Commonly Asked Questions about Foreign Ownership

If you are going to set up a business in Singapore, your mind must be clouded with numerous doubts and questions as every country has different requirements and different regulations.

In this FAQ post, we have complied a list of questions that we commonly get from our foreign customers.

Can A Foreigner Own 100% Of The Shares In A Singapore Company?

Yes, any foreigner, either a company or an individual, can hold 100% shares in a Singapore company. Singapore Companies Act makes 100% ownership of a company by a foreign individual or a corporation possible.

However, certain conditions, like having a resident director, must be fulfilled. If you are above 18 years of age and have not been held responsible for any bankruptcy or legal offense, you can own 100% shareholding of a company in Singapore.

Can I Hold 100% Of The Shares Under A Foreign Company?

Yes, a foreign company can hold 100% shares in a Singapore company. It is made possible by the Singapore Companies Act. However, there may be tax implications involved as corporate ownership in a Singapore Company will disqualify it from certain tax incentives.

Can I Be The Sole Director If I Am A Foreigner?

You can be the sole director of a company in Singapore if you are resident in Singapore, If not, you must appoint a resident director if you reside outside Singapore. Also, to note that if you are the sole director and shareholder, you will need to appoint a Company Secretary that cannot be yourself.

If you are a foreigner, you will also need to appoint a registered filing agent as you cannot self-register your company in the country.

Can I Draw Salary From My Singapore Company If I Don’t Work In Singapore?

Yes, you can draw a salary as a foreign employee of the Singapore Company even if you are doing your work overseas. You will be glad to know as well that if you perform your job wholly outside Singapore, there will not be Singapore tax on the employment income drawn by you as well.

Are There Any Restrictions On Transferring Funds Into And Out Of My Singapore Company?

No, as long as you are not operating from a sanctioned country under the United Nations Security Council. As Singapore is a member of the United Nations, Singapore will have to comply with any sanctions imposed by the United Nations against its country which may include financial transfers.

Do I Have To Pay Tax When I Transfer Funds Into My Singapore Company?Is There Any Difference Between Holding The Shares Under My Personal Name And Under Another Foreign Company wholly owned by me?

The corporate shareholding will disqualify the start up from enjoying the startup tax exemption provided to new companies that lowers the effective tax rate on the first $100,000 of profits to 4.25% and lowers the effective tax rate on the next $100,000 of profits to be 8.5%. One of the qualifying criteria for the start up tax exemption is that all the shareholders should be individuals.

The introduction of additional layers of companies may result in higher scrutiny by the banks when opening a bank account.

Can Another Company Be Named As The Director?

Unlike some other countries like Hong Kong, it is not possible to appoint a company as a director of a Singapore company. In addition, there must be at least one local resident director.

No, opening a company alone does not automatically allow you to work in Singapore. An employment pass (EP) is also required, which gives the right to work in Singapore.

Employment pass is a kind of work permit that you will need to reside in Singapore and work. You cannot work in Singapore without the employment pass. The authorities are now more strict on the issuance of employment pass. We can assist to apply and advise on the employment pass.

Do Foreign-Owned Companies Need To Be Audited?

All the companies registered in Singapore need to be audited. However, Small companies whose revenue did not cross $10 million annually or whose assets at the end of the reporting period were less than $10 million are exempted from audits. Also, businesses must hold annual meetings and file financial statements.

Do I Have To Travel To Singapore To Attend Board Meetings If I Am A Director?

Its not required. Especially in the current COVID19 situation, there’s provisions made to hold a virtual meeting or have written resolutions passed.

Do I Have To Travel To Singapore To Open A Bank Account?

No, in view of the recent COVID situation, we have contacts with bankers that is able to do remote bank account opening with video verification of your identity. We are also able to incorporate the company without requiring you to travel over to Singapore.

Conclusion

Those were some of the most asked questions by foreigners. If you want answers to more questions, do drop us an email in the contact us form and we will respond within one working day.

How to lower Australia tax by incorporating a Singapore Company

We will show a couple of company structures an Australian can use that includes a Singapore company and that will save taxes.

Companies, jurisdictions, and tax – where is a company tax resident?

As a general rule, a company will be deemed to be resident in the country or territory where it is incorporated. In the old days, this was always the case. However, today most jurisdictions demand a certain presence to consider it a tax resident in that jurisdiction. This applies both ways, but it is especially high tax jurisdictions – typically the jurisdictions where the company owner resides – that refuses to accept structures where a company is set up in another jurisdiction whereas most or all activity does not take place in that said jurisdiction.

What type of substance or presence that is required is not always that easy to determine, but the thought behind this is to protect the tax base of the high taxed countries.

