Singapore vs Hong Kong, where is the best place to set up a business?

Hi Alfrex, my company was incorporated in Singapore around 18 months ago and I actually drafted a guide in February. At the time I was considering starting a site for helping entrepreneurs work out where and how to incorporate. However, I put it aside in the end and the article was never shared. So I'll paste it here in case it helps you. It includes some comparisons with HK.

The complete guide to incorporating a company in Singapore

Are you an entrepreneur with a location-independent business? Are you wondering whether you should set up a company in Singapore? With so many different factors involved in the decision-making process, it can be tough find enough reliable, unbiased information to make the right decision. This guide will help you work out whether you should incorporate your business in Singapore, as well as explain the process and costs involved.

Should I incorporate my business in Singapore?

Think carefully before moving forward with incorporating. Below are some key advantages and disadvantages of setting up a company in Singapore.
Advantages:
• A pro-business environment. For the last 12 consecutive years, Singapore has ranked in one of the top three positions for Ease of Doing Business, according to The World Bank’s “Doing Business” reports.
• Highly developed technological infrastructure and legal system (this includes IP laws, which can be invaluable for start-ups).
• An attractive tax system:
o Singapore’s headline corporate tax rate is 17%. This is already better than in most other developed economies, however there are also some tax exemptions: For their first three years, qualifying ‘New Start-Up Companies’ can receive a full exemption on the first S$100,000, and pay only 8.5% on the next S$200,000. After the first 3 years, there are other exemptions that continue to reduce the tax rate on the first S$300,000. There are some upcoming changes to these exemptions, so after reading this article you may want to check here or talk to a professional agency. Also, if the company is not going to be managed from Singapore, you may wish to research double taxation agreements and rules on corporate residence.
o Singapore’s sales tax (GST) is 0% up to S$1 million and 7% after that. Note: if you are selling abroad, you may need to pay sales tax to other countries instead.
o Personal taxes are very low if you live in Singapore. If you live in another country, you’ll need to pay personal tax there instead.
• The location is ideal if you plan to do business in Asia.
• If you are going to live there, you’ll benefit from a safe environment and a high standard of living (though you will sweat a lot!)
• Singapore appears to be more politically stable than Hong Kong.
• English is widely spoken.
Disadvantages:
• The cost of living is high.
• The cost of hiring office space is high due to lack of space. Government subsidies are available for start-ups.
• Singapore’s small market size means you may need to scale internationally in order to attract investment.
• In the competitive tech sector, it can be hard to attract and retain good employees.
• It can be expensive to hire for lower level service work as a result of the government prioritising high-skilled work.

How to set up a company in Singapore

This section covers the process, requirements and costs of incorporating a ‘Pte Ltd’ company – the most common company structure in Singapore.
The process of setting up a company in Singapore is fairly quick and easy, as long as you use a professional agency and ensure you have all the required documents. Assuming there are no hiccups, it can usually all be sorted in less than a week.
The process can be completed via email and post, so you won’t have to travel to Singapore. On the other hand, you will need to go to Singapore to open a bank account there (more on this later).
The process generally flows like this:

1. Choose a name for your company and the agency will then check that it is available.
2. Provide the following documentation:
   a. Passport copy of all directors of the new company (these need to be certified as true copies by a notary unless the relevant person comes to Singapore with the originals).
   b. Proof of address of foreign directors of the new company (such as bank statements / utility bills. These need to be notarised unless the relevant persons come to Singapore with the originals).
   c. The agency might also ask for proof of the business activities of the shareholders (CVs, evidence of employment, financial reports, bank references, business correspondence etc.)
   d. If there is a corporate shareholder, further documents will be required.
   e. Form 45 (Consent to Act as Director) signed by all directors.
3. The agency incorporates the company online and subsequently sends you all the documentation.
   Note that a minimum of 1 local director is required. They must be ordinarily resident in Singapore. As entrepreneurs often do not have a reliable contact in Singapore, it’s typical for the agency to provide them with someone who is willing to act as the local director. The costs of this are explained below.

