Setting up a company: Singapore versus the Philippines
6 minute read
In the first six months of 2018, the Philippines achieved 6.3% economic growth making it the fastest growing economy in Southeast Asia. Meanwhile Singapore, the economic powerhouse of the region, registered a 4.2% growth during the same period. But which is the wiser choice for a company locating itself in South East Asia?
One is fast emerging in the horizon enticing investors with the scope to join its growth trajectory while the other with its well-diversified economy allows profound scope for investment, innovation, and business advance. This guide looks at how each country fares when you are weighing up potential jurisdictions for doing business.
The Global Ranking (2018)
Ease of getting things done
Overall ease of doing business
Starting a business
Getting permission for construction
Protecting minority investors
Registering a company in Singapore is known to be an fast and streamlined process. It takes 2.5 days on an average for a company be registered with the authorities, thanks to simplified procedures and quick clearance.
In the Philippines, it takes 28 days with 16 procedures. Startup costs? Almost zero. Singapore has SGD $1 capital required for a limited liability firm. In the Philippines, you need at least PHP 5,000 to start a limited liability company.
Interested in another company structure? You’re in for a harder time. A branch office of a foreign company must invest $200,000 or $100,000 with recruiting 50 locals and be listed with the Philippines Security and Exchange Commission. To trade with retail customers, it should invest $3 million. A company needs at least five directors holding shares. In Singapore, you need only one director and one shareholder.
Foreign ownership is possible in both countries. A foreign national can register a company in Singapore without having to move there.
The Philippines also allows 100% foreign ownership for corporations opened there. A Philippine corporation can be wholly foreign-owned because its business activity is one which is open to non-Philippine persons or entities or is not subject to maximum investment therein by non-Philippine persons or entities.
Such corporations have individual shareholders so that they (the shareholders) can be directors. The minimum number of directors is five.
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.)
In the Philippines, the corporate tax stands at 30% with a 35% tax is on fringe benefits granted to employees, a 15% tax on profit remittance by foreign branches (does not apply to activities which are registered with the Philippine Economic Zone Authority), and 2% minimum corporate income tax after 3 years of operation.
Both countries also apply value added tax (VAT) for goods and services in the country. Singapore’s rate at 7% remains lower than the Philippines’ at 12%.
Transparency and corruption
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 the Philippines scoring 34/100.
In Singapore, the ACE start scheme offers a matching grant of $7 for every $3 spent subject to $50,000 limit. Businesses working to boost capability in 10 selected areas receive 70% grant (maximum $30,000). There is a $10 million fund to offer matching seed capital for technology startups. Those in the fintech sector may apply for 50-70% funding (maximum limit of $200,000).
Workforce and Talent
With an educated bilingual workforce, the Filipinos have the talent to support economic growth across multiple sectors and is often seen as a great outsourcing pool for their global reputation as polite, service-oriented, and comparatively affordable.
However, Singapore tops the Global Competitive Index in higher education and training, second in labor market efficiency, and 14th in technological readiness. The Philippines ranks 55th, 84th, and 83rd respectively.
Singapore boasts a highly developed urban populace exceedingly skilled to take roles in various capacities. Its education system is among the world’s best with focus on producing an industry-ready workforce renowned for productivity and efficiency.
Singapore has world-class ports, airports, housing, office spaces, transports, ICT infrastructure, and even leads the world in info-communication. The Global Competitiveness Index ranks the smart nation second globally for its state-of-the-art ‘smart’ infrastructure.
The Philippines occupies 97th position in the Global Competitiveness Index. It has launched a six-year program to create and revamp its ports, airports, transport, and end perennial infrastructure problems by 2022.
In Southeast Asia, Singapore leads the access to physical infrastructure while the Philippines is on the fifth spot. The city-state boasts the highest Internet speed with 148 Mbps. At 13.5 Mbps, the Philippines is seventh.
Governance and Institutional Support
The Philippines is still in the transition phase as far as the governance and transparency are concerned. A rapidly expanding middle class anchoring strong domestic consumption has met its match in ambitious infrastructure building planned by the government.
Even the regulatory framework is fast shaping. However, policy unpredictability is still a concern and abrupt decisions have often rattled investors. Though the government is pushing for transparency, law and order is another grey area that needs attention.
While political stability has driven uniformity in policy, Singapore has demonstrated its ability to absorb and reinvent as a business destination based on international precedence.
Transparent business laws, reputation as an efficient logistics hub, and well-diversified economy have invited more than 3,500 multinationals to select the country as their base of operation. Its regulatory and legal framework based on the edifice of rule of law ensures clear protection for investors.
While both countries are similar in culture, location and language, Singapore provides several significant benefits to the Philippines when choosing a location for your regional expansion. Interested in getting started in Singapore? Talk to us.