Why Do Indian Startups Incorporate in Singapore?  

The laws of India and Singapore allow Indian citizens to easily incorporate businesses in Singapore. But what are the benefits for an Indian business owner? This guide helps answer that question. It describes business scenarios where a Singapore-based company structure can be useful for Indian entrepreneurs and businesses.

If you’re interested in registering a company in Singapore, click “Get Started” below. Otherwise, read more to learn the benefits of incorporating in Singapore.

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India-Singapore Relations

India and Singapore are important trading partners and their trade relationship is deepening. Singapore is one of India’s largest trade and investment partners in the ASEAN region, and their economic and commercial ties have significantly expanded over the last decades.

Both trace their social norms and values to the South Asian Indo-Chinese cultural patrimony, but they have followed widely divergent routes since their independence. While India has followed a somewhat meandering yet democratic path from a close socialist economy to a market-based economy, Singapore's resolve to compete in the global market has been steadfast.

The two countries offer vastly different business environments and have adopted distinct approaches to regulating their economies. While Singapore promotes a light-touch, compliance-based regulatory framework, India still operates a complex, heavy-touch "license raj".

Thanks to Singapore's business-friendly environment, infrastructure, connectivity, and the presence of a large Indian community, ithas emerged as a major financial and investment hub for many Indian businesses.

Key Advantages of Incorporating in Singapore over India

The Indian corporate tax rate for domestic companies is 30% whereas Singapore has less than 17% corporate tax rate.
India imposes a capital gains tax of around 15-20%. Singapore has no tax on capital gains.
In India, the value-added tax (i.e., goods and services tax - GST) ranges from 5% to 28%. In Singapore, it’s fixed at 7%. Some goods are even exempted from tax.
In India, dividend distribution (paid from a company's post-tax profits) is taxed. But Singapore avoids this double taxation. Dividends to shareholders are also not taxed.
No significant tax advantages or other benefits are easily available to startups in India, whereas Singapore offers many benefits to its startups.
Singapore has an extensive network of tax treaties, which help Singapore companies that conduct international business avoid double taxation.
For the reasons above, many savvy Indian business owners have either immigrated to Singapore or established strong economic ties with the country. The ideal structure for an Indian business is one that allows businesses access to key benefits in Singapore while allowing access to the Indian market and its wide talent pool.

That’s why a number of well-known Indian entrepreneurs, including Flipkart, Milaap, Mobikon, InMobi, and Medialink have chosen to incorporate in Singapore. Additionally, a large cohort of new Indian tech startups is following the same path. India Briefing stated that the list of Indian companies registered in Singapore is over 8,000 since 2000. Many of them register their businesses online in Singapore without even coming to the country.

Indian entrepreneurs have become well recognized in Singapore. Not only have they achieved professional success and accolades. They have also achieved enormous wealth. Many are now featured on Forbes Singapore's Richest List.

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If you’re wondering how to open a private limited company in Singapore, read our comprehensive guide on company registration in Singapore. It overviews requirements and the step-by-step company registration process.

Global Rankings

#1

For the second year in a row, Singapore’s economy is ranked as one of the most open and free economies in the world, while India is ranked No. 131.

#1

Thanks to its high levels of investment, years of political stability, and overall economic prosperity, Singapore has some of the best infrastructures in the world. Singapore ranked No. 1 for transport and utility infrastructure, whereas India ranked No. 70.

#1

Considering such factors as openness to trade, foreign direct investment openness, trade policies, and infrastructure available to facilitate trade, Singapore was ranked first globally, while India ranked #64.

#2

Singapore ranked No. 2 globally in intellectual property rights protection and No. 1 regionally. Comparatively, India ranked No. 57 globally and No. 10 regionally.

#2

Singapore ranked No. 2 for ease of doing business, while India is considered one of world’s most difficult places to do business (ranked No. 63).

Launching a Startup in India vs. Singapore

We understand there are many things to consider when choosing where to launch your startup. That's why we prepared a comparison guide for you to evaluate both options and find the one that works best for you!

Scenarios for Indian Businesses

India-based companies can incorporate in Singapore through a relatively simple and inexpensive process. That’s because Singapore allows 100% foreign ownership, meaning an Indian citizen or an India-based business can fully own a Singapore company. Read more to explore key scenarios in which an Indian company can greatly profit by registering in Singapore.

Launching a startup

While the advice to launch an Indian startup in Singapore may seem strange, some of the most well-known Indian startups are in fact incorporated in Singapore.

Incorporate a subsidiary of Indian company in Singapore

If you own a successful business in India that’s looking to expand overseas organically or through acquisitions, a Singapore company can facilitate your plans.

