Setting Up a Company: Singapore vs. India

As one of the fastest-growing economies globally, India offers a large market and many opportunities for potential investors. Singapore, on the other hand, continues to uphold its reputation as an established capital market in Asia and one of the world’s major international financial hubs.

While global entrepreneurs and companies have flocked to both countries, there remain apparent differences that businesses need to consider when finding a location for their next phase of growth. This article analyzes the business landscape in both jurisdictions, in areas such as company incorporation, taxation, workforce, and many more.

Current Economic Overview

Since the 2000s, India has made remarkable progress in reducing absolute poverty. Between 2011 and 2015, more than 90 million people were lifted out of extreme poverty. However, the COVID-19 pandemic has reversed the course of poverty alleviation, at least temporarily. The economic slowdown triggered by the outbreak is believed to significantly impact poor and vulnerable households.

India’s real gross domestic product (GDP) is expected to have contracted by 8.5 percent, but has turned positive again in the second half of this year. As growth returns, poverty reduction is likely to return to its pre-pandemic trajectory.

On the other hand, Singapore is a high-income economy with a gross national income of S$411.8 billion per capita as of 2020. The country provides one of the most business-friendly regulatory environments in the world for local entrepreneurs and ranks among the world’s most competitive economies.

Singapore’s current economy is growing faster than previously predicted as vaccinations gain pace, allowing for more economic activity and boosting demand for goods and services at home and in some of its key markets abroad. According to the Ministry of Trade and Industry, the GDP growth is forecasted to grow 6% to 7% this year.

Business Environment 

According to the World Bank, India ranked 63rd for the ease of doing business globally. The country is also one of the largest unicorn bases in the world, with 34 unicorn companies. With an improvement in the economic scenario, there have been investments across various sectors of the economy.

On the flip side, Singapore holds the 2nd position as the best place to do business in the world. The City-State is the 4th fastest country for unicorn businesses to reach the $1 billion valuation mark, alongside the USA and Australia. 

Moreover, Singapore is the fourth-largest recipient of foreign direct investment (FDI) inflows in the world. The country is a perfect destination for FDI due to a simpler regulatory system, flexible tax incentives, a high-quality industrial real estate park, outstanding political stability, and equal to zero corruption rates. Last year, the country attracted $ 22,522.7 billion in FDI.

Quality of Life

Unfortunately, despite being one of the most improved economies, India ranks among the bottom ten destinations of the Expat Insider 2021 survey. The country performs slightly below average in the Ease of Settling In Index (34th). India also receives the second-worst results worldwide in the Quality of Life Index (58th) — only ahead of Kuwait (59th).  However, more than three in five expats (62%) feel at home in the local culture (vs. 63% globally), and 79% say the local population is generally friendly towards foreign residents (vs. 67% globally). 

In contrast, Singapore ranks 5th among the top ten cities in Asia-Pacific with the best quality of life. According to the Expat Insider 2021 survey, Garden City has an above-average performance in most indices. In the Digital Life subcategory of the index, 97% of expats find it easy to get high-speed internet access at home (vs. 79% globally), placing the country the first worldwide for this factor. The City-State performs even better in the Safety & Security subcategory (2nd), where only Finland (1st) ranks higher. Additionally, almost all expats feel safe in Singapore (99% vs. 84% globally) and positively rate political stability (95% vs. 64% globally).

Company Incorporation

In India, entrepreneurs can incorporate their companies under the following primary business entities:

• Public Limited Company
• Private Limited Company
• Joint-Venture Company
• Partnership Firm
• One Person Company
• Sole Proprietorship
• Branch Office
• Non-Government Organization (NGO)

It requires up to 13 steps to incorporate your business in India. Provided that you have all your documents in place, it can take anywhere between 10 – 15 days to register your company there. 

Meanwhile, there are only three steps required to set up a company in Singapore. The company registration process only takes 1 – 3 business days. The main business entities available for entrepreneurs to establish are as follows:

• Private Limited Company
• Sole Proprietorship
• Ordinary Business Partnership
• Limited Liability Partnership
• Limited Partnership

Tax Obligations

-Corporate Tax

India’s tax system is relatively more complex. Companies that do not seek any incentives or exemptions are taxed 22% with applicable cess and surcharge (the effective corporate tax rate of 25.17%). Companies that intend to claim incentives or exemptions are taxed 30%, while new manufacturing companies are taxed 15%. The corporate tax rate for domestic companies is about 25% – 30%, and for foreign companies is around 40% – 50%. 

In contrast, Singapore is far more tax-friendly, with a flat corporate tax rate of 17% that has been consistently ranked as one of the lowest in the world. Newly incorporated companies can claim for full tax exemption on the first S$100,000 of normal chargeable income for each of their first three consecutive years of assessment. 

For additional information on Singapore’s corporate tax, refer to:

All You Need to Know About the Corporate Tax Residency in Singapore

-Withholding Tax

Companies in India making payments to non-residents are subjected to a withholding tax of up to 40%. For instance, interests are subjected to 20% withholding tax, while payments for services by companies and individuals are subject to a withholding tax rate of 40% and 30%, respectively. Dividends paid by resident companies, however, are not taxed. 

On the other hand, Singapore’s withholding tax ranges from 10 to 17%. Interests, for example, are subjected to a 15% withholding tax, while service fees are subjected to the prevailing corporate tax rate. 

You may also want to read a related article:

Singapore Withholding Tax Guide

-Personal Income Tax

The personal income tax rate in India stands at 35.88%, whereas in Singapore, the current highest personal income tax rate is at 22%.

For more information on Singapore’s personal income tax, refer to:

Singapore’s Personal Income Tax Guide for Residents & Non-Residents

Workforce

India’s workforce is the second-largest in the world after China. However, more than 94 percent of India’s working population is part of the unorganized sector. In local terms, the organized sector in India refers to licensed organizations, i.e., those that are registered and pay GST.

Meanwhile, despite being a small country, Singapore produces a highly educated and skilled workforce spread in various sectors. As a result, the country ranked 9th in 2020’s list of the most competitive countries for talent globally by the IMD World Competitiveness Centre. India, on the other hand, ranked 72nd for the same indicator.

Intellectual Property (IP) Protection

Despite showing marked IP environment improvement over the past few years, India still lags far behind Singapore in terms of IP protection. India ranks 40th on International Intellectual Property Index this year, while Singapore ranks 3rd in the world and top in Asia.  The index noted that Singapore excels in all factors, including patent protection, perception of property rights protection, the rule of law, control of corruption, and property registration. 

Final Thoughts

While India’s population can make it an attractive target for companies looking to conquer markets, Singapore provides many significant benefits for businesses, from low tax rates and ease of setting up a business to the excellent quality of life and a skillful workforce. If you have questions in mind about doing business in Singapore, please contact us. You can also book a meeting with our expert for faster assistance. 

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