Since the mid-1990s, Singapore has earned a reputation for being the preeminent location for establishing a holding company in Asia. As a banking and financial services hub, Singapore is the Association of Southeast Asian Nations’ (ASEAN) de facto commercial capital, and has carefully forged its legal and tax regimes to be among the most business- and investor-friendly in the world.
Offering investor’s access to one of the world’s largest combined free trade zones via the ASEAN, ASEAN-China, and ASEAN-India Free Trade Agreements, the city-state of Singapore is the ideal headquarters location for pursuing investment holdings throughout the region.
Singapore’s status as a preferred holding company jurisdiction in Asia is primarily attributable to the city-state’s favorable tax regime and close connection to emerging Asian markets. With more than 70 avoidance of double taxation agreements (DTAs), low effective corporate and personal tax rates, and no capital gains tax, controlled foreign corporation (CFC) rules, or thin capitalization regime, Singapore has one of the most competitive tax systems worldwide. The city-state is also renowned for offering extensive tax incentives to businesses seeking to establish a local presence in the country.
Additionally, Singapore exudes an undeniable level of ‘comfort’ for Western companies and investors. The city-state’s highly skilled English-speaking workforce, strict protection of private and intellectual property rights, and exceptional political and economic stability rival even those of Western Europe and the United States. In quality of life rankings Singapore consistently ranks first in Asia, and among the top 15 globally.
Singapore Holding Companies
In essence, a holding company is a company or firm with ownership of other companies’ outstanding shares or other assets, such as real estate or bonds. In other words, rather than conducting its own business activities, a holding company typically profits strictly from the activities of its assets, or holdings, via the generation of passive investment income—thereby protecting the parent company from the potential risks and liabilities of their holdings. Increasingly, holding companies based in Singapore are also carrying out commercial activities, such as supply chain activities, so as not to fall foul of tax avoidance rules.
Three principal advantages Singapore offers are:
- Minimal requirements for establishing a holding company
- Overwhelmingly favorable tax and legal systems
- The ability to use the holding company as an entrepôt trade destination to access ASEAN and other developing Asian markets
The chart below provides an overview of how Singapore stacks up in comparison to other popular holding jurisdictions.
This article is an excerpt from the March issue of Asia Briefing Magazine, titled “The Gateway to ASEAN: Singapore Holding Companies.” In this issue, we highlight and explore Singapore’s position as a holding company location for outbound investment, most notably for companies seeking to enter ASEAN and other emerging markets in Asia. We explore the numerous FTAs, DTAs and tax incentive programs that make Singapore the preeminent destination for holding companies in Southeast Asia, in addition to the requirements and procedures foreign investors must follow to establish and incorporate a holding company.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam, in addition to alliances in Indonesia, Malaysia, Philippines and Thailand, as well as liaison offices in Italy and the United States.
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