According to the Asia Pacific Tax Complexity Forecast released by accounting firm Deloitte & Touche, Hong Kong is one of the top five priority business locations in the Asia Pacific region. A survey of 1,000 financial and tax professionals within Asia Pacific was conducted in April 2010 to provide a benchmarking tool for tax environments across the region, thereby facilitating business relocation decisions and tax management practices.
The survey results showcased that China and India will have the most complex tax environments in 2013, while Japan, South Korea, and Australia were singled out as jurisdictions that are likely to face increased tax complexity over the next three years. Not surprisingly, Hong and Singapore will have the least complex tax environments in 2013. Other aspects that was included in the study were tax consistency and predictability in different jurisdictions. In this regard, Hong Kong, Singapore, and Australia are considered to have more consistent tax policies and enforcement. While China, India and Indonesia are perceived to have the least predictable tax environments, the tax systems in Singapore and Hong Kong are perceived to be the most predictable.
According to Deloitte professional, Ms. Lili Zheng,
“Given the divergence in tax complexity, consistency and predictability among jurisdictions in the region, it is important for companies to consider the appropriate combination for their business of in-house and outsourced resources and the choice of location of certain business functions.”
It is apparent from Deloitte’s study that both Hong Kong and Singapore are tax efficient jurisdictions that facilitate Hong Kong Company formation and Singapore company set up. Singapore’s tax system bears similarity to the tax system in Hong Kong, which is why both the jurisdictions have fared well in the survey. For instance, Hong Kong’s corporate income tax rate is 16.5%, while Singapore company tax rate is only slightly higher at 17%. Both jurisdictions follow a single-tier tax system and do not impose tax on dividends that are distributed to shareholders. There is no estate duty, inheritance tax or capital gains tax in Singapore or Hong Kong. Both the territories have an extensive tax treaty network. While foreign sourced income is taxed only if it is remitted in Singapore, Hong Kong imposes no tax on overseas income (regardless of whether it was remitted into Hong Kong). Singapore GST / VAT is one of the lowest in the region at 7%, while Hong Kong has no VAT.
Although the Deloitte survey unveiled China and India as the top two priority business locations in the region, their tax environments leave much to be desired. Businesses that want to access both these growing markets can do so by either setting up a Singapore company or by registering a company in Hong Kong. Both Singapore and Hong Kong are strategically located in the heart of South Asia and are excellent platforms to gain access to China or India. Moreover, other enabling factors such as political and economic stability, an efficient legal system, availability of a talented workforce, and excellent business infrastructure make them the ideal launch pad for businesses seeking to tap into the Asia market. Today, both Hong Kong and Singapore have emerged as top destinations for doing business in the world. Undoubtedly, their tax systems have played a crucial role in their success.
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Roger Lee is a Singapore-based freelance writer who writes on a wide range of topics on doing business in various jurisdictions. For more information on topics discussed in this article, refer to Hong Kong company registration http://www.guidemehongkong.com and Singapore company incorporation guides http://www.guidemesingapore.com