Starting a business: Singapore versus Thailand
5 minute read
Singapore is one of the top places in Asia to set up your business, but what makes it a step ahead of Thailand? This guide will discuss the comparison between both countries when it comes to setting up a business.
Based on World Bank’s Ease of Doing Business Report 2018, Singapore is ranked #2 in the world whereas Thailand is ranked #27.
Starting a business
The World Economic Forum’s Global Competitiveness Report recently ranked Singapore as having the best IP protection in Asia and ranked #4 globally whereas Thailand is ranked #89 globally.
Incorporation and company registration in Singapore is fairly simple. However, Thailand has more complexity in incorporating as there are different ways of processing alongside long waiting time for the process to be done by the civil servants.
In Singapore, a company can be 100% foreign-owned.
In Thailand 100% foreign ownership needs to seek approval from the Board of Investment (BOI). Applying for BOI may be strenuous and time consuming as the waiting time after the application can be up to two months. Although companies approved by BOI receive benefits in the form of corporate income tax exemption and visa and work permit support, there are multiple requirements needed and subject to review. However, Thailand has dedicated several industries to be exclusive for locals only, some require approval from the government whereas others have no requirement at all.
Otherwise, finding a local partner that you trust may be recommended to allow easier process. Foreigners are only allowed to own 49% of the outstanding shares.
Directors and shareholders
Singapore only requires 1 resident director and 1 shareholder. Thailand has different requirements depending on the type of business structure. Private Limited company only requires 7 shareholders. Public Limited company required at least 15 shareholders with 5 directors where half of them have to be Thai nationals.
Singapore has been known to have one of the lowest corporate taxes in the world, ranging between 0 to 17%. This is further equipped with extensive tax treaties with more than 60 countries which provide companies greater advantage over other countries.
(Want to know more about Singapore’s tax system? Read our introduction to Singapore’s tax system here.)
Thailand on the other hand has slightly higher corporate tax rate ranging between 0% to 20% depending on the profit. Double taxation agreements also apply to 49 countries to benefit foreign companies.
Both countries also apply value added tax (VAT) for goods and services in the country charging the same rate of 7% however Thailand may charge at 0% for certain products.
Looking to get VC money? Many VC firms these days are based in Singapore or will only invest in companies with a Singapore entity. Various foreign VC firms now are looking beyond United States and China, especially towards Southeast Asia. Located in the center of this region, Business Times mentioned that Singapore saw a surge of funds being poured into the various VC firms in Singapore. This indicates the high interest from investors to support the startup scene in Singapore.
The Singaporean government has also provided various incentives to attract entrepreneurs and venture capitalists. From cutting red tape, good protection of intellectual property and allocating public money for early investments.
To find out more on the various VC firms in Singapore, check out this Map of money.
The Thai government has shown major support towards its VC industry and startup scene by providing tax benefits for VC firms. A temporary tax scheme was launched ending this year made specifically for VC firms to provide benefits in the form of tax exemption for both VC firms and its investors.
Anyone intending of working in either Singapore and Vietnam must have a valid visa/pass before they can start working.
The most common visa/permit for foreigners in Thailand is called the “Work Permit”. This permit allows foreigners to work and operate a business in Thailand as a skilled professional or even as an employer. Thailand has strict laws if caught working without a valid Work Permit. Generally, the success of a Work Permit application depends highly on the hiring company’s registered capitalisation. Do take note that before a Work Permit can be issued to you, you must be on a non-immigrant visa. This visa should be acquired before your arrival in Thailand.
In Singapore, the most common visa for foreigners is Employment Pass “EP”. This visa can be issued to foreign professionals, managers and executives who are required to have a monthly salary of more than SG $3,600. If you are looking to start a new business in Singapore, you can also apply for an EntrePass.
Workforce and talent
English language proficiency ranking
In addition to a higher proficiency in English, Most Singaporeans are effectively bilingual with either Chinese, Malay, or Tamil. This is very beneficial for companies with an English-speaking headquarters as it can reduce miscommunication. Furthermore, as Singapore has a very diverse population, your business may benefit from the various cultural and commercial ties with other countries such as China, Taiwan, Indonesia as well as strong economies from the West.
Thailand, unfortunately has low proficiency in English and ranked #15 in Asia. Most Thai are proficient in Thai language, which has close relations to Laos, some parts in southern China and Northern Vietnam.
When starting a business in another country, you may face a language barrier. Singapore and Thailand both have high literacy rates and are educated. Most Singaporeans generally can speak more than one language, English being the main business language. In Thailand, the business language is technically Vietnamese – however English is widely spoken and commonly used.
Thailand being bigger in size, may have more opportunities but business owners might find it easier to converse with Singaporeans, with English being the main spoken language.
Infrastructure and resources
Singapore is a small city-state, leading the government to focus its resources on ensuring high quality of workforce, extensive public transport for ease of accessibility and a high level of reliable internet connectivity.
Thailand on the other hand is roughly 700 times bigger than Singapore. Thailand is known to have rich mineral resources, natural gas and a leading producer of rice globally. Thailand’s infrastructure has been centralized mostly in their capital city and neighbouring towns. Most parts of Thailand is still underdeveloped, which may hinder smooth process of business transactions.
Governance and transparency
Corruption is a major concern for many entrepreneurs and investors in Southeast Asia. The Corruption Perceptions Index by Transparency International shows that Singapore had the highest score of all Asian countries at 84/100 (on par with Sweden), with Thailand scoring 37/100 (on par with Brazil).
Furthermore, the political situation in Thailand has been considered unstable due to the military coup d’etat on 2014. No election has been done yet and the leading military general has been acting as the prime minister.
While both countries are similar in culture, location and language, Singapore provides several significant benefits to Thailand when choosing a location for your regional expansion.
Interested in setting up your investment vehicle or regional base in Singapore? Talk to us.