A key determinant for setting up a business in a given jurisdiction is the current tax regime. In this sense, both Hong Kong and Singapore boast of being one of the lowest tax jurisdictions in the world. Below is a comparative overview of the tax system in Singapore Vs HK.

tax jurisdiction

Singapore

• Taxes are collected on a territorial principle, meaning companies and individuals pay tax on income earned in Singapore.
• Foreign source income (branch profits, dividends, service income, etc.) will be taxable when remitted or deemed to be remitted to Singapore, unless the income was already subject to tax in a jurisdiction with general tax rates of at least 15%.

Hong Kong

• Taxes are levied on the territorial principle, ie only on income “derived from or arising in” HK and not on income earned outside the SAR.
• Foreign profits are not taxed, even if remitted to Hong Kong.

Corporate tax rate

• Singapore: current corporate income tax rate – 18%. However, the corporate income tax rate from 2010 – 17%. Note: The effective tax rate is much lower: below 9% for earnings up to SGD 300,000 and capped at 18% for earnings over SGD 300,000
• Hong Kong: current corporate income tax rate: 16.5%

Tax on goods and services (known as VAT/sales tax in other countries)

• Singapore: 7%
• Hong Kong: Nile

Capital gains tax

• Singapore and Hong Kong: zero (capital loss expenses correspondingly are not allowed as deductions)

Group Loss Relief

• Singapore: allowed
• Hong Kong: Not allowed

Withholding tax

• Singapore: Interest, royalties, movable property rentals, management and technical fees, and directors’ fees paid to non-residents (individuals or legal entities) are subject to withholding tax. There is no withholding tax on dividends.
• Hong Kong: Royalties, rentals of personal property and fees paid to non-resident entertainers or athletes for their performances in Hong Kong are subject to withholding tax. Withholdings are not applied on dividends and interest.

Double Taxation Agreements

• Singapore: Over 50 Comprehensive Bilateral Tax Treaties
• HK: DTA network of 37 treaties

Fiscal year

• Singapore: January 1 – December 31
• Hong Kong: April 1 – March 31

Filing of tax returns

Singapore:

• Tax returns along with audited accounts must be filed with the Singapore Tax Authority by October 31 of each year.
• Note: Dormant companies (i.e. no accounting transactions for the fiscal year) and exempt private companies (no more than 20 shareholders and the shares do not belong to another company) with an annual turnover of less than SGD 5 million are exempt from the taxes. auditing requirements and may present unaudited accounts.

Hong Kong

• Tax returns along with audited accounts must be filed with the Internal Revenue Department by April 31 of each year. The auditor must be a member of the Hong Kong Institute of Certified Public Accountants and must have a practicing certificate.
• Note: Dormant companies (i.e. no accounting transactions for the fiscal year) and small businesses (i.e. total gross receipts not exceeding HK$500,000) are exempt from audit requirements and may submit unaudited accounts.