Starting a Business in Singapore

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Starting a Business in Singapore

Economy of Singapore

The Singaporean economy is regarded as free, innovative, dynamic and business-friendly. For several years, Singapore has been one of the few countries with an AAA credit rating from the big three, and the only Asian country to achieve this rating. Singapore attracts a large amount of foreign investment as a result of its location, skilled workforce, low tax rates, advanced infrastructure and zero-tolerance against corruption. It is the world’s most competitive economy, according to the World Economic Forum’s ranking of 141 countries, with the 2nd highest GDP per capita.

There are more than 7,000 multinational corporations from the United States, Japan, and Europe in Singapore. Roughly 44 percent of the Singaporean workforce is made up of non-Singaporeans. Despite market freedom, Singapore’s government operations have a significant stake in the economy, contributing 22% of the GDP. The city is a popular location for conferences and events.

Singapore has the world’s highest percentage of millionaires, with one out of every six households having at least one million US dollars in disposable wealth

Exports, particularly in electronics, chemicals and services including Singapore’s position as the regional hub for wealth management provide the main source of revenue for the economy, which allows it to purchase natural resources and raw goods which it lacks. Moreover, water is scarce in Singapore therefore it is defined as a precious resource.

In recent years, the country has been identified as an increasingly popular tax haven for the wealthy due to the low tax rate on personal income and tax exemptions on foreign-based income and capital gains.

Singapore GDP
Singapore GDP

Singapore Economic Indicators

Singapore GDP Growth Rate

Since gaining independence in 1963, Singaporean economy has been growing rapidly and as a result the country has now one of the highest GDP per capita in the world. The economy depends heavily on foreign trade; both from port activities and from exports of electronic components and refined oil. The country is a leading foreign direct investment recipient due to its status of one of the freest, most competitive and most business-friendly economies in the world. Singapore is also an important financial center.

Singapore GDP Growth Rate
Source: Statistics Singapore
Singapore Interest Rate

The Monetary Authority of Singapore does not control the monetary system by monitoring interest rates. Instead, it manages the Singapore dollar (SGD) exchange rate against a trade-weighted basket of currencies of Singapore’s major trading partners and competitors. On January 28th, 2015 Singapore’s Monetary Authority surprisingly reduced the slope at which the SGD appreciates against main currencies, citing lower inflation expectations due to falling oil prices. The Singapore Overnight Rate Average or SORA is the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore between 8.00am and 6.15pm.

Singapore Interest Rate
Source: Monetary Authority of Singapore
Singapore Inflation Rate

In Singapore, the most important categories in the consumer price index are housing (25 percent of total weight) and food (22 percent). The index also includes: transport (16 percent), education (7 percent), health (6 percent), communication (5 percent) and clothing and footwear (3 percent). Recreation, alcoholic beverages, tobacco and others account for the remaining 16 percent of total weight.

Singapore Inflation Rate
Source: Statistics Singapore
Singapore Unemployment Rate

In Singapore, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Singapore Unemployment Rate
Source: Ministry of Manpower Singapore
Singapore Government Dept to GDP

Singapore recorded a government debt equivalent to 126.30 percent of the country’s Gross Domestic Product in 2019. Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.

Singapore Government Debt to GDP
Source: Government of Singapore
Singapore Balance of Trade

Singapore economy relies on purchasing of intermediate goods and exporting of high-value added products. Main exports are: machinery and equipment (43 percent of the total exports); petroleum (19 percent) and chemicals (13 percent). Main imports are: machinery and equipment (39 percent of the total imports); petroleum (33 percent); chemical products (7 percent) and miscellaneous manufactured articles (7 percent). In 2017, the biggest trade deficits were recorded with China, Hong Kong, Malaysia, Indonesia and the United States. Singapore did not record surpluses with any country.

Singapore Balance of Trade
Source: Statistics Singapore
Singapore Currency Dollar

The USDSGD spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the SGD.

Singapore Currency Dollar

Singapore Stock Market (STI)

The Straits Times Index STI is a major stock market index which tracks the performance of the top 30 companies listed on the Singapore Exchange. It is a capitalization weighted index. The STI Index dates back to 1966. Yet, it was recalculated twice in 1998 and in 2008 according to the FTSE methodology.