In practical terms, this is how you should think about it:

  • The default position is still that a Singapore company will be considered a tax resident in Singapore. So, if the Singapore company is owned by an Australian or an Australian company, the Australian tax authorities will have to actively make a decision for this company to be considered an Australian company for tax purposes.
  • It matters a lot where the owners and the customers are. The typical situation is where you have Australian owners and Australian customers. If the owners then set up a Singapore company to serve those Australian customers, they need to have a very good reason to do so, except for paying fewer taxes. If, on the other hand, an Australian owner sets up a Singapore company to serve customers in Asia, it is much harder for the Australian tax authorities to deem that company tax resident in Australia.
  • The type of presence that is required will depend on the type of company. A holding company will need a lot less than a trading company.

Australian CFC-rules (Controlled Foreign Company)

In addition to the resident test, most OECD countries – Australian included – has what is called CFC-rules. In general, these rules state that under certain conditions the tax authorities can disregard a foreign entity completely for tax purposes. The effect of this is that the owner – a person or a company – is taxed directly. The terms vary a lot between countries, but Australia has one of the strictest CFC-rules in the world.

In Australia, the CFC-rules is designed to hit three types of company setups.

  • The offshore holding or investment company. A company that typically are designed to receive passive income from other companies or other sources – especially where this is not tied to ownership (dividends).
  • The “sales to Australia Company”. This is a type of company that sell goods or services to Australian residents or another company that has a presence in Australia.
  • The “service company”. This is the type of company that deliver services to a tangible company. This often raises the question of transfer pricing but under Australian law, this is part of the CFC rules.

Keep in mind that the rules apply to Australian taxpayers only. The rules are fairly complicated, with a lot of exceptions and adjustments. But, the above layout is the essence of these rules.

Basic Company Structures

These are some basic company structures that you will encounter:

The Singapore trading company

In this scenario, an Australian company or individual opens a company in Singapore. The simple setup is:

Australian company/individual 100% ⇨ Singapore company

As long as the Singapore company is an operative company, meaning that you sell goods or services from this company to customers, and the customers are not in Australia, there will not be any CFC problems.

In addition, the Singapore company would need to have some presence in Singapore. In Singapore, you need to have a local director and that will normally be sufficient together with an operative address. If this is the case the company will be deemed tax resident in Singapore.

The Singapore investment company

Opening a Singapore investment company as an Australian company/individual can trigger a CFC situation. Again, we are looking at a simple setup:

Australian company/individual 100% ⇨ Singapore company

Whether there will be a CFC situation depends on two factors.
i) How the income of the company is classified. If it is classified as a passive income, you will have a CFC situation.
ii) How many owners the company has. As long as the UBOs (Ultimate Beneficiary Owners) consists of more than five people, CFC rules do not apply.

The Singapore holding company

The same simple setup:

Australian company/individual 100% ⇨ Singapore company

A Singapore holding company will nearly always create a CFC situation. The reason here is that the company’s income will nearly always be deemed as passive.

In reality, the only way to get away from a CFC situation with a holding company is for the holding company to have more than five UBOs.

But, since Singapore is a section 404 country the CFC situation is not that bad. When a company in a 404 country pays or receives dividends this is not counted as an attributional income. This Basically means that the dividends as such will not be attributed to the Australian company/resident for tax purposes.

So, the effect here is that as long as the company only receives dividends, and not royalties, interests and other types of passive income this is a type of company that will not have any CFC problems.

As can be seen from the above, although the Australian CFC rules are pretty tight, the most common company structures for Australians doing business abroad will not really be affected. This is intentional. The target for the CFC rules is the type of income that is easy to move out of the Australian tax base, not stopping Australians to do business abroad.

As noted earlier a CFC situation will not occur if:

  • If the Australian tax resident owns less than 10% of the foreign entity
  • If the Australian tax resident owns less than 40% of the foreign entity provided that five or fewer Australian tax residents control 50% or more of the company.

Tax in Singapore and Australia

The corporate tax in Australia is 26% to 30% (full rate). In Singapore, the corporate tax rate is 17%, but there are some incentives that will bring the effective tax rate substantially lower (from 4,5%) especially for small and mid-sized companies.

Based on this alone it is obvious that Australian companies/residents will save a lot of tax by moving their offshore operations to a Singapore company instead of operating from Australia.

Company structures for Australians including Singapore companies

Scenario 1:

Scenario 2:

This is a typical structure where an Australian company uses a Singapore company to hold shares in other foreign companies. When receiving dividends that are foreign-sourced, both jurisdictions tax this, but Singapore has some exceptions.

The tax implications here will depend on a number of factors, but in general, it is favourable to use a Singapore holding company. You will need to make a specific assessment for each case.

Since Australia uses “franking” credits on dividends from local companies, it might in some cases be more favourable to use an Australian company if you want all dividends paid out to the UBO.

Conclusion

As we have seen it can be a very good idea for an Australian company/resident to make use of a Singapore company.

However, this only applies to business conducted outside of Australia.

For operational businesses, tax savings can be huge as taxes in Singapore is way lower than taxes in Australia. For holding companies it will in many cases be more favourable to use a Singapore holding company than to use an Australian one.

