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    With its favorable taxation policies and strategic position within Southeast Asia, Singapore offers foreign investors competitive and unprecedented access to the Asian market. Businesses operating in Singapore enjoy over 80 double taxation avoidance agreements, significant tax deductions, and numerous free trade agreements with neighboring Asian nations.

    In addition to its political and economic stability, Singapore stands as a prominent financial center within the ASEAN region. For investors with an international business scope, Singapore offers direct access to the global market. Geographically, Singapore is positioned amongst several thriving Southeast Asian economies, as well as the markets of China and India. The city-state has sought to mirror international business and trade standards, such as those presented by the World Trade Organization and the Organization for Economic Cooperation and Development.

    Singapore’s Economy

    Singapore is one of the wealthiest countries in the world, reporting a GDP per capita of US$$58,483 in 2020, the highest in Asia.

    The city-state has maintained a steady but slowing economic growth over the past five years. However, as is the case in much of the world, it felt the impact of the Covid-19 pandemic, reporting a GDP of US$469.1 billion at the current market price in 2020. This is a 5.4 percent decline, a slump caused in large part hits to the service producing industries and construction sector, and slowing consumption. 2021 has already shown signs of brighter outlook for the city state; GDP grew 1.3 percent on a year-on-year basis in the first quarter, on-par with pre-pandemic levels.

    Singapore’s largest industry sector is services, contributing over 70 percent of the country’s total GDP in 2020. Despite this segment’s overall dominance, manufacturing remained the single largest industry sector in 2020, making up 21.5 percent of GDP. Manufacturing was also the largest contributor to economic growth in the first quarter of 2021 with a 2.2 percent point contribution, and despite slowdowns in other pandemic-stricken industries, it saw a 7.3 percent growth in 2020. This growth has been attributed to an expansion of biomedical manufacturing, electronics, and precision engineering clusters.

    In the services sector, the finance and insurance industry took the largest slice of the economic pie, accounting for 15.7 percent of the GDP in 2020. It was also the second largest driver of growth in the first quarter of 2021, with a 0.7 percent point contribution.

    Singapore was ranked number one in the world in the Heritage Foundation’s Index of Economic Freedom in 2021 for the second year in the row, benefitting from an extremely business-friendly regulatory environment, a fair and efficient judicial system, and strong property rights, among other factors.

    Trade and investment landscape

    International trade represents an indispensable part of Singapore’s economy. The country’s Port of Singapore is one of the busiest and best-connected seaports in the world, with links to more than 600 ports in 120 countries. The port’s maritime cargo throughput reached approximately 590.74 million metric tons in 2020.

    According to the Singapore Department of Statistics, the total volume of import-export reached US$969.1 billion in 2020, of which exports accounted for US$515.6 billion and imports US$453.5 billion – equivalent to 321 percent of the total GDP for that same year.[8] Machinery and transport equipment and chemicals represented the two largest commodity sections traded in 2020.

    The import and export of services also represent a significant portion of Singapore’s total international trade, reaching US$497.1 billion in 2020. Transport services accounted for the single largest exported and imported service sector, representing 28.3 percent and 30.5 percent respectively. Financial services are the second largest export service at 16.9 percent, whereas business management was the second largest import service, representing 11.7 percent of imports.

    China is Singapore’s largest trading partner with a 14.1 percent share of merchandise trade in 2020, followed by Malaysia (10.7 percent) and the US (10.6 percent).

    Thanks to its investor-friendly landscape, a favorable tax regime, and a highly-skilled domestic labor force, Singapore has long been a magnet for investors. It was the third largest recipient of FDI in the world in 2019, receiving US$92 billion according to the United Nations Conference on Trade and Development (UNCTAD) 2020 World Investment Report.  The top investor in 2019 was the US.

    Manufacturing, including petrochemicals, electronics, machinery, and equipment, as well as financial, wholesale and retail trade, and business services, are among the most popular sectors for foreign investors.

    Ease of Doing Business

    Singapore is consistently ranked among the top three economies in the World Bank’s Ease of Doing Business report.

    The transparent nature of Singapore’s business and legal regulations means most of the information a business needs are readily available online. This makes it much easier for overseas decision-makers to learn more about the market during the entry process.

    Singapore’s main working language is English, greatly facilitating communication between foreign businesses and their Singapore staff. Close cultural ties and a deep level of mutual understanding between Singaporeans and citizens of other ASEAN member countries can also significantly help with doing business in the region.

    Businesses that are ready to set up can use Bizfile, an electronic filing system that combines all the tax and business requirements on a single form, reducing the need to queue at service centers. Bizfile is managed by the Accounting and Corporate Regulatory Authority (ACRA), which is the statutory body responsible for the monitoring of new companies in Singapore.

    The time and cost needed to set up in Singapore are relatively short. Overseas business people can make a payment through Bizfile; it costs US$254 (S$300) to register a company and US$10 (S$15) to register the company’s name. Most applications are processed within the same business day; however, the process could take 14 days to two months for applications that need to be reviewed by government agencies.

    The efficient and cost-effective nature of corporate establishment in Singapore has resulted in more than 37,000 international companies and around 7,000 foreign multinationals operating from the country.

    Free Trade and Tax Agreements

    With its favorable taxation policies and strategic position within Southeast Asia, Singapore offers foreign investors competitive and unprecedented access to the Asian market. As of July 2021, businesses operating in Singapore can enjoy over 88 double taxation agreements (DTAs), significant tax deductions, and 26 free trade agreements (FTAs) with both neighboring Asian nations and major economic powers worldwide.

    With its favorable taxation policies and strategic position within Southeast Asia, Singapore offers foreign investors competitive and unprecedented access to the Asian market. As of July 2021, businesses operating in Singapore can enjoy over 88 double taxation agreements (DTAs), significant tax deductions, and 26 free trade agreements (FTAs) with both neighboring Asian nations and major economic powers worldwide.

    There are two types of DTA in Singapore: comprehensive and limited. Comprehensive DTAs cover all income types and allow for the exchange of tax information, whereas limited DTAs cover income from shipping and air transport.

    These DTAs also include treaties with ASEAN’s 10 member states – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam – providing businesses with a greater competitive edge when entering this market.

    The 26 FTAs currently in force consist of 15 bilateral and 11 regional FTAs. These provide Singapore with exclusive access to the largest combined free trade areas due to its agreements with ASEAN as well as its FTAs with China, Hong Kong, India, and the EU. The country is also negotiating new FTAs with the Pacific Alliance-Singapore and Eurasian Economic Union (EAEU).

    Although some regional players maintain strong DTA and FTA networks, ASEAN member states have not matched Singapore’s extensive DTA and FTA network. Singapore’s ability to improve and expand its trade relations will allow the country to continue to be a default location for businesses looking to expand in Southeast Asia and neighboring regions.

    Singapore’s favorable tax regime is internationally recognized for allowing entrepreneurs and companies to enjoy low tax rates and numerous types of tax relief – through incentives, comprehensive tax treaty networks, and exemptions from certain incomes.

    The country’s corporate tax regime is one of the most attractive in Asia. Businesses can take advantage of the flat 17 percent corporate income tax rate for profits above S$300,000 (US$217,000) and 8.5 percent for profits up to S$300,000 (US$217,000).

    Moreover, as the Singaporean tax system operates on a territorial basis, companies are not taxed on most types of foreign-sourced incomes (such as from dividends or branch profits) that are remitted into Singapore; provided they pay tax in the source country with a rate of at least 15 percent. There is also no capital gains tax.

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