It’s vital that you pick an agency that is reliable and trustworthy. When you contact them, ask questions and see how clear and professional their answers are. If you receive generic or incoherent responses, it’s a sign they may not be a good choice. Also, see what qualifications they have. The cheapest agencies may not have qualified professionals.

Cost estimate for incorporating and operating a business in Singapore

Below is a breakdown of the main costs involved (note S$ indicates Singapore dollars (SGD)):
Incorporation fee (S$700-S$900) – As well as forming your company and providing you with the company documents, some agencies will include a year or their registered office service, as well as help with setting up a bank account. (Side note: You may need funds for an initial deposit in order to open a bank account. You should be able to expense this later on. You can also pay yourself back for any incorporation expenses you have personally incurred.)
Corporate secretarial services (S$500-S$700/year) – It is required by law that you have a local company secretary.
Registered Office (S$250-S$400/year)
Local Director (S$2000-S$4000/year plus a deposit that is typically 1-2x the yearly fee) – As mentioned earlier, the agency will typically suggest one of their contacts for this. Note that if you plan to relocate to Singapore, you can act as the local director and avoid the above cost. Before you can do this, you’ll need to obtain an Employment Pass or Entrepreneur Pass. If you do use an agency, the upfront security deposit can be refunded if you find another director to replace your existing one. Clearly, the cost is not insignificant. If you’re comparing Singapore to Hong Kong, consider that whilst this cost does not exist in Hong Kong, accounting costs tend to be higher there.
Preparation and filing of financial statements and tax returns (S$1500-S$3000/year). The agency will typically provide this by partnering with an accounting firm. The package will often include use of Xero or similar accounting software. You’ll be responsible for the bookkeeping, and be aware that the package won’t usually include reviewing your accounting practices or answering complex tax questions. Auditing is another potential cost, but luckily companies that make less than S$10 million in annual revenue typically do not require auditing.
Estimate for the total yearly administrative & accounting costs: (S$4800-S$7500/year)

How to open a business bank account in Singapore

Singapore has international banks such as HSBC and Standard Chartered. The problem with them is that they have very high fees and a high minimum balance requirement. These makes them unsuitable for most SMEs.
Many start-ups instead use United Overseas Bank (UOB). Although their internet banking is a bit dated, the fees are very reasonable and you can get a direct feed for Xero accounting software. Xero is currently one of the best options for accounting. If you can use a direct feed to automatically import your bank transactions into Xero, it will save you a lot of time.
Your agency will be able to help you with opening a bank account. They should be able to advise you on the right bank for your needs, as well as arrange a meeting with the bank to get the account opened. An in face meeting in Singapore will almost always be required. They’ll also need to see your passport, verified proof of address etc. And as mentioned earlier, you’ll need to send an initial deposit to complete the bank opening process.
Banks may be reluctant to work with businesses that are high risk or have zero trading history, so if your business is fairly new, don’t just assume that you will be able to open an account. Having said this, it is generally a lot easier to open a bank account in Singapore when compared to Hong Kong.

Which online payment processors are available in Singapore?

The good news is that most of the main payment processors are available in Singapore, including PayPal, Stripe and Braintree. The bad news? Most processors charge slightly higher fees than they do for European and US companies. For example, with both Stripe and Braintree, the standard fee is 3.4% of the transaction value + $0.50 SGD per transaction. For companies based in the US or Europe, the fees tend to be 1-2% lower. Also, at the time of writing, unless you have a USD account with Standard Chartered Bank, Braintree only allows you to settle in Singapore dollars, and it charges an extra 1% for multi-currency transactions. Meanwhile, Stripe usually applies a rate that is 2% above the mid-market exchange rate. Depending on your situation, you may want to consider opening a foreign currency bank account to minimise payment processing fees and currency exchange costs.

The 30 second summary:
Singapore is currently one of the most attractive countries for incorporating an online business. It has excellent infrastructure, solid banks, a strong rule of law, and a business-friendly tax system. However, it may not suit all businesses so you should consider your own situation carefully before making a decision. Singapore isn’t the cheapest option for an online business, and the cost of a local director is not insignificant. If you do decide to go with Singapore, make sure you find a reliable and professional agency to help you get set up.

