FOREIGN COMPANY RELOCATE TO SINGAPORE

Singapore – Gateway to Asia

Singapore has established itself as a preferred jurisdiction for businesses of all sizes to headquarter their Asian operations. In this paper, we examine some of the key driving factors to Singapore’s success in attracting foreign companies and entrepreneurs to its shores.

Extensive double tax treaties
Singapore has an extensive network of double tax agreements (DTA) with more than 70 countries across the globe. The key benefits of a DTA are a) the avoidance of double taxes, b) lower withholding taxes, and c) preferential tax regime, all of which play an important role in minimizing the tax burden for a holding company structure.

This extensive DTA network, coupled with the absence of capital gains and dividends tax, makes Singapore a very attractive jurisdiction for business investments through a Singapore incorporated holding company.

Attractive tax regime
Singapore’s tax system is viewed as “simple and investor friendly”. The highest corporate tax rate on taxable income is 17%. The tax on capital gains and dividend income is 0%. No withholding tax is levied on post-tax dividends paid from Singapore. Equally important, all foreign-sourced income is tax exempt as long as the income has been subjected to tax in a country with a headline tax rate of at least 15%.

Singapore’s regulatory framework offers a level-playing field for foreign investors, with no foreign ownership restrictions and no foreign exchange controls.

Strategic location with superb connectivity
Singapore has a unique advantage in its geography. The country is strategically located at the crossroads of the main trade and shipping routes of the world, including the major sea route between India and China. Travel to most Southeast Asian countries consists of a short air flight.

Singapore is renowned as a transportation hub, being home to the award-winning Changi Airport and a sophisticated port infrastructure, which has also been consistently awarded the ‘Best Seaport in Asia’ (Asian Freight and Supply Chain Awards) for 24 years to date.

Singapore’s telecommunications infrastructure is also world-class. The country has been ranked by the World Economic Forum, in its Global Information Technology Report 2012, as one of the top economies in leveraging information and communications technologies to boost its country competitiveness. In fact, it is the only Asian country within the top 10 in the Report’s rankings of 142 countries worldwide.

Availability of skilled and multilingual workforce
Singapore’s business environment has proven to be highly attractive to skilled and ambitious workers from across the globe. The fast-paced innovative working environment, together with a large local pool of Singapore talent, has only served to reinforce the country’s reputation as having one of the most productive and motivated workforces in the region. This has been proven by rankings in the IMD World Competitiveness Yearbook.

The country is also renowned for being a multiracial society that is as diverse as it is cohesive. Its citizens originate from diverse racial backgrounds, giving it the capacity to offer workforce solutions requiring multilingual and multicultural sensitivities. The people are one of Singapore’s richest resource.

Smart immigration policies
Singapore provides a variety of immigration schemes for qualified entrepreneurs and working professionals. The government is always looking to attract foreign investments and augment its local workforce with high-level talent from across the globe, which is in line with the liberal immigration policies of Singapore.

Great place for relocation of senior management and their families
Singapore is one of the most prosperous and stable countries in Asia. The country’s stable political environment, public services convenience, diverse range of facilities, and cosmopolitan ambience makes Singapore an increasingly attractive destination for expatriates with families. The country offers a rich variety of dining and entertainment, tropical gardens, world-class hotels, highly-developed infrastructure, and – very important for ambitious families – a host of internationally recognised schools and universities. Singapore’s high quality of life has been consistently validated in various surveys such as the Mercer’s Quality of Living Survey. The friendliness and warmth of Asia, blended together with a vibrant modern lifestyle, makes Singapore a very good place to live, work and study.

Excellent IP protection regime
Singapore provides a robust intellectual property (IP) rights regime, backed by a trusted legal system and strong IP infrastructure. The government’s IP policy is attuned with the aim of encouraging innovation, creativity and growth of industry and commerce in Singapore.  The IP regime has been recognised by the World Economic Forum’s Global Information Technology Report 2012 as the top Asian regime for the protection of IP. Despite the high international rankings, additional initiatives by the government are underway to improve the country’s IP landscape further and build it as Asia’s IP hub.

Efficient legal system
Singapore’s legal system, which was inherited from the British, has now evolved into a distinctive jurisdiction. The system continues to grow in order to maintain its relevance in the current cultural, economic and commercial climate, by absorbing the common law as well as best practices from other mature legal systems. The Singapore legal system has received global recognition for its efficiency and integrity, and the country is deemed to be the least bureaucratic one in Asia according to the IMD World Competitiveness Yearbook 2011. Businesses in Singapore are not burdened by red tape or the slowing down of operations due to bribery or slow legal process. The government regards access to law as a fundamental economic value, which is cherished and harnessed to enhance the country’s reputation as a premier business centre and a leading legal hub in Asia. Singapore’s commercial legal system is renowned for its fairness and impartiality, making it the natural choice of venue for dispute resolution, especially mediation and arbitration, and trial in Southeast Asia. Furthermore, Singapore’s legal services industry is rich in talent.

Best place in the world to do business
Top institutions monitoring economic  and business activity worldwide agree on Singapore’s attractiveness as a business destination. The country has been ranked #1 by the World Bank as the World’s Easiest Place to Do Business, for seven consecutive years to date. It is ranked second by the World Economic Forum in its 2011-2012 Global Competitiveness Index, and was Asia’s leading city in the PwC 2012 Cities of Opportunity Study. According to Gallup’s 2010 Potential Net Migration Index, Singapore was the global leader as the Most Desirable Immigration Destination.

 

Entry Options for Foreign Companies

Foreign companies interested in establishing a presence in Singapore have several straightforward options as summarized below.

Subsidiary Company
Generally, a Singapore subsidiary company is the preferred registration option for small to midsize foreign businesses that intend to establish their presence in Singapore. Singapore allows for 100% foreign ownership of locally-incorporated companies. Such a structure offers protection against liabilities and can also be very tax efficient.

Branch Office
A foreign company may wish to set up a branch in order to legally commence its business activities in Singapore. A branch, although a registered legal entity, is treated as an extension of the foreign company, and therefore, its liabilities extend to the foreign company and its income is not eligible for tax exemptions and incentives, which may otherwise be available to tax resident companies in Singapore.

Representative Office
Foreign companies that are interested in exploring potential business opportunities in Singapore and the region may wish to set up a representative office (RO) before committing to any business venture or large-scale investments. The RO is a temporary setup with no legal persona, and therefore it cannot engage in any trading or business activities; only market research and feasibility studies are permitted. However, the cost for registering an RO is considerably lower, making it an ideal avenue for foreign companies that wish to first study the business environment in Singapore.

 

In Conclusion

Singapore continues to attract record investment commitments despite the challenging global economic environment. The country’s extensive network of double tax treaties, strategic location within the centre of all major growing markets, together with its economic and political stability, its renowned legal system, its extensive connectivity and talent resources, its innovative business environment, and the immense opportunities for business growth within the Southeast Asian region, are just a few factors that drives Singapore’s success as a preeminent business centre of the modern global economy.

TYPE OF BUSINESS ENTITIES

Types of Business Entities in Singapore

This guide provides an overview of the various types of business entities in Singapore and the differences among them. Each of these is subject to different regulatory and tax regimes reflecting their organization and ownership.

The following are the main business entity types in Singapore:

 

Limited Liability Company

A Limited Liability Company (LLC) is a company limited by shares i.e. its liabilities are limited to the amount of share capital. LLC is a business entity registered under the Singapore Companies Act and a separate legal entity from its members. In a LLC, the liabilities of the owners are limited to the assets in the company and their personal assets are protected from business liabilities.

A Singapore LLC can be of the following types:

 

Private Limited Company

A private limited company is a LLC in which the shares are held by less than 50 persons and are not available to general public. Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. The shareholders of a private limited company can either be individuals or corporate entities or both.

A private limited company is the most advanced, flexible, and scalable type of business incorporation in Singapore. It’s also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership).

Why entrepreneurs prefer Private Limited Company

  1. Separate Legal Entity : A private limited company has its own legal identity, separate from its shareholders and its directors. It can acquire assets, go into debt, enter into contracts, sue or be sued in its own name.
  2. Limited Liability: The liability of the members to contribute to the debts of the company is limited to the amount that they each agreed to contribute as capital to the company.
  3. Perpetual Succession: The company’s existence does not depend on the continued membership of any of its members. Ease of transfer of shares or changes in shareholders ensures that company continues to exist even in the event of death, resignation, or insolvency of shareholders or directors.
  4. Ease of raising capital: You can raise capital for expansion or other purposes by bringing in new shareholders or issuing more shares to existing shareholders. Investors are more likely to purchase shares in a company where there usually is a separation between personal and business assets. Also, most banks prefer to lend money to limited companies.
  5. Credible Image: As an incorporated business entity, it commands a better image than a sole proprietorship or a partnership firm, and investors will be more willing to become part of the company as it demonstrates a vision to grow and expand. As a Pte Ltd company, your business will be taken more seriously by your potential clients, suppliers, bankers, and other professionals you will be dealing with.
  6. Easier transfer of Ownership: Ownership of a company may be transferred, either wholly or partially, without disrupting operations or the need for complex legal documentation. This can be done through the selling of all or part of its total shares, or through the issue of new shares to additional investors.
  7. Tax Benefits and Incentives: A Singapore private limited company is a very efficient tax entity. The effective corporate tax rate for Singapore companies for profits up to SGD 300,000 is below 9% and capped at 17% for profits above SGD 300,000. Furthermore, there is no capital gains tax. Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax free.

Public Limited Company

A public limited company is a LLC that may offer its shares to general public. A public limited company must have at least 50 shareholders and is subject to significantly more stringent rules and regulations since they have the power to raise funds from the public. Usually a public limited company is listed on a stock exchange. Public limited companies are outside the scope of this article as they are meant for large businesses.

 

Public Company Limited by Guarantee

A public company limited by guarantee is a type of business entity meant for non-profit purposes. For more details, refer to setting up a non-profit entity in Singapore.

 

Foreign Company Registration Options

Foreign companies wishing to setup a presence in Singapore, have the choice of setting up a branch office, subsidiary, or a representative office in Singapore.

