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Tax Planning

Running your own business, enterprise or branch offices means either you fail or you succeed. However, when you decide to set up a business without much information just for the sake of having one is not right. It is important that you should know the business inside and out, what business ideas are successful, the product you are going to sell and the taxation involved, etc. The locale where you are setting up your business also should be taken into consideration but that is not all. For instance, it is true that Singapore is a good place for foreign investors to set up international companies for many reasons not only limited to a favorable corporate tax, but then that does not guarantee that the business will succeed and we cannot also exactly tell whether it will fail.

There is an old saying that says among the new businesses, 70 percent of which fail in the 1st year. So it goes without saying that some businesses win and some lose. Of course, neither any expert can tell 100% that a legal business in Singapore will fail or succeed but by knowing what businesses are predictably going to flop at present will help you in any way to avoid such business operations. Below then is the list of 5 business ideas that are not encouraged when you set up a company in Singapore today.

1. A Private Gym

It is true that private gyms also succeed but only some of them and not definitely because of the company’s dedication, hard work and the quality time they give to their customers but because of the capital they put into their fitness centre such as the top California Fitness or Fitness First. The capital they actually have is more than what small African nations invest. Without high maintenance marketing and strong funding, it is quite impossible to reach the level of success they have attained.

The cost of the rent for the private gyms is the primary reason that they are not a good business idea in Singapore since you cannot definitely charge more from your clients only because your rent was raised by your landlord. They are not a business idea considered viable any more not only because of the high cost of rent but also because gyms are also part of the facilities offered for free in many condos now.

2. A Small Cafe

It is the University students’ typical business idea to open a small café. Actually, this idea is not exclusive to University students alone but hipsters, amateur chefs and food bloggers have this idea in mind as well. However, Singapore is already filled with so many cafes and food establishments that your small café would have lots of competition such as Settlers, Café Del Mar, Café Cartel, etc.

You have to also bear in mind that Singapore commercial property requires high rents. Not to mention the mentality that once business is making progress, the landlord raises the rent. Unless owning the rights and buying the property is something that is affordable to you, starting a small café is risky.

3. A Small Tuition Agency

Based on Singapore employment rate, the job of private tutors can earn them more money but starting a small tuition agency is a different story. In the years back then, a small tuition agency would work with schools to give enrichment classes at a decent amount. Teaching a second language and Maths brought good profit to the educational entity until 2007 and since then the profit has decreased. At present, many agencies offering such educational services are struggling since the fee for every student has plummeted to $2. Now, parents try to find MOE-qualified teachers for their children, thus agencies formed by ex- MOE teachers are more preferred than the older ones.

4. Interior Decorating

In Singapore, interior decorating is not really the type of business to set up especially that the Singapore renovations market already have a great number of contractors and designers and both offer Fittings, Furnishings, & Fitting (FF&E). As opined by a sales designer, one cannot survive only on interior decorating since FF&E is very subjective and most Singaporean residents will not consider paying the designer on matters regarding good taste. For instance, the cost for painting walls can be justified but the cost for the choice of color. Sales designers can offer both for just a single price.

5. A General Bookstore

Niche bookstores may be successfully run provided there are target demographics. Setting up a general bookstore requires a great deal of inventory that can only be handled by huge companies with advanced logistics. Thus, for smaller bookstores, inventory is daunting work.

It is possible to succeed in selling books on topics like politics and history or gardening. However, when you plan to run a general bookstore where all topics are available is not a very promising investment. Simply put, customers of niche bookstores after their search will probably leave the store with something but those of general bookstores perhaps only 1 customer out of 10 will make a purchase for every visit.

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Singapore is ace when it comes to business friendly countries. According to Santa Ana Charles Hart City Council Ward 3 website, business friendly refers to low taxes, low fees, few and fair regulations, educational and training opportunities and a safe working environment for the business and its customers. Now that we know that Singapore is ranked first, this all means that business opportunities in Singapore are extremely high. Reason being, just by the fact that Singapore has managed to stay at the top for seven consecutive years. Many people are still admiring the country’s efficiency.

The ranking was determined by exploring the eleven areas of business regulation. This involved- just to name a few- the ease of starting a business, getting construction permits, electricity and credit, paying taxes, enforcing contracts, getting support from the government and employing workers.

When it concerns business opportunities in Singapore, there are a few things to take note if you want the recipe to success and to blow away the competition. First up, it is important for a business to have a friendly and efficient way to dealing with contacts. By the time you exceed all expectations and achieve  exponential success, your company will get the competitive advantage and be the best in the business.

