. 

Cost of Living

Singapore offers expats a wide range of accommodation options to suit all types of needs, preferences, and budgets. Rent is still considered affordable when compared to other big developed cities. While concerning education costs, tuition fees for children at international schools are also lower in Singapore than in Hong Kong.

In Hong Kong, you will find that rental housing is much more expensive than in Singapore and is considered to be the same as that of major international cities such as London and New York. Revealed in ECA International’s 2020 “Cost of Living Report,” this year’s most expensive city for expats goes to Hong Kong for another year in a row.

Conclusion

In a nutshell, both Singapore and Hong Kong proved themselves to be potential destinations for establishing new businesses. However, through many salient points, it appears that Singapore remains the most preferred holding company destination in Asia, mainly due to its broad tax treaties and lower payable taxes.

Hong Kong is also facing unprecedented political unrest due to its conflict with Mainland China. In contrast, Singapore is known for its political and economic stability, making it a better place for your business in the long run.

If you are considering relocating to Singapore to start a business, feel free to contact the Biz Atom team, and we will be more than happy to tailor a plan to suit your specific needs.

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