According to a report by Singapore’s Economic Development Board (EDB), 80% of the world’s top 100 tech firms have a regional headquarter in Singapore. Even companies that are already headquartered in Asia have chosen to establish a presence in Singapore to lead their Southeast Asia expansions. An example would be the Chinese tech behemoth, Tencent Holdings. The company has announced in September 2020 that it has selected Singapore as its beachhead to support its operations in SEA. Tencent’s new office in Singapore will house tech and business development functions such as cross-border commerce, cloud computing and e-sports. So in this article, we will be uncovering the top 6 reasons why tech companies are deciding to set up and invest in Singapore.
Free Trade Agreements (FTAs)
The Ministry of Trade and Industry Singapore (MTI) has signed over 23 bilateral and regional free trade agreements worldwide to help facilitate trade and investments. These trade agreements have allowed both investors and Singapore-based companies to enjoy tariff concessions, gain wider access to key sectors and enable faster entry into new and emerging markets. In other words, free trade agreements are designed to make trade and investment between two or more economies easier.
In addition, IPOS (Intellectual Property Office of Singapore) facilitates enhanced intellectual property protection, making it perhaps one of the more attractive benefits for tech investors as IP breaches can be one of the biggest challenges tech companies face when moving overseas. With trade agreements and intellectual property protection that works to tech companies’ advantage, they can set up regional headquarters in Singapore for research and development purposes with peace of mind.
Strategic Location
Singapore’s strategic geographical location has allowed it to transform from a relatively small island into the giant trading hub of Southeast Asia it is today. Not to mention, the country is one of the world’s top transportation hubs for sea and air cargo. Its container ports are the busiest in the world and Changi International Airport is linked to 300 cities in 70 countries, with more than 6,500 weekly flights. Located at the central heart of Southeast Asia, Singapore’s excellent global connectivity is an ideal hub to access other cost-effective manufacturing countries and emerging markets.
Skilled Workforce
At an astounding 97.5%, Singapore has one of the highest numbers of university graduates and literacy rates. With a high literacy rate, widely spoken English and numerous work passes, Singapore has attracted many experienced foreign talents to come work here. By setting up an office in Singapore, tech companies may have access to global talents without being geographically limited.
Low Corporate Tax Rate
Singapore has a corporate tax rate of 17%, which is one of the lowest in the world. To put it in comparison, its neighbouring country Malaysia has a 24% corporate tax rate. Furthermore, new companies such as startups are also eligible for tax incentives for the first three consecutive years, a 75% exemption on the first S$100,000 of their normal chargeable income and also a further 50% tax exemption on taxable income of up to S$100,000. These benefits combined with its government’s business-friendly policies have allowed it to be the best country to start up a business in the Asia Pacific region.
Politically Stable
Singapore's resilient political stability, exceedingly low corruption rates and transparency in public institutions have made it a safe haven for investors globally. This has made Singapore a trusted partner for businesses and allows investors to be more ambitious and be more willing to take risks.
Singapore Government Funding for Businesses
The Singapore government offers a series of grants to businesses in relevant sectors which requires aid, including:
- Productivity Solutions Grant (PSG)
A grant that supports the adoption of IT solutions and digital productivity among businesses in Singapore. To qualify, the company must be registered and operates in Singapore. The solutions that are purchased, leased or subscribed must also be used only within Singapore.
- Enterprise Development Grant (EDG)
This grant aims to support Singapore businesses in key areas such as market and business development, innovation and productivity, and core functions and capability. To qualify for this grant, the SME must be registered and operates in Singapore, have at least 30% of the local shareholding and have a group annual sales turnover of less than S$100 million, or less than 200 employees.
- Double Tax Deduction for Internationalisation (DTDI)
This grant, on the other hand, encourages international expansion or internationalisation among businesses in Singapore. For businesses that carry out global business activities, they are entitled to a 200% tax deduction on eligible expenses for international market expansion and investment development activities.
Another example of the government’s pro-business policies is the series of financial aid released as part of its 2020 budget to help struggling businesses to cope with the COVID-19 virus impacting the international economy.
With Singapore’s pro-business policies that encourage economic growth and technological innovation, tech companies have found themselves a lucrative opportunity to establish a strong foothold in the heart of Southeast Asia and its emerging market. With the recently announced Tech.Pass by the Singapore government, many foreign investors have taken an interest in their eligibility for the pass. For more information on Tech.Pass or starting a business in Singapore, don’t hesitate to send in your immigration-related questions to us!