Setting Up a Company - Singapore vs China
Selecting an appropriate offshore location for setting up and operating a business is a crucial decision for most entrepreneurs. Some key factors of consideration include foreign ownership policy of the jurisdiction, company incorporation procedure and time-line, minimum statutory requirements and compliance, etc.
- Singapore allows foreign entrepreneurs to set up a Singapore private limited company with 100% foreign shareholding. There are no restrictions on the scope of business activities that a company can engage in.
- China allows foreign entrepreneurs to set up a wholly owned limited liability company, also known as a Wholly Foreign Owned Enterprise (WFOE). However, companies can engage only in “encouraged” fields of business activity and not those which are “restricted” or “prohibited”.
Minimum Statutory Requirements
- In Singapore, the minimum incorporation requirements include: a local registered address (residential or commercial); at least 1 local resident director (a Singapore Citizen, a Singapore PR, or a foreigner holding an Employment Pass, Entrepreneur Pass or Dependent Pass); a local resident and qualified company secretary (must be a natural person); a minimum of 1 and maximum of 50 shareholders (natural persons or corporates); and a minimum paid up capital of SGD 1.00.
- To set-up a WFOE in China, foreign entrepreneurs must comply with the following requirements: a local registered address (only commercial and not residential); at least 1 director, unless the company forms a Board of Directors, in which case a minimum of 3 and maximum of 13 directors are required (directors need not be Chinese citizens or residents); a minimum of 1 and maximum of 50 foreign shareholders (natural persons or corporates); a legal representative (need not be a Chinese citizen or local resident); a General Manager (need not be a Chinese citizen or local resident); a supervisor; and a minimum registered capital that ranges from CNY 100,000 – CNY 1 million (depending on the nature of business and local authorities requirements).
- Company registration in Singapore is fully-computerized and can be completed within 1 day via electronic means. There are only two major steps involved in company formation – obtaining company name approval and filing incorporation documents. Post-incorporation, the company can apply for a business license (if required), open a corporate bank account and register with the tax department.
- Company incorporation in China is complex and time-consuming, involving several procedures such as: submitting a project proposal, obtaining company name approval, submitting a feasibility study report, filing incorporation documents and obtaining a business license. Post-incorporation, the company is required to open a corporate bank account, register with the tax department, obtain a Foreign Exchange Registration Certificate, register with the local statistical bureau and financial bureau, etc.
- Singapore company incorporation involves minimal formalities and can be completed in less than 24 hours.
- Setting up a company in China involves transacting with several government bodies and it can take anywhere between 2-3 months to obtain approvals.
Annual Filing Requirements
- In Singapore, an Annual Return must be filed with Companies Registrar and Income Tax Return with the Singapore tax department each year. Small companies are exempt from filing audited accounts with the returns.
- In China, companies must submit Income Tax Returns along with audited accounts to the tax department on a monthly, quarterly and annual basis. In addition, a WFOE must submit an audited annual report for annual inspection to several government authorities. No company is exempt from the audit requirement.
- Singapore charges a corporate tax rate of approximately 8.5% for profits up to S$300K and a flat 17% for profits above S$300K. GST stands at 7%.
- Taxes are significantly higher for WFOEs in China. The current corporate tax rate stands at 25%. Some companies may qualify for lower rates of 20% (certain small companies) or 15% (certain technology companies). VAT stands at 17% for companies with an annual turnover exceeding CNY 1.8 million, while 6% is the VAT rate for all other companies.
On a final note
Singapore offers better prospects for company set up and operation as compared to China. A “restriction-free” foreign ownership policy, 1 day company incorporation, minimal statutory compliance and a low tax regime validate Singapore’s position as an easy country to set up a business, as compared to China.