Doing Business - Singapore vs India

While foreign entrepreneurs and firms have flocked to both countries, there remains distinct differences that a business would need to take into consideration when scouting a location for its next phase of growth. This report analyses the business landscape in both jurisdictions, in areas such as the workforce, business incorporation and taxation.

Economic Overview

Since the beginning of economic reforms in 1991, India has systematically evolved from a closed-door economy to an open one. Today, India's strengths span telecommunications, information technology, pharmaceuticals and jewellery, while retaining its position as the third largest start-up base in the world with over 4,750 technology start-ups.  As a domestic consumption-based economy, the increasing demand due to its population makes the country a good market.  
With one of the world’s most business-friendly environment for entrepreneurs, Singapore is the 12th best country in the world for business (Forbes’ Best Countries for Business rankings). India, on the other hand, ranked #85. Many multinational companies have chosen to set up base in Singapore, next to 154,000 small and medium enterprises. Singapore’s state-of-the-art public infrastructure, convenient online portals and transparent regulations are major draws for corporate entities and investors. 

Business Environment

Despite efforts to simplify business procedures (e.g. a new electronic system for payment of employee insurance contributions, new mechanisms for resolving commercial disputes), India remains one of the world’s toughest places to do business and is ranked #130 in the world (World Bank Ease of Doing Business Report 2017). Singapore, on the other hand, ranked #2.

Here are some key comparatives at a glance: 

• Starting a business (Singapore) #6; Starting a business (India) #155
• Getting construction permits (Singapore) #10; Getting construction permits (India) #185 
• Getting credit (Singapore) #20; Getting credit (India) #44 
• Enforcing contracts (Singapore) #2; Enforcing contracts (India) #72 

In terms of enabling cross-border trade, the World Economic Forum’s Global Enabling Trade Report 2016 ranked India 102nd, citing high costs and delays caused by domestic transportation, crime and theft, corruption on the border and burdensome import procedures. Singapore, on the other hand, topped the list with its efficient border processes and quality of transport services. 

Both India and Singapore have a common law legal system, with infrastructure bearing the influence of British colonial rule. However, when it comes to innovation environment, Singapore is ranked 4th in the world and 1st in Asia for having the best IP protection (World Economic Forum’s Global Competitiveness Report 2016-2017), while India was #42. 

Workforce 

With 1.3 billion people, India has the largest employable talent pool in the world. It is also a young population, with half of its people aged 25 and below. Two-thirds of its population is below the age of 35. This suggests a growing pool of buyers for goods and services, and a growing middle class. Labour costs in India are also generally lower than that in South East Asia.
Millennials, defined as those born between 1979 and 2000, make up the largest generation in the Singapore workforce today. The quality of Singapore’s workforce is also improving; the proportion of PMET jobs (i.e. Professionals, Managers, Executives & Technicians) has increased from 49% in 2007 to 55% in 2016. 
Business Language
India has 2 official languages – Hindi and English, which are both spoken very widely.

English is the main language used for business in Singapore, and is also the main language spoken at home. In accordance to their ethnicities, most Singaporeans also receive formal education on their second languages, which include Malay, Mandarin and Tamil. 

This makes both countries the preferred destinations for companies looking to expand overseas. 

Business Incorporation & Set-Up

In India, the following forms of business entities may be incorporated:

• Private Limited Company
• Public Limited Company
• Unlimited Company
• Limited Liability Partnership (LLP)
• Partnership
• Sole Proprietorship
• Liaison Office / Representative Office
• Project Office
• Branch Office
• Joint Venture Company
• Subsidiary Company

In Singapore, business structures include Sole Proprietorship, Partnership, Limited Liability Partnership, Limited Partnership and Private Limited Company. 

It usually takes 2 to 7 days to incorporate a company in India, while some cases can take up to 6 weeks. Incorporation in Singapore can be done within a day.
To incorporate a private limited company in India, a minimum of 2 shareholders and 2 directors are required. In Singapore, companies can be incorporated with 1 shareholder and 1 director. 

Filing Requirements

Companies in India and Singapore are required to hold an Annual General Meeting (AGM) every year. In both jurisdictions, the first AGM must be held within 18 months from the date of incorporation of the company. 
Similarly, companies must prepare their accounts and get them audited at the end of each financial year. These reports must later be filed with the registrars in the respective jurisdictions. 

Immigration Requirements

There are two relevant work visas in India – a Business Visa, which allows visits to India of up to 6 months for business purposes, and an Employment Visa, which is valid for up to 5 years. However, consult a visa agent to ensure a straightforward approval process. 
In Singapore, an Employment Pass can be issued to foreign professionals, managers and executives, who are required to draw a minimum monthly salary of S$3,600. In addition, foreign entrepreneurs wanting to start and operate a new business in Singapore can apply for the EntrePass. 

