Offshore Structure: Singapore VS Hong Kong Company Comparison

シンガポール has one of the lowest corporate tax rates in the world, excluding capital gains tax, and is ranked number one in the World Banks Ease of Doing Business Index each year.Thanks to its simple tax system and low wages for companies and individuals, Hong Kong has become a popular financial center, occupying a prominent position in Central Asia. They develop talent skills that are ready to be developed for the economy.

In recent decades, both Hong Kong and Singapore have always been considered large corporations around the world as the best places to do business. In fact, they attract millions of foreign investors every year, and their number does not end there.This article discusses the differences between the integration systems of Singapore and Hong Kong and highlights tax issues and legal requirements. 

Differences between Singapore and Hong Kong Incorporation Requirements
Notably, both occupy the top two places of the World Banks Ease of Doing Business rankings, with Singapore at the top. This is why Singapore is deemed Asias future international banking and trading centers, which provide immense benefits to holding companies looking to invest in China, India, Indonesia, Thailand, Vietnam, and Malaysia.Both are known for their stable banking and legal systems and no value-added tax. They have positioned themselves as the go-to destination for providing an additional layer of distance between an Asian subsidiary and the parent company.The two jurisdictions have relatively flexible tax laws, with dividends generally not taxed.

We compare the incorporation requirements of the two jurisdictions below:

Overview of annual compliance
Every company in Hong Kong and Singapore must follow the annual filling requirements so that it can keep maintaining its good legal standing and avoid legal problems. In case a company cannot fulfill the requirements before specific deadlines, it will have to face a penalty or even a forced strike-off. There are 3 main points which are needed to be done in order to keep up with deadlines:Holding annual general meeting.Filling of annual returns.

Filing Profit tax return (PTR) as in the case of Hong Kong company, or Estimated Chargeable Income (ECI) and tax return as for companies in Singapore. An annual audit is required if a company is not considered a small one in Singapore. However, in Hong Kong, the annual audit is mandatory.

Additionally, the records of the accounting activities, the minutes of meeting, and registers of company particulars must be maintained in case of periodic inspection by the government officers.

In Singapore, there are two government authorities responsible for the formulation and deception of most of the statutory requirements governing local companies: Accounting and Corporate Regulatory Authority (ACRA) – national companies registries where to file annual return, and Inland Revenue Authority of Singapore (IRAS) –  national tax authority where to file ECI and annual tax return.

In Hong Kong, things go in the same direction. However, there is a bit difference in the name of the authorities. Whereas in Singapore, there are ACRA and IRAS, in Hong Kong, the file will be sent to the Companies Registry (CR) and the Inland Revenue Department (IRD).

Differences between Singapore and Hong Kong Taxation Requirements
While the incorporation requirements do not vary too much in the two jurisdictions, Singapores leading edge over Hong Kong lies in its taxation policies.In general, while Singapore follows territorial taxation with remittance, Hong Kongs jurisdiction is purely territorial. Both impose no capital gains tax. There is also no withholding tax on dividend distribution in the two jurisdictions, and advance rulings on taxation are possible too.
Banking facilities
The banking industry plays an essential role in both Singapore and Hong Kongs economy. Both countries possess a fully regulated and sound financial system with the presence of the majority of the strongest banks in the world. Overall, banking facilities and services in these two jurisdictions are well–developed for worldwide use with multi-currency and online banking.
Labor force
According to 2019 GCR (Global Competitiveness Report), Singapore was ranked first and Hong Kong was in seventh place in terms of labor market efficiency.In connection with the quality of the workforce, Hong Kongs employees are normally English-educated although they are more comfortable with speaking their main language – Cantonese or Mandarin – in daily life. Thus, Hong Kong workforce is an ideal choice if you are trying to focus your market to nearby countries such as Taiwan and China.In Singapore, there is a significant number of highly educated and well–trained employees from both local universities and foreign ones. Not only English, but singaporean can also communicate fairly in 3 other languages which are Chinese, Malay, and Tamil. Not to mention the fact that most of its people are bilingual fluently. Being well-known for building everything from precise knowledge, as well as being an international hub with various platforms, Singapore attracts the flow of the worlds best talents into its industry.

Immigration policy
In terms of immigration, Hong Kong and Singapore both provide an open immigration policy with appropriate work visa provisions for foreigners who wish to set up their business in these jurisdictions.Although Singapore has slightly tightened its overall immigration recently, it still continues to encourage the immigration of high–skilled and innovative foreign investors and employees who are willing to establish their businesses or work inside its territory.

Each of them who meet the qualification above can start setting up company or be employed under different types of work pass subject to their respective criteria such as EntrePass (Entrepreneur Pass – a word pass permits entrepreneurs who want to start and operate a new business in Singapore) or Employment Pass.

Turning to Hong Kong, nationals of about 170 countries and territories are allowed visa-free visits to this destination for periods ranging from 7 to 180 days. Short-term visitors are allowed to enter Hong Kong on a visitor visa to conduct their business negotiations and sign contracts.

Besides, the government has also introduced appropriate work visa provisions, to cater to the needs of entrepreneurs who may wish to relocate to Hong Kong to run their business or who may want to hire foreign professional employees to work in their company, or those who would like to move to the country for lawful employment purpose.

Wise investors or entrepreneurs will always spend their time evaluating the cost of living before going to final decisions in the incorporating process. ECA Internationals rank in 2019 shows that Hong Kong is ranked as the most expensive city in Asia and fourth in the world. Thus, expatriates have recently preferred Singapore as their destination over Hong Kong.

If you are looking for housing in these jurisdictions, the rental for an apartment in Hong Kong is more expensive than in Singapore, about 47% higher, according to CBREs fifth annual Global Living Report released in April 2019. In regard to education cost, it can be found that tuition fees for children at international schools are lower in Singapore. On the other hand, Hong Kong has been announced to have increased the fee. For those who are seeking domestic help, the costs that related to food and health care are slightly cheaper in Singapore.

To sum up, Hong Kong and Singapore all proved themselves potential destinations for setting up new businesses. However, through many outstanding points, it can be seen that Singapore has captured more attention from companies and entrepreneurs all over the world. It has become Hong Kongs most immediate competitor in many economic angles and will soon turn into the more preferred international business destination in Asia Pacific.With over 10 years of experience, Elite Stag has always been focusing on providing companies with professional one-stop offshore corporate services, covering domestic and foreign company structure consulting, cross-border accounting and tax planning, special permits application, HR outsourcing and Visa services as well as preferential benefits application, etc.

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