Southeast Asia, with a GDP of USD$ 3.08 trillion in year 2020, is considered as one of the world’s fastest growing markets, especially in Malaysia and Singapore.

Singapore was ranked as the 2nd easiest and friendliest place to do business by The World Bank in year 2020 with a score of 86.2%. The population is estimated to be around 5,638,676 with a GNI Per Capita at USD$ 58,770. This country is considered to be a high-income country.

As for Malaysia, the country was ranked as the 12th easiest and friendliest place to do business by The World Bank in year 2020 with a score of 81.5%. The population is estimated to be around 31,528,585 with a GNI Per Capita at USD$ 10,460. This country is however considered as an upper middle-income country.

Despite the difference in ranks, these countries are considered as the two most attractive foreign investment destinations in the Southeast Asia continents. So, how are these two countries beneficial towards your business goals and which you should decide to incorporate in?

Business Environment

Business Environment

According to Forbes Best Countries for Business published in year 2020, Singapore was ranked at number 8 globally. This is because of the country’s prominent performance in trade freedom, update with technology as well as lighter tax burden. On the other hand, Malaysia has remained at 35th place globally, given the country’s strength in investor protection, monetary freedom as well as innovation.

Table below shows the rank of the top three priority an entrepreneur looks for when it comes to foreign investment.

SingaporeMalaysia
Trade freedom168
Technology 1446
Tax burden766

In terms of trade freedom, the Singapore domestic market has remained open for as long as it exists as almost 95% of the goods entered Singapore are duty-free. The efficiency of Singapore border process coupled with the quality of transport services and the country’s overall socio-politic environment has boost the Singapore rank as top 1 in World Economic Forum’s 2020 Global Enabling Trade Report while Malaysia was ranked at 37.

Workforce

While Singapore may have the upper hand in its business environment, but Malaysia has the advantage when it comes to the workforce the country offers.

Malaysia has a larger population with at least 6.2% more compared to Singapore. Even though Singapore workforce focuses more on working the future economy that is different and leaner, Malaysia offers those with higher education background as almost 30% of the Malaysia’s workforce has attained a tertiary education background.

Business Language

It is common knowledge that in terms of language, both Malaysia and Singapore mostly use English as the medium of communication. Both countries are also known to have bilingual speaker who are able to converse in Malay, Chinese as well as Tamil.

Hence, it is still quite easy for the foreign investors to adapt with the situation in both countries given they mostly use English as the business language.

Taxation

Malaysia and Singapore have maintained its corporate tax rate at 17% for Small and Medium Enterprises (SMEs). However, Malaysia is bound to charge at a flat rate of 24% against foreign registered Company in Malaysia. The taxation procedures in Malaysia are double tier as there are taxes to be paid to the Inland Revenue Board and other taxes paid to regional tax authorities.

Bureaucracy

The World Economic Forum has ranked both Singapore and Malaysia highly for the burden of government regulation, transparency of government policy, and public trust in politicians. The Political and Economic Risk Consultancy ranked Singapore as the most efficient bureaucracy in Asia while Malaysia was ranked 7th.

Ease of Business Incorporation Procedures

The steps to incorporating a company in both Malaysia and Singapore take less than 5 days to complete. The steps of incorporation are:

Malaysia

  • The preferred or proposed Company name must be submitted via MyCOID Portal by the appointed Company Secretary. It will take an estimate of 1 to 3 working days for SSM to approve or reject the application. Once its approved, the incorporation application can be submitted next
  • The company secretary must submit incorporation application to SSM within 30 days after the name application is approved. Once done, SSM will take at least 3 to 5 working days to approve or reject the application. Once the application is approved, Section 15 – Notice of Registration will be furnished to the appointed Company Secretary
  • The company must register with the Royal Malaysian Customs to obtain a Goods and Services Tax number where applicable, which is if the company has a turnover exceeding RM 500,000. The number is generated in 2 weeks.
  • The company must also register with the Inland Revenue Board to obtain a tax number.
  • If the company is hiring local employees, it must register with the Social Security Fund and the Employee Provident Fund.

Singapore

  • A name search and approval must be obtained before registration. The application is done online on the Company Registrar’s website called ACRA by the appointed Company Secretary. The approval or rejection is done on the same day except for certain case which ACRA requires more time to assess the application
  • The incorporation documents must be filed with the company registrar within 90 days of the name approval. This can be done online. The company registrar sends an official email showing the company’s registration number. The email serves as the Certificate of Incorporation.
  • The company must apply for a Goods and Services Tax number issued by the Inland Revenue Authority of Singapore. This is applicable where the company is expecting to make an annual company turnover exceeding SGD 1 million.

Annual Compliance Filing

Both Malaysia and Singapore have almost similar annual compliance filing where:

Singapore

Annual General Meeting (AGM) for annual return must be held within 18 months of incorporation and every 12 months for subsequent years.

Malaysia

As per the Company Act 2016, a Malaysian registered private limited Company is not compulsory to hold Annual General Meeting (AGM) as the annual return can be filed each year during its incorporation anniversary date.

Ease of Foreign Investments

In both Malaysia and Singapore, regulations on the participation of foreigners in business are easy compared to other Asian countries.

In Malaysia, a foreigner intending to hold more than 30% shareholding in a company must get approval from the foreign investment committee.

In Singapore, a foreigner can hold 100% ownership in a company without seeking any approval.

Both Malaysia and Singapore do not have visa requirements for foreigners incorporating companies without the intention of relocating.  The foreign shareholders can attend to company matters while on short stay visas.

A foreign investor planning to relocate to Malaysia must obtain an employment pass. The foreigner must show that the company has RM 500,000 in paid up capital if it is 100% foreign owned, and RM 350,000 if the company is a joint venture with local Malaysian partners.

Foreign investors wishing to relocate to Singapore must show that they have 30% or more shareholding in the company and that the company has a minimum paid up capital of SGD 50,000.

Immigration Requirement

All foreign expats who wish to work in both Singapore and Malaysia are required to have valid work passes before they can start working. In both jurisdictions, employment pass can be issued to foreign professionals who earned more than MYR 10,000 in Malaysia (depends on the EP category chosen) and SGD$ 4,500 in Singapore (depending on SAT test).

In a nutshell, both countries offer great benefits in a lot of aspects depending on what the Company end goal is. They welcome foreign investors with an open arm and the regulation imposed are not as strict compared to other Asian countries.

Ready to incorporate your company in Malaysia or Singapore? Contact us for a free consultation!

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FAQs

Does Singapore and Malaysia have the same timezone?2021-09-17T19:12:59+08:00

Yes, both countries have the same timezone, UTC+8. This makes it easy to do business in both countries.

Is Singapore and Malaysia in any double tax agreements?2021-09-17T19:12:28+08:00

Both countries have signed a double tax agreement. However, it should be noted that the agreement can be terminated at any point of time should either party deemed necessary to do so.

Can a foreigner open a business in Malaysia or Singapore?2021-09-17T19:11:57+08:00

Yes, a foreigner can start a business in both Malaysia and Singapore. For more information on Singapore incorporation, read our article here. For more information on Malaysia incorporation, read our article here.

Is the Singapore government pro-business?2021-09-17T19:10:41+08:00

Yes, the Singapore government is pro-business. They have initiated many incentives and grants to encourage foreign direct investments in the country

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