Possible Tax Structures between Singapore and UK

Disclaimer
This is purely regarded as academic information sharing. We hold absolutely no liability over any of the notes below, what you choose to do with this information, or any actions individuals or companies choose to make arising from these notes.

The analysis below represents our views as to the interpretation of existing legislation as at the date of this paper and, accordingly, no assurance can be given that the relevant tax authorities or the Courts will agree with this analysis. It should be noted that further tax legislation could be introduced, or the Courts could come to decisions, which may affect the body of case law and, in turn, affect the expected tax treatment of the current and future state, as described in this memo. We are not responsible for advising of any changes in guidance or interpretation subsequent to the date of this paper.

Your specific facts and circumstances and relevant intercompany relationships and corporate structures should be considered on an individual basis against the contemporary UK/Singapore tax rules prevailing at that time.

Introduction

Principally, Singapore has a lower corporation tax rate than the UK (17% vs 19%), with additional discounts for start-up companies, which makes the disparity for corporation tax even more significant. Singapore also has, on the whole, a more favourable business environment for where companies can do business. UK businesses and individuals can therefore leverage a Singapore entity to:

  • Protect the long term interests of their business; and
  • Potentially save tax.

The most straightforward way to utilise a Singapore entity within a Group is to transfer as much profit as possible to the Singapore entity. This will maximise profit in a lower tax jurisdiction.

Additionally, any decisions that maximise the underlying value of the Singapore entity may also be tax efficient, as Singapore has no capital gains tax, so if the business was to eventually be sold, the tax charge in Singapore would be lower than in the UK.

There are many ways to transfer profits from the UK entity to Singapore, with each method with its own benefits and drawbacks. I have listed a few of these out here:

Option 1 – Management fees from Singapore to UK

If there is any kind of employee or personnel substance, this is the most straightforward way of moving profits from the UK to Singapore. A management fee, sales fee, business support fee, administrative support fee or finance fee charge can be levied on the UK from Singapore, via an intercompany business agreement.
As a result of this charge, the Singapore entity could provide a fixed mark up on costs, profit share or target operating margin which is then set out within the intercompany service agreement. The Singapore entity would then be able to retain profits with the eventual outcome of profits being shifted from the UK entity to the Singapore entity, reducing the overall tax bill for the Group.

The benefit of this arrangement is that it is incredibly straightforward and simple to understand – in most cases the transaction will be VAT free (a similar transaction could take place with the ownership of actual goods being passed along, but if there are VAT charges this would make this scheme unviable).

Additionally, depending on the size of the business, it is quite difficult from HMRC to challenge the amount payable provided that it is in exchange for an actual service, which makes it a comparatively robust structure. As a general rule, the larger the size of the UK business, the larger the chance of an HMRC enquiry, so if the overall quantum of this transaction is generally small, it is unlikely that HMRC will take interest. Additionally, the transfer pricing rules do not generally apply to companies that are small or medium-sized enterprises in the relevant accounting period (but HMRC could still challenge these transactions on other grounds)

Where HMRC can challenge this transaction in on the basis of substance – if there are not underlying personnel carrying out the relevant services, then HMRC might challenge the legitimacy of this transaction. Therefore, as much substance as possible should be created in Singapore if possible. This could include:

  • Assets being owned in Singapore (cash / tangible and intangible assets);
  • Employees being hired in Singapore; and
  • Fixed place of business (such as an office – even if just a virtual office) being rented.

The use of this substance can then be leveraged to charge the UK entity as much as possible, with other options included as per Option 2 and 3 below.

Option 2 – Royalty fees from Singapore to UK

If there is any kind of intellectual property (IP) or other intangible asset that a UK company possesses, the company could then sell/transfer that IP to the Singapore entity. This gives the Singapore entity sufficient substance (i.e. if it holds the asset in Singapore) and a valuable asset which can be sub-licenced for use back to the UK entity. However, given that there is 8% withholding tax usually applied to royalties between the UK and Singapore, this may not be a viable option to save tax in the short term, but could be beneficial if the business is a group with a larger global presence beyond just the UK (as the royalty could be charged from Singapore to these countries instead).

There are rules around the transferring of intangible assets between companies, so it is important businesses consult with their advisors if they are unsure of the value of the asset the company is transferring.

The additional value of this option is that it inflates the value of the Singapore entity while deflating the value of the UK entity. As Singapore has a lower capital gains tax than the UK, ultimately any gains eventually crystallised if and when the company is sold, or when the underlying asset is sold, will incur a lower overall tax charge.

Provided that the asset can be transferred out of the UK relatively easily and with a low tax charge, this probably the most difficult item for HMRC to challenge, as the value of intangible assets and licence fees are highly difficult to value.

