Getting started: Setting up a business
Incorporating in Singapore vs Hong Kong
Both Hong Kong and Singapore have their benefits and disadvantages in equal measure when it is a question of erecting a business. Some of the factors that you should consider when incorporating a company include the activity of the company, location of clients and suppliers, ease of doing business, taxation laws, ease of incorporating a company, type of documents required, and banking facilities required by the applicant.
Among others, these are some of the questions that any investor should ask before making their final decisions on where to invest. Both Hong Kong and Singapore are in Southeast Asia, and it is hard to choose the best place to set your business. Some decades ago, Hong Kong was popularly known for its business opportunities, and most expats preferred the location for business purposes and employment opportunities. However, that is not the case with the current business opportunities and possibilities. Singapore is picking, and it has grown into a business hub for the expats. These are some of the comparisons that this article will highlight to enable you to make informed decisions on the best place to invest.
Ease of Doing Business
Both Singapore and Hong Kong are known for their ease of doing business, and the entire process of starting a company in both countries is approximately three working days. The availability of infrastructures in both states is added advantages to the ease of doing business in Hong Kong as it is in Singapore. As of 2020, Singapore was ranked 2nd in the world with ease of doing business while Hong Kong was ranked 3rd. Therefore, Singapore wins with the ease of starting and doing business.
Any investor is often concerned with the taxation system of a country. One of the unique advantages that Singapore has is its relatively low and effective tax rates. However, both regions follow a single-tiered system for the personal income tax. The maximum income tax rate for Singapore is 22% for persons earning over SGD 320,000. On the other hand, the income tax for Hong Kong ranges between 2% to 17%.
The corporate tax in Singapore is at a flat rate of 17%, while that of Hong Kong is at 16.5% of the assessable profits and 15% for unincorporated businesses. The corporate taxation system in Hong Kong is relatively lower than that charged in Singapore. Both Singapore and Hong Kong do not charge capital gains tax.
Hong Kong does not allow carry backward business losses while Singapore does it for a year with a cap of S$100,000. However, both states allow for indefinite carrying forward losses while such losses in Singapore are subject to the shareholding test.
Ideally, it is possible to conduct business either in Hong Kong or Singapore. However, according to the comparisons above, in as much as Hong Kong is closer to China that makes its market base relatively larger, Singapore is still the best place in Asia to incorporate a company. Further, protests and political unrests in Hong Kong are some of the hindrances to doing business in the state. Comparatively, Singapore has stable governance and economy. Other competitive advantages that Singapore has over Hong Kong include world-class infrastructure, excellent connectivity, and strategic geographical location. In a nutshell, Singapore is much better in the ease of doing business in Asia.