Singapore: Types of Company
For a country to be an attractive location in which to set up a holding company, four criteria must be satisfied:
Withholding Taxes on Incoming Dividends: Incoming dividends remitted by the subsidiary to the holding company must either be exempted from or subject to low withholding tax rates in the subsidiary jurisdiction. This is usually achieved by having in place a double taxation treaty to which the subsidiary and holding company jurisdictions are parties.
Corporate Income Tax on Dividend Income Received: Dividend income received by the holding company from the subsidiary must either be exempted from or subject to low corporate income tax rates in the holding company jurisdiction.
Capital Gains on the Sale of Shares: Profits realized by the holding company on the sale of shares in the subsidiary must either be exempt from or subject to a low rate of capital gains tax in the holding company jurisdiction.
Withholding Taxes on Outgoing Dividends: Outgoing dividends paid by the holding company to the ultimate parent corporation must either be exempt from or subject to low withholding tax rates in the holding company jurisdiction.
By these criteria, Singapore is a relatively attractive jurisdiction in which to set up a holding company although not the most attractive.