Hong Kong or Singapore

One of the most frequently asked, and frustrating, questions we receive from business owners outside of Asia is: „Where should I base my new investment in Asia – Hong Kong or Singapore?

Both are former colonies of the United Kingdom, with parallel traditions of respect for the rule of law, independent and impartial civil administrations, and efficient tax and financial regimes intended to promote the stable growth of enterprise. They are both highly connected to international financial markets with access to logistics and ICT infrastructure that rival, if not best, any other major business hub on the planet. English is an officially recognized language of government, law and trade for both cities, and each has a pool of highly educated international professionals accustomed to complexities of commerce crossing international borders.

Important differences do exist between the jurisdictions however, and to realistically understand why you might opt for one city over another, you need to look beyond the surface level similarities between them.


Probably the most fundamental difference between Hong Kong and Singapore remains the most obvious even to individuals who are unfamiliar with East and South East Asia.

Click the here for a Map of Hong Kong, Singapore, and East-Southeast Asia

Hong Kong is located on the southern tip of China adjacent to Canton (Guangdong) province, historically a region of China with the most direct access to maritime trade alongside Fujian to the immediate north. Hong Kong has traditionally been a hub of trade and financial activity in support of business transacted between East and Northeast Asia, with a long history of acting as a gatekeeper to the Greater China markets. Hong Kong’s proximity first to Japan in the 1980s and then to China and Taiwan after the gold-rush years of the 1990s has kept the territory in direct link with the world’s largest emerging markets at the height of their expansions. This directly lead to the development of a ‘battle tested’ financial services professional and ICT infrastructure, but has also been a primary driving factor behind steadily rising real estate costs over the last 3 decades. Hong Kong’s investment banks, equities traders, brokerage houses, and insurance platforms are the best in the world because of experience and liquidity brought both by Western and Japanese institutional investors over time. The timing and access infrastructure created because of these connections make access in real time to Korean, Japanese, Taiwan, and China markets unparalleled.

Singapore is a more recent arrival from the markets perspective, at least at a somewhat comparable scale to Hong Kong, and has traditionally had a different focus of business activities very much based on its location. The nation is located at the southern tip of the Malaysian peninsula guarding the great oceanic throughway the Malacca straights, where goods must pass between the Indian Ocean and South China Sea. Shipping and logistics naturally follow as a major strength of the territory from an international perspective, outpacing Hong Kong which has outsourced a sizeable portion of its original capacity to mainland Chinese ports in Shanghai, Shenzhen, Guangzhou, and Ningbo. Surrounding Singapore are the dynamic blend of South East Asian states, offering a complex mix of different markets, cultures, and products which have the city as a regional trading hub ever since its inception. Investment markets which naturally developed alongside this growth were commodities trading platforms, PPP and heavy infrastructure development, energy, and some commodities trade. Historical ties to India as well as China have created a multi-ethnic society with contacts to two regional giants from the markets perspective however the distance to either China or India remains a logistics concern for individuals who are focusing their business growth in either of the two nations independently. Generally, for traditional businesses the rule of thumb ‘Hong Kong North, Singapore South’ still has value, although in the internet age careful consideration must be given before simply pointing at the map to determine which jurisdiction is most suitable.

Tax and Compliance

Hong Kong and Singapore operate under territorial tax regimes, which broadly indicate profits sourced from transactions arising outside of the jurisdiction are not subject to local taxation. Their mutual systems are somewhat different in practice, and should be considered in the context of a particular business case.

Generally speaking, a private limited company in Hong Kong or Singapore has roughly the same characteristics. The entities are both legally independent from the owners, and follow similar lines of precedent from a legal perspective in their respective court systems. (Note: Similar does not mean identical and legal advice must be obtained in respect of the facts relevant to each specific case) Prior to implementation of the new company law in Hong Kong in 2014, authorised capital had to be declared and a nominal amount was typically used as a standard. After implementation of the new company law this requirement was changed to reflect Singapore’s standard, which requires a minimum of a single share being issued.


Singapore companies are required to have at least one director who is an individual resident in Singapore, whereas Hong Kong companies are required to have one individual director resident anywhere; there is no local residency requirement in Hong Kong. Both jurisdictions require local secretaries to be appointed for due service of process, and both maintain company registries which are accessible on approximately equivalent formats to the general public. Both Hong Kong and Singaporean companies are required to file annual returns, but may waive the requirement for an annual meeting by written resolution subject to respective formalities. Accounting records must be maintained in both jurisdictions but in Hong Kong there is no exemption from the requirement to file audited accounts. Singaporean companies earning less than SG $5 million per year whose members do not exceed 20 individuals, and have only individual shareholders are exempted from having their annual reports independently audited, although they still must file annually. (Where a Singaporean company has a corporate owner, in other words a subsidiary of an international business, they must still file audited accounts) Both jurisdictions allow for consolidation of group accounts for annual filing if they have subsidiaries, subject to certain requirements.

