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April 05, 2013

Why Indian Tech Startups are migrating to Singapore

“From an Entrepreneurs' perspective, Singapore is a great place to operate from. If you are starting a (VC fundable) venture now, I would recommend having your headquarters/holding company in Singapore and making your Indian operations operate as a subsidiary of that. Singapore also has highly credibile image and is not looked upon as a tax haven.”

- Sesh A.V., Basiz Fund Services at the Venture Intelligence APEX'13 Summit

From a recent Business Today article:
Exact data on such ventures is not available, but the number of Indian companies with operations in the citystate jumped to 4,000 in 2012 from 1,100 in 2000, according to the Singapore Economic Development Board (SEDB). Industry executives say a Singapore presence is ideal for companies aspiring to go global as the city-state is an international business hub. "The very fact that your company is based in Singapore means it is considered more of a regional or global company as the local market is very small," says Murli Ravi, Head of South Asia investment at Singapore-based venture capital firm Jafco Asia.

...The most compelling reason for Indian entrepreneurs to move their headquarters is the ease of doing business in Singapore. The Southeast Asian nation topped the World Bank's Doing Business 2013 survey of 185 countries. India is ranked 132. In terms of starting a business, the city-state is ranked fourth while India comes in at 173. The World Bank survey also notes that it takes three permits and three days to start a business in Singapore. In comparison, it takes 12 approvals and 27 days to start a business in India. "The biggest thing companies love there is zero corruption," says Arvind Lakshmikumar, founder and CEO of Tonbo Imaging. The start-up, which makes high-end imaging equipment for armed forces, was set up in Bangalore in 2007 and moved to Singapore last October. Lakshmikumar says Singapore's easier tax regime makes it even more attractive. The city-state caps corporate tax at 17 per cent, compared with more than 30 per cent in India. Lakshmikumar says Tonbo was also paying 35 per cent import duty on raw material and 15.5 per cent valueadded tax in India. "That's a huge tax burden," he says.

...Capillary Technologies, a customer engagement solutions provider which shifted from Kolkata to Singapore last July, does not want to talk much about the reasons for the move. "We do not want to be seen as a company which is shifting base to save taxes," says co-founder Krishna Mehra. "We are very much an Indian company at heart." Mohan Kumar, Executive Director at Norwest Venture Partners India, says shifting to Singapore was a "smart move" by Capillary since it has a large number of customers in that region. Kumar believes that the trend, which has accelerated over the past two to three years, is likely to pick up further.
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