  • Subsidiary Company. A subsidiary company is a private limited company incorporated in Singapore with the parent company as its shareholder. For small to medium-sized foreign businesses, a subsidiary company is the most preferred choice of registration in Singapore.
  • Branch Office. A branch office is registered in Singapore as an extension of its parent company and not as a separately incorporated entity. The liabilities of a branch office extend to its parent company.
  • Representative Office. A representative office is registered in Singapore as a temporary arrangement for conducting marketing research activities. A representative office does not have any legal status and cannot be engaged in any profit yielding activities.

 

Sole Proprietorship

A sole proprietorship is the simplest but the riskiest type of business form in Singapore. From a legal perspective, sole proprietorship is not a separately incorporated entity and therefore the owner and the business are one and the same. The owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities. As the sole proprietor of a business, you have unlimited liability, meaning that if your business can’t pay all its liabilities, the creditors to whom your business owes money can come after your personal assets. Many entrepreneurs are usually unaware of this enormous financial risk. If the business is sued or can’t pay its bills, the owner is personally responsible for the business’s liabilities.We consider this a serious drawback and hence do not recommend sole proprietorship to inspiring entrepreneurs.

 

Partnership

The partnership type of business structure attempts to address the limited-expansion constraint faced by a sole proprietorship by allowing two or more people to establish and co-own a business. A partnership firm has no legal existance separate from its partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. A partnership type of business structure may make sense only in very limited number of situations. We generally don’t recommend this type of business structure to business owners.

Partnerships in Singapore can be of three types:

 

General Partnership

A general partnership is not a very attractive way to structure a business in Singapore because a) like a sole proprietorship, partners are personally liable for the debts and liabilities of the business; b) each partner can be held responsible for the actions of another partner.

Limited Partnership

The concept of limited partnership is an alternative to the general partnership type of business form in Singapore. It introduces the concept of a limited partner in addition to a general partner. The liabilities of limited partners are limited to their investment in the partnership (capital or property). However, such partners are unable to participate in the management of the business in a limited partnership. In a nutshell, even a limited partnership in Singapore is not a very attractive vehicle for setting up a business for most people.

 

Limited Liability Partnership (LLP)

Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. LLP was introduced in Singapore in 2005 through enactment of Limited Liability Partnership Act. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company.

A LLP is primarily meant for carrying a profession (e.g. accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field. The owners must enter into detailed agreements about how the profits and management responsibilities are divided. It can get very complicated and generally requires the services of a lawyer to draw up the agreement. Partners in a limited liability partnership are  usually responsible for cultivating their own clients based on the partner’s specific area of focus.

A LLP must have at least two partners at all times. An LLP is not suited for a business that carries a trade.

 

Which business entity type to choose?

Deciding on the right business structure to incorporate in Singapore will depend on your particular situation and plans. As a general rule, you can use the following guidelines when making your decision:

  • If you are a local person and would like to register a small business where you will be the only owner and the nature of your products/service does not carry liability issues, it might be easier for you to register your business as a Sole Proprietorship. However, you must carefully consider the fact that in case of any business liabilities, the claimants can go after your personal assets.
  • If your business involves selling your services by way of the profession you hold (e.g. accountant, lawyer, architect, etc.) and you have one or more additional partners in a similar profession and would like to build a joint practice, setting up a LLP might be a suitable business structure for you.
  • In all other cases, incorporating a private limited company in Singapore would be the best choice. Although compliance requirements are little more complex, it is by far the best structure in the long run.
REGISTER A COMPANY

Singapore Company Registration Guide

When considering the registration of a new company or relocation of your existing company to Singapore, note that most Singapore companies are registered as private limited liability companies (commonly known as private limited companies). A private limited company in Singapore is a separate legal entity and shareholders are not liable for the company’s debts beyond the amount of share capital they have contributed (hence the term limited liability). According to the Singapore Companies Act, any person (foreign or local) above the age of 18 can register a Singapore company.

A properly structured private limited company is a very tax efficient corporate body; hence, this form is the most common type of business entity registered in Singapore.

 

Pre-Registration – What You Need to Know

Key facts about company formation

 

  • Company Name.  The name must be approved before incorporation of the Singapore company can occur.
  • Directors.  A minimum of one resident director (a resident is defined as a Singapore Citizen, a Singaporean Permanent Resident, or a person who has been issued an Entrepass, Employment Pass, or Dependent Pass) is mandatory. There is no limit on the number of additional local or foreign directors a Singapore Company can appoint. Directors must be at least 18 years of age and must not be bankrupt or convicted for any malpractice in the past. There is no requirement for the directors to also be shareholders,  i.e. non-shareholders can be appointed directors.
  • Shareholders.  A Singapore private limited company can have a minimum of 1 and maximum of 50 shareholders. A director and shareholder can be the same or a different person. The shareholder can be a person or another legal entity such as another company or trust. 100% local or foreign shareholding is allowed. New shares can be issued or existing shares can be transferred to another person anytime after the Singapore company has gone through the incorporation process.
  • Company Secretary.  As per Section 171 of the Singapore Companies Act, every company must appoint a qualified company secretary within 6 months of its incorporation. It has to be noted that in case of a sole director/shareholder, the same person cannot act as the company secretary. The company secretary must be a natural person who is ordinarily resident in Singapore.
  • Paid-up Capital.  Minimum paid-up capital for registration of a Singapore company is S$1. Paid-up capital (also known as share capital) can be increased anytime after the incorporation of the company. There is no concept of Authorized Capital for Singapore companies.
  • Registered Address.  In order to register a Singapore company, you must provide a local Singapore address as the registered address of the company. The registered address must be a physical address (can be either a residential or commercial address) and cannot be a P.O. Box.
  • Taxation. Singapore registered companies enjoy very attractive tax exemptions and incentives. Your company pays less than 9% for the first S$300,000 annual profits and 17% flat after that. There are no capital gains or dividend taxes on Singapore companies. Excellent tax benefits and business reputation of Singapore are the key reasons why entrepreneurs from around the world prefer to form a company in Singapore.

 

Considerations for foreigners

Foreigners wishing to open a Singapore company, must take into consideration the following points:

  • You must engage a professional firm to register a Singapore company. Singapore law does not allow foreign individuals or entities to self-register a company.
  • There is no requirement for you to obtain any special Singapore visa if you merely want to incorporate a private limited company but have no plans to relocate to Singapore. You are free to operate your company from overseas as well as free to visit Singapore on a visitor visa whenever required to attend to company matters on a short-term basis. But keep in mind that in such cases, you will need to find a local resident director since each company must have at least one local director. Professional service firms offering Singapore incorporation services often offer the services of a local nominee director for this purpose.
  • If you plan to relocate to Singapore to operate your company, you are required to obtain an Employment Pass or Entrepreneur Pass type of work pass. Once you have obtained your work permit, you can act as the local resident director of your company.
  • All Singapore company incorporation formalities (as well as work permit formalities, if applicable) can be handled without you having to visit Singapore. The only exception may be opening a bank account, depending upon the bank you choose.

 

Required Documents

For the purpose of company incorporation in Singapore, the following information is required by the company registrar:

  • Company Name
  • Brief Description of Business Activities
  • Shareholders Particulars
  • Directors Particulars
  • Registered Address
  • Company Secretary Particulars
  • Constitution

The incorporation service firm you engage will typically collect the following documents from you in order to prepare the necessary company incorporation paperwork:

  • For non-residents: Copy of passport, overseas residential address proof, and other Know-Your-Client (KYC) information such as a bank reference letter, personal and business profile, etc.
  • For Singapore residents: Copy of Singapore identity card
  • If the shareholder is a corporate entity: Copy of registration documents such as Certificate of Incorporation and Constitution.

Note that officially endorsed translated versions must be provided for any non-English documents.

 

Registration Procedure and Timeline

Company registration procedure in Singapore is fully computerized by the Singapore Registrar of Companies. As a result, the Singapore incorporation process is quick and efficient without any bureaucratic red-tape involved. Under normal circumstances, the company can be incorporated in 1-2 days.

There are two distinct steps involved in the Singapore company setup procedure: a) Company Name Approval and; b) Company Registration. Both steps can be accomplished on the same day assuming there are no delays caused by Company Registrar.

Step 1: Name Reservation

To set up a Singapore company, the proposed name for the company must be approved first. Company name approval is obtained by filing the application with the Company Registrar. The service firm you have chosen to register your company will do it for you as the first step in the incorporation process.

Generally the name approval/rejection notification comes through in less than an hour unless the proposed name has some certain words (such as bank, finance, law, media, etc.) that might require the review and approval of a corresponding external government authority. If the name is referred to an external authority, the name approval may get delayed by few days or weeks.

To improve your chances of quick name approval, make sure the name:

  • is not identical or too similar to any existing local company names
  • does not infringe with any trademarks
  • is not obscene or vulgar
  • is not already reserved

An approved name will be reserved for 60 days from the date of application. You can extend the name for another 60 days by filing an extension request just before the expiry date.

Step 2: Register Company

Once the name has been approved, the filing of the incorporation request as well as the approval from the Registrar of Companies can be completed in a few hours assuming incorporation documents are ready and have been signed by the directors and shareholders of the new company.

There are cases when the incorporation procedure can get delayed if the shareholders or directors are of certain nationalities, although this happens in rare cases only. In such cases, the authorities might ask for additional information.

A registration fee of S$300 is payable to the Singapore Registrar of Companies at the time of incorporating a private limited liability company.

 

Post-Registration Formalities

Documents Issued

Certificate of Incorporation

The Company Registrar will send an official email notification confirming the incorporation of the company. The email notification includes the company registration number and is treated as the official certificate of incorporation in Singapore. A hard copy of the certification of incorporation is no longer issued by default as it is not needed in Singapore. However, if you do prefer a hard copy, an online request can be made to the Company Registrar after the incorporation of the Singapore company. A fee of approximately S$50 is applicable and the hard copy can be collected the next day from the office of the registrar.

Company Business Profile

A business profile containing the particulars of the company can be obtained from the Company Registrar by making a request online and paying a small application fee. Generally, the document (a PDF file) is available for download within an hour of the request and contains the following key details:

  • Company name and registration number
  • Previous names for the company, if any
  • Incorporation date
  • Principal activities
  • Paidup capital
  • Registered address
  • Shareholders details
  • Directors details
  • Company Secretary details

The above two soft documents (i.e. email notification of incorporation and company business profile) are sufficient in Singapore for all legal and contractual purposes including opening of corporate bank accounts, signing office lease, subscribing to telephone/internet services, etc.