Option 3 – Loans from Singapore to UK

If the company has large amounts of capital to move around, it may be possible to set up a intercompany loan, with the Singapore entity lending capital to the UK entity, charging interest in the process. Any interest charged will move profits from the UK entity to the Singapore entity.

Unfortunately there is a 5% withholding tax on interest charged between the UK and Singapore, so the only viable way to save money on loans is via a third country, explained in the paragraph immediately below:

If an entity is set up in Singapore, then the Group has an option to operate cross-border transactions either from the UK or Singapore. It may be the case that the UK’s double tax treaty has an non-preferential withholding tax applied to interest, royalties, income, or other cross-border transactions. However, if the Group holds an entity in Singapore, then the relevant transaction could be carried through the Singapore entity instead. For example, where the UK and another country (country A) has a 10% withholding tax applied to interest earned from cross-border loans, but Singapore and country A has a 0% withholding tax applied to interest earned from cross-border loans, then the Group could set up a loan from Singapore to Country A and therefore avoid paying the withholding tax.

HMRC could challenge such an arrangement under ‘treaty shopping’ rules, so it is important to check your specific arrangements with your tax advisor.

Remarks on how to set up the Group company structure

From a UK perspective, there are a number of variables to consider when deciding on how to set up the Group structure. Options include:

  • Having one individual own both the UK and Singapore company
  • Have the UK company own the Singapore company, or vice versa
  • Set up a UK or Singapore holding company, which owns both the Singapore company and the UK company

It may depend on the long term plan of the business owner how best to structure the Group. If the company is to eventually sell the business, it might make more sense to set up a holding company in the UK or Singapore, which then owns the new Singapore entity. This allows parts of the business to be sold relatively easily and provides flexibility for then how to proceed.

Alternatively, the business owner could own the Singapore entity directly. This is where the business owner might want to keep the UK entity and Singapore entity separate.

If the company in the UK is a real estate investment company, a dividend withholding tax of 15%, so it would make sense for an individual to own the Singapore company (i.e. it can operate independently as a management / financial company, such that dividends back to the UK do not levy a 15% withholding tax charge)

Viability to save on personal taxes

Having an entity in Singapore provides flexibility and support for an individual’s tax residency. The individual could reside in Singapore, particularly if they anticipated a sudden increase in capital gains or income (i.e. a business was due to be sold) and they wanted to take advantage of significant short-term income and capital gain increases.
This would be subject to the ‘temporary non-resident’ rules in the UK so the business owner should act carefully and plan accordingly if planning to live temporarily abroad to utilise a lower tax rate.

Withdrawing funds from a Singapore entity to an individual in the UK

In short, it is preferable for a UK individual who is UK tax resident to withdraw income via dividends, rather than via salary. Principally, UK individuals are taxed at a lower rate on dividends than salary.

Moreover, dividends in the UK have an additional £2,000 minimum allowance that salary does not have, so UK individuals only start paying tax on dividends at £14,500. Therefore, the individual will suffer less UK tax on dividends than they do on income.

Additionally, there is a challenge of employing overseas individuals that causes challenges to the overall structure of the business. If a Singapore entity employees an individual in the UK (or most likely, any international country – the specific agreement will be explained in the relevant double tax treaty for Singapore and that entity) and that individual:

“is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise”

it will create what is known as a Permanent Establishment (PE) in the country where the individual resides. The outcome of this process is that any profit attributed to that individual is liable to corporation tax in the country where the PE exists. Given that clients who are potentially interested in setting up a Singapore entity will be entrepreneurs / high-value employees, there is an increased risk of their activities falling under the “authority to conclude contracts” as per the legislation above.

In summary – this means that the overall benefit of utilising Singapore in the structure is negated, because there is no corporation tax saving. Therefore any individual should generally only withdraw dividends from the company and not seek to be employed by that company.

Other remarks

It is important to clarify that UK individuals pay tax at the same rate for both foreign income and UK income. In effect, where a UK tax resident has UK income and Singapore income arising, both this income is generally taxed at the same rate. Therefore all tax savings from utilising the Singapore entity will arise at the corporate, rather than personal level. (i.e. all savings arise from the Singapore entity paying a lower rate of tax than a UK entity, where both entities would incur the same income).

What Is A Company Secretary For Singapore Companies?

Are you about to establish your business in Singapore? Are you fulfilling all the criteria required to set up a company in this country? You must have done all the relevant research and must be aware of all the rules and regulations. But, are you aware that the first thing to do is to find a Company Secretary to assist with the Company incorporation? A Company that has foreign directors will require a qualified Company Secretary to do the incorporation and file the appointment of foreign directors.

A company secretary is one of the requirements for a company to be incorporated in Singapore. Also, the secretary should be a resident of Singapore.

The secretary is the compliance officer of the company. But can anyone be appointed as your company’s secretary? Read on to know all the important information about the company secretary for Singapore companies.

Does Every Company Require A Company Secretary?

Yes, every company that needs to be incorporated in Singapore needs to have a company secretary.

