A Great Simian or just a Monkey

sweden

Sweden vs Singapore if starting or running a company

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.

Sweden: 22%
Singapore: 17%

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%).
Singapore: 0%

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?

Singapore: 830.000
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!

8. Conclusion

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.

Sweden and Singapore are competitive countries

World Economic Forum today released The Global Competitiveness Report 2014-2015. The report is as always a joy to read for a Swede living in Singapore. Two fantastic countries when it comes to innovation and competitiveness.

About Sweden the report have the following text in their excerpt:

10. Sweden, despite a rather stable competitiveness profile across all areas, falls four places this year. Overall the country boasts important strengths across the board, with strong institutions, excellent infrastructure and healthy macroeconomic conditions. Perhaps more importantly, Sweden has managed to create the right set of conditions for innovation and scores very high in many of the dimensions that are key to creating a knowledge-based society.

About Singapore the report says the following:

2. Singapore ranks second overall for the fourth consecutive year, owing to an outstanding and stable performance across all the dimensions of the Global Competitiveness Index. Again this year, Singapore is the only economy to feature in the top three in seven of the pillars; it also appears in the top 10 of two other pillars.

World Economic Forum have two great articles with a lot of data and links for the nerd, so I thought I would just share two photos that kind of highlights how Sweden and Singapore are holding up, pretty good I would say.

sweden-global competitiveness

most big companies per city

world witout strangers

A world without strangers

People in Asia need to learn about the rest of the world, yes, but probably even more important, we as non-asians need to learn about the different countries in Asia as well.

Just read an article over at Tech In Asia on how Asian founders need to gain experience from abroad markets to succeed. I would say that the key message is caught in the last part of the article:

There are plenty of startups that have founders who did not study abroad, but foreign exposure undeniably gives local startups an extra edge that their unexposed counterparts do not. Foreign-educated founders have a window into another world. They see what their country could be, they see what is behind, and what is ahead.

I think the post and the general perception in Asia is a bit to humble. Asia is where the future is. So I would really like things to be the other way around as well.

I am a Swede and in general we are well educated and travel a lot. Also since we are located pretty far up and isolated in the north we tend to seek a lot of influence from the rest of the world. So I think we are well above many other countries in terms of adopting and learning about other cultures. I write this not to put Swedes on a pedestal but rather to emphasise the fact that even though I thought I knew quite a lot about this huge Asian market, I realised that I actually did not know much at all.

Just think about it, we tend to talk about Asia as one market, cmon! India alone is like 5-7 different countries and markets. The “asia” statement is almost as stupid as when US companies talks about Europe as it was one country or at least one market. There are few similarities between Indonesia and Singapore, few similarities between Japan and Vietnam and few similarities between China and India.

Non-asians need to go to Asia to learn as well

Even during my short time living in Singapore (since Aug 2013) I have seen quite a few non asian companies shut down due to the fact that they did not understand the market and tried to enforce their way of doing it. Western companies have a tendency to look down on the maturity on the asian market and unfortunately many markets in Asia seems (as with the Tech In Asia post) to see themselves as a lesser market.

Shift in focus, Asia rules

What is expected to be the biggest tech IPO ever, Alibaba, is estimated for August, a Chinese eCommerce company not known by many outside the financial industry, a Chinese eCommerce site. Path is getting bashed for “being big in Indonesia”, but few actually know that Indonesia has the highest rate of mobile vs desktop users in the world and that they are one of the worlds most growing emerging markets as well as a massive 250M inhabitants. To be an early big player in Indonesia is probably pure gold. Markets like India, Philippines, Malaysia, Indonesia, Japan, China etc are huge. 50% of the worlds population lives in this region of the world.

population_in_asia

We, as non-asians, also need to go to this market to understand and get to know the different cultures both on a person level and on a business level. There are so much things we need to learn to even have a chance of being successful in one or many asian countries.

Non-asians need to understand the complexity and asians need to gain self asteam and realise that the market they live in is in it self currently the most interesting on earth. Just a fun fact is that Alibaba alone has bigger transactions then the entire US eCommerce market combined.

Education in other countries

The post writes a lot about people from Asia benefits from getting an education in other, non-asian, countries. That is probably very correct, but it also goes the other way. Non-asians would benefit a lot of spending time in parts of Asia prior to starting their business, if Asian countries are included in target markets (as they should be).

One great example that I personally have stumbled upon is the NUS / KTH student exchange program. National Uniersity of Singapore and the Royal Institute of Technology in Sweden, have an exchange program were students spend 12 months in the other country doing internships at one or several businesses. I have personally met several of those students and all of them have impressed me with the added knowledge both from a pure understanding point of view but also as individuals. How they actually have gained personal experience in both cultures. As an example Swedes have a strength in solving problem and working in teams as well as thinking outside the box. Singaporeans are very knowledgable and hard working, very strong business focus. When you combine these two you get persons how are hard working, knowledgeable and problem solving maniacs that as an add on take their own initiatives and work great in teams. This is purely on personal experience, so no statistically proven data. I hope to be able to work with many from this program over time.

A world without strangers

This headline is actually from a T-shirt that I bought in Hong Kong a couple of years ago and I think it symbolises the world we are supposed to live in today, both as respect for other people in the world as well as from a business perspective.

Welcome to Sweden

Arrived in Sweden this weekend and was welcomed with wonderful weather. Will be here for 2 months before going back to Singapore.

