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Why should I invest in Singapore?

Friendly and lean

regulatory environment.

Located at the very heart of Southeast Asia, Singapore provides one of the world’s most business-friendly regulatory environments for local entrepreneurs. The city-state is also ranked among the most competitive economies worldwide. Indeed, it topped both IMD’s World Competitiveness and World Economic Forum (WEF)’s Global Competitiveness rankings.

Founding member of the ASEAN (Association of South-East Asian Nations), Singapore represents a relevant gateway to serve the fast-growing markets of the region and beyond with minimal tax and duty costs. ASEAN aims to achieve the free flow of goods in the region resulting in less trade barriers and deeper economic linkages among Member States. In addition, its proximity to China is a significant advantage for entrepreneurs and businesses willing to invest in this market.

The political stability, an efficient system of developed infrastructures as well as a well-known skilled workforce makes the city-state an interesting environment for foreign investors who want to expand their businesses in the region.

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How can I set up a company in Singapore?

There are several legal structures that can be used to establish a Company in Singapore. Most common ones are the Private Company Limited by Shares, the Branch Office the and the Representative Office (RO).

Private Company Limited by Shares

A private limited company is an entity registered to the Accounting and Corporate Regulatory Authority (ACRA) of Singapore under the Companies Act (Chapter 50). The Constitution of a private company must provide for (i) maximum up to 50 shareholders; and (ii) restriction to the right of shareholders to transfer the company’s shares. Shareholders can be either individuals or corporations, and the name of the entity shall include the suffix “Private” or “Pte” and “Limited” or “Ltd”.
An Exempt Private Company (EPC) is a Private Company exempted from statutory annual audit and its shareholders shall be 20 or less without corporations holding any interest in the company’s shares.

Incorporation requirements

A Private Company is the most common flexible and preferred type of business structure among entrepreneurs in Singapore.

The requirements for the incorporation are the following:

The company must have at least one shareholder, but no more than 50;
Minimum paid-up capital of SGD 1.00;
At least one director must be “ordinarily resident” in Singapore, i.e. being a Singaporean resident (Citizen of Singapore, or Foreigner holding a Permanent resident visa, or a foreigner holding an work visa and employed by the same company)
A registered office address (it cannot be a P.O. box)
A Singapore-based company secretary must be appointed within six months from the day of incorporation
An auditor must be appointed within three months from the day of incorporation (except for small companies which are exempt from auditing obligation)

 

Branch Office

A Singapore Branch Office is one of the three company structure options that foreign companies can set up in Singapore. A Singapore branch is considered an extension of the foreign company and not as a separate legal entity. Unlike a Singapore subsidiary, the parent company of a branch office entity is implicitly liable for all the debts and liabilities of the branch office. A claimant can approach the Singapore courts of law to initiate legal proceeding against the headquarters, by virtue of its branch being located in the Singapore jurisdiction.
The branch of a foreign company must have at least one authorised representative who is ordinarily resident in Singapore.
Being “ordinarily resident in Singapore” means the authorised representative’s usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident or an EntrePass holder can be accepted as a person who is ordinarily resident here.
The filing agent must generally be provided with the following documents or information for submission to ACRA:

Name and registered office of the foreign company in its place of incorporation
Certified copy of the foreign company’s certificate of incorporation
Certified copy of the foreign company’s constitution/charter/by-laws
Notice of the foreign company’s registration number, business description and legal entity type
Particulars of the foreign company’s directors
Particulars of at least 1 Singapore resident who has been appointed to act as the branch company’s authorised representative
Statement of consent from the branch company’s authorised representative who has consented to their appointment
Particulars and opening hours of the branch office in Singapore
The latest audited financial statements of the foreign company (if this is required under the laws of the place of incorporation).

 

Representative Office

The Representative Office (RO) must confine its activities strictly to conducting market research and feasibility studies on the viability of setting up a permanent entity in Singapore, inclusive of the following:

Collect information about markets, competitors and/or customers
Conduct research on the demand for the product and/or service
Gather information on business regulatory requirement for subsequent set up of permanent entity
Cultivate trade contacts and handle product enquiries
Participate in exhibitions and trade shows


The RO must be represented by staff from its own headquarters or Singapore staff. The Enterprise Singapore Board has the discretion to determine whether the number of staff employed in the RO is reasonable.

Foreign entities wanting to submit their applications for a Representative Office must fulfil the following criteria:

Sales turnover of the foreign entity must be > US$250,000
Number of years of establishment of the foreign entity must be >= 3 years
Proposed Number of staff for RO should be < 5 people

All new applications must be accompanied by the following documents:

Softcopy attachment (in English or an official English translation) of the foreign entity’s Certificate of Incorporation or Registration Certificate (as applicable)
Softcopy attachments of the foreign entity’s latest Audited Accounts

 

Additional entities available in Singapore

Public Company by Shares

A Private Company Limited with more than 50 shareholders is a Public Limited Company. It is similar to the Private Limited Company in terms of limiting the liabilities of the shareholders and benefitting from the competitive corporate tax rate. On the other hand, it can raise capital by offering shares and bonds to the public and it may be listed on the Singapore stock exchange (SGX).

Public Company Limited by Guarantee

A Public Company Limited by Guarantee is generally used to carry out non-profit activities (i.e. charities, organisations promoting culture and arts, etc.) by (non-profit) organisations that require a corporate status. A company limited by guarantee is nevertheless registered with the ACRA and governed by the Companies Act. They are not required to have the word “Limited” in their name.
Unlike companies limited by shares, companies limited by guarantee do not have share capital. Thus, the liability of members is limited to the amount which they undertake to contribute to the company in the event of winding up and which will be provided for in the company constitution.
Since companies limited by guarantee are prohibited from paying dividends and profits to its members, the structure is unsuitable for for-profit organisations where members typically seek a return on their investment through pay-outs such as dividends.

