Hong Kong and Singapore have emerged as the epicenters for startups and tech in Asia and worldwide. Both locations have attractive tax regimes for foreign companies and have invested heavily in government-backed startup programs, fostering positive growth and support in the region. Southeast Asia’s internet economy has more than tripled its size over the last four years, soaring to a US$100 billion for the first time in 2019 with expectations to reach US$300 billion by 2025.
However, while countries like Indonesia, Thailand, Vietnam, and the Philippines are supported by larger populations, arduous bureaucracy coupled with complex laws and taxes remain the biggest roadblocks stopping startups and companies from incorporating in these jurisdictions.
With that in mind, it does not appear that Singapore or Hong Kong will relinquish their titles as the anchors for company formation in the region. Both countries have digitized the process of incorporating and managing businesses, making it easier and quicker than ever for companies to incorporate. As global finance hubs, Singapore and Hong Kong are attracting more and more foreign investment and entrepreneurs. We explore the reasons why Singapore and Hong Kong remain the two best locations to incorporate your business.
The original financial hub in Asia, Hong Kong has six times as many operating companies as Singapore. It is home to one of the most flexible and supportive corporate governance regimes in the world. Providing an amazing and diverse business ecosystem for startups and foreign companies to grow and thrive.
Benefit #1: Hong Kong is ideally positioned geographically.
Hong Kong is strategically located at the geographical and economic center of Asia. With a world-class airport that operates 24 hours a day, business executives have easy access to all the major markets in the region. In fact, executives are able to zip to and from Hong Kong, Beijing, Shanghai and back, all in a day.
It is Hong Kong’s close proximity to mainland China, the largest single market in the world, that fuels its success. Hong Kong has been the gateway to China for over a century and remains the prime location for startups and corporations hoping to tap into the huge Chinese market. The Closer Economic Partnership Arrangement (CEPA) further grants Hong Kong preferential access to the mainland Chinese market. Hong Kong holds all the expertise, know-how, strategies and facilities required to become successful in China.
Hong Kong is only a three-hour drive from the major manufacturing facilities in the Pearl River Delta. (PRD). More than just a manufacturing hub, the PRD is rapidly emerging as a global leader in high-tech industries such as biomedicine, robotics, telecommunications, and alternative energy. Huawei and Tencent both have headquarters located in the PRD and Apple has opened a research and development center. The PRD’s innovative and advanced manufacturing services coupled with Hong Kong’s world-class financial and technical expertise has created an unbeatable advantage for any company.
Benefit #2: Hong Kong is pro-business.
Free trade is the lifeblood of Hong Kong. Hong Kong’s economy is driven by three key economic principles: free trade, free enterprise, and free markets.
The Hong Kong government endorses a market-driven economy with minimal interference from government policy. Your business can flourish with little bureaucracy and government restrictions. Open and welcoming to foreign investment, there is no restriction to inbound or outbound investment and there is little business corruption.
Benefit #3: Hong Kong has low taxes
Hong Kong has one of the lowest tax rates in Asia, it has some of the lowest tax rates in virtually all other developed countries. Hong Kong’s territorial tax regime is simple and predictable. Profits earned overseas are not taxable in Hong Kong. Profits earned in Hong Kong, have a maximum corporate tax rate of 16.5% where profits in excess of HKD $2 million. For profits under this threshold, corporate tax rates sit at 8.5%. When you account for generous allowable deduction and depreciation allowances, the total tax bill is often far less.
There is no capital gains tax, withholding tax, sales tax or VAT. Personal income is charged at a standard rate of 15%. Property taxes sit at 15% of rental income, incredibly low for international standards.
Benefit #4: Hong Kong has an effective legal system.
Hong Kong not only has an effective, trustworthy banking system, it also provides a highly effective legal system. The rule of law is fundamental to Hong Kong’s position as a business epicenter. Distinct from that of the People’s Republic of China, Hong Kong’s legal system is a legacy of British Administration of Hong Kong and is a mix of common law and local legislation. Because of this, Hong Kong benefits from a stable and mature legal system with laws protecting business rights and intellectual property. Judicial, executive and legislative branches of government are separate and disputes are settled quickly and fairly.
Benefit #5: Hong Kong has a dynamic startup ecosystem
Hong Kong’s startup scene is on the rise, and with good reason. The Global Innovation Index 2019 listed Hong Kong as the third most innovative area in South East Asia, East Asia, and Oceania. The most popular industries for startups in Hong Kong for 2019 were fintech, e-commerce, supply chain management, and logistics. The government offers rich support for startup initiatives, including financial support that can help businesses grow and thrive in those early years. There is also an immense opportunity for private funding with investments in startups reaching US$720 million in 2019.