Singapore Stock Market STI
Singapore Stock Market STI
Singapore Ease of Doing Business

Singapore is ranked 2 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Singapore remained unchanged at 2 in 2019 from 2 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Ease of Doing Business in Singapore
Source: World Bank
Singapore Business Confidence

Business Confidence in Singapore increased to -3 points in the third quarter of 2020 from -7 points in the second quarter of 2020.
In Singapore, the Survey of Business Expectations of the Manufacturing Sector covers around 410 manufacturing firms. These companies are asked to assess their expectation of general business conditions, output and employment for the next six months. Provided responses are then weighted by their contribution to employment and value added. The indicator is computed as the difference between the weighted percentage of positive assessments and the weighted percentage of negative responses. The index varies on a scale of -100 to 100; a value of -100 indicates extreme lack of confidence, 0 neutrality and 100 extreme confidence.

Singapore Business Confidence
Source: Statistics Singapore
Singapore Bank Lending Rate

Bank Lending Rate in Singapore remained unchanged at 5.25 percent in October from 5.25 percent in September of 2020.

In Singapore, the prime lending rate is the average rate of interest charged on loans by 10 Singaporean leading banks and finance companies to private individuals and companies.

Singapore Prime Lending Rate
Source: Monetary Authority of Singapore
Singapore Corruption Rank

Singapore is the 4 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

Singapore Corruption Rank
Source: Transparency International
Singapore Credit Rating

Standard & Poor’s credit rating for Singapore stands at AAA with stable outlook. Moody’s credit rating for Singapore was last set at Aaa with stable outlook. Fitch’s credit rating for Singapore was last reported at AAA with stable outlook. DBRS’s credit rating for Singapore is AAA with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Singapore thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Singapore as reported by major credit rating agencies.

Skyscrapers in the Central Business District in Singapore
Skyscrapers in the Central Business District in Singapore

Taxation in Singapore

Personal income taxes in Singapore range from 0% to 22% for incomes above S$320,000. There are no capital gains or inheritance taxes in Singapore. Singapore’s corporate tax rate is 17% with exemptions and incentives for smaller businesses. Singapore has a single-tier corporate income tax system, which means there is no double-taxation for shareholders.

Singapore introduced Goods and Services Tax (GST) with an initial rate of 3% on 1 April 1994, increasing government’s revenue by S$1.6 billion (US$1b, €800m) and establishing government finances. The taxable GST was increased to 4% in 2003, to 5% in 2004, and to 7% in 2007.

The Singapore government runs two investment companies, GIC Private Limited and Temasek Holdings, which manage Singapore’s reserves. Both operate as commercial investment holding companies independently of the Singapore government, but Prime Minister Lee Hsien Loong and his wife Ho Ching serve as chairman and CEO of these corporations respectively. While GIC invests abroad, Temasek holds 31% of its portfolio in Singapore, holding majority stakes in several of the nation’s largest companies, such as Singapore Airlines, SingTel, ST Engineering and MediaCorp. As of 2014, Temasek holds S$69 billion of assets in Singapore, accounting for 7% of the total capitalisation of Singapore-listed companies.

In April 2013, the country was recognised as an increasingly popular tax haven for the wealthy due to the low tax rate on personal income, a full tax exemption on income that is generated outside of Singapore and 69 double taxation treaties that can minimise both withholding tax and capital gains tax. Australian millionaire retailer Brett Blundy, with an estimated personal wealth worth AU$835 million, and multi-billionaire Facebook co-founder Eduardo Saverin are two examples of wealthy individuals who have settled in Singapore (Blundy in 2013 and Saverin in 2012). Additionally, Australian mining magnate Gina Rinehart owns property in Singapore and American investor Jim Rogers moved to Singapore in 2007—Rogers has identified the 21st century as an era in which Asia will dominate and wishes for his two daughters to learn Mandarin as a key outcome of the relocation. Chinese Media TV celebrities Jet Li and Gong Li have also taken up naturalised Singapore citizenship.

Corpo-
rate tax
Perso-
nal income tax
VAT or
sales tax
Social Security Rate for Companies Social Security Rate for Employees
17% 22% 7% 17% 20%

How to Start a Business in Singapore

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