Some of the other items you will almost certainly need upon registration of your Singapore company include:

  • Share certificates for each of the shareholders
  • Share register indicating shares allotted to each of the shareholders
  • Company seal for the company
  • A rubber stamp for the company

Opening a Corporate Bank Account

After successful registration of your Singapore company, you can open a corporate bank account in any of the major banks in Singapore such as HSBC, Standard Chartered, Citibank, DBS, OCBC, UOB, etc. Many of the banks in Singapore these days require physical presence of the company principals as part of the account opening procedure. You should consider the following:

  • If you are unable to visit Singapore, you should choose a bank that allows opening of the corporate bank account without your visit to Singapore.
  • If you are able to visit Singapore, you have a wider choice of banks to choose from. In this case, you can explore the features and facilities provided by different banks and decide on the bank that best suits your needs.

 

Applying for Business Licenses

Depending on your company’s business activities, you may need to obtain one or more business licenses after you have incorporated your company but before you can commence your business operations. Fortunately, very few business activities require such a license. Examples of business activities that require a business license(s) include restaurants, educational institutes, travel agencies, financial services, import/export of goods, etc.

 

Goods and Service Tax (GST) registration

If the projected annual revenue of your company exceeds SGD 1 million, your company must register for GST. GST tax is also known as Value Added Tax (VAT) or Sales Tax in many other countries. If your company is GST registered, you will need to charge this tax (currently 7%) to your clients on the goods and services provided and in turn remit this amount to tax authorities. GST registration is not mandatory if your company’s annual turnover does not exceed S$1 million.

 

Annual Filing Requirements

Once your Singapore company has been incorporated, the Companies Act dictates certain annual filing requirements and formalities.

 

FAQ

What type of local registered address is required to open a company in Singapore?

A local registered address is one of the minimum requirements for opening a company in Singapore. The registered address must be a physical address in Singapore i.e a physical location and not just a Post Office Box (PO Box).

Residential addresses can be used as a business address under the Home Office Scheme. However, prior approval from the Housing Development Board (for HDB flats) or Urban Redevelopment Authority (for private properties) must be obtained in order to use residential premises (owned or rented) for home office use.

 

Do I need to invest S$50,000 for registering my business in Singapore?

Only foreigners who wish to relocate to Singapore under the Singapore Entrepreneur Pass scheme in order to operate their newly setup Singapore company are required to invest a minimum sum of S$50,000 as paid-up capital at the time of company incorporation. Local entrepreneurs (i.e Singapore citizens and Singapore Permanent Residents) and foreign entrepreneurs who are relocating to Singapore under the Singapore Employment Pass scheme do not need to invest S$50,000 in order to register their business in Singapore. The only minimum investment that is mandated by authorities is paid-up capital of S$1 at the time of  Singapore Company Registeration

 

Who can act as the company secretary for a Singapore company?

In order to act as a company secretary for a Singapore company, the person must be:

  • A natural person;
  • A Singapore resident (i.e. Singapore citizen, Singapore Permanent Resident, or a foreigner who has been issued with an Employment Pass or Dependent Pass); and
  • A person who is knowledgeable about the Singapore Companies Act. (S)he must also possess the requisite experience to fulfill the role of a company secretary.

Note that a person who is the sole-director of the company cannot act as the company secretary. Additionally, a private company is not required to appoint a properly qualified person as a company secretary unless mandated by the Singapore Company Registrar, ACRA. In other words, a Singapore private limited company is not  required to appoint a public accountant or a company secretary certified by the Singapore Association of the Institute of Chartered Secretaries and Administrators.

Can a company secretary from another country act as company secretary for a Singapore firm?

A qualified company secretary from another country can act as a company secretary of a Singapore company only if (s)he is a Singapore resident i.e a Singapore Permanent Resident or a Singapore Employment Pass or Dependant Pass holder.

 

What is paid-up capital?

Paid-up capital is the total amount of capital that has been funded by shareholders. In other words, it refers to the sum of money that a company has received from shareholders who have completely paid for their purchased shares. The minimum paid-up capital requirement for setting up a company in Singapore is S$1.00.

 

How long must I keep my Singapore company’s accounting records?

A Singapore registered company must keep accounting records as well as any other document that can explain the company’s business transactions and financial position for a period of at least five years after the completion of the transactions or operations to which they relate.

 

What are the paid-up capital requirements for Singapore companies?

You can incorporate a company in Singapore with a minimum paid-up capital (also often known as share capital) of S$1 only. However, you must keep the following in mind:

  1. If you are applying for relocation visa Entrepreneur Pass (EntrePass), the company must have a minimum paid-up capital of S$50,000.
  2. If you are applying for relocation visa Employment Pass (EP), although there is no official minimum paid-up capital requirement, we recommend a paid-up capital of at least S$50,000 in order to improve chances of EP approval.
  3. If the company business is a regulated business (e.g. travel agency, recruitment agency, financial services, etc.), the minimum paid-up capital requirements will be dictated by the relevant licensing requirements.

The concept of authorized capital has been abolished in Singapore. The paid-up capital can be listed in Singapore Dollar or any other major currency, although Singapore Dollar is the preferred currency of choice as a matter of convenience. Whatever capital you list is treated as paid-up capital and you will be required to inject this amount into the company. Paid-up capital of the company can be freely utilized towards company’s business needs. There is no requirement for this money to be locked in the bank account for any specific period of time.

If you want to list a paid-up capital higher than the minimum S$100, you have two options:

Option 1: List a higher paid-up capital at the time of incorporation
Keep in mind that whatever paid-up capital amount you list, will need to be deposited into the company’s bank account. Since we will be acting as your company secretary, we carry certain fiduciary responsibilities in this matter and have to ensure that the necessary paid-up capital is in fact injected into the company. Therefore, if you wish to list a paid-up capital higher than S$100 at the time of incorporation, we will require you to deposit that money with us first. Once your company bank account is open, we will transfer the paid-up capital amount into your company’s bank account.

Please note that as a Hawksford Singapore policy, the maximum paid-up capital that we can accept under this option is S$100,000. For paid-up capital higher than S$100,000, you will need to choose option 2.

Option 2: Increase paid-up capital after registration of the company
Under this option, you can increase the paid-up capital any time after registration of the company. In this case, the process is as below:

  1. Incorporate the company with minimum share capital
  2. Open corporate bank account
  3. Inject funds into bank account
  4. Prepare documents for increase of share capital
  5. File documents for share capital increase with authorities

We will then prepare and file the necessary paperwork with Company Registrar to reflect the revised paid-up capital of the company. Note that a fee will apply for for additional work that has to be undertaken for items 4 & 5.

Most of our clients prefer Option 1 because it does not cost extra and is faster. Your paid-up capital amount is deposited into a separate ‘Client Deposits’ account with us and transferred immediately to your corporate bank account once it’s open. This service is provided by Hawksford Singapore for the sole benefit of clients only.

Let us know which option is preferred by you.

 

What are the guidelines for naming a Singapore company?

The first step in Singapore company registration process involves reserving the desired name for the company. A company cannot be registered until the name has been approved first. If the name does not conflict with an existing name and it does not contain any sensitive or offensive words, the approval process is very quick and happens in less than an hour.

Once you have engaged our incorporation service, we will immediately file the name approval application for your company prior to preparing the incorporation documents. After the name approval application has been filed, Company Registrar normally will inform of the application outcome within one hour. There are three possible outcomes as listed below:

Outcome 1: Name is Approved

If name is approved, this is good news and we will proceed to next steps of incorporating the company.

Outcome 2: Name is Referred

What does “name is referred” mean? It means that the name application has been referred to a relevant government authority for review and approval. This typically happens when the company name contains one or more words that could imply a specific type of business activity which is a regulated business activity in Singapore. Examples include “financial”, “bank”, “school”, “media”, “publishing”, etc.

When the name is referred, the review and approval process may take 1-2 weeks. At this stage, you may decide to wait for the outcome or apply for a different name instead.

Outcome 3: Name is Rejected

If the name is found to be similar/identical to an existing name or containing non-desirable keyword(s), the name will be rejected by the Company Registrar. If the name is rejected, there are two available options:

  1. If there is a solid reason why the name should be approved, an appeal can be submitted to authorities by providing proper justification. The name appeal make take 3-5 days for processing.
  2. Submit another name for approval

 

Does a Singapore company require a local resident director?

Yes, a Singapore company is required to have at least one local resident director. In order to qualify as locally resident, the person must be:

  • Singapore citizen; or
  • Singapore permanent resident; or
  • Employment Pass holder (the Employment Pass should be from the same company for which he/she wants to act as a director); or
  • Entrepreneur Pass holder (the Entrepreneur Pass must be from the same company for which he/she wants to act as a director)

A director must be a natural person and above 18 years old. Corporate directors are not permitted. There are a number of different ways you can satisfy the local resident director requirement:

  1. If you plan to relocate to Singapore to run your company, you will need to apply for a work visa of type (employment pass or entrepass) under your new entity. Once your work visa is approved, you can act as the local resident director.
  2. If you have a local partner or know a trustworthy person in Singapore who is willing to act as the local director, your problem is solved.
  3. Alternatively, most foreigner entrepreneurs and businesses that setup a Singapore company without relocating to Singapore, use our nominee local director service. Our nominee director service does not require any shareholding in the company and does not get involved in the company operations or banking matters.

 

Can a foreign individual or a foreign company be 100% shareholder of a Singapore company?

Yes, Singapore Companies Act allows for 100% ownership of Singapore companies by foreign persons or entities. There are also no restrictions on the type of business activities that a company can engage in. No special approvals are required by foreigners. In other words, there is no difference between a local or a foreign person who wishes to form a Singapore company.

 

What is the min. age requirement for directors & shareholders of a Singapore company?

Directors and shareholders of a Singapore company must be at least 18 years of age.

 

How long does it take to incorporate a Singapore company?

