In recent times, Singapore has been a preferred hub for Indian companies aiming for efficient global expansion. Many Indian startups have chosen Singapore as their base, leveraging its stability and business-friendly environment.
However, Singapore's regulatory landscape has undergone a
transformation. In response to international scrutiny, the nation has
introduced measures like taxes on foreign investor capital gains, eroding its
once-favorable fiscal advantages.
Concurrently, Singaporean financial institutions now bear
expanded compliance duties, with elongated know-your-customer (KYC) procedures
extending the opening timelines for new corporate accounts to 4-6 months. To
navigate this, companies often opt for temporarily opening offshore accounts.
These changes come amidst global pressures on Singapore to
enhance oversight against potential multinational tax avoidance. While crucial
for reputation bolstering, these steps unintentionally raise operational
hurdles for legitimate businesses.
Furthermore, Singapore's corporate tax rates have narrowed the
gap with India's to a mere 8%. Indian groups must now carefully consider the
escalating tax uncertainties in India concerning their Singapore entities,
including risks related to POEM guidelines, PE rules, and Indian TP
regulations. Finding local directors willing to accept enhanced legal liability
is increasingly challenging. Maintaining local employee bases incurs high
overheads due to strict visa controls, steep living costs, and real estate expenses.
For Indian startups, unwinding Singapore holding structures
poses additional complications as Singapore law prohibits local entities from
merging into Indian companies, though permitted under Indian statutes.
In summary, the burgeoning regulatory and operational costs,
diminishing tax arbitrage, and heightened Indian tax uncertainty surrounding
Singapore warrant a thorough reevaluation. While once attractive for its
simplicity, legitimate Indian businesses with a Singapore presence now grapple
with significantly more tax and compliance constraints as the jurisdiction's
cost-benefit balance shifts.
Indian businesses and startups are advised to reassess whether
Singapore continues to serve as an ideal base for their global ambitions.
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