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Doing Business - Singapore vs United States of America

The two most important considerations in forming a business are the choice of business structure and the choice of business jurisdiction. Today, the location of a business can affect its efficiency, effectiveness and sustainability. Given the traditional association of entrepreneurship with the United States of America (US), many businessmen assume that it is the most favorable country for establishing and operating a business. However, in today’s business environment the advantages of forming a business in US are less significant than they once were. Instead, jurisdictions such as Singapore that have devised business friendly policies offer better prospects for entrepreneurs.

In recent times, the advantages of forming a business in the U.S. are less significant than they once were. In this comparative report, we look at the differences in doing business in Singapore and the U.S. 

Economic Overview

With a population of 325 million, the U.S. offers the largest consumer market on earth. Household spending in the U.S., in fact, accounts for over a quarter of global household consumption. In addition, U.S. free trade agreements with several other countries also provide companies enhanced access to hundreds of millions of additional consumers. Besides the size of its market, investors are also attracted to its business-friendly environment and quality of life. 
The Singapore economy is primarily supported by activities in the manufacturing and services sectors, which account for a fifth and two-thirds of its output¬¬¬ respectively. Singapore’s natural connectivity to emerging markets in the region, positive labour-employer relations, favourable tax regime, and strong rule of law have all contributed to the country’s competitive advantage, thereby enabling the Singapore economy to grow consistently and rapidly over the past four decades. 

Business Environment

Though ranked 4th in the world for the ease of doing business 6 years ago, the U.S. has slipped to the 8th position in 2017 (World Bank Doing Business Report). By contrast, Singapore ranked 2nd in the world for its pro-business environment, which allows the efficient and transparent functioning of businesses. The following are key comparatives at a glance: 
Starting a business (Singapore) #6; Starting a business (U.S.) #51
Enforcing contracts (Singapore) #2; Enforcing contracts (U.S.) #20    
Getting credit (Singapore) #20; Getting credit (U.S.) #2  
Each state in the U.S. has their own laws and court systems. However, the federal law takes precedence over these state decisions. In the U.S., the jury is perceived as a layer of protection against the abuse of power. Hence, while a judge rules on matters of law and instructs the jury of what is against the law, a jury decides on facts. A judge, however, can overrule a jury, though only occasionally. 

Singapore’s legal system is based on the English Common Law.  In 1969, trial by jury was abolished as entrusting matters of life and death to 7 laymen was deemed undesirable. Today, Singapore is ranked 9th globally for its rule of law, and is the only Asian state in the top 10 (World Justice Project Rule of Law Index 2016). The U.S., on the other hand, is ranked 18th. 

Workforce

In both jurisdictions, women are a significant part of the labour force at 46.8% in the U.S. and 45.8% in Singapore. The median age of the labour force in the U.S. and Singapore are comparable at 41.9 and 43 respectively. 
1 in 3 adults in the U.S. hold a degree or higher, while 43.8% of Singaporeans received tertiary education. 

Business Language

English is the language used in business in both jurisdictions. However, given that the U.S. holds the world’s fifth largest Spanish-speaking population, Spanish is the second most common language in the U.S. In Hawaii, both English and Hawaiian are official languages, while in Alaska, English and 20 other native languages are made official languages. 

Though English is the main language used in legislation, regulation and business in Singapore, most Singaporeans also receive formal education on their second languages, which include Malay, Mandarin and Tamil. 

Business Incorporation & Set-Up

There are two main types of U.S. business entities: the business corporation (company limited by shares) and the limited liability company (LLC). Business entities are formed under state law instead of federal law. This means that if a business wants to do business in another state, it must register to do business there. As mentioned above, each state makes its own laws, so requirements may differ between states. In addition, each state has its own register of company names.  

A private limited company is the most flexible and scalable type of business entity in Singapore. It is also the most preferred form of business entity, as opposed to sole proprietorship or limited liability partnership. A director and a shareholder are required for incorporation. 

It takes 6 days to incorporate a company in the U.S., while procedures to form one in Singapore can be completed in a day. 

