Hong Kong vs. Singapore? This is a very common question asked by many investors and entrepreneurs when entering the Asian market. Hong Kong and Singapore are two leading business hubs in Asia. They offer a wide range of resources necessary to start a business successfully. That is why they attract entrepreneurs from all parts of the world and create better opportunities for businesses.
The purpose of this article is to provide a comprehensive comparison for businesses considering incorporation in either jurisdiction. Hong Kong and Singapore both offer low taxation and straightforward procedures, but have distinct advantages. This article will discuss a multitude of factors a business should consider when incorporating in either location.
Ease and Speed of Incorporation: Hong Kong vs. Singapore
Here is a detailed description of the ease and speed of business incorporation in Hong Kong vs. Singapore.
Hong Kong Incorporation
Incorporating a business in Hong Kong is a relatively straightforward process and can be completed within one business day. You can incorporate your business online using the e-services offered by the Hong Kong authorities. A local registered address and a company secretary are required for setting up the business. You will also need a director of any nationality to incorporate the business. Incorporation in Hong Kong requires minimal documentation and is a cost-effective process.
Singapore Incorporation
Business incorporation in Singapore can be completed entirely online through the BizFile, typically taking between 1 and 3 days. It requires you to have a local registered address and a company secretary. However, the company’s director should also be a resident of Singapore.
Comparative Summary
When comparing Hong Kong and Singapore, both offer a speedy and smooth incorporation process. However, Hong Kong incorporation is highly user-friendly, with less rigid residency requirements and lower annual costs.
Corporate Taxation: Hong Kong vs. Singapore
Corporate tax rates and exemptions in Hong Kong and Singapore are as follows.
Hong Kong
Hong Kong follows a two-tiered corporate tax system. It imposes an 8.25% tax on the first HKD 2 million and a 16.5% tax beyond that. It applies a territorial tax system, which means only the income earned within Hong Kong is subject to taxation. Companies earning outside Hong Kong can apply for offshore tax exemption. Hong Kong has no capital gains tax, no dividend tax, and no GST. Moreover, general imports in Hong Kong are also exempted from tariffs. The Double Taxation Avoidance Agreement (DTA) network of Hong Kong is smaller in comparison to Singapore. It covers more than 50 jurisdictions and offers relaxation in several markets.
Singapore
Singapore charges a flat 17% corporate tax but offers targeted incentives that can significantly reduce the overall tax for startups. Qualifying startups can access exemptions on the first SGD 200,000 in profits, and businesses involved in R&D can get further deductions. Singapore also has a territorial tax system, which only taxes the profits earned within Singapore. A 9% Goods and Services Tax (GST) is also applied to most goods and services in Singapore. The Double Taxation Avoidance Agreement (DTA) network in Singapore is extensive, covering over 100 countries. This provides businesses with cross-border income streams with stronger international coverage.
Check our comparative taxation schedule :
| Feature | Hong Kong | Singapore |
|---|---|---|
| Corporate Tax Rate | Two-tiered system: – 8.25% on the first HKD 2 million – 16.5% beyond that | Flat rate of 17% |
| Territorial Tax System | Yes, only income earned within Hong Kong is subject to taxation. Companies earning outside Hong Kong can apply for offshore tax exemption. | Yes, only profits earned within Singapore are taxed. |
| Exemptions & Incentives | No capital gains tax, no dividend tax, and no GST. General imports are also exempted from tariffs. | Targeted incentives that can significantly reduce the overall tax for startups. Qualifying startups can access exemptions on the first SGD 200,000 in profits, and businesses involved in R&D can get further deductions. |
| Goods and Services Tax (GST) | None (no VAT either). | Yes, a 9% GST is applied to most goods and services. |
| Double Taxation Avoidance Agreement (DTA) Network | Smaller network compared to Singapore, covering more than 50 jurisdictions and offering relaxation in several markets. | Extensive network, covering over 100 countries, providing businesses with cross-border income streams with stronger international coverage. |
| Capital Gains Tax | None | None |
| Dividend Tax | None | None |
| Import Tariffs | General imports are exempted from tariffs. | Not specified in the provided information, but Hong Kong has an advantage here with zero tariffs on general imports. |
Comparative Summary
While Hong Kong has a two-tiered corporate tax system, Singapore charges a flat 17% tax on corporate income. Hong Kong does not have a GST, while Singapore applies a 9% GST on most goods and services. In summary, Hong Kong has a lower tax burden and offers a straightforward tax treatment.
Regulatory Environment & Intellectual Property Protection: Hong Kong vs. Singapore
Regulatory environment and IP protection: Hong Kong versus Singapore.
Hong Kong
The general regulatory framework in Hong Kong is relatively straightforward and facilitates business operations. Hong Kong operates under a common law system, which is characterized by low complexity and efficient management. Intellectual property rights in Hong Kong encompass trademarks, patents, and copyrights, which adhere to high standards. This enables companies to prevent theft and duplication of their intellectual property. The Hong Kong government is also in the process of extending patent box incentives in the region to offer more opportunities to businesses.
