Hong Kong vs Singapore for Business in 2024

The city of Hong Kong is a unique place to do business, with its own culture among the English common law and a solid legal system from the rest of China. It’s also an important part of Asia’s financial center, which means it attracts many businesses looking to expand their operations into the region.

Singapore, on the other hand, is another Asian city-state that’s often seen as the next step after Hong Kong. Like Hong Kong, it’s a major financial hub based on English common law, meaning contracts are enforceable by any court worldwide. This makes it a great choice for international companies who want to be able to operate no matter where they go.

To help you decide which location best suits your business needs, let's dive deeper into the differences and advantages of doing business in Hong Kong and Singapore.

📉 Statistics: For over 20 years, Lonely Planet has ranked Hong Kong as the best city in the world. This year, Forbes magazine also named it one of the top 10 cities for expats.

Ease of doing business

Hong Kong and Singapore have their perks and drawbacks when it comes to doing business in both countries.

Hong Kong

The World Bank says Hong Kong has the most open economy in the world. It’s not only easy to start a new business. It’s easy to buy property, hire employees, and run a company. There’s strong protection of private property, and entrepreneurs have better access to finance. These factors mean that starting a business is easier than it might be in other places.

To make matters even better, local authorities have been devoting resources to help businesses grow for decades. They offer low taxes, reduced regulation, and less red tape.

Singapore

Singapore is a fantastic option for those wanting to strike out independently. It offers generous government support for small businesses through subsidies and tax breaks. The country is also home to the world’s busiest port so that goods can move quickly and cheaply between here and anywhere else in the world.

But Singapore does come at a cost. Entrepreneurs may find regulations are strict, and getting permits could take weeks or months. And while the country is known for its safety, crime rates are high.

💹 Quick Facts: Hong Kong is renowned for its free imports and exports duty-free. Singapore serves as a global trade gateway and an offshore banking center for foreign investors with affordable financing and easy export across ASEAN borders.

Business incorporation

Both Hong Kong and Singapore are great destinations to incorporate your business. However, there are some factors you may consider.

Hong Kong

Incorporating your business in Hong Kong is relatively simple. You don’t need to register anything with the government, and you won’t need to pay any fees. All you need is a valid passport, proof of residency, and two personal references. However, you will still need to fill out some paperwork before you can officially incorporate it. Once incorporated, you’ll receive a certificate of incorporation that shows your company’s name, address, status, and registered agent.

You’ll also need to appoint a director. Directors are responsible for managing the day-to-day activities of the company. They must be over 18 years old and have lived in Hong Kong for at least six months. If you choose directors who live outside of Hong Kong, you may be required to pay them a fee.

Singapore

Setting up a limited liability company (LLC) in Singapore is straightforward. You simply need to provide a valid passport, proof that you reside in Singapore, and three personal references. You’ll also be asked to sign a power of attorney document, giving someone else the authority to act on your behalf. An official stamp will show when you file this document. As soon as you file, you’ll get a Certificate of Incorporation that includes all the information about your company.

You’ll then need to decide who should serve as your director. A board usually consists of five people, though you can add more depending on how large your company becomes. Each director needs to be over 21 years old and have resided in Singapore for at least one year. If you choose directors from overseas, you may be charged a fee.

💹 Quick Facts: Hong Kong offers speedy incorporation, affordable startup costs, and simple bank account setups, while incorporating a business in Singapore takes less than a week, with minimal capital requirements and flexible legal frameworks.

Corporate taxation

You must understand the corporate taxation system for your business no matter which country you choose to develop your business.

In this section, we'll compare the tax frameworks of Hong Kong and Singapore to help you make informed decisions when setting up or expanding your business.

Hong Kong

Corporate taxes in Hong Kong are technically 0% for any business conducted outside Hong Kong borders. However, for businesses conducted inside of Hong Kong, the two-tier corporate tax applies.

For companies incorporated within Hong Kong, the tax sits at 8.25% for any assessable profits value under HKD 2 million, whereas for companies with profits over HKD 2 million, the tax is 16.5%.

Unincorporated companies are subjected to the same assessable profit thresholds. However, the taxes are 7.5% and 15%.

This means that if you make sales within Hong Kong, you’ll owe tax on those sales. The offset for this taxation is that there are also no VAT or Foreign Exchange Controls in place for businesses in Hong Kong.

Singapore

In Singapore, corporate taxes are 17%, which is slightly higher than in most other countries. Corporate income tax is based on profits rather than revenue. For example, a company earning HKD5 million (USD 735,000) per year would pay no tax on its first HKD2 million (USD 280,000) but would pay 30% on the remaining HKD3 million (USD 420,000).

However, this does not mean that your business will be taxed twice. Instead, Singaporean companies are exempt from paying income tax on their foreign earnings, just like Hong Kong. To qualify for this exemption, you must meet specific requirements, including:

• Being incorporated into Singapore

• Having an office in Singapore

• Making profits in Singapore

• Paying dividends in Singapore

• Holding assets in Singapore

• Not being a resident of another country

The good news is that these conditions are easy to meet. For example, many multinational corporations already operate in Singapore.

Legal environment

In this section, we will compare the legal systems of Hong Kong and Singapore. We will focus on things like foreign ownership, protection for shareholders, and taxation policies.

Hong Kong

Hong Kong has been ranked the best place to start a business by Forbes since 2011. The city attracts entrepreneurs because it provides a stable legal environment, low taxes, and easy access to international markets. There are few restrictions on foreign ownership, and many multinational corporations operate there.

However, the city does not offer much protection to minority shareholders. They’re often excluded entirely. Foreigners cannot sue if a local shareholder takes control of the company, and even if they win, they might not be able to collect damages.