Filing Requirements

Singapore companies are required to declare their revenue amount and Estimated Chargeable Income (ECI) to the Inland Revenue Authority of Singapore (IRAS) at the end of each Financial Year. Companies must also hold an Annual General Meeting (AGM) once every calendar year. 

In the U.S., publicly traded companies must submit a Schedule 10-K, which includes audited financial statements, to the U.S. Securities and Exchange Commission annually. Private companies are not required by law to provide audited financial statements, but best practices and contractual obligations may require that small businesses supply such documents. 

Immigration Requirements

Individuals travelling to the U.S. for business-related purposes (without actual work or receiving payments) can apply for the B-1 visa, which lasts 90 days. A H-1B visa may be obtained if the individual is planning to work in a business he or she starts in the U.S. However, the job should be one that normally requires a bachelor’s degree or higher. Individuals coming to the U.S. to engage in substantial trade or develop an enterprise can apply for the E-2 treaty 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

In the U.S., federal income tax is progressive of up to 39.6% of taxable income, while taxes for federal social insurance programmes (i.e. Social Security, Medicaid, Medicare) are taxed separately. 

In Singapore, the progressive tax rate for personal income ends at 22%.

Corporate Tax

Federal corporate tax varies from 15 to 34%, or 35% if taxable income exceeds US$335,000. 
In contrast, companies in Singapore enjoy a headline corporate tax rate of 17% on their taxable income. 

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. 
On a federal level, a R&D tax credit incentivises investments in innovation within the U.S. Tax incentives can also vary between states. For instance, the California Competes tax credit is an income tax credit available to businesses that want to stay and grow in California. In New York, a Start-Up NY programme offers new businesses the opportunity to pay zero taxes for 10 years. 

Withholding Tax

Residents in the U.S. making payments to non-residents must generally withhold 30% of the payment. 
Singapore’s withholding tax, however, ranges from 10 to 17%. 

Foreign-Sourced Income

In the U.S., resident corporations are taxed based on worldwide income, whereas for Singapore, profits earned and retained outside the country are not taxable.

TAX

SINGAPORE

USA

Corporate Tax

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

15% - 35%

Branch Tax

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

30%

Capital Gains Tax

-

20%

Income Tax

0% - 22%

15% - 35%

Withholding Tax
- Dividends
- Interests
- Royalties


0%
15%
10%

 

30%
30%

30%

Double Taxation Relief

Yes

Yes

Foreign-Sourced Income Tax

May be taxable if received or deemed received in Singapore

Yes

GST/VAT

7%

0% - 7.5%

Country Rankings at a Glance

YEAR

CATEGORY

SINGAPORE’S RANK

US’ RANK

SOURCE

2017

Ease of Doing Business

2

8

World Bank, Ease of Doing Business Report

2016

Ease of Doing Business

1

7

World Bank, Ease of Doing Business Report

2015 – 2016

World’s Most Competitive Economy

2

3

World Economic Forum, Global Competitiveness Report

2015

World’s Best Country for Business

8

22

Forbes Best Countries for Business List

2014

Country Most Open to Trade

1

15

World Economic Forum, Global Enabling Trade Report

2015

World’s Freest Economy

2

12

Heritage Foundation’s Index of Economic Freedom

2015

City with Best Quality of Living

26

27

Mercer’s Quality of Living Survey

2015

Country with Least Corruption Perception

8

16

Transparency International’s Corruption Perceptions Index

2015

World’s Most Competitive Economy

3

1

IMD, World Competitiveness Yearbook

2009

Country with Lowest Tax Misery

11

18

Forbes Tax Misery and Reform Index

2010

World’s Most Innovative Economy

7

11

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

2010

World’s Most Economically Globalized Country

1

57

KOF Index of Globalization

2010

World’s Best Labor Force

1

2

BERI’s Labor Force Evaluation Measure


On a Final Note

Albeit operating within a large market, companies in the U.S. face the challenges of a complex taxation system, restrictive labour regulations and bureaucratic inefficiencies. Though Singapore is a much smaller market, it more than makes up for it with its supreme connectivity to key regional economic partners. Better tax laws, more options for incorporating entities and a business-friendly environment remain key draws of Singapore’s successful incorporation climate, as compared to the U.S. 

 

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