Setting up a company: Singapore vs Indonesia

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Setting up a company: Singapore vs Indonesia

Setting up a company in a foreign country can be a daunting decision which requires careful considerations and systematic analysis of the pros and cons each country provides. While certain countries make it extremely easy for business investors to do business and achieve sustained growth, other countries deter or delay these processes. This article will help you assess the procedures of company incorporation in Singapore and Indonesia, while also taking a careful look at the resources each one provides to budding investors.

  • Foreign Ownership concerns:

Singapore has a pro-business stance and allows 100 percent foreign ownership of private limited companies. If you’re setting up a company in Singapore, you do not need a local partner to do business. Appointing a resident company director and a single shareholder is enough for the purposes of procedure. Indonesia, in this regard, differs significantly as it necessitates that you set up either a limited liability company that has 100 percent foreign ownership or a limited liability company that has a joint venture scope which requires that a local resident owns at least 5 percent of the shares. A disinvestment requirement is also necessitated by virtue of which a foreign-owned company must divest 5 percent of shares to a local resident. Additionally, there are also fields which allow no foreign ownership in Indonesia. This gives Singapore a higher level of appeal for potential business investors over Indonesia.

  • Statutory Requirements of Setting up a Company:

For foreign investors, Singapore has minimum requirements. To set up a company, you must appoint a company secretary who is a natural resident, a director who must possess an employment pass certificate, have shareholders between 1 to 50 individuals while showing a paid-up capital of S$1. What makes setting up a company in Indonesia slight difficult than Singapore is its additional requirements of setting up a commissioner, requiring to possess a minimum paid capital of RP 50,000,000 which is around S$6757 besides having a paid-up capital of 25 percent of the total authorized capital.

  • Procedure of Incorporation:

Company registration is quick and efficient in Singapore, thanks to its effective administrative system, no corrupt government officials, no need for bribes and strict legal system. You can have your company incorporated within 24 hours. All you need to do is apply for name approval with the company registrar, which is usually notified within an hour of application, and filing of incorporation documents with the registrar. If you’ve all your documents in order, you’d receive an email notification approving your company incorporation, which is regarded as the official certificate of incorporation. Post incorporation, your firm is required to apply for Goods and Services Tax, which can be done within 24 hours, and obtain necessary permits which do not take more than a week and create a corporate bank account. The process that Indonesia puts its foreign investors through is rather tedious, slow and inefficient in comparison. You can take up to 12 weeks to complete all formalities related to company incorporation. After you’ve submitted your application, it’d take 5 weeks to process your license. You’re also required to create a deed of establishment citing Articles of Association of the company, in the presence of a notary. Obtaining a domicile citing the official address of the company comes up next, followed by registering with the tax department and opening up a corporate bank account, after which you’re required to submit all these documentations to the Ministry of Justice. Your approval must arrive sometime after 2-3 months, after which you’re again required to register your approved deed, obtain necessary business permits and then finally receive your permanent business license. Such a complicated procedure with unnecessary paperwork usually deters business investors from choosing Indonesia as opposed to Singapore where the process is lightning fast like their telecommunication services and extremely easy to comply with procedures. So, at a glance, Singapore is better and more preferred because the time period for incorporation in Singapore is 24 hours, whereas, in Indonesia, it is somewhere between 3 to 6 months.

  • Tax Concerns:

Indonesia has a tax rate of 25 percent which is 8 percent more than the flat rate Singapore offers its corporate partners, at 17 percent. Besides, the single-tiered territorial structure of the tax regime in Singapore ensures your company does not suffer the perils or inconveniences of double taxation. If the attractive tax rates were not enough to situate Singapore at an advantageous position than Indonesia, its procedures of tax filing are extremely easy and efficient. To elaborate, findings at the World Bank Report (2018) cite that business owners make 5 tax payments a year in Singapore, whereas they have to make 52 tax payments a year in Indonesia. Singapore allows you to save time and money, and rather channelize your energy to your firm’s sustained growth rather than spend it on filing complicated paperwork and hence is a better choice for your company incorporation.

  • Protection of Intellectual Property:

Foreign investors often look at a country’s way of dealing with the intellectual property while investing in it. The Global Competitiveness Report (2013-14) by the World Economic Forum, Singapore is the best contender for protection of intellectual property rights in Asia, and the second-best in the world. Indonesia has an attractive position but is far behind on position 38 in comparison to Singapore.

  • Workforce:

Local workforce makes quite an important consideration for setting up a business in a foreign country. Singapore’s workforce in comparison to Indonesia’s is highly skilled, educated, holding degrees and diplomas while reflecting a higher English proficiency index which makes employers communicate easier and makes business activities smoother. Singapore according to GCI findings tops ‘Labour Market Efficiency’ in which Indonesia does not perform so impressively. Also, Singapore is emerging as a hotbed for global talent, attracting foreign talent with impressive immigrant laws and attractive reputed university educational opportunities.

A comparison between Singapore and Indonesia reaffirms Singapore’s favorable position in regards to doing business. It is an extremely well-developed country with flexible laws, anti-corrupt government policies, stable and a robust economy that paves way for infrastructural development and intellectual growth.

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