5 insider tips for German companies setting up in Singapore

Large German multinational companies (MNC) have had a long history of setting up a regional business in Singapore. Recently, German testing, inspection and certification company, TUV SUD, broke ground for the construction of a S$100 million regional hub. This is the company’s first major real estate investment outside of Germany.

Speaking to reporters at the ground-breaking ceremony, TUV SUD board member Ishan Palit said: “Our decision to further invest in Singapore demonstrates our confidence in this market and its aspirations for the future. Singapore is constantly innovating and is always prepared to test new technologies and solutions to propel its Smart Nation vision."

However, Singapore may also prove attractive for Mittelstands or German small- and medium-sized companies (SMEs). Like in Germany, SMEs are a major driving force for Singapore’s economy – making up 99% of enterprises and employing 70% of the workforce.

However, there are some considerations that every German company looking to do business in Singapore should note. Here are five insider tips.

1) Decide on your regional HQ role

There are different foreign company registration options.

Firstly, you will need to decide if you are setting up a branch office, subsidiary or representative office in Singapore.

A branch office is a registered legal entity which is treated as an extension of the parent company. However, it is non-resident which means that the head office will be liable for any acts committed by the Singapore office.

The subsidiary office, on the other hand, is a locally incorporated private limited company with the foreign company as the major shareholder. In Singapore, companies can be 100% foreign owned but the head office cannot be held for debts and liabilities for the subsidiary office.

View foreign company registration options.

Secondly, you will also need to establish the business operations of your company in Singapore. This will have implications on tax and incentives.

For example, under the Finance & Treasure Centre Incentive scheme, companies growing their treasury management capabilities in Singapore is eligible for reduced corporate tax rates of 8% and withholding tax exemption on interest payments.

The Research Incentive Scheme for Companies, encourages businesses to set up research and development operations in Singapore with reduced qualifying corporate tax rates of 5% to 10%.

2) Know which government agency to work with

This brings us to the next point – it is important to work with the relevant Singapore government agency for your industry.

There are some common agencies that you will need to know for your Singapore company registration such as the Accounting and Corporate Regulatory Authority of Singapore (ACRA) and Central Provident Fund Board (CPF).

There is also only one national taxation authority – the Inland Revenue Authority of Singapore (IRAS). There is no municipal tax or “Gewerbesteuer” and IRAS handles all corporate and personal tax issues including any free trade or double taxation agreements between Singapore-Germany.

However, industry-specific agencies may be better able to assist with your set-up. For example, you may need to seek permission from the Monetary Authority of Singapore - the country’s regulatory and central bank, if you are incorporating a business in the finance, securities, insurance and asset management sectors. The MAS also rolls out its own incentives for financial technology companies and offers a sandbox for new entrants to Singapore.

3) Familiarise yourself with employment policies

Like in Germany, the premiums for national retirement and health insurance programmes are borne by both the employer and employee. There is also a scheme similar to the German Church Tax or “Kirchensteuer” where the employer deducts the employee’s pay for contribution to their ethnic community groups such as CDAC, ECF, MBMF and Sinda.

There are, however, other employment policies that are unique to Singapore. Singapore does not have a minimum wage requirement but there are regular updates on foreign work visas that may have an impact on your hiring policy. The Ministry of Manpower issues these guidelines but you may access our quick guide to various Singapore immigration schemes here .  

While the National Trade Union Congress is a confederation of trade unions and professional associations, the Tripartite Alliance for Fair & Progressive Employment Practices (TAFEP) – a collaboration among the government, labour union and employer representatives – plays an active role in ensuring fair employment opportunities for local Singaporeans. TAFEP has laid guidelines around recruitment practices covering even freelancers.

4) Explore different locations for your HQ set-up

Although Singapore is a small island, there are regional hubs that help companies of similar backgrounds interact and expands business opportunities, for example, the International Business Park (German Centre) and Clean Tech Park.

One-north in the western part of Singapore is designated as a research and business park for the biomedical sciences, info communications technology, science and engineering.

Relevant government agencies such as Agency for Science, Technology and Research are based there. Ride-hailing giant, Grab, is building a S$181 million headquarters in one-north while pharmaceutical giant, GSK’s regional headquarters their functions as a commercial hub for more than half of the company’s global healthcare operations.

Seletar Aerospace Park in the north-eastern part of the island is designated as a global aviation hub where Rolls Royce has built a S$700 million manufacturing, testing, training and research facility.

Check out five reasons why German companies should set up in Singapore

5) Take advantage of the local German network

There are several local German associations that can help soften your landing in Singapore such as the Goethe-Institut, Singaporean-German Chamber of Industry and Commerce, German Centre for Industry and Trade and the German embassy. Established in 1856, the German Club is also the oldest foreign club in Singapore.

During Hawksford’s 2019 German Roadshow, we have seen that Singapore remains the European Union’s largest trading partner in Southeast Asia and that many German companies continue to choose Singapore as their first base outside of the home country.