Why do so many Indian start-ups register in Singapore? Like PhonePe, Flipkart, InMobi and many more! Let’s understand the reason behind it:

1. Tax Savings for Venture Capital (VC) Investors

Capital gains tax in India is 15-20%, and in Singapore, it is zero! As most VCs make their returns by selling company shares, capital gains are taxed, not business profits or dividends.

This directly impacts their returns to the fund, and structuring is a combination of several steps – such that a trust registered in Mauritius invests in start-ups, sells shares, and transfers the money to its investors across the globe.

Discover how startups register their presence in the business landscape, paving the way for innovation and success.

2. Tax savings on profitable companies

Indian companies have an income tax rate of 25-30%, but Singapore has a tax rate of only 17%.

3. Political Risk, IP Law and Arbitration

Singapore is among the top 5 countries in the world in ease of doing business ranking. This is because it has the most politically stable government, which always takes a neutral stand in international affairs.

Intellectual property protection laws in Singapore are much stronger than in India, as are arbitration laws.

Both of the above are far behind in India!

4. Raising Capital from China

If you raise funds from Chinese investors, you must get special approval from the Reserve Bank of India in India. There is no such requirement in Singapore.

5. Ecosystem and South East Asia HO

If you decide to enter the South East Asia Market with your product, investors focus on those markets headquartered in Singapore. Therefore, very often, you will need to set up a head office in Singapore and transfer the IP to Singapore Entity.

Despite all the above, why you should register in India instead:

• While Singapore has lower taxes on this front, if your primary business is in India, Indian tax laws will oblige your investors to pay taxes in India, even if they are foreign parties who bought and sold shares of the Singapore entity.
• While it may seem that setting up an SG company online is easy, opening a bank account in SG from India is a huge pain. Hence, Indian Start-ups-register in Singapore only if you are planning to start actual operations there.
• You can transfer the intellectual property to Singapore at the request of your investors, but still, you will have to keep your Indian unit to hire employees and run all the operations. So it’s not always that easy and not always necessary.
• Despite what people say, I think the Indian ecosystem is mature enough, and you don’t need to go to international markets just to raise equity funding. If it’s for conducting business, go and cast your net far and wide.