The Business Times has stated that while it would be tough for Singapore to make convincing advancement, the country has the opportunity to seek for improvement in the area of property registration.

Singapore, among other countries- 23 economies in East Asia and the Pacific to be exact- have made their administrative background more business friendly since 2005. Additional countries include San Antonio and other Texas sites. There are even several countries sending up their representatives to Singapore to learn its business system.

To cater to the high demand of business opportunities in Singapore, the country made sure that there are plenty of business hotels for clients. There are over 50 hotels ranging from Swissotel Merchant Court, The Ritz-Carlton Millenia, Pan Pacific Orchard Hotel to Amara Sanctuary Resort Sentosa. These are mainly four/five stars hotels located at the central business and shopping district and the airport.

In terms of ease of doing business and trading across borders, Singapore is also ranked first. The country’s export goods include machinery and equipment, pharmaceutical and refined petroleum products. Some of the most common import goods is comprised of mineral fuels, chemicals, foodstuffs and consumer goods. The country still stands among the top three when it comes to dealing with construction permits, protecting investors and resolving insolvency.

Numerous sites have reported that Singapore’s economy has been ranked as the most open in the world, the least corrupt, most pro-business, with low tax rates (14.2% of GDP) and one of the highest per-capita gross domestic products in the world. These reports include the World Economic Forum and the Transparency International 2012.

In addition, the country has several international trade agreements with other countries. As you’re reading this, you might recall the Agreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP) and the Agreement between Japan and the Republic of Singapore for a New-Age Economic Partnership (JSEPA). Both agreements concluded on 2000 and 2001 respectively.

To conclude, we can all agree that while the costs of living in Singapore is high, the economic viability of country has established it as an attractive business location. Because of the huge number of business opportunities in Singapore, the little red dot has proven it as an accomplished and diversified country.

The amount taxed from an individual actually depends on his or her taxation status. This status can even benefit you in terms of gaining profit or having income tax breaks, once properly stated. If not, issues of double taxation will arise, even issues about the citizenship of the individual!
Because of this, it is really vital that you grasp the sense of tax laws and the rules applying to your native country and of course, to your new country of residence. Even more, being knowledgeable about international tax planning is required of you.

If you are not aware on how to start to learn tax planning on an international leave, there exist experts on the subject matter who can offer you their services. These experts can be divided into four groups:

 

  • Local Accountants

It is vital that, even as you leave your home country, you appoint an accountant who works there. This local accountant will assist you in understanding international taxation rules applicable to your new country and the perspectives on it as well. Also, you will need another local accountant under your employ, but this time, in your new country. This is because they know the rules in the country better than your local accountant back home. It is best that you employ two local accountants so that you will have balance in the taxation in both countries where you operate.

 

If you want to have the right taxation status, hire a professional to do it for you. They will definitely be able to handle your taxes as they have a working knowledge on international taxation/accountancy as well as financial planning. They will also be able to explain to you the benefits and drawbacks of your current status. As an addition, they will also be able to help you take advantage of offshore opportunities that you’re eligible to. These offshore opportunities can help cover the taxation liabilities you might have. The professional tax planners can also create an efficient tax plan for you so that you can decrease your taxation liability in a legitimate way.

 

  • International Accountants

As their title has it, they are experts on international accountancy. Hiring such accountants can help you get a better grasp on your tax planning. These international accountants are very knowledgeable about international taxation and the policies that apply as well, so you can’t go wrong. But if your main concern is taking advantage of your offshore banking opportunities, international accountants are not really the go-to person for the job. But what they can do for you though is give you advise on how your residency applies to taxation policies and laws.

 

  • International Financial Advisers

Advice is always important whenever you are making huge decisions, especially if it involves a lot of money. In financial investments, there are professional financial advisers you can hire to help you. Hire one that is knowledgeable in international finance so he can direct your assets in a better way as you settle in your new home overseas. Financial advisers can also make you understand the ins and outs of your offshore transactions, helping you limit your total taxation liability.

 

Did you know that the financial centers for offshore businesses were actually established by onshore financial institutions (like banks and other private corporations)? This is because the onshore institutions felt too restricted by dated laws, rules and regulations, as well as statutes. They couldn’t maximize their companies. Citicorp, for example, felt this way and decided to go out of the US and establish their first offshore company. Soon, most of Citicorp’s net income (roughly 64% of it) came from their offshore sources.

