Hong Kong Vs. Singapore for Doing Business
Two English-speaking countries with low tax rates, supportive government policies, excellent banking services, and high levels of economic freedom — sounds like a dream come true for business owners, right?
Hong Kong and Singapore offer all of these perks and more, making them popular choices for entrepreneurs looking to set up a business in Asia. But if we were to pit these two financial hubs against each other, who would come out on top?
Let’s compare the two, and see how they stack up against each other.
Introduction: Hong Kong and Singapore
Hong Kong is strategically located in the heart of Asia, bordering mainland China, and has a long history as an international trading port.
It’s the perfect location to access Asia’s booming markets. Not only that, but it also shares the same time zone as major business cities like Beijing, Singapore, Shanghai, Perth, Kuala Lumpur, and Manila.
Not to mention, cities like Seoul, Tokyo, Bangkok, Ho Chi Minh City, and Jakarta are only a short flight away.
Singapore’s unique geographic location at the southern tip of the Malay Peninsula makes it an excellent gateway to Southeast Asia markets.
Its proximity to major shipping lanes and world-class port makes it a prime choice for businesses seeking efficient logistics and transportation.
Additionally, Singapore boasts a highly skilled workforce, with most of its population fluent in English.
Plus, Singaporeans generally have a pro-business and entrepreneurial mindset, making it easy for businesses to thrive there.
Here’s a summary of the key differences between Hong Kong and Singapore:
|The Rank for Easy of Doing Business||Singapore ranked 2nd||Hong Kong ranked 3rd|
|Corporate Tax Rate||Singapore 17%||Hong Kong 16.5% on profits over HK$2M and 8.25% on profits under HK$2M|
|GDP Per Capita||Singapore 72,794.00 USD (2021)||Hong Kong 49,800.54 USD (2021)|
|English as the Official Language||Singapore Yes||Hong Kong Yes|
|Legal System||Singapore English Common Law||Hong Kong English Common Law|
|Financial Hub||Singapore Yes||Hong Kong Yes|
|Banking System||Singapore Advanced||Hong Kong Advanced|
Ease of Doing Business
Singapore is ranked 2nd on the World Bank’s Ease of Doing Business index, making it one of the most business-friendly countries in the world.
It only trails behind New Zealand.
From 2007 to 2016, Singapore consistently ranked 1st on the index, showcasing its commitment to creating a business-friendly environment.
On the other hand, Hong Kong ranks 3rd on the index, just behind Singapore.
It’s improved a lot, considering that in 2018, it was ranked 5th.
So, why is this So?
- First, the two countries enjoy political stability and efficient government policies.
Singapore and Hong Kong have long been recognized as politically stable countries with low levels of corruption, providing businesses with a safe and secure environment to operate in.
- Secondly, the tax rates for corporations in both Singapore and Hong Kong are relatively low compared to other countries.
In Singapore, the corporate tax rate is 17%, while in Hong Kong, it’s slightly lower at 16.5% for profits over HK$2M and 8.25% for earnings under HK$2M.
- Another crucial factor is the presence of a highly skilled and educated workforce in Singapore and Hong Kong.
Both countries have invested significantly in their education systems, producing talented workers who understand their respective markets and can quickly adapt to changes.
- Furthermore, the banking systems in both countries are highly advanced, facilitating smooth financial transactions for businesses.
- However, Singapore edges out Hong Kong with its well-established banking regulations and robust financial infrastructure.
- Government policies also favour businesses in Singapore and Hong Kong, with both countries having a business-friendly legal system that protects intellectual property rights and enforces contracts.
- Furthermore, the processes for setting up businesses in both countries are straightforward and streamlined, with minimal red tape.
- One area where Hong Kong has an advantage over Singapore is its strategic location.
Right next to China, a global economic powerhouse, makes it an ideal location for businesses looking to tap into the Chinese market.
- Finally, let’s not forget about the living conditions in both countries.
Singapore is known for its cleanliness and efficient public transportation, making it desirable to live and work.
On the other hand, Hong Kong has a vibrant culture, bustling nightlife, and delicious cuisine, making it an attractive destination for expats.
Regarding corporate taxation, both Singapore and Hong Kong have favourable business tax rates.
Singapore has a flat % corporate tax rate of 17%, with various tax incentives and exemptions available for specific industries.
In comparison, Hong Kong has a slightly lower corporate tax rate of 8.5% for profits up to HK$2 million and 16.5% for earnings above that.
Let’s break it down:
- Hong Kong doesn’t tax dividends or interest income, whereas Singapore taxes foreign-sourced dividends but allows double tax relief.
- Singapore imposes a tax on offshore income remitted into the country, while Hong Kong does not tax offshore income. However, Singapore does allow offsets under its double-taxation agreements.
- Both countries don’t have capital gains taxes. But Singapore has a few possible exceptions that you can read here.