Incorporated several SaaS companies, got an entrepreneur Visa and live in Hong Kong.

Process was pretty straightforward to be honest. There is a lot of paperwork, but objectively the requirements are very transparent and achievable.

Getting a bank account / credit card was time consuming, but not as harsh as people explain. Just complete all the paperwork diligently, use an agency, expect it to take 2 months or so.

I compared with Singapore at the outset, and Singapore seemed to have harder requirements such as local director requirement, and their Visa process required being sponsored or funded by local incubator / investors. As a bootstrapped business this didn't work for me.

In terms of liveability though - Hong Kong is probably more expensive in terms of apartments and office space, and English is not as widely used here as you expect.

I believe tax is a little simpler and lower than Singapore as well.

Government is starting to make a big push on tech and startups now - large pot of money dedicated to investment schemes, and there is a pretty generous reduced tax rate for new companies - I think you end up paying something like 8% effectively.

If you are planning to continue living in Japan, I'm not sure it makes much sense though, because you will probably have to declare foreign owned company income anyway (most developed countries require this), in which case you will be paying the same, but adding a huge amount of complication.

HK was easy setup didn't need to visit or pay for a nominee director.
Singapore required both.

But once setup, HK was a nightmare. Couple years in we still don't have a bank account and have a long expensive process ahead to close the company down.

If picking between the 2 again (or needing Asian incorp) I would go Singapore, but our HK company has now reincorporated in the UK which was quick, simple and cheap, even without a physical presence.

HK and Singapore are certainly the leaders for startup incorporation in Asia, but it largely depends on your audience. If Asian target then japanese company probably fine, if global then US could be a good bet, even if you're from Asia.

Disclaimer: I am British, living in Asia, which adds some bias to the UK part.

Hi Alfrex, see if UK LLP could work better for you.

https://transferwise.com is a nice alternative to traditional banks.

For those saying it's hard to get a bank account in HK, it's true but there is an alternative. https://www.neat.hk/business/features

It's like a bank account - you get a bank account number and corporate prepaid MasterCard(s). It has very low fees and you don't need to deposit any money. If you have already setup your HK company, you can do the Neat application entirely online.

Setting up a company doesn't require you to be a citizen and you only need 1 person. For the first year it costs about US$1500. My link gives you 10% off: https://ac-athenasia.com/ref/252/

For the second year it will cost about $1000 for legal maintenance and $1000 upwards for accounting. I used AthenAsia to setup my company.

Tax is 8.25% for the first $2M in profit, 16.5% thereafter.

Are there specific reasons you don't want to start in Japan? If yes then I'd go with SG but really while you're starting out setting up an offshore business is almost always more stress and hassle than it is worth.

Yes, I have experience setting up a business in HK. Setting up the business is easy enough but getting a bank account was a nightmare.

A friend has told me the process in Singapore is significantly easier and Singapore is more startup friendly. If I would start over I would setup in Singapore so I suggest the same to you.

One alternative that's not been suggested, Stripe offer US company setup including bank account, without visiting, for $500 through their atlas program.
Tax has got more friendly with the **** in charge and US company makes things very accessible for most users.

The days of running easy off-shore companies in either Singapore or Hong Kong are long gone. Setting up the companies themselves is easy enough (HK slightly easier then SG, as SG requires a local to be involved). However, it's the banking that make both location an absolute nightmare at the moment.

Both locations are making it more clear that have zero interest in small businesses. In HK it's very common to be slapped with the most insane requirements and if not met in due time, HK banks have no problems simply closing your account with little to no advance notice. Banks in SG are on a similar trajectory, albeit slightly behind HK it appears. SG will make you maintain high minimum balances (often in excess of $50,000).

I have had businesses in HK and have worked with several in SG. Therefor I know enough to void both locations. For my latest business I went with Estonia instead and couldn't be more happy!