Incorporate a holding company for Indian business

A Singapore-based holding company is a very common corporate structure. It’s used by many large organizations (e.g. Flextronics, Wilmar, Trafigura, Temasek, and CapitaLand). In particular, it’s a great option for subsidiaries that are based in India

Incorporate a trading company in Singapore

An Indian business that provides products or services to foreign clients can reduce the red tape associated with its operations by incorporating a Singapore company. The Singapore company acts as the distributor for the Indian company’s products or services.

Wealth management for an Indian high-net-worth individuals

If you are an India-based family that has accumulated significant assets and are concerned about preserving and safely transmitting them to the next generation, you should consider Singapore as a location to set up your family office.

Singapore immigration by setting up a business

Many established Indian entrepreneurs find it very attractive to migrate to Singapore for the following reasons: it's better for business; has a better quality of life; has excellent opportunities for children; "feels like home" compared to many other western countries; is quite close to India; welcomes them with open arms through its Entrepreneur Pass and Employment Pass schemes; and it's a great place to retire.

Optimizing intellectual property transfer pricing for Indian businesses

If you own intellectual property (IP) that has commercial value, you can maximize its long-term economic value by holding it in a Singapore company. The IP can be sold or transferred to a Singapore company and licensed for use to the parent company (or its subsidiaries) for a fee. The licensees can be located in India or in any other country. License fees accumulate with the Singapore company under extremely favorable tax rates due to special treatment given to such companies in Singapore. Moreover, the eventual sale of the IP asset in Singapore will be done with zero capital gains tax.

Hiring international staff for India-based business

An Indian business that is hiring senior-level international executives can improve the after-tax take-home pay and benefits package by hiring through their Singapore subsidiary. The executive is then deputized for the Indian operation and can work in India. Such internal secondment is a very effective strategy for attracting and retaining high-level international talent.

Facilitating international travel for Indian executives

Most countries have strict visa requirements for persons who hold Indian passports, imposing a burden on them to travel internationally. However, having a Singapore work visa is viewed favorably by most countries when they are considering granting a visa to such an individual. Therefore, the Indian business can create a Singapore subsidiary and obtain a work visa for its business persons. The work visa would enable them to work in Singapore and travel internationally with fewer restrictions.

Managing currency risk for India-based business

Indian businesses that have to receive or make payments in a foreign currency run a significant currency risk if the target foreign currency moves in an adverse direction against the India Rupee. As its highly volatile, it can be hedged using futures or options but those strategies can be rather expensive. An alternate approach for the business is to hold its assets in a stable currency such as USD, EURO, or SGD. This can be achieved by creating a Singapore subsidiary that can then maintain the company's holdings in the desired stable currency. Singapore has one of the best foreign-currency markets which makes it a very good jurisdiction for managing such risks.
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Investing in an Indian Business

If you are considering making an investment in a company that is based in India, you should consider making the investment through a Singapore-based company.

This is certainly the right strategy if you are a non-Indian investment firm or a non-Indian person. But even for Indian investors or for India-based investment firms it may make sense to make such an investment through a Singapore-based entity.

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Singapore: the biggest investor in India

What’s the main attraction for MNCs to invest through their subsidiaries in Singapore?

There are inherent advantages of incorporating in Singapore over India. Additionally, the bilateral tax treaty between the two countries makes it easier to do business in Singapore. India and Singapore entered into a Comprehensive Economic Cooperation Agreement (CECA) in 2005. Under the agreement, a foreign shell company in Singapore can enjoy capital gain tax exemption, provided its annual expenditure on operations in Singapore is more than S$200,000 in two years and it is listed on the Singapore Stock Exchange. Under the Singapore–India DTAA, capital gains from the alienation of shares in a company are not taxable in the country where the company is located. Such gains are instead taxable in the country where the seller of the shares is a resident.

This provision can also create significant tax savings if the parent is a US company. Furthermore, US taxation of the India subsidiary profits may also be avoided if these profits are kept with the Singapore holding company for future investments in Asia. For instance, if profits from the Indian subsidiary are routed through the Singapore holding company to a Thai subsidiary (and no cash moves through the US parent company), no Singapore tax is imposed on dividends from India or Thailand due to Singapore's foreign-sourced income exemption scheme. No adverse tax consequences are likely to result for the US parent company either. Thus, such a structure can provide the investor with the most tax-efficient route to grow their investment.

Conclusions

Singapore company can be a useful and versatile platform for an Indian business or an Indian person in many ways. Many sophisticated Indian entrepreneurs (including Binny Bansal, the founder of FlipKart) are have already made this move. Whether you plan to register your small business in Singapore or would like to register an online company in Singapore from India, our team can help you take the next steps in your journey.

CorporateServices.com empowers global entrepreneurs with information and tools necessary to discover Singapore as a destination for launching or relocating startup ventures. We offer a complete range of company incorporation, immigration, accounting, tax filing, and compliance services in Singapore.

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