According to the act, every company should have at least one secretary, having his principal or only place of residence in Singapore. Also, he should not be debarred under section 155B from acting as a company’s secretary.

Further, the directors of the company have to take all the necessary steps while hiring the company’s secretary. It includes the verification that every secretary of the company is knowledgeable in their fields.

What Does A Company Secretary Do?

A company secretary has various roles and responsibilities with regards to the various stakeholders:

Company: The company secretary has to make sure that all the relevant statuary obligations are met such as filing annual returns or XBRL. Also, they make sure that the business interest of the company is always protected, and the company always practices good corporate governance.

Directors: The company secretary serves as an advisor regarding compliance matters to the directors such as which corporate actions require a board approval and which actions require shareholders approval.

Shareholders: Company secretaries are required to advise on the necessary communication with the shareholders of the company to make sure requirements under the Company’s Act are complied with. The secretaries will also issue required notices and disseminate financial statements in accordance with date requirements under the law, so the shareholders are always ready to participate in decision making at any company’s meeting.

Duties Of Company Secretary

  • Board Meetings
  • The company secretary is responsible for drafting records and resolutions of the board meetings and facilitating the decision-making process of the company.

  • Statuary Compliance With ACRA
  • The company secretary needs to file the company’s annual accounts timely and maintain the necessary registers. There are a number of registers that a Company has to maintain, such as Register of Members, Register of Directors etc. Also, they will help to file notice to share transfers, a notice of resignations or removal of auditors, amendments to the Company’s Constitution, change in address, or any other ACRA’s regulatory requirement.

  • General Meetings
  • General meetings are also arranged by the company secretary, which should be in compliance with the Company’s Constitution and the Company’s Act.

  • Corporate Governance
  • The company secretary also assists the directors of the company for the implementation of good corporate governance practices within the organization.

  • Shareholder’s Duties
  • The company secretary is responsible for supervising share allotments, transfers, issues, and deal with various matters that affect the shareholders and their queries.

  • Constitution
  • When a Company was incorporated previously, they will have two documents which specifies how the Company will conduct its business and perform decision making which is called Memorandum & Articles of Association (M&AA). However, after the recent revision to Company’s Act, the M&AA is combined into a single document called the Constitution. The company secretary will advise the directors if they are complying with the Constitution of the Company.

  • Duties Related To Non-Executive Company Directors
  • The secretary needs to act as a medium of communication and information for non-executive company directors.

  • Corporate Governance
  • The secretary is responsible for helping the directors in promoting good corporate governance practices within their organization.

By When Do I Need To Appoint A Company Secretary?

The company cannot be left without a company secretary for more than six months at any one time. If you are a new company, your company should have a new company secretary within six months of incorporation.
Also, once the secretary is resigned, removed, or appointed, the resolution must be lodged with ACRA within 30 days.

Can I Be The Director And Company Secretary?

Yes, you can be director and company secretary at the same time, provided you fulfill the criteria of physically present at the registered address of the company. However, if the Company has only one Director, the sole director cannot be the Company Secretary as well.

What Are The Qualifications Required To Be A Company Secretary?

The directors of the company appoint the company secretary of the company and set his/ her remuneration. However, considering the section 171 of the Company Act, directors need to follow certain guidelines while appointing the secretary.

According to the Company’s Act, the secretary should meet the following criteria:
The individual must be a member of the Institute of Chartered Accountants of Singapore (ICPAS). If not, he/ she should have served as secretary of the company for at least three years out of the five years before being appointed secretary of the company. CA members (Singapore) are also recognized.

He/she can also be a partner of SAICSA (Singapore Association of the Institute of Chartered Secretaries and Administrators).

Conclusion

So, this was all you need to know about the company secretary you want to set up your business in Singapore. You must make the right decision to hire a qualified company secretary for the future growth of your company. To find out more about incorporating a Company in Singapore, you can refer to our guide here.

We will be glad to assist in providing Company Secretary Services, please contact us here for more information.

Types of Business Entities for foreigners in Singapore

Singapore is one of the best countries to set up a business. This is evidenced by the number 2 ranking in the 2019 World Bank annual ratings for ease of doing business. Whether its incorporating a company or setting up a partnership, the process is straight-forward, fast and relatively painless compared to other jurisdiction.

Considering its tax incentives, cash grants, and financing schemes, the proactive government of Singapore is famous for promoting entrepreneurship. However, you may be wondering as a foreigner, what type of business entities are available for you as a foreigner.

In this article, you will read about the various types of business entities in Singapore and decide which one suits you and your business.

1. Private Company Limited By Shares

This is a business entity that is registered under the Companies Act. The private company under this entity can have a maximum of 50 members, whereas a public company under this entity can even have more than 50 members.