What started out as an act of freedom for the onshore companies who felt restricted eventually became world-class and outstanding financial institutions. They became headquarters, even. Once they became successful, they started to create policies that were meant to attract foreign trade. They made policies that allowed business to minimize their tax liabilities as well as reduce or eliminate business restrictions. This change in the international trade market resulted into a very active economic movement.

Usually, such offshore financial centers are situated in small states with very little population. They are considered as tax havens. Currently, there are at least 75 tax havens existing all over the globe. Each haven is deliberately unique from other havens because they want to attract certain types of investors that they can cater to.

Let us take for example the island of Aruba. It was designed in a way that they can have fast economic development. They were solely depending on their oil refineries before for their source of revenue, but now, they created a new investment policy that allowed it to participate in the economic system throughout the world. This policy was becoming the offshore tax haven. In a sense, they “rented” out their laws about taxes, company incorporation and other business legalities, fully allowing them to go through with their economic development as well as diversification.

On the other side of the world, we can take a look at Singapore, who, unlike Aruba, was intended to help the dollar market of Asia. As evident today, Singapore has become a thriving money haven, and of the best too. Another tax haven is Bahrain and it was designed to serve the offshore needs of the Middle East, most especially the financial needs of Saudi Arabia.

Actually, if not for the electronic revolution caused by the EFT (electronic fund transfers) mechanisms back in early 70s, these offshore money havens would have never been possible. That very technological development made it very affordable to build banks and corporations, as well as holding companies in far-flung areas. Both inter and the intra time zone business also became a possible home-based business alternative when the EFT was launched.

This gave way to the establishment of wholesale banking on an international scale. It was possible to maintain large amounts of deposits in a wide range of currencies, as well as transfer the money in a vast global network of different corporations, financial institutions, individuals, and etcetera to those who are interested in borrowing money. It allowed the foundation of many new business practices for transnational transactions and led the development of international financial activities as well, such as subcontracting.

Today, it is evident that these international money havens have established a very permanent presence in today’s international economy. They have transformed from a mere financial center into “brokers” for global businesses.  It really is important to never forget where all of this started with the initiative of large banks and financial institutions from all over the globe. Also remember that everyone, even the powerhouses like US, China and Japan, need to play their money on an international market. They use these havens as well for a more convenient financial transaction. Overall, it is noteworthy that the Bahamas has now become a very large offshore haven, if not the largest, because it has been designed for different purposes—may it be government use or intelligence agencies.

These havens are completely a part of the financial world and that is a known fact already. They are legitimate mediums where investors can rely for their offshore ventures. The manner it is done may change throughout time, but the goal of these havens will forever be the same—to flourish the international economy.

Putting up an offshore company not only helps you save from high taxes but it also makes your profits more fluid. Investing in an offshore company protects your assets too. These kinds of companies are organizations or firms incorporated outside your country. In many cases, investors invest in these kinds of businesses because tax laws are much more lenient in other countries where they decide to establish their companies. However, it doesn’t mean that if you have an offshore corporation you are already exempted from paying taxes where the income came from. For more on  International Tax Planning, click here.

Having an offshore company gives you the advantage of being exposed to the international field of business. You may be known worldwide thus being able to trade internationally. It is also a plus if you have a foreign property because it increases your asset protection and privacy.

Usually it is more complicated to establish a corporation in the United States. Opting for offshore companies would protect not only your assets in a better way but also protect you from more future liabilities.

In other countries like Panama, one can create an offshore company under a different name. Being anonymous can help safeguard assets unlike in the U.S which is not possible. Unfortunately, these days having an anonymous bearer share corporation is not anymore encouraged in many countries except in Panama.

Not all countries have the same rules regarding the formation of offshore companies, but summarizing all the benefits, it is way below the budget to form a company- it saves you a lot of investment capital. It is also important to research first the destination of such company and there should be a consultant such as a lawyer before deciding on the establishment of the said business.

A few disadvantages may also come about. Hiring employees that can meet the company’s requirements in the chosen country may be a bit challenging. Also, the restrictions of forming just any type of company must be considered because countries also control what foreign investors establish in their jurisdiction. Another one is the inconvenience of processing your business properties in case you die. Foreign countries have the authority to hold your business thus prolonging the process of releasing your assets to your heirs.

In choosing which country to move your assets to, you must be smart enough to look at the pros and cons. From there, you may already move your business from one country to another. Choosing a country that will allow you to transfer your business to other jurisdictions is important. You just have to process the proper paper works and you will be sure not to lose your incorporation charter.

Always remember that there are a lot of advantages and disadvantages in offshore companies. Do not forget to weigh things first before anything else.