An India Singapore Corporate Tax comparison – What to expect when you start your business in Singapore

 

What to expect when you start your business in SingaporeCredit: Business Setup Worldwide

 

As one of the fastest-growing economies in the world with its recent economic reforms, India presents a huge market and wealth of investment opportunities. Singapore, at the same time, continues to uphold a reputation as an established capital market in Asia and one of the world’s leading and trusted international financial centres. There are distinct differences that a business would need to take into consideration when scouting a location for its next phase of growth.

Macroeconomic Comparison

Parameters

India

Singapore

Annual GDP (2017)

2,600,000M.$

320,000M.$

Population (2017)

1,339,180,127

5,612,000

Surface Area

3,287,259 sq. km

719 sq. km

GDP Per Capita (2017)

1,941$

57,021$

Exports (2017)

298,376.2 M.$

373,236.7 M.$

Exports as a % of GDP (2017)

11.58%

115.14%

  

Ranking Comparison in various fields

Parameters

India’s Rank

Singapore’s Rank

Ease of Doing Business

77

2

Global Passport Power Index

68

2

Unemployment Rate (2016)

85

133

WEF Global Competitiveness Index

58

2

GII 2018 global rank

57

5

Global Peace Index

136

8

 

Business Outlook in Singapore

  • Stable government and effective regulatory system
  • Extensive free trade agreements
  • Highly regarded by international forums & reports
  • Gateway to the rest of Asia
  • Strong intellectual property protection
  • Access to highly skilled local pool of talents

 

 

Corporate Tax Structure and Rate in Singapore vis-à-vis India

Tax Slab / Exemption in Singapore

Under the Tax Exemption Scheme for New Start-Up Companies, qualifying new companies are given the following tax exemption for the first three consecutive years where the year falls in:

YA2020

  • 75% exemption on the first $100,000 of normal chargeable income
  • 50% exemption on the next $100,000 of normal chargeable income

 

YA2010 to YA2019

  • Full exemption on the first $100,000 of normal chargeable income
  • 50% exemption on the next $200,000 of normal chargeable income

 

Under the Partial Tax Exemption for all companies, all companies including companies limited by guarantee can enjoy the following tax exemption:

YA2020

  • 75% exemption on the first $10,000 of normal chargeable income
  • 50% exemption on the next $190,000 of normal chargeable income

 

YA2010 to YA2019

  • 75% exemption on the first $10,000 of normal chargeable income
  • 50% exemption on the next $290,000 of normal chargeable income

With effect from YA 2010, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. This is one of the lowest tax rates in Asia. The effective tax rate for first three years comes to 14.88% and in the forthcoming years would come to 15.26% after taking the partial tax exemption benefit.

Tax Slab / Exemption in India

Under the tax exemption for eligible startup companies, the startup incorporated after April 1, 2016, is eligible for getting 100% tax rebate on profit for a period of three years in a block of seven years provided that annual turnover does not exceed Rs 25 crores in any financial year. This will help the startups to meet their working capital requirements during their initial years of operation. This tax exemption is available only if certification is obtained from The Inter-Ministerial Board setup by Department of Industrial Policy and Promotion.

 

However, with a viewpoint of angel tax, when closely-held private companies receive equity funds from outsiders and these investments are made at a premium to the fair market value (FMV), it is held that the amount raised in excess to the fair value is taxable under Section 56 (ii) of the Income Tax Act as “income from other sources”. The rate of tax on such value is 30.9 per cent and it not only applies to matured private limited companies but also to small startups that took early-stage investments. Nevertheless, the matter is still pending and final verdict on the same has not been published.

Under Indian Taxation Laws, if certification is not obtained and if turnover for the previous year does not exceed INR 250 crores, two cases come into picture assuming the taxable income to fall between 1 Crore to 10 Crores.

Case 1: Normal Corporate Tax

Flat income tax rate of 25% would be applicable with an addition of surcharge of 7% and health & education cess of 4%.

Case 2: Applicability of Minimum Alternate Tax

In case MAT u/s 115JB is applicable, the flat income tax rate of 18.5% would be applicable with an addition of surcharge of 7% and health & education cess of 4%.

The rule says that the higher of the above two needs to be paid as tax to the credit of the Government. If we consider the Case 1 to be applicable, The effective tax rate comes to 27.82% which is much higher as compared to that of Singapore.

 

Tax on Capital Gains in Singapore vis-à-vis India

 

Singapore India
1. There is no concept of Capital Gain Tax

1. The long-term capital gains on sale of listed securities exceeding Rs.1 lakh are taxed at 10% without indexation

2.The short-term gains on securities with STT are taxed at 15 percent

3. Any sale of shares, securities, mutual funds etc. gets taxed under these tax laws

 

GOODS & SERVICE TAX IN SINGAPORE VIS-À-VIS INDIA

Singapore India

1. 1 of the lowest GST rates in the world

2. Flat 7% GST rates

3. Mandatory GST registration for revenue exceeding S$1 million, in any one financial year

4. Voluntarily GST registered scheme available

1. GST has recently been introduced in India

2. No Flat rates have been devised till date

3. Highest rate extends as high as to 28%

4. As many as 37 returns are to be filed annually

 


To Conclude:

With a politically stable government, locally based companies get to enjoy an encouraging and stable environment to conduct their businesses in Singapore. Singapore’s shipping industry coupled with an excellently managed sea port, inbound and outbound trade becomes very reliable and very efficient because of the geographical strategic location. Being a prosperous country, Singapore not only enjoys racial harmony, a peaceful environment coupled with low crime rates, companies get to enjoy uninterrupted and a progressive environment to conduct businesses. Having appeared in many different forums and reports with good appraisal by external sources, Singapore is an ideal location for many other companies to start their business in and a launchpad towards the rest of Asia. However, India has still a long way to go but the recent developments suggest that India is ready for creating a business-friendly environment. Overall, Singapore ranks far better than India in terms of Business Environment and the taxation structure is too beneficial for the assessee companies when compared with Indian taxation regime.

 

 

 

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