Southeast Asia is a fast-growing region that is home to outperforming emerging economies such as Thailand and Singapore. (CNA) Though Singapore and Thailand averaged at least 3.5% annual per capita gross domestic product (GDP) growth over the past 50 years, how exactly do the two countries compare when it comes to doing business? In this article, we analyse the business environments of Singapore and Thailand, in areas such as the workforce, business incorporation and taxation.
Being a small country with limited natural resources, Singapore is the second most densely populated country in the world. (Business Times) Despite its limitations, it attracts and supports a diverse range of industries from aerospace and electronics to medical technology and creative industries. (EDB) Singapore is also the second freest economy in the world, known for its open and corruption-free business environment and robust monetary and fiscal policies. (Straits Times) Of the 37,400 international companies based in Singapore today, more than half are running their Asia-Pacific businesses from the city-state. (Bloomberg)
With more than 34 million tourists visiting Thailand yearly, tourism is a crucial driver of growth for the “Land of Smiles.” (IMF) The country is also heavily dependent on exports, which accounts for more than two-thirds of its GDP. Though the Thai economy is still recovering from slow growth since coup in the Year 2014, it is currently experiencing strong growth in both tourism and the export of manufactured goods. Thailand’s National Development Plan also aims to scale up infrastructure to bring in private investors and enhance Thailand’s global competitiveness.
The workforce in Singapore is highly-educated, productive, and proficient in English, with more than half of the resident population holding a degree, diploma or other types of higher education qualification. (TODAY) According to the IMD World Talent 2018 report, Singapore ranked first in the Asia-Pacific region in terms of talent competitiveness, which evaluates a country’s capabilities in areas such as education, workplace training and language skills. (HRM Asia)
In Thailand, a third of the labour force is employed by the country’s agricultural sector, which contributes about 10% to its GDP. (CIA) Though the country’s literacy rate remains high at 92.8%, (UNESCO) Thailand’s education system has been tainted by political instability. Furthermore, in the lead-up to the country’s general elections on 24 March 2019, political parties have proposed to replace the country’s minimum wage policy with alternatives such as cash support for citizens earning below the national poverty line. (Bangkok Post)
Incorporating a Business
Both Singapore and Thailand have similar company registration processes that include company name registration, submission of company incorporation documents and the depositing of share capital.
However, it takes five procedures and four and a half days to start a business in Thailand, as compared to two processes and day and a half in Singapore. A business may be incorporated in Singapore with a minimum paid-up capital of SGD 1 (SME Portal), while foreign-owned companies must be incorporated in Thailand with a minimum capital of 2 million Thai Baht. (Thai Embassy) 25% of this sum must be deposited upon incorporation.
With its well-designed regulations and business-friendly environment, Singapore has been ranked 2nd in the world by the World Bank in its Doing Business 2019 report, whereas Thailand clinched the 27th spot.
Singapore’s corporate tax rate is 17%, while that of Thailand is 20%.
Unlike Thailand where companies are taxed on their worldwide income (PWC), tax resident companies in Singapore can enjoy tax breaks on their overseas income. To ease business costs and support restructuring by companies, Singapore companies are also eligible for a Corporate Income Tax (CIT) Rebate at a rate of 20% of the tax payable, capped at SGD 10,000.
Corporate tax filing for Singapore companies is due on 30th November each year for hard copy filing and 15th December for e-filing. (IRAS) Required forms include audited or unaudited accounts, tax computations as well as IRAS’ Form C. Form C is used to declare a company’s income, while tax computations state net profit/loss adjustments as per the company’s accounts. Smaller companies with annual revenue of SGD 5 million or less can file a simplified form instead.
In Thailand, corporate tax is paid twice a year. A mid-year return must be filed two months after the end of the first 6-month accounting period (PWC). The government also provides tax incentives to support small and medium-sized enterprises (SMEs). SMEs with revenues not exceeding 30 million baht may enjoy progressive corporate income tax rates that range from 0% to 20%. (Business Times) Likewise, companies promoted by the Thailand Board of Investment (BOI) may be exempted from corporate income tax for up to eight years, and enjoy VAT refunds on imported machinery. (Bangkok Post)
For its attractive tax rates and ease of online tax filing and payment procedures, Singapore was ranked 8th globally in the World Bank’s Paying Taxes 2019 report, while Thailand came in 59th. In general, businesses in Thailand make an average of 21 tax transactions a year, with 229 hours spent on filing, preparing and making tax payments. Companies in Singapore, on the other hand, make five payments a year, with 64 hours spent on tax administration annually.
Singapore and Thailand both make ideal jurisdictions for incorporating a business. However, considering Singapore’s attractive corporate tax rates and rebates, robust pro-business policies, and a skilled workforce, Singapore edges past Thailand in offering an investor-friendly and transparent business environment.
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