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Indian Companies Eyes Singapore As Top Destination For Overseas Expansion

Singapore has seen a rise in outbound foreign direct investments from India-based enterprises during H2 2011. Based on recent data, Singapore received a fifth of India’s US $20 billion investments in foreign companies, a 20% increase from 2010.

Singapore has recently overtaken the US as the second destination for India-based firms who are looking into overseas expansion. The island state is poised to catch up to the tiny Republic of Mauritius, which holds the title rank for being the most preferred business destination because of its advantageous tax treaties with India.

A number of India’s big-name companies are eyeing Singapore for global expansion. In 2011, Tata Communications, one of India’s largest telecommunications company, has established a S$210 million facility in Singapore. The telecommunications company is also planning to invest an additional SG $440 million in phases in the next several years.

Singapore’s favorable tax agreement with India, which relieves foreign-based companies of double taxation, allows Indian companies to maximize their profits and focus on expanding their operations in the country. This has paved the way for more companies to head over to the island state. Based on statistics, establishments owned by Indian entities have grown by fourfold to over 4,000 since the last decade.
India’s corporate tax rate is pegged at 30.9% for revenues amounting to INR 10 million. The Indian government also imposes capital gains or dividends tax on India-based firms which is not the case in Singapore.

Aside from its strategic location and open economic environment, Singapore has a simplified and fairly low corporate tax system that was established in the interest of foreign investors. The country imposes a flat corporate income tax rate of 17% for all profits exceeding SG $300,000. Generally, the corporate tax rate for companies with profits amounting to SG $300,000 during the year of assessment is 8.5%.