Both Hong Kong and Singapore have been the most preferred countries for incorporating a business by foreign entrepreneurs. Selecting one among the two can be done only after a careful analysis of various factors with respect to the incorporation of a company.
For the past few decades, Asian countries have been the favorite business location for entrepreneurs all over the world. Having a stable government, stringent yet accommodative financial regulations, and numerous tax benefits for startups, has made Asia a welcoming ground for budding business tycoons.
The World Bank, in its reports, stated that the top 5 Asian countries which are easiest for foreign entrepreneurs to make an entry are Hong Kong, Singapore, Malaysia, Thailand, and Taiwan.
Amongst the listed countries, Singapore and Hong Kong have always had a tad bit of competition against each other when it comes to offering business opportunities to residents and foreign business persons.
Admittedly, both the countries give a plethora of possibilities to the businesses to expand further into other countries like China and India. Both the countries have groomed their business ecosystems to be accommodative of new start-ups while offering reasonable tax incentives.
Additionally, both Singapore and Hong Kong exhibit multicultural ethnicity and offer a phenomenal standard of living. Also, many overseas entrepreneurs find it comfortable to extend their business in either of the countries, as both Singapore and Hong Kong use English as one of their official languages.
Hong Kong or Singapore- Which is the Best Place to Incorporate a Company?
A superficial study of both countries shows that both are equally advantageous in setting a business into motion. It is a well-known fact that the place where a business is installed plays a key role in its success. Therefore, how would a foreign entrepreneur choose between the two? Sometimes choosing between the best is quite a challenge too!
The first factor to look into while setting up a business is the type of corporate entity it could be incorporated into. Both Singapore and Hong Kong offer various genres of corporate entities to set up the business, yet the private limited company has been the most popular set up amongst them.
A side-by-side analysis of the incorporation of a private limited company in Singapore vs Hong Kong is stated below:
|1||The authority responsible for incorporating the company is Accounting and Corporate Regulatory Authority (ACRA)||Companies Registry is the concerned authority|
|2||In the case of a foreign business owner, 100% ownership of the business is allowed||In the case of a foreign business owner, 100% ownership of the business is allowed|
|3||In the case of a private limited company, a minimum of 1 to a maximum of 50 shareholders is allowed||In the case of a private limited company, a minimum of 1 to a maximum of 50 shareholders is allowed|
|4||At least one of the directors must be a natural person and a resident of Singapore||At least one of the directors (resident or non-resident) must be a natural person|
|5||Company Secretary must be a resident of Singapore||Company Secretary must be a resident of Hong Kong|
|6||The minimum paid-up capital to start the business is $1||There is no mandatory minimum paid-up capital|
|7||The name of the company must be approved prior to the incorporation||There is no need for prior approval, but the name thus chosen must not infringe existing company names or trademarks|
|8||The incorporation of the company can be done online through BizFile||The incorporation of the company can be done online through e-Registry|
The taxation rates offered by both the countries are minimal, ranging between 16-17%. Taxation in Hong Kong is purely territorial. The income earned anywhere other than Hong Kong is not taxed, including the repatriated income. On the other hand, taxation in Singapore is partly territorial, wherein the income sourced out of Singapore alone is taxed and certain types of income earned in other foreign countries are subject to tax on receipt or remittance in Singapore.
Both the countries have signed agreements to prevent double taxation with major countries like China, Japan, Canada, and U.K. Singapore has signed agreements with more countries as compared to Hong Kong. While Hong Kong gives tax exemption for the first HK$20,000 earned, Singapore also offers government authorised tax incentives for the first SGD300,000.
Legal System and Trade Agreements:
Both the economies have entered into bilateral and multilateral free trade agreements (FTA) to encourage business and trading with foreign countries. To reinforce the same, both the countries provide low tariffs on several goods and services. Further, the legal system in both countries has taken after British Common Law. Both countries have very strict enforcement in the implementation of contractual obligations. Furthermore, both Singapore and Hong Kong follow a top-class dispute resolution system and promote the same through Arbitration and Conciliation.
Both Singapore and Hong Kong provide a high quality of life to their residents and for entrepreneurs who expand their businesses there. Also, both countries, although expensive, have been considered to be very safe to lead a normal life.
The World Economic Forum has ranked Singapore number 1 and Hong Kong number 2 in terms of infrastructural facilities. It might be a challenge to drill down and pick one country to be the best over the other for the incorporation of the company.
An entrepreneur should weigh the pros and cons of various factors, including the geographical location of the country, the market demand, and the ethnicity of the country to decide which would be the right place to launch the business.
But given the political unrest in Hong Kong, due to its relationship with China, a number of foreign businesses are now being installed in Singapore. Singapore has everything that Hong Kong has to offer, and perhaps a little more! Long story short, at present, it would be preferable to incorporate a business in Singapore rather than Hong Kong for political reasons if not the others.