Singapore has a very rich history that has led to become one of the world’s financial centers quite rapidly. The reason for this is the establishment of trade when Sir Stamford Raffles brought a trading center of the East India Trading Company there. Due to this decision, Singapore received the opportunity to become one of the world’s leading financial centers because it became a gateway between Asia and Europe through global commerce. Even after the East India Trading Company closed, Singapore was one of the cities that adapted to the changing ways of globalization and commerce. For this reason, it has become one of the most powerful economies in Asia.
When considering whether to relocated to Singapore for a job in the financial sector or whether it is wise to invest in investments in Singapore, it is wise to consider the conversation below:
Reasons Behind Singapore Being a Top Destination for the Fin-Tech Industry
One of the primary reasons that Singapore even outnumbers Hong Kong is their ability to adapt to the changes of the times. Granted, the East India Trading Company did start them off; however, what made Singapore what it truly is was the reforms that transpired in the 1980’s and 1990’s to attract foreign direct investment. Once this boom of foreign direct investment occurred, Singapore was able to attract leading banking institutions that wanted to have branches in a secure market in the Asia region. An important point to realize is that the banking and foreign direct investment is only part of the reason that Singapore flourished. Singapore also attracted an enormous Start Up culture, which is why many of the digital financial trading companies are based there.
Singapore had an impressive initiative called Smart Nation that had the objective of introducing ICT technologies to Singapore’s governmental boards. This has made Singapore prepare for the digital revolution through their Start Up efforts and be on the cutting edge of the Fin-Tech industry as it was gaining momentum. Thus, Singapore has adapted to three different trends in commerce. Today, their constant adaptive attitude, particularly in the digital world, puts them in a divine position to keep growing their economy to be a very attractive destination for international commerce.
How Singapore Became a Leading Financial Center
- Taxation: Taxation is surely one of the primary motivations behind companies electing to do business in Singapore. Singapore is purposely structured this way to attract the type of revenue that they seek in their economy. Below, is a chart illustrating the current corporate tax rate within Singapore:
|Tax rate on corporate profits for up to 300,000 SGD||Effective tax rate at 8.5%|
|Tax rate on corporate profits above 300,000 SGD||17%|
|Tax rate on capital gains accrued by the company||0%|
|Tax rate on dividend distribution to shareholders||0%|
|Tax rate on foreign-sourced income not brought into Singapore||0%|
|Tax rate on foreign-sourced income brought into Singapore||0 – 17% subject to conditions|
Some of the primary benefits of taxation within Singapore is that Singapore is a territorial area for taxation meaning that money made in Singapore is taxed; however, there is room for taxation treaties with many countries who tax over 15%. The income that is made in Singapore is taxed at a maximum rate of 17% on income made within Singapore. Income made outside of Singapore has a potential of waiving taxes once the money is remitted to Singapore depending on the agreement between the countries. In fact, there are over fifty different tax treaties between external countries and Singapore. This causes businesses to save a considerable amount of capital when conducting business within Singapore.
- Ease of Doing Business: The majority of Singapore’s policies are designed with the objective of attracting foreign companies to their market. One of the primary highlights of conducting commerce in Singapore is that the main language spoken is English. In addition to the language, the government makes each policy driven towards having an open market that does not have many bureaucratic hurdles.
- Skilled Workforce: Tying into the ease of conducting commerce in Singapore, there is also a very highly educated and skilled workforce there. The British influence in the region established a reliable infrastructure to the country in terms of academia and English-language level. This makes a great difference to companies because they have a pool of very talented individuals to choose from. Furthermore, with the arrival of many financial institutions in the 1990’s, Singapore has a diverse expatriate community that has increased the quality of schools there by opening more international schools. These schools have grown the potential workforce in Singapore considerably, which further perpetuates the country’s attractiveness to foreign direct investment.
Final Remarks on the Subject
Singapore absolutely is one of the powerhouses of Asia. In terms of geography, Singapore was fortunate that the East India Trading Company viewed its location as strategic. Due to this influence, Singapore was given the opportunity to learn one of the most important languages in the world to global commerce. Singapore was also provided the opportunity to have substantial wealth that led to the formation of reliable governmental bodies to create a paradise for global entities to develop and thrive. That said, what truly made Singapore have the economy it does today is its initiative to be ahead of or current with the changes to global commerce. Going forward, it will be incredible to see what Singapore will do with the perpetual digitalization of the financial sector.