- Singapore imposes withholding taxes on royalty income, whereas Hong Kong only applies withholding taxes on certain royalties.
- Hong Kong has no VAT/GST, whereas Singapore has a GST (goods and services tax) of 7%.
- Both countries have a relatively low personal income tax rate, with Singapore’s maximum rate at 22% and Hong Kong’s maximum at 17%.
- Singapore’s tax system is comparatively more complex, with several exemptions and incentives available, whereas Hong Kong has a more straightforward and streamlined tax system.
A notable contrast between Singapore and Hong Kong regarding company formation lies in the residency requirements for directors. Singapore insists that at least one company director must have an official residence here.
On the other hand, Hong Kong does not impose any such restrictions and permits all directors to be non-residents. The stipulation in Singapore can lead to added business costs. Foreign entities hesitant or unable to shift a board member to Singapore frequently seek guidance and support from corporate service providers like Acclime.
Both Hong Kong and Singapore necessitate the appointment of a company secretary who is a resident. However, the former allows a Hong Kong-registered and licensed corporate entity to serve as the company secretary. Singapore requires the person to be a natural person.
Again, the role of a company secretary in Singapore is more complex and has specific licensing requirements. In Hong Kong, the role is reduced to ensuring statutory compliance.
You can read about the requirements for a company secretary in Singapore here.
For Hong Kong, you can read it here.
Annual Financial Reporting
While Singapore and Hong Kong share numerous similarities in their financial reporting stipulations, Hong Kong stands apart with its compulsory annual audit requirement for all firms a Hong Kong CPA must execute.
That is a noteworthy distinction that companies should consider when comparing the two jurisdictions.
For an in-depth understanding of the accounting and tax landscape in both Singapore and Hong Kong, consider reading Acclime’s Singapore’s Accounting and Tax Requirements and Hong Kong’s Accounting and Tax Requirements.
Location and Infrastructure
Singapore is a well-connected financial hub that boasts modern infrastructure and top-notch amenities. Its proximity to SEA and India makes it an ideal location for businesses looking to expand into these markets.
On the other hand, Hong Kong has a reputation as Asia’s premier international financial centre, with a sophisticated and well-established business environment. It also serves as a gateway to Mainland China, which makes it an attractive destination for companies looking to enter the Chinese market.
Despite a few hiccups, Hong Kong continues to strut its stuff as the go-to hub for sourcing and purchasing in the Greater Bay Area (GBA). Its reigning title as Asia’s largest financial centre isn’t going anywhere anytime soon.
However, it’s important to note that the People’s Republic of China (PRC) government has been boosting Shenzhen’s potential to compete with Hong Kong within the Greater Bay Area (GBA). Measures such as relaxing restrictions on foreign currency exchange are part of these efforts, paving the way for Shenzhen to offer a rivalling base within the GBA.
Singapore has surpassed Hong Kong in the race, emerging as the region’s most bustling container port and successfully positioning itself as the logistical hub of Asia. While Hong Kong may still be a leading base for tapping into the mainland China market, it appears that Singapore is leading the pack to reach out to Asia at large.
Being a distinguished member of ASEAN, the third largest market globally with a population of 650 million and an impressive addition of 140 million fresh consumers, Singapore has undoubtedly charted a compelling narrative in the global business landscape.
Both Hong Kong and Singapore boast top-tier banking amenities. These financial hubs, well-acquainted with the demands of a worldwide clientele, can smoothly handle significant international transactions.
Hong Kong used to have a slight edge over Singapore as a slightly cheaper banking option, but these days, it seems like the gap no longer exists. With Singapore’s banking sector expanding rapidly and Hong Kong’s fees rising, the choice between these two financial centres has become less black and white.
Banking in Hong Kong has a notorious reputation for setting tricky hurdles for non-residents desiring to set the wheels of their accounts in motion. Fear not, the account will indeed be activated, but brace yourself for a maddeningly long and tedious process that may require several visits to the bank.
On the other hand, Singapore has been actively trying to attract foreign investors by making it easier for them to open accounts remotely. A few innovative banks in Singapore have embraced the digital age, allowing the interview process via video conferencing. This modern approach has resulted in a significant increase in foreign investors choosing Singapore as their business base.
The Cost of Doing Business in Singapore and Hong Kong
Regarding the salary landscape in these two territories, things are pretty even. Singapore might lean a smidgen towards offering bigger pay checks to those at the top of the food chain, but don’t start packing your bags to the Lion City just yet. Interestingly, the tables turn when it comes to middle management. Clerical staff, for example, earns slightly more in Hong Kong than in Singapore.
Switching gears to office space rental, Hong Kong ranks as the most expensive in the APAC region, beating Beijing and Tokyo. Conversely, Singapore has shown a downward trend in rental prices over the past few years, making it a relatively more affordable option.