Income Tax

India’s progressive personal income tax rates go up to 30%, though surcharges of up to 10% are also applicable. In Singapore, however, the progressive tax rate for personal income ends at 22%.

In India, dividend distribution tax is tax paid by corporates on the dividend that they pay to their shareholders. The dividend distribution tax in India is 15%. Using a one-tier corporate tax system, Singapore avoids double taxing its investors. Hence, taxes paid by companies on their chargeable incomes are the last tax paid, since shareholders will not be taxed on dividends paid by a resident company. 

Corporate Tax

In India, a flat rate of 25% corporate tax is levied on the income earned by companies, while a surcharge of 5% is levied if the annual turnover of a company crosses 1 Crore Rupees (i.e. S$210,000). 

Companies in Singapore enjoy a headline corporate tax rate of 17% on their chargeable income. 

Tax Exemptions & Incentives

In certain cases, resident companies in India can deduct dividend received from other resident companies. Special provisions are also applicable to venture fund and venture capital enterprises. 

For the first 3 years, newly incorporated companies in Singapore can enjoy full tax exemption on their first S$100,000 of chargeable income.

Withholding Tax

Companies in India making payments to non-residents are subjected to a withholding tax of up to 40%. For instance, interests are subjected to 20% withholding tax, while payments for services by a company and individual are subjected to a withholding tax rate of 40% and 30% respectively. Dividends paid by resident companies, however, are not taxed. 

Singapore’s withholding tax ranges from 10 to 17%. Interests, for instance, are subjected to a 15% withholding tax, while service fees are subjected to the prevailing corporate tax rate. 

Foreign-Sourced Income

Foreign-sourced income is taxed only when remitted into Singapore whereas Indian companies are taxed on worldwide profits irrespective of whether they are remitted into India or not.

TAX	SINGAPORE	INDIA
Corporate Tax	17% (Eligible new start-ups are given full exemption on their first $100,000 for the first 3 years)	30% (resident companies) 40% (non-resident companies)
Branch Tax	17% (Partial exemption on first $300,000)	40%
Capital Gains Tax	-	15-20%
Income Tax	0% - 22%	0% - 30%
Withholding Tax - Dividends - Interests - Royalties	0% 15% 10%	10% 10% 10%
Double Taxation Relief	Yes	Yes
Foreign-Sourced Income Tax	May be taxable if received or deemed received in Singapore	Taxable
GST	7%	5-28%

 Country Rankings at a Glance

YEAR	CATEGORY	SINGAPORE’S RANK	INDIA’S RANK	SOURCE
2017	Ease of Doing Business	2	130	World Bank, Ease of Doing Business Report
2016	Ease of Doing Business	1	130	World Bank, Ease of Doing Business Report
2015	Ease of Doing Business	1	142	World Bank, Ease of Doing Business Report
2015	World’s Most Competitive Economy	3	44	IMD, World Competitiveness Yearbook
2015	World’s Freest Economy	2	128	Heritage Foundation’s Index of Economic Freedom
2014-2015	World’s Most Competitive Economy	2	71	World Economic Forum, Global Competitiveness Report
2014	Country Most Open to Trade	1	96	World Economic Forum, Global Enabling Trade Report
2014	Country with Least Corruption Perception	7	85	Transparency International’s Corruption Perceptions Index
2014	World’s Best Country for Business	8	93	Forbes’ Best Countries for Business Index
2014	World’s Best Country for Life Experience	3	20	HSBC’s 2014 Expat Experience Report
2010	Ease of Paying Taxes	4	164	PWC, IFC, World Bank’s 2011 Paying Taxes Survey
2010	World’s Best Labor Force	1	–	BERI’s Labor Force Evaluation Measure
2010	Most Efficient Bureaucracy in Asia	1	10	Political and Economic Risk Consultancy Survey 2010
2010	Best Place for Asians to Live	1	27	ECA International’s 2010 Location Ratings System
2010	World’s Lowest Risk City for Employers	3	59	Aon Consulting’s People Risk Index
2009	Country with Lowest Tax Misery	11	43	Forbes Tax Misery and Reform Index

On a Final Note

Though legally abolished in 1949, India’s caste system, however, remains something foreign investors struggle to understand. For example, since independence, the government has reserved a certain percentage of government jobs for lower castes. This, however, has been protested by upper castes in recent times.  In addition, the challenges of low-quality infrastructure, red tape and regulatory tangles are something to take into consideration when thinking about doing business in India or Singapore.