Income and Offshore Treatment

Hong Kong taxes corporates at a flat rate of 16.5%, while Singapore sets its standard rate at 17%. Hong Kong follows a more broadly applicable territorial regime, whereby only income arising in or derived from Hong Kong sources is subject to Hong Kong profits tax. Foreign sourced income, attributable to a 0% tax rate, is not taxable once granted offshore status, even if such income is repatriated to Hong Kong. Double Tax Agreements in Hong Kong are still applicable even where income is deemed offshore but repatriated to the territory, which is a situation which arose in respect of China based manufacturing and wholesale under transhipment via Hong Kong to markets in Japan, North America, and Europe. Singapore’s territorial system is perhaps better described as quasi-territorial, whereby both residents and non-residents are liable to tax on income accruing in or derived from Singapore alongside foreign income deemed received in Singapore. Essentially this means that profits deemed to have been repatriated to Singapore will be assessable for full corporate tax. If a Singaporean company desires to claim benefits under the country’s extensive network of Double Tax Agreements then the income considered for treatment must have been declared for taxes locally in Singapore.

Double Tax Agreements

Singapore is the traditional hub of Double Tax Agreements and Treaties in Asia, which directly results from its strategic location amongst the matrix of South East Asia countries on its borders. Keeping in mind the caveat applying domestic Singapore tax to transactions taking advantage of these treaties mentioned above, this network provides a great deal of flexibility for larger corporations in need of regional treasury and back office corporate administrative centres. Hong Kong’s own network of tax treaties has been growing rapidly, and while generally it still cannot compare to Singapore’s range globally, it does offer unexpected benefits in certain cases. Notably, both China and Indonesia have preferable treaty terms in place with Hong Kong compared to Singapore.

Capital Gains, Indirect Tax and Withholding

Neither jurisdiction taxes capital gains directly, but both may attribute income earned from the disposal of assets to the general profits tax depending on the context of a particular trade. There is no goods and service tax in Hong Kong or customs except in a very limited number of areas (Example: distilled alcohol and tobacco are subject to import duties but beers and wines are not, which is why Hong Kong is recognized as the Wine Hub of Asia), and Hong Kong does not levy any VAT or Sales Taxes. While Singapore does have a general goods and services tax set at 7% it is not applicable until a company generates turnover of more than SG $1 million annually, and has a number of incentives available.

Withholding taxes in Hong Kong payable to non-resident companies and individuals are generally set to the following schedule:

Dividends: 0%
Interest : 0%
Royalties: 4.95%/16.5%
Royalty payments made to an unaffiliated non-resident for the use of, or the right to use, intangibles in Hong Kong, or where the royalty payments are deductible for the payer, are deemed to be taxable in Hong Kong. The amount deemed taxable is 30% of the gross amount of the royalties paid, resulting in an effective rate of 4.95% (4.5% for a non-corporate person). If the royalty is paid to an affiliated non-resident for the use of intangibles that previously were owned by a person carrying on business in Hong Kong, 100% of the royalty amount is deemed to be taxable, resulting in an effective rate of 16.5% (15% for a non-corporate person).

In Singapore the withholding tax situation is more complicated and must be considered in the context of potential deductions, exemptions, or other incentivized treatments potentially available to transactions based on the circumstances at hand. Generally, payments from Singapore resident companies to a non-resident individual or entity are subject to withholding tax according to the following guidelines.

Dividends: 0%
Interest: 0%/15%
Royalties: 0%/10%
Considering interest payments, the 15% rate applies (unless the rate is reduced under a tax treaty or an exemption applies under certain domestic concessions), provided the income is not derived by the non-resident through its operations carried out in or from Singapore. Where operations are carried out in or from Singapore, interest will be taxed at the prevailing corporate tax rate.

A 10% rate applies on royalties (unless the rate is reduced under a tax treaty or an exemption applies under certain domestic concessions), provided the income is not derived by the non-resident through its operations carried out in or from Singapore. Where operations are carried out in or from Singapore, royalty income will be taxed at the prevailing corporate tax rate.

Banking Options

Both Hong Kong and Singapore offer a similar selection of international and regionally headquartered banks to choose from, however in both jurisdictions account opening on behalf of purely ‘offshore’ entities has become much more difficult than in the past. Expect in either jurisdiction to be required by banking officers to present a complete portfolio of due diligence documents, including profiles of beneficial owners, certified identity and address proof copies, introductions from existing institutional and professional relationships, as well as business plans, financial statements, or other supporting proofs of business activities for which the accounts will be used.

From a currency perspective, both jurisdictions are stable based on the strength of the economy and subsequent array of commercial finance products available in the market. While Singapore’s dollar is currently set to a market exchange allowing for a broad fluctuation of exchange rates, the Hong Kong dollar is pegged to the US dollar within a marginal band (note: approximately 7.75 HKD to 1 USD), for practical purposes making the currency a surrogate of the USD. Both territories are centres of offshore RMB exchange, although Hong Kong’s markets are still the largest in the region. Interest rates are set by the respective monetary authorities according to prevailing interbank rates daily, and information is publically available in accordance with international standards.


In the end both cities offer a highly competitive base to launch your business into Asia. Taking into consideration our above exploration of some of the more detailed differences between Hong Kong and Singapore, your next step is to look back at what you have built as well as what you hope to achieve. Last, but never least, now is the right time to plan your visit to both cities and experience what unique features each has to offer firsthand! There is nothing like the present!

Henning SchwarzkopfRead all author posts

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