Taiwan vs Singapore a Comparison - Sandhurst
Taiwan and Singapore are two popular, optimal choices for an offshore financial centre. The two countries have their own benefits and drawbacks, but they remain two of the top destinations for offshore financial centres.
Taiwan as an Offshore Financial Centre
Taiwan is often considered an “unnoticed Asian tax haven,” and the country is very “modern.” A natural person or a foreign investor can setup a company in the country. You'll be able to choose among the following business entity types:
- Limited Liability Company
- Branch Office
- Representative Office
- Subsidiary Company
- Company Limited by Shares
When setting up a company, you’ll have to provide 3 – 5 company names, which will all undergo a preliminary check by the government to ensure that no conflicts exist. All of the names will need to be provided in Chinese.
If a name is already in use, you may be able to add additional words to it to make it unique.
Import/export registration is available as well, and this would allow for a formal English name to be used for the company.
Opening a business in the country takes just seven steps, and it’s easiest to use a professional firm to help you with the process. These steps include:
- Preparing all of your legal documentation
- Picking your business address
- Picking your business items
- Choosing and reserving a company name
- Preparing your company seal
- Remitting capital and opening your first company bank account
- Picking a responsible person
For the purpose of this article, we’ll assume a company is being formed, and this will require:
- Key people to be assigned
- An application for approval of foreign investors submitted to the Investment Commission of the MOEA
- CPA certification that the capital invested is adequate
- Application sent to the MOEA to examine and certify foreign equity investment
- Register as a tax-paying entity
- Apply for any required licensing
- Apply for any required health or labor insurance
Annual documents are required, depending on the entity chosen, which may include:
- Business report
- Balance sheet
- Profit and losses statement
- Changes in shareholders’ equity
- Statement of cash flows
- Allocation of net income and retained earnings proposal
Non-resident companies are only taxed on income derived from Taiwan sources, but resident companies are taxed on worldwide income.
Corporate tax rates in Taiwan were a flat 17% for a long time, but as of January 1, 2018, this rate was raised to as much as 20%. Taxable income up to TWD 120,000 is exempt, but afterward, a 20% rate is applied.
Tax rates are adjusted to 18% (2018) or 19% (2019) if taxable income is less than TWD 500,000. Non-resident companies are only taxed on income derived from Taiwan and would follow the same tax structure as mentioned above.
Double taxation treaties also exist with 28 other countries, including Singapore, UK and Germany.
Tax compliance is ranked the 30th easiest in the world, so Taiwan is a great option for doing business.
Taiwan’s workforce is highly skilled, and there are labor rights and safeguards aimed at protecting employees. The Labor Standards Act sets labor conditions in the country, and the minimum wage in 2018 is NTD 22,000 per month.
Social security and pensions are available, and there are also fringe benefits that all companies must provide to their employees. Workers’ compensation is also required.
Taiwan's population has swelled to over 23 million people, and it exists as a thriving democracy with a highly attractive export market. Taiwan is a centre of excellence, and it has high standards for IT, technology and science.
Literacy stands at over 80% in the country, and 95% of students continue their education past the age of 15 when compulsory schooling ends. Around two-thirds of students taking the national university entrance exams will be accepted into a higher education program.
A concern in the country is that the population decline will continue, and by 2023, it’s projected that the number of higher education enrollments will drop by a third. This will have a major impact on the availability of a skilled workforce.
As it stands today, Taiwan offers a vibrant economy and ample labor force that can help fill the ranks of an offshore financial centre. The decline in population will remain a real concern, with the possibility that workforce scarcity may drive up salaries and cause immense competition in the workforce.
Singapore as an Offshore Financial Centre
Singapore is slated to overtake the United Kingdom as the second-largest offshore financial centre in the world. Estimates suggest that $1.7 trillion in offshore money will be kept in the country by 2020.
Switzerland still remains the leader in offshore financial centres.
The Singapore government has done a lot to make it easy to incorporate a business in the country and remain compliant.
Comprehensive double taxation avoidance agreements are also in place, with over 50 agreements to date. There are a multitude of free trade agreements, and strict enforcement of intellectual property makes it a great choice for startups.
When registering a business, the entity’s name must be approved before incorporation. This is the same premises in Taiwan, and the idea is simple: a business name needs to be approved so that no confusion over the name exists. This is a safeguard that the government offers in an effort to ensure that businesses don’t infringe on the trademarks of another entity.
Once approved, you’ll also need to do the following before registering your company:
- Appoint at least one resident director
- Create or appoint a physical Singapore registered address
- Paid-up capital of a minimum of S$1 must be provided to register the company
When a non-Singapore resident would like to incorporate in Singapore, by law, it is required that the registration of the business be conducted by a professional firm. The professional firm will guide all business owners through the process and explain any future steps that need to be taken for the business to remain compliant.
If an owner plans to move to the country, additional requirements must be met. This will include obtaining one of the following:
- Entrepreneur Pass
- Employment Pass
Name approval can take a few days or weeks, and this is the longest part of the registration process. The base registration process may be completed in as little as a few hours in some circumstances.
Annual filings are required in Singapore, and all licenses must be kept current. The annual filings will include:
- Financial statements
- Chargeable income filing
- IRAs filing of your annual tax return
- ACRA filing of your annual return
- Annual general meeting
- Financial statement audit
The financial statement audit depends on how many employees the business maintains as well as the amount of annual income earned. Not all entitles will need to undergo a financial audit.
Within six months of incorporation, you’ll need to appoint a qualified company secretary.
Once incorporation is complete, you can open a bank account at any major bank in Singapore. Business licenses will need to be obtained for most business activities, but the professional firm assisting with registration will be able to assist you in this matter.
Companies that expect to have revenue of S$1 million or more will need to register to pay Goods and Services Tax. This tax, which stands at 7%, will be charged to the client as a tax for the goods or services provided.
This tax is the same as a VAT or sales tax in other countries.
Taxes are very friendly and straightforward. The first S$300,000 in annual profits will pay less than 9%. Annual profits after the S$300,000 mark will be subject to a flat tax percentage of 17%.
Singapore’s workforce is considerably small with just 5.7 million people.
While the workforce may be small, this doesn’t mean that it’s not a vibrant workforce. The smaller workforce has a great education system that focuses on high achievement. Often considered “go-getters,” the workforce focuses on being lean and:
- Adopting new technology rapidly
- Innovating at a faster pace
- Keeping productivity at high levels
Labor force participation is over 67% in the country, and females are increasingly entering the workforce. More than half, or 54.6% of people in Singapore has a diploma or hold a degree of some sort.
Singapore has one of the lowest tax rates in the world, and that is what has helped the country move up as one of the top financial centres in the world.
There are ample reasons to start an offshore financial centre in both Taiwan and Singapore. Taiwan has a larger workforce, although there are fears that the workforce is shrinking. This shrinking workforce needs to be offset to allow the country to remain a reliable choice for an offshore centre.
While the workforce is substantially smaller than Taiwan, Singapore continues to impress with a very high level of the workforce holding a degree of some sort. There is also the key benefit that the workforce has been adopting new technology at a fast pace, and productivity has remained a key point in the country’s work environment.
Both countries are a great choice for an offshore financial centre, but Singapore may offer an easier business setup and maintenance.