Partnership/LP/LLP

A partnership is a business owned by at least two partners (individuals or companies). It is not a separate legal entity from the business owners as they are personally liable for all debts and losses of the partnership. The maximum number of partners is 20.
The Limited Partnership (LP) is distinguished from the General Partnership because it requires at least one limited partner and one general partner, the latter being personally liable for all the debts and liabilities and the former not personally liable; as such, the limited partner cannot take active management roles.
Finally, the Limited Liability Partnership (LLP) gives the flexibility of operating as a partnership while having a separate legal identity from its partners, similar to a private limited company.

Sole proprietorship

A business owned and controlled by an individual (without any partners) is defined as sole proprietorship. The sole proprietor has unlimited liability for the business liabilities.

What is the tax framework in Singapore?

Singapore adopts a quasi-territorial basis of taxation. Therefore, companies and individuals, whether resident or non-resident, are taxed mainly on income sourced in Singapore.
Foreign-sourced income remitted into Singapore by an individual is exempted from tax. However, this tax exemption does not apply to foreign-sourced income received by a resident individual through a partnership in Singapore.
The statutory board of the Singapore government in charge of tax collection is called IRAS (Inland Revenue Authority of Singapore) and it was established in 1947.

Singapore has one of the worlds’ most extensive DTA (Double Tax Agreement) networks, which includes over 90 treaties.

DTAs eliminate instances of double taxation and seek to prevent international tax evasion by granting the exchange of information between the tax authorities of the countries involved. They also provide for reduction of tax on some types of income.
Only Singaporean tax residents and residents of the treaty partner can benefit from the application of the DTA.

General Corporate Tax

17%

Corporate Income Tax (CIT)

0%

Capital Gains

0-17%

Dividend

8%

Goods and Services Tax

Corporate Income Tax (CIT) 

In Singapore, a company is taxed at a nominal tax rate of 17% on its chargeable income.
Private limited companies are granted a tax rebate based on the Year of Assessment. It was of 25% for YA 2020, capped at SGD 15,000. Partial tax exemption and tax exemption are applied to qualifying start-up companies for the first 3 consecutive YAs.

 

Capital Gains

Capital gains derived from investments, such as the sale of property, shares and financial instruments, are not taxable in Singapore. However, where a gain is considered to be revenue in nature, such gain could be subject to tax in Singapore.

Dividends

Dividends paid by Singapore tax resident companies are exempt in the hands of shareholders, either if paid out in Singapore or overseas. Foreign dividends received by a Singapore company are offshore sources of income. Hence, they are not subject to tax until they are remitted to Singapore. Once remitted to Singapore, the foreign dividends are in principle taxed at a rate of 17% unless the foreign dividend is tax exempt under the applicable provision of foreign sourced income.

Personal Income Tax

0-22%

According to yearly personal income

The personal income is taxable when it accrues in or is derived from Singapore, whether or not the individual is resident in Singapore. Hence, individuals are not taxed on the income earned while working overseas. Singapore's personal income tax rates for resident taxpayers are progressive. This means higher income earners pay a proportionately higher tax, with the current highest personal income tax rate at 22%. They range from 0% to 22% (yearly personal income above SGD 320,000) for residents, while for non-residents – individuals who has stayed or worked in the country for less than 183 days - a flat rate of 15% to 22% is levied.

Moreover, capital gains, dividends or inheritance are not taxed.

 

Disclaimer: illustrative; percentages based on latest applicable regulation at the time of publishing; information provided do not substitute professional advice from our consultants.

How can a company be financed?

All major local and international banks present attractive offers related to commercial banking (for corporations), private banking (for wealthy individuals and UHNWIs) as well as retail banking.
The main local banks are DBS (Development Bank of Singapore), established in 1968 and considered the largest bank in Southeast Asia, OCBC (Oversea Chinese Banking Corporation) as well as UOB (United Overseas Bank). In addition, other international banks, like Standard Chartered, Citi Bank and HSBC, have their own presence in the country.
Most of these banks have their own online process to apply for the opening of a corporate account. Generally, this implies the submission of several documents, including:
The Board of Directors Resolution approving the opening of the account and the signatories
A copy of the Certificate of Incorporation, the Resolution and the Company’s Business profile from the Company Register
The Bank’s Corporate Account opening form
A copy of the constitutional documents of the business entity
Certified copies of Passport and Proofs of Address of the Directors and Ultimate Beneficiary Owners (UBOs)

 

Immigration

Singapore Visa Schemes

All foreigners who want to stay and work in Singapore should hold a valid pass (work visa). For foreign professionals, there are two main options: the Employment Pass (EP) or the Personalized Employment Pass (PEP). Moreover, investors can apply for the Entre Pass to start investing in Singapore.

Singapore Permanent Residence Schemes

The Singapore Government welcomes professionals and other foreigners who can make a fine contribution to the country’s economic development. Thus, there are several Permanent Residence (PR) schemes to obtain the Singapore Permanent Residence status.

Singapore citizenship

Despite the several steps involved in the application, becoming a Singapore citizen may be very convenient under many points of view, including - among the others - the passport travel freedom (fewer travel restrictions and liberal visa requirements to US), the eligibility for the CPF (Central Provident Fund), lower medical and schools’ fees as well as a better employability (due to less paperwork and formalities for the employers).

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