To celebrate I thought I would share some Swedish entertainment and explaining two words, Lagom and Jante, to help non-Swedes understand us better.

The funny sitcom Welcome to Sweden puts us on the spot with a lot of anecdotes and slapstick humor. So if you want to get to know all the strange things about Sweden and Swedes, this is almost a documentary.

http://youtu.be/ZppGW7CZ5wc

Since Sweden is also known for it’s music I though I could share two new brilliant songs from Swedish artists, both are favourite bands of mine, Teddybears Sthlm and In Flames.

It’s been busy times since arriving, except the regular work things, there have been some other major things to do. These three Instagram photos do summarise it quite well (at the bottom of this post). A lot of BBQ, moving the lawn (or what used to be the lawn) and get accustomed again to “mellanmjölkens land” aka the land of ‘lagom’ and ‘Jante’.

Lagom and Jante

These words, Lagom and Jante, that do not exists anywhere else.

Lagom is a Swedish word with no direct English equivalent, meaning “just the right amount”.

The Swedish-English dictionary defines lagom as “enough, sufficient, adequate, just right”. Lagom is also widely translated as “in moderation”, “in balance”, “perfect-simple”, and “suitable” (in matter of amounts). Whereas words like “sufficient” and “average” suggest some degree of abstinence, scarcity, or failure, lagom carries the connotation of appropriateness, although not necessarily perfection. The archetypical Swedish proverb “Lagom är bäst”, literally “The right amount is best”, is also translated as “Enough is as good as a feast”. That same proverb is translated as “There is virtue in moderation”.

The Law of Jante is the idea that there is a pattern of group behaviour towards individuals within Scandinavian communities that negatively portrays and criticises individual success and achievement as unworthy and inappropriate.

Generally used colloquially in Sweden and the rest of the Nordic countries as a sociological term to negatively describe a condescending attitude towards individuality and success, the term refers to a mentality that de-emphasizes individual effort and places all emphasis on the collective, while discouraging those who stand out as achievers.

Sweden is a fantastic country and I have rally missed you. The air, the nature, the people and also the quality of a lot of things. Swedes and Sweden are really good at many things, we are just a bit poor on telling it to the world.

singapore

2013 The Year of Change

Lived in three countries, lost 20kg, sold a company, invested in 3 and starting a new one.
To do a quick summary of 2013 is hard, probably one of the hardest years ever to look back and try to, in short words, describe.

Personal

On a personal level the main thing is that I have re-gained my control over my body. A decade of decadance (remember the Mötley Crue album?) is over. Almost 20kg lighter and now back to the way it should be, eat healthy and excercise regulary.

Main acheivements

  1. Changed the way I eat and lost 18kg (from 96kg to 78kg today)
  2. Ran Singapore Marathon (42 195m in a sauna). It was a tough one with the high humidity and all, but pushed through.
  3. Did Singapore Commando Challenge (12km with 25 really tough obstacles). Was great fun!
  4. Excercised minimum 2 days a week the entire year, no exceptions.
  5. Walked a lot instead of taking car/bus/taxi.

I also think I have become a better person this year. I have spent a lot of time with people I admire and learn from. I think I am in a stage of life were I reflect a lot and want to learn from those with greater knowledge. One of my best teachers have been my friend Okk. He has in just being him, made me realize new ways to look at life. I am honored to be able to call him my friend. I have also learnt a lot from all the different cultures and religions I have bounced into during the year. The more I learn, the more I realize how little I know.

I have started to get very attracted to the buddist way of looking at life. One task for 2014 will be to learn more about buddism.

I am also humbled to have met many new friends during 2013. It is not an easy task at my age with family, work and all the other things happening.

2013 have been a fantastic year for me as a person in every possible way. I am very happy with how 2013 turned out. I am also full of confidence for 2014.

Family

Without them I would be a less of a person, love them more then life and I am honored to be able to spend so much time with them, it is a fortune not everyone have and I sincerely appreciate it to the fully. We have during this year lived 4 months in Thailand, 3 months in Sweden and 5 months in Singapore. Our daughter have gone to Swedish School in Thailand, school in Sweden and International School in Singapore (ISS International School). She enjoys the school in Singapore the most of the three.

Since I was not working operational in any company from August til December I had a lot of time to support our daughter in her new school (everything is in english that she did not know), doing homework and just make sure her move to Singapore was great. Well needed for us to spend a bit more time together.

Professionally

2013 started out as a year as many others lately. Silverbakk was moving in the right direction and we showed growth and a healthy business With great clients. It was also time for change and I sold most of my share (still on the board and as an strategic advisor). I left the daily operation and left the CEO role to Magnus. Between August and December I networked a lot and also made some angel investments in companies I strongly believe in. Clean Motion, FundedByMe and Newton Circus. It was nice to wind down a bit after a lot of hard work for a couple of years, but I missed building a company, so I started to carv out the strategy for my next venture. More on that in January 2014.

I have met tons of fantastic people since moving to Singapore, some of them am I already doing business with and others I hope to work closely with soon as well. Singapore is easy in many ways, but also tough. So far I love everything with Singapore from a business perspective, but I am also new to Singapore so maybe in a year I will be able to give a more correct and experienced view.

2013 have again been the year of change. It is now time to build for the future and execute on the plans I have now set in motion. I have done a lot of mistakes and have learnt a lot during my previous ventures, so now it is time to put that knowledge to work and build a new company.

2014 will be the year of execution, it is the year when things will happen.

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