Company Incorporation: Why Global Entrepreneurs Gravitate to Singapore and Hong Kong?

A growing number of individuals and private companies are increasingly choosing to incorporate in Singapore and Hong Kong. Both countries offer good infrastructure, with a business- and talent-friendly culture that is reflected in the country’s immigration policies, regulatory environment, and openness of its people. Furthermore, their governments have secured policies related to laws, regulations and taxes that promote the growth of entrepreneurship and trade in their respective countries.

Hong Kong and Singapore have consistently been at the top of the list in the Doing Business Report compiled by the World Bank each year. This is due to the business-friendly policies followed in both countries, such as low import and export costs, well-structured laws to protect investors, and labor regulations that favor employers.

Both countries have again been ranked at the top of the list in the 2010 Doing Business Report. For the ‘Ease of Doing Business’ index, Singapore and Hong Kong are ranked first and third respectively, while, for the ‘ Business Creation Index’, Singapore and Hong Kong are ranked third and eighteenth respectively.

Also, in the 2009-2010 Global Competitiveness Report, Singapore ranked third after Switzerland and the United States in global competitiveness.

Hong Kong as a business destination

As one of Asia’s emerging economies, Hong Kong is the preferred business start-up option for many entrepreneurs. Already recognized as Southeast Asia’s key financial services and investment hub, Hong Kong is poised to become Asia’s leading international financial center, vying with Shanghai, Tokyo and Singapore to claim the top spot.

Many companies doing business in Asia prefer Hong Kong as their base of operations. There are many American and European multinational companies using it as a gateway to China, and similarly, many mainland Chinese businessmen are using Hong Kong holding companies for real estate deals.

Hong Kong companies can obtain the tax benefits associated with most tax havens without compromising their image as in the case of being headquartered in a tax haven. In 2009 alone, around 109,000 new businesses were registered in Hong Kong, which is a record for the city. Starting a new business is a quick and easy procedure.

To make it even more attractive to investors, the Hong Kong government wants to make it even faster and easier to set up a corporation in the country. By early 2011, the government plans to establish electronic business incorporation and registration, which will allow an entrepreneur anywhere in the world to set up a business in the country via the Internet in just a few minutes. In a recent interview, Hong Kong Registrar of Companies Ada Chung said, “For our clients, we understand that speed is everything.”

On the subject of deterring illicit activity and attracting legitimate business, he added: “We’re trying to do both, really, to improve governance while still allowing enough flexibility in the business environment.”

Singapore as a business destination

Singapore is a well-developed and flourishing free market economy that has an open and corruption-free environment, a low tax regime, and a GDP per capita on par with many developed countries in the west. It is the main center for trading oil and other energy products, and is a key center for foreign exchange trading.

Regulatory changes introduced by the Singapore authorities have attracted many international fund managers to move their operations to the city. While Japan and Hong Kong are the key players in the region’s hedge fund management arena, Singapore is becoming one of the preferred Asian locations among hedge fund managers for fund start-ups. Singapore is climbing the hedge fund ladder at a rapid pace due to the comparatively simple registration process, which is a critical issue when deciding where to set up shop.

Singapore is also interested in becoming an Islamic banking center, efficiently in the area of ​​wealth management and working to establish a regulatory system for it. It will benefit greatly from being located close to the Islamic states of Malaysia and Indonesia, and has also attracted interest from investors from the Middle East. Another key selling point is that, unlike some other jurisdictions, there is no need to rent or purchase a physical office in Singapore for incorporation. Virtual office services are legally permissible and can be easily set up by a local professional services firm. Singapore’s corporate tax rate is now 17% and allows many tax breaks for new start-ups. Also, there is no capital gains tax in Singapore. All these factors make the country an ideal jurisdiction for the incorporation of companies.