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Establishment of Singapore Company
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Hong Kong and Singapore, as two of the most important financial centers in Asia, hold a prominent position in the global financial market. Both cities share similarities in their economic development models and financial systems. For investors, tax incentive policies are one of the key factors when deciding where to set up a company. Want to learn more about the tax differences between Hong Kong and Singapore? Keep reading as we provide a comprehensive analysis and insights.
1. Overview of the Tax Systems in Hong Kong and Singapore
While both Hong Kong and Singapore’s tax policies are known for being simple, transparent, and supportive of business growth, there are slight differences in their tax system design. Hong Kong operates on a "territorial taxation principle," meaning only income derived from Hong Kong is subject to profits tax. In contrast, Singapore follows a "global taxation principle," but typically exempts foreign-sourced income that is not repatriated to Singapore.
Main Types of Taxes
Hong Kong’s primary taxes include:
- Profits Tax
- Personal Income Tax (Salaries Tax)
- Property Tax
- Stamp Duty
Meanwhile, Singapore’s main types of taxes include:
- Corporate Income Tax
- Personal Income Tax
- Property Tax
- Goods and Services Tax (GST, equivalent to VAT)
- Stamp Duty
Characteristics and Advantages
Hong Kong: No consumption tax, capital gains tax, or estate tax, combined with relatively low corporate tax rates, making Hong Kong’s tax system highly attractive to investors.
Singapore: While maintaining low tax rates, Singapore has a strong network of international tax treaties and offers various tax exemptions, providing a conducive business environment for foreign investors.
2. Comparison of Corporate Tax Systems
Below are the corporate tax rates for Hong Kong and Singapore:
Hong Kong Profits Tax Rates
| Taxable Profits | Tax Rates |
| First HK$ 2,000,000 | 8.25% |
| Above HK$ 2,000,000 | 16.5% |
Singapore Corporate Tax Rates
| Taxable Income | Tax Rates |
| First SG $10,000 | 4.25% |
| SG$ 10,000- SG $190,000 | 8.5% |
| Above SG $190,000 | 17% |
Tax Scope
Hong Kong only taxes income sourced from Hong Kong, while Singapore taxes the global income of local companies, but with a tax exemption scheme for foreign-sourced income, providing more flexibility for businesses.
3. Comparison of Personal Tax Systems
Personal Income Tax
- Hong Kong: Personal income tax is progressive, ranging from 2% to 17%.
- Singapore: Personal income tax rates range from 3% to 22%.
Although both places use progressive tax structures, Hong Kong's rates are relatively lower, making it more attractive to middle- and low-income earners.
Deductions and Allowances
Both Hong Kong and Singapore offer various personal tax deductions, including child allowances, personal allowances, and allowances for supporting parents, although the specific conditions differ.
| Item | Hong Kong | Singapore |
| Basic Allowance | HK$ 132,000 | SG$ 20,000 |
| Married Person Allowance | HK$ 264,000 | No spouse allowance |
| Child Allowance | HK$ 130,000 per child | SG$ 4,000 per child |
In terms of basic allowances, Hong Kong offers significantly higher allowances than Singapore, particularly benefiting middle- and low-income groups, which makes Hong Kong’s tax system more appealing for reducing tax burdens.
4. Conclusion
Both Hong Kong and Singapore are known for their low-tax, simple, and transparent tax systems, attracting investors and businesses from around the world. Each city has its own advantages in terms of taxable income scope, international tax policies, and tax treaties. Singapore's global taxation system and extensive international tax treaty network are particularly beneficial for companies with international operations, while Hong Kong’s offshore tax exemption policy and flexible tax system appeal to multinational corporations.
Businesses can choose the most suitable location based on their specific needs. If international operations are a priority, Singapore’s tax policies may be more favorable; however, if tax flexibility is more important, Hong Kong would be the ideal choice.
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