Investment holding companies are a popular business structure for investors looking to diversify their portfolios and manage their assets more efficiently. These companies are set up to own and manage investments, such as shares, bonds, and real estate, without engaging in active business operations.
When it comes to setting up an investment holding company, Singapore has emerged as a top choice for investors. Singapore’s pro-business environment, favourable tax system, efficient regulatory framework, and access to global markets and talent make it an attractive destination for setting up an investment holding company.
Singapore’s Favourable Business Environment
Singapore’s pro-business environment is one of the most attractive in the world, consistently ranking at the top of global indexes. Its political stability, strong legal system, and business-friendly policies make it an ideal destination for investors looking to set up an investment holding company. Singapore’s government is committed to fostering a competitive and innovation-driven economy, with a range of initiatives and incentives in place to support businesses of all sizes.
Attractive Tax Regime
With its low corporate tax rates and favourable tax framework, Singapore has become an attractive location for businesses looking to optimise their tax efficiency and maximise their profits. The following are tax advantages you can enjoy:
- Absence of capital gains tax, which means that any profit generated from the sale of investments or shares is not subject to tax.
- Comprehensive double taxation agreement network, which allows for the avoidance of double taxation on income earned in other countries.
- Low corporate tax rate of 17 percent, and the companies may also be exempt from tax on certain income types.
- Dividend income tax exemption, as dividends received from a Singapore-resident company are exempt from tax in the shareholders’ hands.
- The foreign tax credit pooling system provides businesses with increased flexibility in claiming foreign tax credits, reduces their tax liabilities in Singapore on remitted foreign income, and simplifies the overall process of tax compliance.
- No inheritance tax is required for individuals who inherit money or property in Singapore. The estate duty has been abolished for deaths occurring on or after 15 February 2008.
Investment holding companies in Singapore can also take advantage of various tax incentives, such as the Global Trader Programme (GTP) and the Financial Sector Incentive (FSI). Furthermore, Singapore’s tax system encourages companies to reinvest their profits back into their business by offering tax deductions for qualifying expenses. These expenses include research and development, employee training, and capital investments.
The government is committed to maintaining a competitive tax system to support businesses in the country. Its tax policies are designed to attract foreign investments and encourage local companies to grow and expand their operations. Investment holding companies can optimise their tax efficiency and improve their bottom line by taking advantage of the tax benefits and incentives available.
Efficient and Transparent Regulatory Framework
The city-state has a well-established legal system, and this regulatory framework has helped create a business-friendly environment conducive to investment and growth.
The regulatory framework in Singapore is streamlined, and the incorporation process is straightforward, allowing investment holding companies to set up and operate quickly. The government has implemented initiatives to digitise and simplify administrative procedures, further reducing regulatory burdens for businesses.
Furthermore, the Monetary Authority of Singapore (MAS) is the central bank and financial regulatory authority in Singapore. It is responsible for regulating financial institutions and safeguarding the stability of the financial system. The MAS has a reputation for being a fair and transparent regulator, and it provides a predictable regulatory environment conducive to business growth.
Singapore has also established a solid corporate governance framework, ensuring that businesses operate ethically and responsibly. The Code of Corporate Governance provides guidelines and best practices for companies to follow, promoting transparency and accountability in corporate decision-making.
In addition to its efficient and transparent regulatory framework, Singapore also has a strong intellectual property (IP) regime. The country has robust laws and regulations that protect and enforce IP rights, making it an ideal location for businesses involved in innovation and technology.
Access to Global Markets and Talent
Singapore’s strategic location and its world-class infrastructure provide investment-holding companies with easy access to global markets. Its efficient transportation and logistics network makes it an ideal gateway for businesses planning to expand their operations across Asia and beyond.
Singapore’s strong trade and investment agreements with other countries have also aided in opening new markets for businesses. The country has signed Free Trade Agreements with various countries, providing businesses with preferential market access and tariff deductions.
Its multicultural and diverse population has helped create a pool of talented professionals. Singapore’s highly skilled workforce makes it an attractive location for businesses seeking to access a talent pool of skilled and knowledgeable workers.
Moreover, the government has implemented various initiatives to attract and retain foreign talent. The Global Investor Programme (GIP) provides a pathway for investors and entrepreneurs to obtain permanent residency in Singapore, while the Tech. Pass program provides a fast-track for top-tier talent to work and live in the country.
Succession Planning
The parent company can play a significant role in facilitating succession planning. This arrangement allows for tax deferral while ensuring a seamless transfer of the entire estate as a unified entity to the next generation. Singapore’s regulatory framework favours trust structures that incorporate holding companies. The following are the advantages of intergenerational wealth transfers, all made possible by a holding company:
- Establishment of clear governance rules for family wealth
- Ensuring consistent implementation
- Seamless transfer of diverse assets located in multiple countries as a single unit
- Outsourcing of risk management, asset protection, and wealth preservation to professional managers through a centralised delegation point
- Development of a comprehensive intergenerational strategy that integrates asset holdings with other tools (e.g., wills, family offices, foundations, selection of residence jurisdiction, and lasting power of attorney)
Loss Insulation
The subsidiary’s liabilities are effectively separated from the holding company, providing insulation and safeguarding the holding company from potential losses. This aspect of loss insulation is a significant advantage offered by the structure of a holding company in Singapore.
The parent company can coordinate and consolidate the resources of its subsidiaries. This allows for mutual benefits: if a subsidiary performs well, the parent company reaps the rewards, while if a subsidiary underperforms, the parent company’s exposure is limited to the initial investment made in that subsidiary.
Asset Protection
A Singapore holding company can offer protection for valuable assets, including patents, trademarks, and intellectual property (IP), by transferring ownership to a separate subsidiary. This arrangement safeguards these assets against unwarranted legal challenges and facilitates the efficient buying and selling of patent portfolios.
Holding companies owned by individuals with substantial wealth provide a layer of protection for personal assets, as these assets are controlled by the corporation rather than the individual. This shields the individual from debt liabilities, lawsuits, and other associated risks.
Effortless Asset Transactions
By segregating assets into separate subsidiaries, the process of transacting those assets is greatly simplified. The ability to sell a subsidiary as an independent entity without the need for extensive business restructuring or laborious accounting reviews, allows for seamless transactions.
The separate management of subsidiary accounts facilitates the valuation and perception of value by potential buyers. As a result, asset acquisition and disposal are significantly streamlined when they are held within a subsidiary.
Unified and Consistent Control
The ownership of the holding and subsidiary companies is overseen by the board of directors, enabling the owners to maintain control. This arrangement facilitates centralised strategic coordination among the individual businesses while granting them the freedom to operate autonomously.
A holding company structure ensures consistent ownership and governance policies across the subsidiaries. As an illustration, in cases where new investors are involved, they may stipulate that all patents and intellectual property (IP) assets of the business are held under a single subsidiary to facilitate transparent management.
Confidentiality
By insulating the owners from the daily operations of a subsidiary, they can preserve confidentiality and privacy regarding their involvement and strategic decisions. Foreign investors are strongly advised to seek the assistance of professionals specialising in company incorporation in Singapore when establishing a holding company in the country. Generally, most company structures require at least one shareholder and one local director. Typically, holding companies do not have restrictions on the number of foreign directors they can appoint.
Conclusion
Navigating the regulatory framework in Singapore can be challenging, and this is where a corporate services firm can provide valuable assistance. By engaging a corporate services firm in Singapore, investors can ensure that their investment holding company is set up for success and compliant with all relevant regulations, enabling them to focus on their core business activities and achieve their growth objectives. With the right support and guidance, setting up an investment holding company in Singapore can be a wise and rewarding move for investors.