Singapore
The general regulatory framework in Singapore focuses on transparency and efficiency. Operations, setup, and most business-related activities are open to the public to make the system transparent. Singapore ensures that the system’s efficiency is maintained and all available resources are utilized effectively. Singapore puts a strong emphasis on a robust system for intellectual property protection. It offers world-class IP protection and a well-structured IP regime.
Comparative Summary
Hong Kong and Singapore both provide robust IP regimes and similar IP frameworks. The IP protection in Hong Kong is very streamlined, while Singapore has slightly more structured regulations. However, the setup and maintenance in Hong Kong are more straightforward, giving it a little extra advantage.
Banking & Financial Ecosystem: Hong Kong vs. Singapore
The banking and financial ecosystem for new businesses in Hong Kong and Singapore is explained in detail below.
Hong Kong
Hong Kong has a strong international presence in the banking sector and financial ecosystem. It is extremely easy to open a bank account in Hong Kong, as non-resident directors often qualify for this purpose. Hong Kong is home to some of the world’s central global banks, including HSBC and Standard Chartered Bank, which offer a wide range of financial services. The services provided by banks in Hong Kong include account opening, loan granting, credit and debit card services, and many other financial services.
Hong Kong also offers foreign businessmen access to other banking services that have been designed to match contemporary business requirements. Fintech Companies like Airwallex, Payoneer, and PayPal are providing flexible, digital-first financial services solutions, such as multi-currency accounts, cross-border payments, and transaction management, tailored to the needs of businesses operating internationally, helping global businesses operate with ease.
Singapore
The banking and financial ecosystem in Singapore is very sophisticated. Singapore is a global economic hub that hosts a diverse range of banks. It is often perceived as easier to open a corporate bank account in Singapore due to its swift approval process for resident directors. Just like Hong Kong, Singapore also offers a wide range of financial services, including business account opening, loans, card services, and various other services. Moreover, the fintech sector in Singapore is evolving rapidly, offering customers more efficient services.
Comparative Summary
Hong Kong offers exceptional global financial connectivity and is more flexible in terms of director eligibility. On the other hand, Singapore is excellent for local account convenience and fintech facilities.
Infrastructure & Connectivity: Hong Kong vs. Singapore
Infrastructure and connectivity for businesses in Hong Kong and Singapore.
Hong Kong
Hong Kong provides a world-class infrastructure for business set-up and operations. Transportation and telecommunication in Hong Kong allow entrepreneurs to run their businesses efficiently and securely. Hong Kong serves as a gateway, offering proximity to mainland China. This allows businesses to expand their reach across Asia and enhance their chances of growth.
Singapore
Singapore’s infrastructure is highly developed and efficient. Businesses can easily provide their services from one corner of the city to the other. Its strong global connectivity enables enterprises to reach their target audience worldwide. Its airports, seaports, and high-speed digital networks make it easy to connect internationally.
Comparative Summary
Both Singapore and Hong Kong are infrastructural powerhouses, offering numerous benefits for businesses. Although Hong Kong is closer to mainland China, which provides more business advantages, Singapore plays a key role in expanding business in the Southeast Asia region.
Other Relevant Factors: Hong Kong vs. Singapore
Some other aspects that a business should consider when incorporating in Hong Kong and Singapore are listed below.
1. Cost of Living and Doing Business
Businesses should select a jurisdiction that is within their budget and offers all necessary facilities at a reasonable cost. Hong Kong tends to be slightly more affordable, while Singapore may have higher utility costs.
2. Talent Availability
Hong Kong is a place where people can experience a mixture of Eastern and Western cultures. Hong Kong and Singapore are both multi-cultural and offer diverse cultural settings.
3. Cultural Environment
Hong Kong is a place where people can experience a mixture of Eastern and Western cultures. Hong Kong and Singapore are both multi-cultural and offer diverse cultural settings.
4. Market Proximity
Another factor to consider when choosing a location for the business is market proximity. Hong Kong is an ideal location for companies exploring mainland China, and Singapore serves as a gateway to Southeast Asia.
Choosing the Right Hub
Singapore and Hong Kong are two of the most favourable jurisdictions for incorporating a business, with each offering its benefits. Hong Kong can be characterized by its simpler regulatory framework, proximity to mainland China, and greater leniency when it comes to matters of directors. Singapore, on the other hand, has quicker incorporation procedures, excellent intellectual property (IP) protection, and simple banking.
In the end, the decision of any business to extend its operations either in Hong Kong or Singapore will be based on a number of aspects- the nature of the business, the target market, and strategic plans in the Asian market. Both of the jurisdictions are equally considered, and the appropriate decision will always depend on the exact objectives and business requirements of a company.