Singapore

Singapore was named the top destination for doing business by the World Bank in 2014. Its laws are designed to protect investors and encourage entrepreneurship. Foreigners can own 100% of a company without paying capital gains tax. And if they want to sell their shares, they can do so freely.

However, foreigners can only own 25% of a company without being subject to additional taxes. This limit applies to both individuals and joint ventures. It doesn’t apply to sole proprietorships and partnerships.

Banking Infrastructure

Strong banking infrastructure is essential for businesses to flourish and expand, as it offers the necessary financial services and support required for seamless operations.

This section will dive deep into the banking systems of Hong Kong and Singapore, comparing factors like opening a business bank account, digital financial services solutions, and banking support for international and local transactions to help you choose the right banks for your business.

Hong Kong

Hong Kong's banking system is robust and advanced, making it an appealing choice for businesses. Opening a corporate bank account in the city is generally straightforward, with a variety of international and local banks available to cater to your business needs. Banks in Hong Kong provide comprehensive support for international transactions, including competitive foreign exchange rates and efficient wire transfer services.

Singapore

Similarly, Singapore's banking sector is well-developed and reliable. Opening a corporate bank account in the city-state is typically hassle-free, and businesses have access to a diverse range of financial services, including multi-currency accounts and efficient international wire transfers. Furthermore, Singapore has been actively promoting the adoption of fintech solutions and digital banking, which further enhances the banking experience for businesses operating in the city-state.

Ease of Doing Business Index

The Ease of Doing Business Index offers insights into how each country is ranked in terms of its business-related environment. Let's compare Hong Kong and Singapore's ranks to see the components they provide to business owners.

Hong Kong

Hong Kong ranks highest in ease of doing business among major economies according to the Ease of Doing Business Index. The city offers a wide range of services, including banking, insurance, and electricity. It also allows businesses to open bank accounts within 48 hours and offers free shipping on most items sold online.

Singapore

Singapore ranks second overall in the index. It’s known for being a safe haven for investments, and it’s considered one of the easiest places to set up a business. It’s also very competitive for exporters, which makes it easier to find buyers.

Workforce Quality

For businesses to succeed and maintain their competitiveness in a global economy, it's critical to have a skilled and diverse workforce. Let's examine the quality of the workforces in Hong Kong and Singapore, as well as how they serve various businesses and sectors.

Hong Kong

Hong Kong is one of the world’s leading financial centers. As such, it attracts professionals from all around the globe. According to the International Monetary Fund, Hong Kong’s population of 7.4 million includes 2.6 million students. That’s nearly double the number of students found in Switzerland (1.2 million). Much of Hong Kong's population has studied mostly Finance and Business degrees in the past. Still, the winds of change are blowing as the newest graduates are pursuing more engineering and other STEM degrees with support from the local government.

Singapore

Singapore's workforce is made up mostly of immigrants. More than half of the country’s residents were born outside of Singapore. However, this figure drops significantly when compared to other countries. Only about 1.9% of Singaporeans are non-citizens. Singapore prides itself on being a tech hub for many companies, seeing IT and software development offices in the region. Google's Asia HQ is in Singapore, and more large companies are moving to the city-state every year.

💡Tip: Leverage the skilled workforce in Hong Kong and Singapore by partnering with local universities and talent pools to attract top talent in various fields.

Economic Landscape

Determining a business's potential for development and success requires a thorough understanding of the regional economy. Let's take a look at the major economic factors and sectors that influence Hong Kong and Singapore.

Hong Kong

The economy of Hong Kong is based heavily on finance, tourism, and trade. The city is a global center for trading in commodities like cotton, sugar, coffee, tea, cocoa, rubber, fruits, and steel. It’s home to some of the world’s busiest ports.

Singapore

The economy of Singapore is primarily driven by its thriving service sector. About 80% of the country’s GDP comes from the private sector. Sectors include retail, accommodation, food, healthcare, transportation, and telecommunications.

Immigration policy

On a nation's workforce and general business climate, immigration regulations may have a big influence. Let's explore how immigration policy has an impact on the business environment in each country.

Hong Kong

In Hong Kong, there is no restriction on immigration. Any foreigner who wants to work or study in the territory must first obtain a visa. Compared to many other countries, Hong Kong's policy on immigration is flexible. Foreigners who want to work or study in Hong Kong can get a visa if they meet the government's requirements. In addition, Hong Kong offers various types of visas, such as employment visas, investment visas, and dependent visas, so that different people can get what they need.

Singapore

There are restrictions on immigration to Singapore. Citizens of certain countries need to get a permit before entering the country. There are also quotas that cap the number of foreign workers allowed into Singapore each year.

Quality of Life

When comparing business settings, quality of life is a crucial consideration since it can have a major impact on where your business settles.

Hong Kong

Hong Kong is an international financial center and commercial gateway to China. Its advanced infrastructure and natural beauty make it a great place to live. It’s ranked highly in quality-of-life studies, too. While 25% of the city is a dense urban jungle, the rest is well-managed greenery and mountain ranges ripe for getaways from city life from every corner.

Singapore

While Singapore may not have the same reputation for having high living standards as its Hong Kong counterparts, it does offer a higher standard of living than most other cities. It’s one of the safest cities in the world, and it’ll provide you with a comfortable environment where you can relax after a hard day at work.

Final thoughts

The decision between Hong Kong and Singapore for your company incorporation ultimately comes down to your specific requirements and objectives. Both city-states have their pros and cons, as well as distinctive services tailored to certain business sectors.

While Singapore provides a safer atmosphere, a tech-friendly climate, and a government that is supportive of small enterprises, Hong Kong has a more open economy, greater banking infrastructure, and a growing financial industry. Thus, it's important that you evaluate the components that are most important to you.

By weighing these factors, you can decide which one will support your long-term company goals and position you for success in the vibrant and competitive Asian market.