Doing Business - Singapore vs United Kingdom

London has time and again shaken off the rest of Europe to be crowned the region’s leading economic powerhouse. Despite its Brexit vote, the UK emerged the strongest of the world’s advanced economies by the end of 2016, with growth accelerating in the months after.

Singapore, on the other hand, is one of the smallest countries in the world and once came under British rule. With sheer guts and gumption since self-independence, however, Singapore successfully leapt from Third World to First – within a generation. Today, the city-state’s foreign exchange centre is the third-largest globally, after London and New York.

When choosing to do business in Singapore or the UK, a business must note the few but distinct differences between the jurisdictions, in areas such as the workforce, immigration and taxation. This report serves as a comparative guide. 

Economic Overview

The UK is the fifth largest economy in the world and is fueled by the strength of its services sector, which accounts for some 79% of its total GDP. In fact, the largest UK exports are financial services as a result of the credibility the country has gained in this sector. In addition, the country is the world’s 11th biggest manufacturing nation. Key industries include automotives, pharmaceuticals, and aerospace. 
Strategically located in the heart of key Asian trading routes, Singapore is Asia’s most competitive business country. Like the UK, while growth is fueled by a thriving financial services sector, exports in electronics and chemicals provide the main sources of revenue for the economy. When it comes to GDP per capita, Singapore ranks higher at #9 compared to the UK at #13. 

Business Environment

For factors such as corporate tax rates, set-up costs, energy prices and transparency, the UK stands at #7 in the ranking of 190 economies on the ease of doing business (World Bank Doing Business Report 2017). Singapore, on the other hand, ranks 2nd in the world after New Zealand. The following are key comparatives at a glance: 
 Starting a business (Singapore) #6; Starting a business (UK) #16
 Protecting minority investors (Singapore) #1; Protecting minority investors (UK) #6
 Enforcing contracts (Singapore) #2; Enforcing contracts (UK) #31
The UK comprises 3 legal systems – the English law applies in England and Wales, while the Northern Ireland law applies to Northern Ireland. 

Scots law, which applies in Scotland, is based on civil law principals with common law elements. 

As Singapore inherited its legal system from the British, who founded modern Singapore, judges in Singapore continue to refer to English case law, as well as relevant Singapore cases. The law, however, has been modified to some extent by amendments made to statutes. 

In the World Justice Report’s Rule of Law Report 2016, Singapore ranked 9th in the world, while the UK follows on the heels at 10th. 

Workforce

The Labor Force Participation Rate (LFPR) in the UK is recorded at 78.4%, while that of Singapore is 60.4%. The female LFPRs in the UK and Singapore were comparable at 57% and 58% in 2016 respectively, while the male LFPRs were recorded at 69% and 76% respectively. 

The minimum wage in the UK is £7.50 (age 25 and above), while such is not prescribed in Singapore. 

In the UK, all workers have the legal right to ask for flexible working arrangements, after 26 weeks of employment. In Singapore, however, companies can apply for grants and incentives for its flexible work arrangements. 

Business Language

British English is the English language spoken and written in the UK. Other major languages include Welsh and Scots. While two-thirds of UK citizens cannot speak any foreign language, one-third can speak and understand French, German and Spanish.

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

Business Incorporation & Set-Up

The four main types of business entities in the UK are Sole Trader, Partnership, Limited Liability Partnership and Limited Liability Company. Similarly, business structures in Singapore include the Private Limited Company, Subsidiary Company, Representative Office and Sole Proprietorship. 

Starting a business in the UK requires 4 procedures and take 4.5 days, whereas incorporating in Singapore requires 2 steps, which can be completed within a day. 

Filing Requirements

Private companies in the UK are not required to hold any general meetings. However, private limited companies must file full annual accounts and company tax returns with the Companies House and Her Majesty’s Revenue and Customs (HMRC). Public companies, however, must hold annual general meetings (AGMs) within 6months of the end of each financial year. 