This is the most popular choice of business entities for foreigners and for very good reasons. It offers limited liability for the shareholders and gives the flexibility of raising capital or qualifying for grants (you can refer to our business grants write up here), there are also numerous tax advantages for foreign residents individuals as dividends declared by a Singapore resident Company is exempted from tax. There are tax exemptions specifically for new Companies that are incorporated in Singapore but not for other business entities. In addition, there’s zero capital gain tax on subsequent sale of shares in Singapore. With all those advantages, you will wonder why should anyone even consider the other business entities!

According to statistics collected in FY2017 on business entities created in Singapore. Starting a Company is the overwhelming winner, with over 63% of new entities opting for a private limited Company.

This type of business entity can also have 100% foreign shareholdings, however, it is a requirement that the Company should have at least one local director and you will need a registered filing agent to assist you in doing the registration. You can refer to our guide on Starting a business in Singapore for more information.

If you are looking to work in Singapore, it is also possible to apply for an employment pass under the Company.

2. Sole Proprietorship/ Sole Trader

Ideal for small businesses, a sole proprietorship is a type of business that is owned by a single person. This type of business does not support any separate legal identity from the person owning the company and holds the final decision in matters related to the business.

Since the business is entirely controlled and owned by the sole trader, he/ she has unlimited liability and can be sued in the business name or his/ her name. Also, this entity is not considered a separate legal entity.

If you want to be a sole proprietor in Singapore, you must be of 18 years of age, a resident of the country, and you should not be labeled as an undischarged bankrupt.

Simply put, if you are a foreigner residing outside of the country, you cannot apply for this partnership as the sole proprietor needs to be ordinarily a Singapore resident.

3. Ordinary Business Partnership Or General Partnership

If you are looking to start a small business with a local partner or a few local partners, an ordinary business partnership might be a good idea for you. A general partnership is similar to a sole proprietorship in terms of liability, structure, and taxes.

This type of business firm is a partnership that supports at least two members and cannot exceed 20 members. If the partnership exceeds this number, the company is required to be incorporated under the Companies Act.

If you are an individual owner of the company, the tax rates applied will be personal, and for a company, corporate tax rates will be applied.

All the partners above 18 years can combine their skills, resources, and industry in this partnership with the sole goal of making profits. However, if none of the partners are residents of the country, the company must appoint an authorized representative who must be a Singapore resident.

The major demerit of this business entity is that it is not considered a separate legal entity. It means all the partners of the company would be personally held liable for the partnership’s losses and debts. That means there has to be a lot of trust between the partners as it does not matter who is responsible for these debts and losses.

4. Limited Partnership

A minimum of 2 members also forms a limited partnership, but there is no limit on the maximum number of partners. In this type of partnership, at least one partner must be a limited partner. Also, this type of entity has an option for limited liability.

It means the general partner will have unlimited liability, who will also be legally responsible for obligations and debts. Similar to the above entity, this partnership is also required to have an authorized representative of the country.

So, if none of the partners of your company are Singapore residents, you are required to appoint a manager who must be a resident of Singapore. Further, the partners under this entity are required to state their income share while filing their Personal Income Tax.

5. Limited Liability Partnership

Along with the option for limited liability, the owners also have the flexibility of operating as a partnership under this entity. In this type, you will get the benefits of both a partnership and private limited companies.

This business entity can be considered a separate legal entity from its partners. It can even own the company in the Limited Liability Partnership’s name.

For setting up a business under this entity, you can either be a local or a foreign resident and can be both individual and corporate bodies. If you are a foreign resident individual, you will need the assistance of a registered filing agent to submit the online application on your behalf.

Conclusion

So, we gave gone through the various options available in Singapore. Although each entity has its pros and cons, selecting a one that caters to your needs is solely dependent on your requirements and business type.

Before you start up the business, you can contact us here if you have any questions that you are unsure of or if you have decided to go ahead with incorporating a Company, you can take a look at our incorporation packages. here.

Starting a Business in Singapore? Keep These Things in Mind

Did you know Singapore is the second-best place after New Zealand to do business according to a report from World Bank? Yes, with a score of 86.2 out of 100, Singapore offers a fast and easy way to start a business. And, isn’t it what every business owner wants?

Substantial investment and trade are what makes Singapore one of the most competitive countries in Asia to make your business expand. With strong government support and a relatively low tax rate, Singapore is undoubtedly a thriving financial hub. On top of that, Singapore has a myriad of opportunities for foreigners as well as the locals.

So, if you are about to expand your business and taking it to Singapore, this post is for you. We will guide you through the system of opening your business in the financial hub.

Requirements for Setting up Your Company

You can register your business in Singapore as:

  • Private Limited Company
  • Limited Liability Partnership
  • Sole Proprietorship

Taking scalability into account, many new companies register themselves as “Private Limited Company” with Accounting & Corporate Regulatory Authority (ACRA). Also, in this option, shareholders are not liable for losses and debts apart from their share capital.

Since the Singapore Companies Act governs the private limited company, it should comply with its laws under the Inland Revenue Authority of Singapore (IRAS) and ACRA.