A trick Singapore businesses use is to opt for a park instead of a downtown location. That allows them to save on office space rental while enjoying the same perks and conveniences.
The COVID-19 pandemic exerted pressure on both Hong Kong and Singapore, with their rental cost falling the fastest in Hong Kong, dropping 12% in the first six months of 2020 alone. However, it is noteworthy that while Singapore’s rental cost fell slower, it has remained stable despite the pandemic.
The workforce in both Singapore and Hong Kong competes at an international level, judging by their capacity to cultivate, draw in, and retain skilled individuals. While accounts of distinctions in work culture are primarily experiential, they commonly favour Hong Kong for its more open-minded working atmosphere. Hong Kong is known to encourage a culture of innovation and risk-taking.
In both Hong Kong and Singapore, English is recognized as an official language. However, Singapore has a slight edge as English is predominantly considered a first language. Conversely, Mandarin is spoken by around half of the population in both regions, making talent acquisition straightforward.
If your enterprise necessitates frequent interactions with the Greater Bay Area markets, the fact that Cantonese is the primary language for 97% of Hong Kong’s population might influence your decision.
The industry and job roles needed will naturally influence which location boasts a more expansive talent pool. For instance, Hong Kong’s historical prominence in trading provides a vast reservoir of talent for sourcing and purchasing roles. Conversely, Singapore’s approach as a regional epicentre for tech companies guarantees a steady flow of digital expertise.
Another important factor to consider in terms of talent is the level of education and qualifications. Both Hong Kong and Singapore have highly regarded universities and educational institutions, producing a skilled and knowledgeable workforce. However, Singapore has been consistently ranked as having one of the best education systems in the world, emphasizing STEM (Science, Technology, Engineering, and Mathematics) subjects.
Hong Kong and Singapore offer simplified processes for working permits and visas, granted the appropriate corporate framework is in place to support such. Both regions provide alternatives to yearly visa requirements for expatriates contemplating a long-term shift by proposing more enduring solutions. After seven years of residency and employment in the territory, Hong Kong offers the option of permanent residence.
Singapore extends its provisions even further, considering the possibility of citizenship and passport issuance. While these options are undoubtedly appealing, you also want to consider what this might mean to other members of your family. For example, Singapore has limitations on dual citizenship. It doesn’t allow citizens to hold dual citizenship, which means that if one acquires Singaporean citizenship, they must renounce their previous nationality.
On the other hand, Hong Kong doesn’t recognize it all. It acknowledges the existence of dual citizenship but does not recognize it. That means that while a person may hold dual citizenship, they will still be considered solely as a Hong Kong citizen by the Chinese government. It can be advantageous for individuals who do not want to renounce their previous nationality but still want to enjoy the benefits of being a permanent resident in Hong Kong.
The startup scene in both Hong Kong and Singapore is thriving, with government support and initiatives to boost entrepreneurship.
The Singapore government highly supports entrepreneurial endeavours, providing incentives and backing to foster startup growth. Moreover, it not only supports multiple venture capitalists but also engages in fund-matching initiatives. The process of procuring seed and angel funding in Singapore is typically more straightforward compared to Hong Kong.
Meanwhile, Hong Kong is diligently working towards expanding its cadre of angel investors. That’s particularly observed among the younger generation of affluent local families keen on diversifying their familial investment portfolios.
Moreover, there has been an uptick in the number of comprehensive investment programs, and the availability of funding for promising entrepreneurs is on the rise. However, raising funds is still more complex in Hong Kong than in Singapore.
Singapore — The Gateway to SEA
Singapore is often considered the gateway to Southeast Asia, with a highly diverse population and strong economic ties to other countries. That makes it an ideal location for businesses expanding into the Southeast Asian market.
However, in recent years, Singapore has gained tremendous momentum, with its startup ecosystem attracting many global investors, eying the middle class in countries like Cambodia, Thailand, and Vietnam.
Hong Kong — The ideal location for tapping into the Chinese market
Hong Kong’s strategic geographical position makes it an attractive base for companies looking to tap into the growing Chinese market. With its proximity to mainland China, Hong Kong offers a unique advantage for businesses looking to expand into this lucrative market.
If you’re looking to enter the elusive GBA market, Hong Kong is the perfect launchpad due to its proximity and cultural understanding of the market.
It’s a Wrap Up
Choosing between Hong Kong and Singapore for business setup largely depends on your specific market interests and aspirations. Both locations offer their unique advantages, making them highly desirable choices. Singapore is the gateway to Southeast Asia and has a strong presence in the region’s growing economies.
On the other hand, Hong Kong offers access to the Chinese market, which boasts tremendous growth potential.
With the right strategy and mindset, Hong Kong and Singapore can serve as excellent bases for your business ventures in Asia. So, whether you choose to set up your business in Hong Kong or Singapore, you can rest assured you’ll have access to a highly skilled workforce, world-class infrastructure, and a business-friendly environment.