Why you should setup a Singapore company if you want to run businesses in Malaysia

Setting up a Singapore company can be a strategic decision for entrepreneurs looking to do business in Malaysia. Singapore’s robust financial infrastructure, favorable tax policies, and close economic ties with Malaysia make it an attractive base for companies targeting the Malaysian market. Here’s a breakdown of the main reasons to consider establishing a Singapore company for your business operations in Malaysia:

1. Ease of Business Setup and Low-Cost Maintenance

Streamlined Company Incorporation Process: Singapore is renowned for its efficient and straightforward company registration process, allowing businesses to incorporate within a day or two in some cases. For Malaysian entrepreneurs or those from other countries, this quick setup process allows them to establish a legal entity swiftly and begin operations almost immediately.
Low Minimum Capital Requirement: Setting up a company in Singapore doesn’t require a high initial capital outlay, with only SGD 1 as the minimum capital requirement. This feature makes it accessible for businesses of all sizes, especially startups or SMEs that might not have large budgets.

2. Favorable Tax Regime

Attractive Corporate Tax Rates: Singapore offers a flat corporate tax rate of 17%, one of the lowest in the region, with various tax exemptions and reliefs for new startups. Singapore’s partial tax exemption scheme and startup tax exemption (SUTE) help lower the effective tax rate further, making it attractive for businesses looking to optimize their tax efficiency.
No Capital Gains Tax: Singapore does not impose capital gains tax, which is beneficial for businesses or investors planning to reinvest their profits or sell shares.
Avoidance of Double Taxation: Singapore has signed Avoidance of Double Taxation Agreements (DTAs) with over 80 countries, including Malaysia, allowing businesses to benefit from reduced tax rates or tax relief on cross-border income. This means that profits made in Malaysia may be exempt or credited against Singaporean tax, reducing the overall tax burden.

3. Proximity to Malaysia and Strong Bilateral Trade Relations

Geographical Proximity: Singapore’s close proximity to Malaysia allows businesses to manage operations in both countries conveniently. The physical closeness enables Singapore-based business owners to travel frequently to Malaysia, attend meetings, and oversee operations without long travel times or significant costs.
Favorable Bilateral Agreements: Singapore and Malaysia have maintained strong economic ties, with many agreements that facilitate business operations between the two countries. Businesses can leverage Singapore’s favorable business environment to engage with Malaysia’s growing market, especially in sectors like manufacturing, technology, and retail.
ASEAN Free Trade Area (AFTA): Being part of ASEAN, Singapore enjoys preferential access to the entire ASEAN market, including Malaysia. Goods and services can move freely with minimal tariffs under AFTA, reducing costs for Singapore companies operating in Malaysia.

4. Access to a Robust Financial and Banking System

Global Financial Hub: Singapore is a leading global financial center, with access to top-tier banking services, venture capital, and other financial institutions. This access is invaluable for businesses that require financial support for expansion into Malaysia.
Access to Loans and Credit Facilities: Singaporean banks provide a variety of loan products and credit facilities, making it easier for businesses to finance their operations. Companies in Singapore can also access government grants and schemes specifically designed to support SMEs and startups, many of which can be applied toward expanding into neighboring markets like Malaysia.

5. Reputable and Stable Business Environment

Stable Political and Economic Environment: Singapore consistently ranks as one of the most politically stable countries in Asia. Its low levels of corruption, strong legal framework, and pro-business government policies create an environment conducive to business growth.
Reputation and Credibility: A Singapore-registered company often enjoys greater credibility and trust globally. Singapore’s robust legal and financial systems give companies a competitive edge when doing business in Malaysia, as Singapore companies are seen as reliable partners with high compliance standards.

6. Support for Foreign Entrepreneurs and Talent Mobility

Ease of Hiring and Relocating Talent: Singapore has liberal immigration policies that allow companies to hire foreign talent through Employment Passes, S Passes, and other work permits. This is particularly advantageous for Malaysian businesses looking to set up in Singapore and potentially employ skilled individuals who can work in both markets.
Opportunities for Local and Foreign Entrepreneurs: Singapore offers the EntrePass scheme, allowing foreign entrepreneurs to start and operate businesses in Singapore. Additionally, Malaysia and Singapore have cross-border talent programs that make it easier to relocate or assign employees between the two countries.

7. Well-Developed Infrastructure and Digital Connectivity

Advanced Digital Infrastructure: Singapore is known for its world-class infrastructure and high-speed internet connectivity, which supports seamless communication with Malaysian offices or partners.
Logistical Hub: Singapore’s world-class port and airport facilities make it a logistics hub for the region. Businesses that require import/export operations can benefit from Singapore’s well-developed supply chain infrastructure, enabling efficient trade and distribution with Malaysia.

8. Enhanced Intellectual Property Protection

Strong IP Protection Framework: Singapore provides a robust intellectual property (IP) protection framework, a critical factor for businesses developing proprietary technology, products, or brands. This protection ensures that innovations and trade secrets remain safe and helps companies retain a competitive edge when entering the Malaysian market.
Regional IP Hub: Singapore’s IP-friendly policies and initiatives make it a regional IP hub, which is advantageous for companies looking to safeguard their brand and assets in Malaysia. Businesses can register their trademarks, patents, and copyrights in Singapore, with the assurance of high enforcement standards.

9. Well-Connected Trade and Investment Network

Free Trade Agreements (FTAs): Singapore’s extensive network of FTAs with countries worldwide enhances trade possibilities and reduces tariffs for products manufactured or traded from Singapore. Companies operating in both Singapore and Malaysia can benefit from streamlined import/export processes.
Investment Incentives: Singapore provides various incentives and grants for businesses, including productivity incentives, research and development (R&D) grants, and funding programs. For Malaysian entrepreneurs, Singapore offers a business-friendly environment to establish a company that can access these incentives, making expansion into Malaysia cost-effective.

10. Strong Legal and Regulatory Framework

Transparent Regulatory Environment: Singapore’s transparent and clear regulatory environment makes it easier for businesses to understand and comply with legal requirements. This transparency minimizes regulatory risks and ensures that businesses can focus on expansion and growth.
Efficient Dispute Resolution Mechanisms: Singapore’s legal system is widely regarded for its efficiency, which is beneficial if disputes arise during cross-border operations. Singapore’s court system and arbitration facilities provide businesses with a reliable mechanism for dispute resolution, making it easier to handle issues related to contracts, intellectual property, and trade.

Conclusion

In summary, establishing a Singapore company provides multiple strategic advantages for businesses aiming to operate in Malaysia. The streamlined company setup, favorable tax policies, strong financial and legal systems, and proximity to Malaysia make Singapore an ideal base for companies targeting the Malaysian market. Additionally, Singapore’s stable economic environment, IP protection, and ease of access to ASEAN markets offer businesses a platform for sustainable growth and expansion. By leveraging Singapore’s strengths, businesses can confidently expand their reach in Malaysia and beyond, with a solid foundation that supports long-term success.