Many Indian startups register in Singapore due to various reasons. One of the main reasons is tax saving for VC investors. In India, capital gains tax can be as high as 15-20%, while in Singapore, it is zero. As most VCs create their returns by selling shares in companies, it's the capital gains they get taxed on and not business profits or dividends.
Singapore also offers tax savings on profitable companies as its income tax rate for companies is only around 17%, while in India, it can be 25-30%. In addition, Singapore is one of the top five countries in the world in terms of ease of doing business and has a highly robust intellectual property protection law and arbitration system.
If Indian startups plan to penetrate the Southeast Asia market, Singapore is an attractive location as many investors focusing on those markets are headquartered there. However, there are some reasons why startups might choose to register in India instead. For instance, if your primary business is in India, the Indian tax laws will force your investors to pay taxes in India, even though they are foreign parties who have bought and sold shares of a Singapore entity.
Moreover, opening a bank account in Singapore from India can be challenging, and startups should only register in Singapore if they plan to open actual operations there. Additionally, while startups can transfer their intellectual property to Singapore on the insistence of investors, they will still need to keep their Indian entity to hire employees and run all operations.
Despite the advantages of registering in Singapore, the Indian ecosystem has grown to be quite mature, and startups do not need to go to international markets to raise equity funding.
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