The actual incorporation of a company can be accomplished in a matter of few hours after due diligence clearnace as the whole process is computerized. However, the overall process can  take anywhere from one day to few weeks depending on the following factors:

  • Name reservation. Before a company can be incorporated, its name has to be reserved first. Assuming there are no objections to the name being proposed, the name reservation process can be accomplished in less than an hour. However, if the name conflicts with an existing name or if the proposed name contains some sensitive words that may require a review by relevant authorities, the name approval process can get delayed to few days or weeks.
  • Signing of incorporation documents. If you are in Singapore, this is a quick and easy process. However if you are located overseas, the logistics involved in signing and sending the signed documents can take few days.

 

ENTREPRENEUR'S GUIDE TO COMPANY STRUCTURE

Entrepreneur’s Guide to Company Structure

Often when new entrepreneurs set out to incorporate a Singapore private limited company, they are confronted with certain basic questions that revolve around the definition of a corporation. For instance, what are the connotations of the term legal personality in the context of companies? What constitutes a Singapore corporation? Who runs the company? What are their functions and liabilities? What is meant by a company’s Constitution? Where and how does limited liability come into play?

This guide provides answers to most of these questions and serves as a good starting point for individuals who are planning to incorporate a Singapore company for the first time. If you have an overall understanding of what a company is, you can skip this article and proceed directly to Singapore Company Registration guide that outlines the requirements, procedure, timeline, and other relevant details of company incorporation.

The following topics are covered in this guide:

  • Legal Nature
  • Key Components
  • Company Directors
  • Company Shareholders
  • Company Secretary
  • Memorandum and Articles of Association
  • Share Capital

Legal Nature of Singapore Corporation

Individuals planning to incorporate a Singapore company for the first time are often unsure of how an incorporated company differs from its owner from a legal perspective. Companies incorporated in Singapore have two legal characteristics that enable them to undertake activities in their own right. They are:

  1. Separate legal personality
  2. Legal capacity

Separate legal personality

The law treats a Singapore incorporated company as being a separate person from its members and those who manage its operations. What this essentially implies is that:

  1. The company can incur and receive obligations and hold property in its own name, enter into contracts with its members, directors or employees and with third parties.
  2. The company can be the plaintiff or defendant in civil proceedings and in certain cases may be a defendant in criminal prosecutions.
  3. The legal rules that separate a company from its participants are referred to by lawyers as the corporate veil.
  4. The company continues unchanged even if the identity of its participants changes.
  5. The company can enter into legal relationships with its members or directors.

 

Consequences of treating a corporation as a separate legal entity

  1. A company’s obligations and liabilities are its own and not of its participants.
  2. A company’s rights are its own and not those of its participants.
  3. A company can sue and be sued in its own name.
  4. A company has perpetual succession.
  5. A company’s property is not the property of its participants.
  6. A company can contract with its controlling participants.

Despite the general rule that a Singapore incorporated company and its participants must be treated as separate legal entities, courts under certain circumstances (outlined below), treat both as the same person.

  1. Where the corporate form is used to avoid an existing legal duty
  2. Where the company is being used to perpetuate fraud
  3. Where the company is acting as the agent or partner of the controller
  4. Wrongful trading provisions

 

Legal capacity of a corporation

Companies’ ability to carry out acts of legal effect is referred to as their capacity.

  1. Companies have full capacity to carry on or undertake any business or activity, do any act or enter into any transaction.
  2. Companies have the legal capacity to do most of the things that a natural person can do and some additional things (such as issue shares and create floating charges over their property).

However participants of the company may be permitted to decide on the limits of the powers of their creation. These limits may be spelt out in the company’s constitutional documents – the Memorandum of Association and Articles of Association.

How Does A Corporation Operate?

Companies operate through officers or agents. The directors are often considered as the “brain and nerve centre” of the company, followed by the members or shareholders. They represent the mind and will of the company and control what it does. Acts of the directors and members are acts of the company. The scope of the powers of each of these organs is defined by the Memorandum and Articles of Association, in addition to the general principles of Singapore company incorporation laws.

The board of directors is responsible for the conduct and the management of affairs of a company. More specifically, they have fiduciary and ethical responsibility and accountability for what a company does. Shareholders being owners of the company have the power (through voting rights) to select members of the board of directors.

Company Directors

A private limited company incorporated in Singapore may have one or more directors. However at least one of the directors must be a local resident of Singapore. Listed public companies are required to have three directors.

Role of directors

The role of directors is to manage or supervise the management of the business of the company. Functions vary depending on the size and type of company and the role of directors in it. In the case of small businesses, the directors manage the company’s business, in the sense that they work in the business and make day to day decisions involved in running it. In larger companies, directors take on a supervisory function, leaving day to day decision making to the executive management. As most of the company’s powers are vested in the board of directors, they actually control its affairs and are thus answerable to the company’s shareholders collectively.

Directors have very broad powers of management. This means that most of the capital and enterprise decisions that must be made by the company in the course of its operations, will be made by the directors.

Duties of directors

Duties of directors fall under two broad categories:

  1. Statutory duties of care, skill and diligence, and
  2. General law duties or fiduciary duties of loyalty and good faith.

Statutory duties are administrative duties, enforced by the Accounting and Corporate Regulatory Authority of Singapore (ACRA) such as:

  1. General duties of disclosure.
  2. Updating and maintaining the accounting records of the company.
  3. Preparing the financial statement for the company’s Annual General Meeting (AGM).
  4. Ensuring that the first AGM is held within 18 months of the incorporation of the company and, following that, in every calendar year, at an interval not exceeding 15 months.
  5. Ensuring that regular directors’ and shareholders’ meetings are held in order to review the company’s financial and trading position.
  6. Ensuring that the company maintains a members register and other statutory books at its registered office.
  7. Appointing an auditor within three months of incorporating the company.

General law or fiduciary duties, enforced by the Company are as follows:

  1. Directors must act in good faith and in the interests of the company. In other words, the director must act honestly. The interests of the company are the interests of its members, creditors, other companies in the group, employees, customers, suppliers, and the community.
  2. Directors must utilize their freedom to make decisions on the behalf of the company wisely.
  3. Directors must not place themselves in a position of conflict, where a personal interest conflicts with their duty to act in the interests of the company.
  4. According to Sec 339 (3) of the Companies Act, directors must  not knowingly incur debts, where there is reasonable ground to believe that the company would not be able to pay its debts. This duty comes into play only if the company is being wound up or if there are legal proceedings against the company.
  5. Sec 157 (2) of the Companies Act prohibits directors from using information that they acquire by virtue of their position to meet their personal gains or to cause detriment to the company.

Consequences of breach of duty

Statutory duties are enforced by the Accounting and Corporate Regulatory Authority of Singapore (ACRA). Consequences of breach of statutory duties involves a fine imposed by the Registrar. Alternatively, legal proceedings can be initiated and if the offender is found guilty, criminal penalties such as a fine and prison sentence can be imposed.

General law duties are enforced by the company of the which the person is a director. A company’s civil remedies for breach of general law duties include the following:

  1. A court injunction that orders the director to stop doing something or to make him/her take remedial action.
  2. A demand for compensation, under circumstances where the director’s breach of duty has resulted in a loss for the company.
  3. A demand for repayment of profits, under circumstances where the director has made a profit by breaching his fiduciary duties.
  4. A court order to return property owned by the company, under circumstances where the director holds the company’s property as a result of breaching his/her fiduciary duties.

Company Shareholder 

Role of shareholders

Shareholders are members of a company. All Singapore incorporated companies are required to have at least one member. Members are, broadly speaking, owners. They are people who have invested money with the company in the expectation that they will receive a return of their investment, if the company is successful, either in the form of distributions paid out of the company’s profits during its trading life or in the form of a growth in the value of their investment in the company, over time. In a company limited by shares, members are shareholders – people who have subscribed for or purchased shares in a company. Shareholders play an important role in raising capital for organizations.

Shareholders are granted special privileges, including the right to vote on matters such as elections to the board of directors, the right to propose shareholder resolutions, the right to share in distributions of the company’s income, the right to purchase new shares issued by the company, and the right to a company’s assets during a liquidation of the company. Generally, shareholders have a say in limited matters, when compared to directors.

Broadly speaking shareholders have the following powers as per Singapore laws:

  1. power to adopt, modify or repeal provisions in the company’s Memorandum or Articles
  2. power to veto certain reductions of capital, and in the case of public companies
  3. power to remove directors from office and approve auditors

Shareholders also have reserve powers in the following matters:

  1. where the Board is unable to act
  2. to commence and prosecute legal proceedings where the alleged wrongdoers control the company
  3. to ratify directors’ acts

 

Company Secretary

Each Singapore company is required to have at least one company secretary who must be a natural person and have his/her principal or only place of residence in Singapore. The company directors appoint the company secretary and the Articles of Association provide for the terms and conditions of office to be determined by the director.

The Company Secretary occupies a pivotal role in the incorporation and administration of the company. He/she is the person who ensures compliance with the many regulations affecting companies. He is the one who keeps the necessary registers, sends out notices, organizes meetings, takes down minutes and files whatever forms are required by ACRA. The main function is to handle all the paperwork and procedural matters involved in running an incorporated company. In short, the smooth running of the company depends on his efforts.

Key duties include

  1. establishing and maintaining all company registers
  2. arranging for shareholder and director meetings
  3. lodging and filing documents with ACRA
  4. acting as a liaison with the Stock Exchange and ensuring compliance with requirements (announcements, disclosure etc.)
  5. arranging for allotment and issue of shares and handling transfer and transmission of shares
  6. providing administrative assistance in the preparation and presentation of annual returns
  7. acting as advisor to directors, other officers and members
  8. acting as intermediary between directors and officers of the company
  9. responsible for custody and use of common seal of the company and legal documents.

 

Memorandum and Articles of Association

Singapore Company Incorporation law provides a mechanism by which participants can agree upon the basis on which various things connected with the ongoing operation of the company will be carried out. This is done through the company’s constitutional documents – Memorandum and Articles of Association

Please note that as of 3 Jan 2016, the Articles of Association and the Memorandum will be merged into one single document to be known as the ‘Constitution’

Memorandum and Articles of Association (MAA) is a key document of the Singapore company incorporation process. It sets out the key characteristics of the entity that has been incorporated. The Articles of Association set out how the company is internally regulated. All companies must have a set of Articles of Association. Companies are generally free to design their own or may choose to adopt by default, the set of articles provided for in the Fourth Schedule of the Companies Act, referred to as Table A. The Memorandum and Articles of Association are meant to complement each other. Where there is a conflict, provisions in the Memorandum will prevail over those in the Articles.

