Singapore is heaven for companies whilst the Swedish welfare system is broken, but Sweden hangs in there for other reasons and has also changed in the right direction during the last years.
After one year learning about the Singaporean regulations, taxes and general business environment for companies here, I thought it was time to share some key findings in regards to the difference between running a business in Sweden compared to Singapore.
I run companies in both countries.
Sweden is still competitive if no employees, if it is more like a holding company, and you can rely on dividend not salary. Sweden has great business ethics and a healthy yet productive work life balance.
Singapore is run like a company and the support the government gives to companies is extensive. Singapore is build to create a great environment for companies and has truly succeeded with the task.
This post only brings up the different taxes and fees and how those compare. I have another post in the making about the startup and VC climate here in Singapore, so I will leave that part out in this post. No soft skills are brought up in this post.
1. Starting a company
I would say it is about the same. Sweden has a bit more user friendly way of doing it online, but in general I would say the cost and the administration is extremely good in both countries. Well done both Sweden and Singapore.
2. Employing people
Singapore: This topic depends a bit if you employ a Singapore Citizen / Permanent Resident or an expat.
- Citizen or PR: You have to pay CPF (Central Provident Fund. CPF is like a pension fund that everyone has. There are other stuff included as well. Just head over to CPF (the design is beyond awful btw) to find out the details. The economics is both straight forward and complicated. Straight forward in the way it is calculated and complicated in the way that it is two parts, one part that is payed by the employer (currently you as an employer pay maximum of S$800) and a part that is payed by the employee, but this part is deposited by the employer and then deducted from the salary before payed. The most complex thing with this process is that you cannot pay CPF online from your business bank account, this since the Singaporean banks do not allow eNets (e.g VISA or MasterCard) transactions on Business Cards, but has to be done by autogiro or cheque (how is that for old-school).
- Expats: The process of getting a Visa for an expat is pretty straight forward and easy process, all done online. The online systems are not perfect, one fun thing is that the online systems are closed outside of office hours, so when you most of the time actually have that hour over to apply for an employee, the system is closed. When in Singapore you tend to get upset with the amount of time and effort it takes to get an Employment Pass for an employee. It is a wast amount of documentation and rules that apply, also the government have recently tightened the rules a bit. Yes, it is cumbersome, but if we look at the hole picture it is actually really generous and great system. If compared to Sweden this process is like a breeze. It is fair, straight forward and honest. Singapore still lacks some competence in certain areas, many of those areas are expertise that Swedes and many other western countries have, so most of the time the process is very straight forward. Minestry Of Manpower even got a self assessment tool if you want to try if you would get an EP in Singapore. You do not pay any CPF for expats.
In summary, the maximum CPF you pay as an employer is around 16% (a S$5000 salary gives a S$800 CPF contribution), but in most cases well below 5%.
Sweden: Well, this is a beast. In Sweden there are two different taxes / fees that has heavy impact on the financials for a company, employer fee and social benefits. Those combined adds up to 38-46% extra that you have to pay on top of ordinary salary to the employees. This has a huge impact on small companies.
Conclusion: The CPF system is not perfect (inherited from Switzerland if I am not mistaken), but it is fair to both employer and employee. I cannot say the same for the Swedish system. There are some significant advantages with Sweden here also. The safety for an employee is great in Sweden, whilst in Singapore it is almost zero, on the other hand the un-employmentrate is also almost zero.
3. Income tax
Well, don’t know how to put it, but it is expensive to run your own company in Sweden if you also are employed in the company. It is actually a really shitty situation in many ways. Singapore is a really good country for this.
Sweden: Between 31-56%
Singapore: Between 7-20%
Conclusion: If you look in your wallet when you are paid your salary, you will not want to be in Sweden, you will want to be in Singapore.
4. Company tax
This is actually the subject where Sweden as well as Singapore are in pair on being globally competitive in a good way.
Even if it is not such a big difference there is a big difference in attitude. Singapore have tons of tax exemptions for young companies. Some you don’t even have to apply for, but are just there by default, such as the one that makes the first three years kind of good from a tax perspective since IRAS heavy subsidised tax on the first S$300.000. For the first thee years it will be an average of 5.67%.
Conclusion: You can easily get the impression that the Swedish tax system for companies are there to punish rather then help small companies. Whilst the Singaporean system more have the approach “If we make it easy for a company to survive the first 3 years, there is a higher chance of you succeeding and by that pay the government more taxes long term”. Sweden have a bit further to go before we can call it startup-friendly. The system is in many ways built for large companies like IKEA, H&M, Ericsson, SKF, Electrolux, Volvo, Atlas Copco, Boliden, Husqvarna, Saab (not the cars), since we have a few of those big ones, actually Stockholm is ranked #16 in the world when it comes to cities with amount of large companies.
5. Capital Gains Tax
Hands down a victory to Singapore. Hard to compete with the amount of 0% in tax on capital gains.
Sweden: 20-30% (the large portion would be in the range of 30%).
Conclusion: Well, go figure.
6. It gets really interesting when putting the numbers together in an example
I will make two simple examples. The first is on an operational level och the second is on a dividend level.
Operational example: If you are two people in a company and you send an invoice to a customer for the amount of 100.000 (currency irrelevant). Lets assume you will take all of that in salary divided between the two of you.
In Singapore you would get approximately 43.000 each.
In Sweden you would get approximately 12.500 each.
Dividend example: Your profit before tax for the last year is 1M. How much will you as an owner get in your hand?
Sweden: ca 600.000
To summarise this topic I would say that if you run a company without employees and can pay yourself dividend every year and just a minimum salary there is not a huge difference (still big), but as soon as employees come into the picture (as employee yourself or if you hire people) the equation gets really good for Singapore and really bad for Sweden.
7. Don’t you get more in Sweden since you have the high taxes, how about the Sweden welfare?
The Swedish welfare system is a hoax, it does not exist anymore. The Swedish welfare system is build upon the notion that we have free and great healthcare, education, pension and infrastructure etc. It is not hard to find relevant arguments that the Swedish welfare system is broken, especially when we look at what we pay for it. Singapore has great healthcare, education and infrastructure. they even have a military defence that is actually up and running and can do stuff in less the 5 years if something would happen that might require a military defence.
To be clear, Sweden has healthcare, education, infrastructure etc, but most people have an additional healthcare insurance to avoid the waiting time etc (exactly as in Singapore), payed by the employer or privately. The healthcare is also ranked amongst the lowest in EU. The education has decreased tremendously in the last 20 years and is according to PISA, Sweden is at the lower end. Infrastructure….well, nowadays we have road tolls on roads and a railway that is not working properly. We do have great internet though.
Yes, I know that Singapore is unique in many ways, but still, so could Sweden be, at least when you consider what we pay in tax!
From a business perspective there is not even a competition. Singapore wins on all levels. From a personal perspective there are other angles to consider. Singapore is a survival of the fittest country and Sweden has a really great balance of living standard and work ethics etc. That is a personal question to consider.
I must add that I am no tax or law expert in anyway. All example are based on simple calculations and all the small stuff is left out to keep it simple and straight forward.