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High costs constrain Gulf small businesses
Published in The Saudi Gazette on 19 - 05 - 2012

According to a recent report on Forbes.com, high licensing and related fees are squeezing small businesses and stifling entrepreneurship in the Gulf Cooperation Council (GCC).
The report identified four factors, i.e. – business registration fees, paid-up capital, business renewal fees and exorbitant rental rates - put GCC entrepreneurs between a rock and a hard place.
1) Business registration fees, which include government fees, visas and deposits, ranges from $5,000 to $15,000 in the region.
2) Paid-up capital of $15,000 is also required to be deposited in banks in GCC for starting a business.
3) The annual business renewal fee of approximately $10,000 is mandatory irrespective of profit or loss also proves to be a huge burden on new GCC startups, particularly in the first few years of operations.
4) Furthermore, high rental rates of commercial real estate and the annual government fee of approximately $10,000 per branch prevent businesses from expanding their operations.
Compared with other countries, for example, Singapore, "it is difficult for entrepreneurs in the GCC region to grow their businesses to the level that they desire or even focus on the future growth path with such conditions in place. In comparison, the cost of opening a Singapore company or running operations in Singapore are testament to the republic's consistent top ranking in World Bank's Ease of Doing Business Index for the past six years," Satish Bakhda, Head of Rikvin's Operations, said.
With 20 free trade agreements (FTAs) with 27 economies as well as 69 comprehensive avoidance of double tax agreements (DTAs) under its belt, Singapore facilitates business across borders and makes it less costly for small businesses in Singapore to expand their operations internationally.
With regards to paying taxes in Singapore corporate tax and personal income tax rates are progressive and designed to boost entrepreneurship. In addition, Singapore offers every Singapore-registered firm a 400 percent tax deduction or a 60 percent cash payout option each year for expenditure made in a wide variety of value-added activities via the Productivity and Innovation Credit (PIC) scheme. Additionally, capital gains are not taxed in Singapore. "All these factors give Singapore a defining edge in encouraging entrepreneurship and we are optimistic that Middle eastern entrepreneurs are in good stead to benefit from setting up a Singapore company," Bakhda added.


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