Following are the requirements for the establishment of a company:

  • Directors: You must employ at least one director who should reside in Singapore.
  • Company Name: You need a company name, which must be approved by the ACRA.
  • Shareholders: You will need no less than one shareholder if you want to set up your business in Singapore.
  • Company Secretary: You must have a company secretary, who should be a resident of Singapore.
  • Paid-up capital: You will need at least S$1.00 of paid-up capital.
  • Registered Address: To establish a business in Singapore, you will need a physical office address.

Once a new company has been setup, you can purchase a Business Profile from ACRA. It is an electronic report that includes relevant information about your business. It will show the registration date, registration number (UEN), details of shareholders, etc.

This report is normally used to open a corporate bank account, apply for loans and grants applications and is required for most official transactions.

Do I have to be physically there?

No, for establishing a business in Singapore, your physical presence is not required. However, to open a corporate bank account, some banks may ask you to be physically present.

How to open a Bank Account

In Singapore, opening a bank account is quite easy. Most of the banks will generally require the company’s majority directors and the account signatories to be present there to sign the paperwork.

But if you cannot be physically in Singapore, we have contacts at banks that can do remote bank account opening for our clients. Due to the increasing stringent nature of the Anti-Money Laundering (AML) requirements, a bank account will take up to 14 days to open.

Singapore’s Tax Regime

Singapore has an excellent and business-friendly tax exemptions and incentives. If you open a company in Singapore, you have to pay an 8.5% tax on your first S$300,000 of annual profits and only 17% after that.

Additionally, there is no dividend or capital gains tax. Singapore also has double tax avoidance treaties with numerous countries to prevent double taxation.

Post-Business Registration Formalities

  • Certificate Of Incorporation
  • You will get an email from ACRA confirming the successful integration of the company. Since it includes the registration number of the company, it would be treated as the official certificate of incorporation in Singapore.

  • Business Profile
  • You can also obtain a soft copy of the business profile of your company, which will include registration number and name of the company, registration date, business activities, registered address, paid-up capital, and details of directors, shareholders, and secretary of the company.

  • Licenses And Permits
  • Several companies need the approval of a license from government authorities, including private schools, travel agencies, video companies, money lenders, banks, liquor distributors, childcare centers, financial advisers, and importers, retailers, and wholesalers of liquor.

    You should get the appropriate permits and licenses before commencing the operations of the company.

  • GST Number
  • You should also get a goods and services tax registration if the expected turnover of your company is more than S$1 million per year.

  • CPF Registration
  • You should also register yourself with the Singapore Central Provident Fund (CPF). In this compulsory pension fund scheme, the employer and the employee (Singapore citizen/permanent resident) contribute a percentage of the monthly salary to this fund.

  • Custom Registration
  • Also, register your company with Singapore’s customs if your business involves exporting or importing.

Conclusion

So that was a lot of information about establishing your business in Singapore. It will be really good if you can visit Singapore as it’s a lovely country to stay in and not just to do business. If you still have questions unique to your situation so you can drop us a note. and we will assist where we can.

Lastly, if you wish to have an efficient and fuss free Company Incorporation, please take a look at our incorporation packages.

3 Important Tax Considerations before Starting A Singapore Company

Do you know what is the effective company tax rate in Singapore? If your answer is 17%, we will tell you why its much lower than that and why in this article.

Every year there are many new businesses getting set up in Singapore. It is primarily because of the conducive business environment offered by the Singapore government to entrepreneurs. One can get access to capital, suitable location (our airport is a major transit hub), and even the pro-business unions which are not allowed to disrupt operations or organize strikes.

The reason for that can be traced back to the founder, when Singapore became independent, it was decided that we will need to attract Multi-National Companies (MNCs) to set up in Singapore as we do not have much natural resources and is a relatively small country (Total square area is only 721 square km, you can barely see it on a world map).

Hence, we need companies to set up in Singapore to provide both employment and tax revenue. To attract these companies, Singapore had to provide a stable, friendly, efficient place to do business and it had to be economically attractive for business to operate in Singapore which leads to the main points in this article.

One of the major economic reason that attracts new startups and companies placing their subsidiaries here is the city-state tax friendliness. To understand how competitive corporate taxes rates are in Singapore, we will only need to look at the ranking from trading economics which ranked the Corporate Tax Rate of all the countries. Out of 195 countries, Singapore was ranked at number 28 (excluding tax havens that have zero corporate tax).

So, here is everything you need to know about the three essential tax considerations for Singapore Companies.

What is the Singapore Company Tax Rate?

The corporate tax in Singapore is 17% flat on its chargeable income. Although it is already one of the lowest in the world market, most companies do not pay close to 17% tax rates in Singapore.