Content of Memorandum of Association

The memorandum defines the company. A company’s Memorandum of Association must be dated and should at least contain the following:

  1. name of the company
  2. details about the company’s share capital
  3. full names, addresses and occupations of the subscribers to the memorandum and
  4. a statement indicating the subscribers desire to form the company and their agreement to take up shares in it.

Content of Articles of Association

The Articles of Association generally contains provisions that regulate the internal management of the company. Companies are generally free to decide on the content of their articles. Articles normally deal with matters that relate to:

  1. the issue of share capital and the variation of rights attached to shares
  2. liens and calls on shares, as well as, transmission and forfeiture of shares
  3. procedures for general meetings of the company and notices relating to the same

 

Legal effect of Memorandum and Articles of Association

Memorandum and Articles of Association is considered as a statutory contract between a company and its members, and among the members themselves. It binds even new members entering the company after incorporation of the company. Non-compliance with the Articles is amount to procedural irregularity. If a provision of a company’s Memorandum or Articles of Association is not observed then

  1. in case of non-compliance by a company, a member may be able to obtain a declaration or injunction requiring the company to comply
  2. in case of non-compliance by a member, another member of the company may be able to obtain declaratory or injunctory relief or damages.

 

Share Capital

Shares represent ownership in a company. When an individual buys shares in a company (either at the time of company incorporation or subsequently), he/she becomes one of the owners of the business. This entitles the individual to a share of the distributed profits of the company, known as dividends.

A share in a limited company, is a claim against the company to which the rights set out in the Companies Act and the company’s Memorandum and Articles of Association attach. Generally those rights will be:

  1. Distribution Rights(i.e. rights to receive dividends during the company’s life, and, depending on the terms of issue of the particular share, rights to repayment of the principal and to share any surplus assets of the company on a winding up) and
  2. Control Rights(i.e. rights to exercise some control over the management of the company’s affairs, generally taking the form of a right to vote on particular decisions affecting the company)

The company’s share capital is the amount of money or assets contributed to the company, by its members when they subscribe for shares in the company. In subscribing for a share, a person who wishes to become a member takes some of their own money or assets and contributes that amount to the company. The amount contributed becomes the property of the company, and the contributor is issued with shares in the company, which may be ordinary shares or shares with particular rights attached. Share capital is a principal source of finance for private limited companies.

The minimum share capital requirement for Singapore company incorporation is $1. The concept of authorised capital has been abolished in Singapore.

In summary, a private limited company incorporated in Singapore is a legal entity separate from that of its officers, with its own profits, losses, assets and liabilities. Ownership of a private limited company is established through the division of shares. The limited liability aspect of a Singapore company protects its directors and owners from the financial liability should the company encounter problems. Not surprisingly, most entrepreneurs who are interested in Singapore company incorporation choose to setup a private limited company.

ANNUAL FILINGS

Annual Filings for Singapore Companies

This guide highlights the annual filing requirements for Singapore private limited companies and apply to both active and inactive companies.

 

Preparation of Financial Accounts

Based on your company’s financial activities during the accounting year, you must prepare your annual financial accounts in accordance with the Financial Reporting Standards of Singapore. If you have medium to large number of accounting transactions each month, we highly recommend that you perform monthly bookkeeping to keep your ledgers in order. If however, the number of monthly financial transactions is relatively small, you can perform bookkeeping on a quarterly or annual basis. The financial accounts should consist of Statement of Comprehensive Income (i.e. Profit and Loss Account), Statement of Financial Position (i.e. Balance Sheet), Cash Flow Statement, and Statement of Changes in Equity.

 

Filing of Estimated Chargeable Income (ECI)

Singapore companies are required to declare the revenue amount and Estimated Chargeable Income (ECI) by filing ECI form with Inland Revenue Authority of Singapore (IRAS) within 3 months of the Financial Year End for the company. Even if the company estimates its chargeable income as zero, it still has to file a “Nil” ECI.

 

Audit of Financial Accounts

Once the financial accounts are ready, your company may be required to have its accounts audited if the company falls under one of the following:

  • Entity is a Singapore company with corporate shareholding; or
  • Entity is a Singapore company with annual revenue exceeding S$5 million.

 

Annual General Meeting (AGM)

Each Singapore company must hold an Annual General Meeting (AGM) once every calendar year. The following general rules apply to AGMs:

  • The first AGM must be held within 18 months of its incorporation;
  • No more than 15 months may elapse between subsequent AGMs;
  • Accounts presented at the AGM shall be made up to a date not more than 6 months before the AGM;
  • Private companies are allowed to dispense with AGMs if at a general meeting of the company a resolution to that effect is passed by all members with voting rights.

 

Filing of Annual Return with ACRA

Each Singapore company must lodge an Annual Return (AR) with ACRA within 1 month of its AGM. Particulars of the company officers, registered address, and auditors (if applicable) must be included in the AR.

 

Filing of Annual Tax Return with IRAS

Each Singapore company must file its annual tax return with IRAS by November 30. Singapore adopts the preceding year basis for taxation. The profits for the financial year ending in the preceding year will form the basis for filing the tax return in the current year.

Note that the directors the company are responsible and accountable for complying with the annual filing requirements. Failure to comply with the statutory compliance requirements is an offence and may result in fines or prosecution.

TAX SYSTEM AND RATES

Persons, including corporations, partnerships, trustees and bodies of persons carrying on any trade, profession or business in Singapore are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Singapore and certain foreign-sourced income from such trade, profession or business.

 

Current Tax Rates in Singapore

Corporate Tax Rates

 

SET UP AN OFFICE SPACE TAX RATES

Personal Tax Rate

PERSONAL TAX RATES

Singapore Income Tax System – Key Facts

 

  • Singapore follows a territorial basis of taxation. In other words, companies and individuals are taxed mainly on Singapore sourced income. Foreign sourced income (branch profits, dividends, service income, etc.) will be taxed when it is remitted or deemed remitted into Singapore unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%. Although the concept of locality of the source of income seems simple, in realty its application often can be complex and contentious. No universal rule can apply to every scenario. Whether profits arise in or are derived from Singapore depends on the nature of the profits and of the transactions which give rise to such profits.
  • Singapore corporate tax rate is capped at 17%. By keeping corporate rates competitive, Singapore continues to attract a good share of foreign investment. Singapore follows a single-tier corporate tax system, where tax paid by a company on its profits is not imputed to the shareholders (i.e. dividends are tax free).
  • Singapore personal tax rates start at 0% and are capped at 20% (above S$320,000) for residents and a flat rate of 15% for non-residents.
  • To increase the resilience of taxes as a source of government revenue, Goods and Services Tax (GST) was introduced in 1994. The current GST rate is 7%. The balanced mix of tax on consumption and income reduces the vulnerability of revenue intake to adverse changes in economic conditions and strengthens the resilience of Singapore’s fiscal position.
  • Interest, royalties, rentals from movable properties, management and technical fees, and director’s fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.
  • For personal taxes, the tax year is the normal calendar year i.e. January 1 – December 31. Deadline for filing personal tax return is April 15. For corporate taxes, a company is free to to decide on its financial year. Deadline for filing corporate tax return is November 30. Taxes are paid on a preceding year basis.
  • Singapore has no capital gains tax. Capital loss expenses are correspondingly not allowed as deductions.
  • Singapore has concluded more than 50 bilateral comprehensive tax treaties to help Singapore companies minimize their tax burden.

 

Types of Taxes in Singapore

 

  1. Income Tax is chargeable on income of individuals and companies.
  2. Property Tax is imposed on owners of properties based on the expected rental values of the properties.
  3. Estate Duty has been abolished since February 15, 2008.
  4. Motor Vehicle Taxes are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion.
  5. Customs & Excise Duties – Singapore is a free port and has relatively few excise and import duties. Excise duties are imposed principally on tobacco, petroleum products and liquors. Also, very few products are subject to import duties. The duties are mainly on motor vehicles, tobacco, liquor and petroleum products.
  6. Goods & Services Tax (GST) is a tax on consumption. The tax is paid when money is spent on goods or services, including imports. This kind of indirect tax is also known as Value Added Tax (VAT) in many other countries.
  7. Betting Taxes are duties on private lottery, betting & sweep-stake.
  8. Stamp Duty is imposed on commercial and legal documents relating to stock & shares and immovable property.
  9. Others – The two main taxes are the foreign worker levy and the airport passenger service charge. The foreign worker levy is imposed to regulate the employment of foreign workers in Singapore.
CORPORATION TAX

Singapore Corporate Tax

Singapore is often cited as the leading example of countries that continues to reduce corporate income tax rates and introduce various tax incentives to attract and keep global investments. Singapore has a single-tier territorial based flat-rate corporate income tax system. Effective tax rates as one of the lowest in the world and the general “business friendliness” of Singapore are the two important factors contributing to the economic growth and foreign investment into the city-state.

 

Single-tier income tax system

Since January 1, 2003, Singapore has adopted a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempt from further taxation.

There is no tax on capital gains in Singapore. Examples of capitals gains include gains on sale of fixed assets, gains on foreign exchange on capital transactions, etc.

 

Corporate income tax rates and general tax exemptions

Singapore’s headline corporate tax rate is a flat 17%.

 

General Tax Incentives

Listed below are general tax exemptions/incentives currently available to Singapore resident companies. Once these tax exemptions are applied to the taxable income, the effective income tax rate for small-to-midsize Singapore companies is reduced significantly.

  • 0% tax on S$100K taxable income
    The corporate income tax rate is 0% on the first S$100,000 taxable income for each of the first three tax filing years for a newly incorporated company that meets the following conditions:
  • be incorporated in Singapore
  • be tax resident in Singapore
  • has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.

 

  • 8.5% tax on taxable income of upto S$300K
    All Singapore resident companies are eligible for partial tax exemption which effectively translates to about 8.5% tax rate on taxable income of upto S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.