All Singapore incorporated companies are required to hold AGMs and file annual returns. 

Immigration Requirements

Individuals looking to set up a business in the UK can apply for a Tier 1 (Entrepreneur) visa. This visa is valid for a maximum of 3 years and 4 months and also requires the individual to have access to investment funds totaling more than £50,000. Alternatively, investors with an access to at least £2 million in investment funds can apply for the Tier 1 (Investor) visa. 

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

 

With a progressive tax rate of up to 22%, Singapore offers the lowest effective tax rates in the world. In the UK, income tax rates for higher brackets of taxable income go up to as high as 45%. 

Corporate Tax

Companies in Singapore enjoy a headline corporate tax rate of 17% on their chargeable income, while a 20% corporate tax applies in the UK. 
Tax Exemptions & Incentives
For the first 3 years, newly incorporated companies in Singapore can enjoy full tax exemption on their first S$100,000 of chargeable income. Small business entities in Australia with turnovers of less than AUD 2 million are entitled to a corporate tax rate of 28.5%.  

A company in the UK may claim for R&D tax reliefs for innovative projects that seek an advance in the overall knowledge or capability in a specific field. 

Withholding Tax

Payments made by a resident company to a non-resident company are subject to a withholding tax of 20%. There is no requirement to deduct withholding taxes from dividends. 
Singapore’s withholding tax ranges from 10 to 17%. 

Foreign-Sourced Income

Unlike non-resident companies, resident companies in the UK are taxed on foreign income. In Singapore, profits earned and retained outside the country are not taxable. 

TAX

SINGAPORE

UK

Corporate Tax

17%
(Eligible new start-ups are given full exemption on their first $100,000 for the first 3 years)

20%

Branch Tax

17%
(Partial exemption
on first $300,000)

20%

Capital Gains Tax

-

20%

Income Tax

0% - 22%

0% - 45%

Withholding Tax
- Dividends
- Interests
- Royalties


0%
15%
10%

 

0%
20%
20%

Double Taxation Relief

Yes

Yes

Foreign-Sourced Income Tax

May be taxable if received or deemed received in Singapore

Yes

GST/VAT

7%

20%

Country Rankings at a Glance

YEAR

CATEGORY

SINGAPORE’S RANK

UK’S RANK

SOURCE

2017

Ease of Doing Business

2

7

World Bank, Ease of Doing Business Report

2016

Ease of Doing Business

1

6

World Bank, Ease of Doing Business Report

2015

Ease of Doing Business

1

8

World Bank, Ease of Doing Business Report

2015

World’s Freest Economy

2

13

Heritage Foundation’s Index of Economic Freedom

2015

World’s Most Competitive Economy

3

19

IMD, World Competitiveness Yearbook

2014-2015

World’s Most Competitive Economy

2

8

World Economic Forum, Global Competitiveness Report

2014

Country Most Open to Trade

1

6

World Economic Forum, Global Enabling Trade Report

2010

World’s Best Country for Business

5

10

Forbes Best Countries for Business List

2010

World’s Most Innovative Economy

7

14

INSEAD and the Confederation of Indian Industry’s Global Innovation Index

2010

Intellectual Property Protection

3

17

World Economic Forum, GlobalCompetitiveness Report

2010

World’s Freest Economy

2

10

Fraser Institute’s Economic Freedom of the World Index

2010

World’s Best Labor Force

1

11

BERI’s Labor Force Evaluation Measure

2010

World’s Best Country to Work In

2

8

IMD World Competitiveness Yearbook

2009

Country with Lowest Tax Misery

11

37

Forbes Tax Misery and Reform Index

 

On a Final Note

The UK is considered to be the epicentre of the global financial industry and ranks high as a business host. Though the UK makes the perfect entry point for the rest of Europe, however, Singapore is the preferred gateway to Asia and remains a highly sought-after investment destination for business formation. 
 

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