Benefits of Investing in India via a Singapore Holding Company in a New Guide by Rikvin

With the change in government in India, the world is looking up to its new Prime Minister Narendra Modi to revive the country’s economy, who recently launched his flagship ‘Make in India’ campaign to propel the country into top 50 of World Bank’s Ease of Doing Business rankings by 2016.

Till that happens and India embarks on business-friendly policies, foreign entrepreneurs and companies are well-advised to use Singapore as the launchpad to their India businesses, details Rikvin, Singapore’s pioneer company incorporation and work visas consultancy, in its new guide published recently.

The reasons for such an argument are ample.

“With no capital gains tax, one of the lowest corporate tax rates in the world, no controlled foreign company rules, and 75 comprehensive double taxation agreements and eight limited treaties, Singapore, where company incorporation takes just few hours if all the paper work is in order, is easily the most preferred incorporation destination in Asia by a long distance,” explained Christine Lim, General Manager of Rikvin.

While the headline corporate tax rate in India is 30 percent excluding surcharge and education tax, it is only 17 percent in Singapore.

Also, dividends distributed by Singapore tax-resident companies are tax exempt in the hands of their shareholders in Singapore. The country also does not impose any withholding tax on dividends. Whereas in India, a dividend distribution tax of 16.22 percent is imposed.

Moving to exemptions, Singapore has announced a Corporate Tax Rebate of 30 percent for years of assessment 2013, 2014 and 2015, subject to an annual cap of S$30,000, for these three years.

Moreover, the Singapore Government grant tax exemptions under the Start-up Tax Exemption scheme to qualifying companies on normal chargeable income of up to S$300,000 for each of the first three consecutive years of its operation.

“A very important advantage of incorporating a Singapore holding company to do business in India, as detailed in Sections 13 (7A) to 13 (11) of the Income Tax Act of Singapore, are the clauses for tax exemption on India-sourced income of Singapore companies applicable to dividends, branch profits and service incomes,” added Lim.

Also, beneficial is the Foreign Tax Credit (FTC) scheme, which allows a Singapore company to claim a credit for the tax paid in India against the Singapore tax that is payable on the same income. The claim, which is called Double Tax Relief, helps the company in avoiding double taxation.

“Finally, Singapore companies can benefit from the FTC Pooling system introduced in 2011, which while simplifying tax compliance, has also reduced the tax payable on India-sourced income of Singapore companies,” concluded Lim.