 

Effective Corporate Tax Rate

The above general tax incentives mean very attractive tax rates for small-to-midsize companies. For example, a typical Singapore resident company with S$2,000,000 annual taxable income will be taxed as below:

First Three Years of Income Tax Filings

INCOME TAX FILINGS

 

 

One-off Corporate Income Tax (CIT) Rebate for YA 2016 & YA 2017

According to the Singapore Budget 2016, every Singapore company will be eligible for a corporate income tax rebate. Singapore companies can claim a one-time 50% corporate income tax rebate on corporate income tax payable for YA 2016 & YA 2017, subject to a cap of S$20,000. This is an enhancement to Budget 2015 to help companies, especially SMEs.

 

Income tax filing due date

Income tax filing due date for Singapore companies starting year 2009 is November 30.

The company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation. The Form C is a declaration form for a company to declare its income whereas tax computation is a statement showing the adjustments to the net profit/loss as per the accounts of a company to arrive at the amount of income that is chargeable to tax.

 

Income tax basis period

In Singapore, corporate income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending (FYE) in the year preceding the YA. For example, in year 2008 you will be filing corporate tax return for your company’s financial year that ended anytime between January 1, 2007 to December 31, 2007. Your company’s accounts are prepared up to the FYE each year.

 

Withholding tax

Singapore has implemented a withholding tax law (on certain types of income) to ensure the collection of tax payable to non-residents on income generated in Singapore. The tax withholding does not apply to Singapore resident companies or individuals. Under the law, when a payment of a specified nature is made to a non-resident company or individual, a percentage of the payment has to be withheld and paid to Income Tax Authorities. The amount withheld is called the withholding tax.

 

Industry specific and special purpose tax incentives

In additional to the general tax exemptions/incentives listed above, there are certain industry specific and special purpose income tax incentives and concessionary tax rates offered under the Singapore Income Tax Act.

 

Tax residence of company

A company is considered as resident in Singapore if the control and management of the business is exercised in Singapore. Although the term “control and management” is not defined explicitly by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors and not the day-to-day decision making and operations.

In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings from outside Singapore. This is true even if, for example, the lower level operations are taking place in Singapore. A company’s residence may change from one year of assessment to the next depending on the circumstances. A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.

The basis of taxation for a resident company and non-resident company is generally the same with the exception of certain benefits that are available to resident companies. These include:

  • A Singapore resident company is eligible for income tax exemption scheme available for new start-up companies.
  • A Singapore resident company can enjoy income tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act.
  • A Singapore resident company is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.

 

Singapore tax treaties

A tax treaty between two countries is generally an agreement that specifies how the income earned will be taxed by the authorities of each country when a company is involved in doing business in both countries. The main benefit and objective of a income tax treaty is to help businesses avoid double taxation of their income.

Singapore has concluded tax treaties with more 50 countries and the list continues to grow. The treaties reflect Singapore’s continual efforts to help businesses in relieving double taxation and to encourage and facilitate the trade and investment opportunities across-borders.

Starting 2008, Singapore has gone a step further in providing unilateral tax credits to Singapore companies. According to the new policy, all Singapore companies that earned income from countries that don’t have double tax agreement with Singapore, will be allowed a tax credit on their foreign-sourced income from those countries.

 

Net income vs taxable income

A company’s income means gains or profits from any trade or business income from investment such as dividends, interest and rental royalties, premiums and any other profits from property other gains of an income nature.

As per Income Tax Act of Singapore, corporate tax is imposed on the income that is A) accruing in or derived from Singapore; B) received in Singapore from outside Singapore.

Part A is the income that has a source in Singapore. Part B is the income with a source outside Singapore and received in Singapore. For Part B however, there are certain qualified exemptions commonly known as Exemptions On Foreign Sourced Income.

A company’s net profit/loss alone does not provide an accurate picture of the taxable income. For instance, some of the expenses incurred by your company may not be deductible for tax purposes or some of the income received may not be taxable or it may be taxed separately as a non-trade source income.

Certain company income may be exempted from tax under the provisions of the Singapore Income Tax Act. Examples include general tax exemptions available to all companies, exempt income for certain industries such as shipping income derived by a shipping company, foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions, exemptions on qualified foreign sourced income, etc.

 

Tax treatment of losses

In general, a company can deduct allowable expenses against the income for taxation purposes in Singapore. The loss can be carried forward indefinitely (subject to certain conditions), however, it must be deducted in the first available year where there is a statutory income. The deduction of the loss follows the “proceeding year” basis. It’s important to note that the losses can be utilized only as long as there is no substantial change in the shareholding.

 

FAQ

If the primary activity of a company is stock trading, will trading capital gains be tax free?

An investment/stock dealing company is a company whose primary business activities is to buy and sell investments or shares with a view to making a profit. The investments and shares are the trading stocks of the company. Hence any gain from the sale of these investments is taxable under S10(1)(a) of the Income Tax Act.

 

Is a tax credit available for income earned in countries without a tax treaty with Singapore?

Yes. You can get a unilateral tax credit for the foreign taxes paid on the following income under Section 50A of the Singapore Income Tax Act:

  1. Income derived from any professional, consultancy and other services rendered in any territory outside Singapore.
  2. Dividends or
  3. Profits derived by an overseas branch of a Singapore resident company.

Unilateral tax credit under Sec 50A would also apply to foreign sourced royalty from non-treaty countries, provided the royalty is not:

  1. borne directly or indirectly by a person resident in Singapore or a permanent establishment in Singapore or
  2. deductible against any Singapore sourced income

 

Can tax exemption be carried forward to subsequent years if there is no profit in first 3 years?

No. If during any of the first three tax years, your company incurs losses or it has no income (e.g. business has not commenced), your chargeable income and tax payable will be nil. In this case, since there is no chargeable income, your company cannot enjoy the benefit given under the tax exemption scheme for new start-up companies for that particular tax year. However, that particular tax year will still be included in determining the first three consecutive tax years.

 

What is the corporate tax rate in Singapore?

Singapore has a flat corporate income tax rate of 17%. For annual profits of up to S$300,000, tax incentives are available that make the effective corporate tax rate below 9%. For example:

Newly incorporated companies with individual shareholders will be taxed as follows:

  • The first S$100,000 in annual profits will be tax exempt for the first three years.
  • The next S$200,000 in annual profits will be taxed at 8.5%.
  • Profits above S$300,000 will be taxed at the flat rate of 17%.

Newly incorporated companies with corporate shareholders will be taxed as follows:

  • The first S$300,000 in annual profits will be taxed at 8.5%.
  • Profits above S$300,000 will be taxed at the flat rate of 17%.

 

What is the due date for filing corporate taxes?

The deadline for filing final corporate tax return in Singapore is November 30. The tax return is filed on a prior year basis i.e. you will need to file tax return for the financial year that ended in the previous calendar year.

Keep in mind however that each company is required to file an Estimated Tax Return within 3 months of the end of its financial year.

 

Is a Singapore company required to file audited accounts?

Companies that meet the following criteria are not required to have their accounts audited and can file unaudited accounts:

  • No corporate shareholders; and
  • Total number of shareholders less than 20; and
  • Annual revenue does not exceed S$5 million.

All other companies are required to file audited accounts.

 

Are capital gains taxable for Singapore companies?

Capital gains in Singapore are tax exempt.

 

Are dividends to shareholders taxable for Singapore companies?

There is no dividend tax for Singapore companies. Once you have paid corporate income tax on the profits of your company, the post-tax profits can be distributed to shareholders tax free.

 

What tax incentives are available for new startups in Singapore?

New tax incentives for Singapore start-up private limited companies have been introduced since 2005 to support entrepreneurship and to help foster growth of SMEs. Under the new scheme, a newly incorporated company that satisfies the qualifying conditions (viz. be incorporated in Singapore, be a tax resident of Singapore and has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares) will be taxed as follows:

  1. For each of its first three consecutive tax years – corporate tax rate of 0% on the first S$100,000 of taxable income and 9% (partial exemption) tax rate on the next S$200,000 of taxable income. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.
  2. From the fourth tax year onwards – 9% tax rate on taxable income of upto S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%.

For instance if your annual taxable income is S$500,000, then your effective corporate tax rate based on the exemption will be as follows:

First Three Years

 

CORPORATE TAX

Can the post-tax company profits be transferred to shareholders overseas?

Post-tax company profit distribution to shareholders is normally referred as dividend income. As far as Singapore is concerned, dividends can be repatriated to shareholders’ anywhere without any further tax consequences. Whether the dividend income is taxable in the overseas shareholders’ country would depend on the domestic tax laws of that country and the tax treaty between Singapore and the partcular country in question.

 

Is company profit distribution to shareholders taxed?

No. Under the current one-tier corporate tax system, tax paid by a company on its chargeable income is the final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders.

 

Do we still need to file a tax return if our company did not make any profits for the year?

Yes. Every Singapore company is required to file a tax return on an annual basis.

 

What is the taxation policy on products and services sold to customers outside of Singapore?

This question related to Goods and Services Tax (GST) in Singapore. Exports of goods and provision of international services are zero-rated supplies. In other words the goods or services are subject to 0% GST (Goods and Services Tax).

 

For how long can the company losses be carried forwarded?

Where your company incurs business losses in a tax year and the adjusted losses exceeded the other sources of income or where there are no other sources of income to offset the trade losses, there will be unutilised losses from the tax year. The unutilised losses can be carried forward to offset against your company’s assessable income for the subsequent tax years if it satisfies the qualifying condition. Losses can be carried forwarded indefinitely, until they are fully utilised subject to certain conditions such as no substantial change in shareholders.

 

Can the company pay for accommodations and car expenses of directors and other employees?

Yes, that is possible. This benefit comes under the umbrella of benefits-in-kind which refers to benefits received by employees, from the employer, in non-cash form. There however are certain taxable implications on the company provided accommodation and company reimbursable car expenses for the director or employee in Singapore.

 

What kind of business travel expenses are tax deductible?

The following rules apply:

  1. If your company pays transport allowance to the employees as part of their remuneration package, the transport allowance is a deductible expense, as it is part of staff cost.
  2. Motor vehicle expenses for foreign registered cars used exclusively outside Singapore are deductible if the expenses are incurred for business purposes.
  3. The private hire car expenses and hiring charges for foreign rental cars used exclusively outside Singapore are deductible if the cars are used for business purposes.
  4. If your company owns Q-plate business passenger cars that were registered before 1 Apr 1998, motor vehicle expenses relating to these Q-plate cars are tax deductible.

Note however than many of these benefits may have tax implications on the employee side.