Benefit #6: Hong Kong makes it easy to get your business off the ground.
In Hong Kong, you’ll find everything you need for your business, whether you’re just launching it or ready to scale. Incorporation can be as quick as a few days and the process is relatively simple.
Hong Kong also has a diverse and well-educated population. It’s immigration policies are designed to attract talented and skilled professionals, making the workforce incredibly competitive. Hong Kong is bilingual: business is conducted in English, but the majority of the population also speaks Cantonese or Mandarin.
Looking for an excellent place to live? It’s comparatively easy to move into Hong Kong, and you’ll find that the area offers a high quality of living for most of its residents. You’ll also find that Hong Kong has a world-class infrastructure in place that is designed to help nurture and support business growth, including excellent communications and a state-of-the-art shipping hub that makes it easy to ship goods to anywhere in the globe. In short, Hong Kong is designed with business in mind.
Like Hong Kong, Singapore is a great place to do business. In fact, Singapore has been ranked as the best country in the world for doing business for ten years running in an evaluation by The World Bank. There are a number of important reasons why this is the case, and if you’re looking for an excellent place to incorporate your online business in Asia, Singapore is a great place to start.
Benefit #1: Singapore already has a system in place to nurture startups.
When you’re ready to launch your online business, you may need a great deal of help throughout the process. You’ll want access to investors and loans that can help you build and grow your business as well as the kind of thought leadership that can help propel you from obscurity into one of the biggest names in your industry. Worldwide, a large percentage of startups fail, many of them within the first few years of operation. When you choose to incorporate in Singapore, however, you’ll give yourself access to some of the best tools that you, as a business owner, can use to help grow and expand your business. Thanks to Singapore’s corporate ecosystem, which is designed to nurture startups and small businesses, you’ll increase your odds of success.
Singapore also offers greater access to startup fundraising. Many startups need a little extra help getting off the ground. Finding the right investors, many of whom are available in Singapore, can make it much easier to achieve your financial goals and help your business get off to the right start.
Benefit #2: Singapore offers excellent intellectual property protection.
As a startup, you have a number of unique ideas and concepts that you want to share with your customers. In order to make the most of those concepts, however, you have to protect them. Singapore is ranked second in the world when it comes to the protection of intellectual property, making it an excellent place to incorporate your business when you deal in abstract concepts and innovation.
In addition to intellectual property protection, Singapore also provides a high degree of safety for your business in general. The legal system is set up to help protect small business owners and operators, offering you more security when it comes to your income and your business.
Benefit #3: Singapore is already home to many of the top businesses in the world.
Your business does not exist in a vacuum. Having adequate access to banks and entrepreneurs can provide you a wealth of knowledge and insight. Singapore, thanks to its geographic location and overall suitability as a city filled with big business, is ideally positioned to allow you to make the important business connections that can allow your company to grow and thrive.
Benefit #4: Singapore offers an attractive corporate tax rate.
Like Hong Kong, Singapore offers a tax structure designed to help startups and small businesses succeed, rather than crushing them under the weight of tax demands. In Singapore, corporate taxes cap at 17%, allowing you to focus on reinvesting your profits into your business, rather than on ensuring that you have raised the right amount for your taxes.
Singapore also has a personal tax structure that can benefit you as an individual, if you choose to locate yourself in Singapore. Choosing the right location for your business can make a big difference in the taxes you’ll pay–and particularly in the early years of your business, that could spell the difference between success and failure for your online business.
Benefit #5: Singapore offers a robust local talent pool.
Having the right connections can make a big difference when you’re ready to expand your online business. Need to hire someone to take care of your website? Singapore has someone who can take care of that. Need assistance with product designs or innovations that will help provide customers with a better overall experience with your brand? In Singapore, you can more easily connect with those individuals. As your business grows, you will find that you need to outsource an increasing amount of your daily business tasks. While small business owners and entrepreneurs must often accomplish many tasks for their companies, there’s a point at which your business’s growth outstrips your ability to handle those tasks on your own. When you choose to locate your business in Singapore, you’ll find that you can easily locate the talent you need to accomplish those tasks.
Choosing where to incorporate your business is an important decision that you don’t want to make arbitrarily. While both locations are epicenters for startups and tech in Asia, Hong Kong offers a distinct advantage to businesses that want to penetrate the mainland Chinese market, while Singapore tends to appeal more to startups wanting to capture Southeast Asia’s booming internet economy.
Having trouble deciding where to set up and how to set up your startup? We can help! contact us on [email protected] or call +852 3905 3618 and let us assist you with your expansion plans, so you can focus on disrupting the future without any reservations.