Three major reasons why most companies pay less than the 17% tax rate are:

  • Tax exemption scheme for startups
  • Partial Tax Exemption for Companies
  • Corporate Tax Rebates

Tax exemption scheme for startups (Updated 2020)

According to the annual Doing Business Report of the World Bank, if you are seeking a place to do business easily, Singapore is the right place for you. In fact, Singapore is ranked second best by the World bank for the world’s easiest place to do business. There’s no added bureaucracy on business compliance and setting up. (A Company can be set up in less than one day!).

The tax authority has provided a tax exemption scheme for newly incorporated companies to support entrepreneurship and help the local businesses grow. Under this scheme, the startup that comes under this scheme from year 2020 onwards will get a 75% exemption on the first $100,000 of normal chargeable income. This reduces the tax rate from 17% to 4.25% for the first $100,000 and for the next $100,000, a 50% exemption is provided. This means that for the next $100,000, the effective tax rate is only 8.5%. Taken together, for the first $200,000 of taxable income, a Singapore company will only be paying 6.3% of tax.

The even better news is that this exemption is given for the first 3 consecutive years. If we refer back to the Corporate tax rate ranking by trading economics, a 4.5% of tax rate will put Singapore as the second lowest tax regime after Micronesia (excluding all tax havens with zero corporate tax).

Is the Tax exemption scheme for startups applicable to all newly incorporated companies? No, unfortunately if your new company is an investment holding company or a company which undertakes property development for sale, for investment, or for both investment and sale. The tax exemption scheme will not be applicable.

A common question that you may be wondering is what happens after the first 3 years, do you have to pay 17% corporate income tax on all your income? Read on for the next scheme below: (Spoiler alert: No, you don’t have to.)

Partial Tax Exemption for Companies (Updated 2020)

For Companies that have been registered more than 3 years, they are eligible for the partial tax exemption for Companies scheme. Under this scheme, the first 75% of the first $10,000 of chargeable income will be exempted with 50% of the next $190,000 of normal chargeable income being exempted.

This lowers the effective tax rate for the first $200,000 of profits to be single digits. To be precise, the effective tax rate will be only 8.28% maximizing the tax exemption scheme.

Corporate Tax Rebates

It is highly likely that most Companies in Singapore pay an even lower rate of tax than what is computed after the two scheme above. The reason is that since 2013, the government has implemented the Corporate Tax Rebates scheme. This scheme rebates 25% of the income tax which is payable to the government capped at $15,000.

This means that for the first $60,000 of tax payable, you will get a 25% rebate, this is on top of the two schemes which we discussed above. Hence, the effective tax rate under the tax exemption scheme for new startups will be 4.7% while the effective tax rate under partial tax exemption scheme will be further reduced to 6.2%.

The Corporate Tax Rebate is only announced each year but it has been in place for a number of years.

All these schemes and tax incentives are the reason why Singapore is really on the verge of being declared a tax haven by the world economies and makes it economically so attractive to foreigners to start their Companies here.

Capital Gains Tax Is Nil

Capital gains tax is the tax on the profit by the sale of an asset that is non-inventory. Most common sources of capital gains are coming from the sales of bonds, real estate, stocks, and property.

For an entrepreneur, this will be really beneficial when considering an exit plan for your Company. When a business owner divests his shares in a Company, it could be for a substantial amount running into the millions and the tax bill can be hefty given the amounts at stake here. In Singapore. there will be no tax on the amount you receive for the shares. This may be surprising but Capital gains in Singapore are non-taxable. Therefore, there is no requirement for you to declare the gains as an income in your tax returns.

The reason is the encouragement of entrepreneurial business activities and also because due to the lack of natural resources, the government’s strategy plan is for Singapore to become a financial powerhouse. In order to attract investors with significant capital to invest into funds in Singapore, it was maintained that Capital gains tax should be nil. Hence, any capital appreciation will not be taxed in Singapore.

However, you must take note of stamp duties when selling shares to another party.

Dividends Are Tax-Exempt

The system in which we can classify the Singapore tax system is One-tier. This means that the company paying the tax as a separate legal corporate entity is the final tax of the company’s profit. All the dividends will be exempted from further taxation in the hands of the shareholders.

It wasn’t always the situation though, before 2002, dividends was taxed at the shareholder’s level after the Company had paid corporate tax on it. There was some discussion on the same profits being taxed twice making it unattractive for companies to declare dividends to their shareholders and the new One-tier system was implemented in the year of 2002.

In summary

Singapore is an attractive place to start a Company. Taking into consideration the tax schemes and exemptions above, we can understand why most foreigners decide to choose Singapore as their preferred place to incorporate a Company.

To find out more about the process to start a Singapore Company, you can always take a look at our incorporation packages. or drop us a note here for discussion.
best paper writing online

That is why we partner with Xero – The World’s Easiest Cloud  Accounting Software, so that you can always enjoy doing business anytime, anywhere.

Visit Us

Asia Square Tower 2
12 Marina View
#11-01
Singapore 018961

Connect