What is the taxation policy towards royalty income?

Royalty income is the income received for the right to use copyrights, patents and trademarks. Royalty income accruing in or derived from Singapore as well as earned from outside Singapore and received in Singapore, is taxable.

CALCULATING TAXABLE INCOME

Calculating Corporate Taxable Income

In general, a company’s taxable income is not the same as net income. The calculation of taxable income for a company begins with net profit/loss in the company’s accounts and then making various adjustments to arrive at the taxable income for the given accounting year. Adjustments are made because some of the expenses incurred by your company may not be deductible for tax purposes. Similarly, some of the income received by your company may not be taxable or it may be taxed separately as a non-trade source income.

 

Taxable Income Adjustments Overview

A Singapore company is taxed on its income accruing in or derived from Singapore and income received in Singapore from outside Singapore subject to applicable exemptions and tax reliefs. Income includes:

  • gains or profits from any trade or business
  • income from investment e.g. interest and rental
  • royalties, premiums and any other profits from property
  • other gains of an income nature

In order to calculate the taxable income the following adjustments are made to the Singapore company’s net profit/loss data:

  • Deduct Non-Taxable Income. Income of non-taxable nature is deducted from the chargeable income. Examples include capital gains, sale of fixed assets, gains on foreign exchange on capital transactions, exempt shipping income derived by a shipping company, foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions, and other income exempted from tax under the provisions of the Singapore Income Tax Act.
  • Adjust Net Investment Income. Investment income is non-trade income that includes interest income, dividend income, and rental income. Investment income for income tax calculation purpose is assessed separately because excess of expenses over the income received from one source of investment cannot be claimed against the surplus arising from another source of investment. For example, any excess of expenses attributable to rental income cannot be deducted against dividend or interest income.
    Net investment income is then calculated as
  • a) first deduct all the investment income from chargeable income
  • b) deduct the investment related qualified expenses from the investment income for each type of investment income
  • c) add the balance net investment income for each type of investment.
  • Deduct Qualified Business Expenses. Expenses that are wholly and exclusively incurred in the production of trade income are deductible. Examples of deductible expenses include wages, office rent, services fees, R&D expenses, and so on. Examples of non-deductible expenses include fines, fixed assets write-off, income tax, private and domestic expenses, motor vehicle expenses incurred in respect of private passenger cars, etc.
    The list of deductible and non-deductible business expenses is rather large can not be discussed comprehensively in the context of this article.
  • Deduct Capital Allowances. Expenditure incurred on the purchase of fixed assets is not deductible for tax purposes as it is capital in nature. Depreciation on fixed assets is also not deductible for tax purposes. However, in place of the depreciation, the company can claim for a deduction for the wear and tear of the fixed asset known as “capital allowance”. Unutilized capital allowances from previous accounting periods as well as from the current account period on fixed assets can be deducted.
  • Deduct Unutilised Losses. Qualified losses incurred can be deducted against the income in Singapore. Qualified loss means a) the loss must arise from the carrying of a business; b) it has not been utilized previously. The deduction of losses follows the “preceding year” basis i.e. deduction is allowed in the year(s) subsequent to the year in which the loss incurred. If the losses cannot be fully adjusted in the relevant year of assessment, the remaining portion can be carried forward to the next year of assessment. Losses can be carried forwarded indefinitely subject to certain conditions.
  • Deduct Unutilised Donations. Only donations that are made to approved institutions of a public character can be deducted for the company’s income tax calculation purpose.

 

Taxable Income Adjustments Example

Please note that the following is a simplified example only.

TAX INCOME ADJUSTMENT

TAX INCOME ADJUSTMENT

TAX INCOME ADJUSTMENT

TAX ON FOREIGN SOURCE

Singapore Tax Policy On Foreign-Sourced Income

As per Income Tax Act of Singapore, the corporate tax is imposed on the income of that is a) earned from Singapore; or b) received in Singapore from outside Singapore (subject to certain exemptions). The first part deals with the income that has a source in Singapore. The second part is the income with a source outside Singapore but  received or deemed received in Singapore.

In order to determine whether the income is subject to taxation in Singapore, we need to find answers to the following questions:

  1. Does the income qualify as foreign-sourced income?
  2. Was the foreign-sourced income “received” in Singapore?
  3. Was the foreign-sourced income “received” in Singapore subject to taxation overseas?

Check 1: Does the income qualify as foreign-sourced income?

Under the Singapore Tax Ordinance, an entity is chargeable to Profits Tax under the following conditions:

  1. the entity carries on a trade, profession or business in Singapore;
  2. the trade, profession or business derives profits; and
  3. the profits are sourced in Singapore; or
  4. the profits are sourced overseas but “received” in Singapore (certain exemptions apply as we will see later)

The first two conditions are straightforward; however the concept of locality of the source of income can be complex and contentious. No universal rule can apply to every scenario. Whether profits arise in or are derived from Singapore depends on the nature of the profits and of the transactions which give rise to such profits. Among other things, the following broad principles play an important role when determining the locality of source of income:

  1. The guiding principle is that one looks to see what the taxpayer has done to earn the profits in question and where he has done it. In other words, the proper approach is to identify the operations which produced the relevant profits and ascertain where those operations took place.
  2. Often where the principal place of business is located in Singapore and there is no business presence overseas, profits earned by that business are likely to be treated as sourced in Singapore.
  3. One of the factors that determines the locality of profits from trading in goods and commodities is the place where the contracts for purchase and sale are effected. “Effected” does not only mean that the contracts are legally executed. It also covers the negotiation, conclusion and execution of the terms of the contracts.
  4. When a business earns commission by securing buyers for products or by securing suppliers of products required by customers, the activity which gives rise to the commission income is the arrangement of the business to be transacted between the principals. The source of the income is the place where the activities of the commission agent are performed. If such activities are performed in Singapore, the income will be treated as sourced in Singapore.

In considering the relevant facts, the nature and quality of the activities matter more than their quantity. It is the cause and effect of such activities on the profits that is the deciding factor.

 

Check 2: Was the foreign-sourced income “received” in Singapore?

Assuming certain income qualifies as foreign-sourced income, if such income is not received in Singapore, it’s tax exempt. There has been considerable debate on what constitutes the term foreign-sourced income “received in Singapore”. In order to avoid confusing taxpayers, the Inland Revenue Authority of Singapore (IRAS) has made efforts to clarify the meaning and how it affects a company’s tax liabilities.  As per IRAS clarifications, the term foreign-sourced income “received in Singapore” implies the following:

Funds Coming Into Singapore

This is under the IRAS section 10(25)(a) clarification, which says: “any amount from any income derived from outside Singapore which is remitted to, transmitted or brought into Singapore”. It refers to money, dividends or other forms of monetary payment being paid into a Singapore-based bank account belonging to a Singapore-based company from an overseas source. It could also be cash, cheques and other types of money orders being physically brought into Singapore and received by the company. This money that the company receives should be the result of the company’s business activities, such as sales, service fees, consultation etc and contributing to its revenue or profit.

Debts Payments

Section 10(25)(b) of the IRAS clarification states: “any amount from any income derived from outside Singapore which is applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore”.

If your company owes money in Singapore, whether it is to a supplier, a bank or as a result of legal proceedings, and you use overseas-acquired earnings to pay all or part of it, the money used is considered “income received in Singapore”. The money could have been residing in an overseas-based bank account for a long time. However, once you use it to settle a debt in Singapore, it is counted as “received in Singapore”. The key point here is that the debt is being paid off inside Singapore, not overseas. For this to happen, the money must somehow be brought into Singapore.

Goods and Movable Property

Section 10(25)(c) states: “any amount from any income derived from outside Singapore which is applied to purchase any movable property which is brought into Singapore”. Movable property, also known as movables, refers to items that can be moved from one place to another. As opposed to real estate, land or other types of fixed property which cannot be moved.

For an individual, movable property is his or her personal belongings. For your company, it may refer to goods, raw materials, equipment and other movables that are directly connected to your business.  If you use your foreign-sourced funds that have been kept overseas, to buy equipment overseas and then you ship those items into Singapore, then the money used for those purchases becomes “income received in Singapore”.

One concern is how much tax the IRAS can charge for goods that may have depreciated in value. IRAS has clarified that the taxation will be based on how much was originally paid for the movable property and not its book value or net worth at any given date.

IRAS has also issued the following clarifications to address various concerns raised:

  • Based in Singapore – foreign sourced income is only taxable if it applies to a company that is based in Singapore. Foreign-based companies with no Singapore office are able to use Singapore-based banks and fund management institutions without fear of being taxed.
  • Overseas investment – you can use your foreign-acquired income to invest in additional assets as long as they stay out of Singapore. However, your company cannot use those investments or expenses as a basis to claim for tax deductions in Singapore.
  • Non-income funds – IRAS is willing to exempt non-income funds from taxation if you are able to provide proof that the money has nothing to do with business-related income. To do this, you should specify income and non-income and provide dates from when the non-income money was remitted to Singapore. You must show proof that the income amounts were not touched.
  • You can show that the money sent to Singapore is not more than the capital minus any losses incurred. IRAS will also allow you to set off any overseas losses against foreign sourced income received in Singapore.

 

Check 3: Was the foreign-sourced income “received” in Singapore subject to taxation overseas?

Assuming the foreign-sourced income earned by your company is considered as “received in Singapore” as per Check 2 above, whether or not this income is subject to taxation in Singapore depends on if it was subject to taxation overseas. Foreign sourced income that is received in Singapore can be tax exempt if the following conditions are met:

  • the headline tax rate of the foreign jurisdiction from which the income is received is at least 15%; and
  • the specified foreign income has been subjected to tax in the foreign jurisdiction from which it was received.

If you overseas income received in Singapore does not meet the above conditions, the said income is liable to taxation in Singapore. However, IRAS will give you a tax credit on whatever tax you did pay overseas even if there is no double-taxation agreement in place. Singapore wants to make sure that your corporate income is not subject to double-taxation.

 

In Summary

It is apparent from the above elaboration that it may not always be easy to determine with certainty the locality of the source of the income of a business. If your objective is to avoid paying taxes all together for your company income, it may be a bit challenging to achieve it through a Singapore company. However, if your goal is to avoid paying double taxes but let the income be subjected to the low-tax regime of Singapore, incorporating a Singapore entity is a perfect choice.

INDUSTRY SPECIFIC TAX INCENTIVES

Industry Specific Tax Incentives in Singapore

With a low headline corporate tax rate of 17%, generous tax exemptions for small-to-midsize companies, and industry-specific tax incentives, Singapore is well positioned to maintain its economic competitiveness in today’s global environment. The Government of Singapore provides a comprehensive package of tax concessions and incentives to businesses whose business activities reflect the direction in which the state plans to steer economic development.

 

Tax Incentives For Financial Services Industry

Some of the key tax incentives include:

  • Trading Income. Capital gains and income made by financial service companies trading investments for and on behalf of their non-resident clients are often tax exempt both in the hands of the financial services company and in the hands of the non-resident client. The effect of this incentive is to make Singapore an attractive location for foreigners to base their investments.
  • Fee Income. Concessionary tax rates are levied on profits earned by financial services companies in respect of income earned billing clients for investment services rendered.
  • Withholding tax exemption for Over-The-Counter (OTC) financial derivatives payments:  Qualifying financial institutions enjoy withholding tax exemption on all payments made on qualifying OTC financial derivatives to persons who are neither Singapore residents nor are permanent establishments in Singapore. The withholding tax exemption is set to expire in March 2021.

 

Tax Incentives for Banks

Liberalization of the Withholding Tax Exemption Regime for Banks: With effect from April 1 2011, interest and other qualifying payments that are made to all non-resident persons in relation to their trade or business will be granted a withholding tax exemption. The withholding tax exemption will be applicable to payments liable to be made between 1 April 2011 and 31 March 2021, for contracts which take effect before 1 April 2011; and payments liable to be made on contracts which take effect on or after 1 April 2011 to 31 March 2021. According to Budget 2012, the withholding tax exemption (which was previously not extended to permanent establishments) will also apply to permanent establishments in Singapore. This change will take effect for payments to be made from 17 Feb 2012 to 31 Mar 2021 (for contracts already in force before 17 Feb 2012); and  all payments arising from contracts effective on or after 17 Feb 2012 to 31 Mar 2021. This exemption is applicable to:

  • All banks licensed under the Banking Act or approved under the MAS Act,
  • Finance companies licensed under the Finance Companies Act, and
  • Approved financial institutions licensed under the Securities and Futures Act that engage in lending as part of their regulated activity of dealing in securities in Singapore

 

Tax Incentives for Fund Management Industry

Singapore has emerged as the most popular Asian location for fund management companies. The key factors spurring the growth include attractive tax benefits and the relatively short time taken to register a fund in the city-state.

Tax Exemptions for Offshore Funds

An offshore fund that is managed by a Singapore-based fund manager is exempt from Singapore tax on specified income from designated investments, provided the offshore fund is a qualifying fund. Specified income refers to profits, gains, dividends and interest from designated investments. Designated investments include traditional investments such as stocks, shares, securities, bonds, deposits, futures contracts etc.

A qualifying fund is one that:

  • Is not 100% beneficially owned by Singapore investors including Singapore resident individuals, Singapore resident corporate entities and Singapore-based permanent establishments of non-residents,
  • Does not have a Singapore presence, and
  • Can only be in the form of companies, trusts or individual accounts.

A qualifying investor also enjoys tax exemptions on income derived from qualifying funds. A qualifying investor is:

  • An individual investor
  • A bona fide non-resident non-individual investor that:
    • does not have a Singapore presence or business activity (other than a fund manager), or
    • has a Permanent Establishment in Singapore but does not use funds from its operation in Singapore to invest in the qualifying fund.
  • Certain specified Singapore government entities
  • A Singapore resident corporate investor that owns not more than 30% or 50% (if the fund has 10 or more investors) of the qualifying fund.

Tax Exemptions for Onshore Funds

In 2006, the Singapore government introduced the Singapore Resident Fund Scheme, under which the above mentioned tax exemption scheme for offshore funds was extended to funds constituted in Singapore as well, subject to the following conditions:

  • The fund vehicle must only be a company,
  • The fund must be constituted in Singapore and have its administration performed in Singapore, and
  • The fund must be approved by the MAS.

This scheme has boosted the fund management industry in Singapore as it offers an additional advantage of Singapore’s extensive treaty network that helps to reduce tax liability in treaty countries that the fund invests in.

Enhanced Tier Fund Management Scheme

With effect 1 April 2009 to 31 March 2014, an enhanced tier has been introduced to the existing fund management incentives for funds with a minimum size of S$50 million, at the point of application, amongst other conditions. Under the enhanced tier there will are no restrictions imposed on the residency status of the fund vehicles as well as that of investors. The enhanced tier also applies to funds that are constituted in the form of Limited Partnerships. Additionally, the 30% or 50% investment limit imposed on resident non-individual investors has been lifted for funds that come under this enhanced tier.

Concessionary Tax Rate for Fund Managers

Under the Financial Sector Incentive Scheme for Fund Managers, fund managers in Singapore are taxed at a concessionary rate of 10% on fee income, subject to certain conditions and MAS approval. This scheme applies to fund managers who employ at least three fund management or investment advisory professionals. The professionals’ basic monthly income must exceed S$3,500.

 

Tax Incentives for Global Trading Companies

Under the Global Trader Scheme, an approved global trading company is granted concessionary tax rates of 5%-10% for 5-10 years on qualifying offshore trade incomes, depending on the company’s turnover and business spending. Global Trader status is typically granted only to well-established players in their respective industries with a proven track record of international trade, procurement and transportation of qualifying products. The following derivative instruments qualify under the GTP scheme:

  • Exchange-traded and over-the- counter (OTC) commodity derivatives in a commodity which is in the approved GTP company’s list of approved commodities; and
  • Exchange-traded and OTC freight derivatives.

Derivative instruments such as interest-rate swaps and forex derivatives are not covered under the GTP. According to the 2011 Budget, the existing list of qualifying derivative instruments under the GTP will be expanded to include all derivative instruments. This enhancement will apply to income from qualifying trades in the new qualifying derivative instruments, derived by a GTP company from Year of Assessment 2012. A sunset clause will be introduced for the GTP scheme viz. 31 March 2021. Companies can be approved as a GTP company or GTP (Structured Commodity Finance) company on or before 31 March 2021. The GTP company can enjoy the benefits under the various enhancements during their award tenure of up to five years.

 

Tax Incentives For Shipping & Maritime Industry

The Maritime and Port Authority of Singapore (MPA) has developed a number of incentive schemes to encourage shipping companies to grow and enhance their business further. The Maritime Sector Incentive (MSI) outlines incentives for companies engaged in international shipping operations, maritime (ship or container) leasing, shipping support services.

Maritime Sector Incentive (MSI) scheme

  • Maritime Sector Incentive – Approved International Shipping Enterprise (MSI-AIS) Award: International shipping companies that have established worldwide networks, a strong track record, and are committed to expanding their shipping operations in Singapore are eligible for a tax exemption on qualifying shipping income for either a 10-year renewable period; or a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period.
  • Maritime Sector Incentive – Maritime Leasing (MSI-ML) Award: Entities with a strong track record that exhibit a commitment to expand shipping and container financing operations in Singapore can choose to apply for the MSI-ML award on or before 31 May 2016. Under the MSI-ML award, Ship or container leasing companies, funds, business trusts or partnerships can  enjoy tax concessions for up to 5 years on their qualifying leasing income. Furthermore, an approved manager of the asset-owning entity can enjoy a concessionary tax rate of 10% on its qualifying management income.
  • Maritime Sector Incentive – Shipping-Related Support Services (MSI-SSS) Award: An approved MSI-SSS company can enjoy a concessionary tax rate of 10% on the incremental income derived from the provision of the following qualifying approved shipping-related support services for a period of 5 years:
    • Ship broking;
    • Forward freight agreement (FFA) trading;
    • Ship management;
    • Ship agency;
    • Freight forwarding and logistics services; and
    • Corporate services rendered to qualifying approved related parties who are carrying on business of shipping – related activities
  • Withholding tax exemptions:
    • Entities under the International Shipping Operations category of MSI will, subject to conditions, enjoy automatic withholding tax exemption on qualifying payments made in respect of qualifying foreign loans taken to finance the purchase or construction of both Singapore-flagged and foreign-flagged ships, without having to apply for such exemption on a case-by-case basis during the period from 1 June 2011 to 31 May 2016. The entities that qualify for this exemption include:
      – MSI-Shipping Enterprise (Singapore Registry of Ships) (MSI-SRS);
      – MSI-Approved International Shipping Enterprise (MSI-AIS) companies; and
      – MSI-Maritime Leasing (Ship) [MSI-ML(Ship)] entities.
    • Qualifying entities will, subject to conditions, enjoy automatic withholding tax exemption on qualifying payments made in respect of qualifying foreign loans taken to finance the purchase of qualifying containers and inter-modal equipment during the period from 17 Feb 2012 to 31 May 2016. The entities that qualify for this exemption include those that are awarded the following status under the MSI-Maritime Leasing (Container) award:
      – MSI-ACIE; and
      – MSI-ACIE (Local ASPV).

Other Incentives

  • Ease in GST compliance for businesses that support the maritime industry: With effect from 1 July 2010, the GST zero-rating will be expanded to include pleasure and recreational ships that are wholly used for international travel. Additionally, it will apply to all goods (including stores and merchandises) supplied for use on board or installation on a qualifying ship, regardless of whether the ship calls on a port outside Singapore. Zero rating of GST also extends to the transport of goods or passengers via a ship to or from international waters, regardless of whether the ship calls on a port outside Singapore.
  • Established international shipping companies with worldwide networks and a good track record, once approved, are exempt from tax on income from the operation of their ships outside of Singapore for a period of 10 years.
  • With effect from 17 Feb 2012, payers making bareboat, voyage and time charter payments to non-residents for the use of ships will no longer have to withhold tax.
  • Under the Block Transfer Scheme (BTS), withholding tax exemption can be granted in respect of interest payable on a loan taken by a shipping enterprise from a lender outside Singapore to acquire a Singapore-flagged ship. This withholding tax exemption is for ships registered with the Singapore Registry of Ships (SRS) on any date from 1 Jan 2009 to 31 Dec 2013.
  • Qualifying ship operators and ship lessors can avail of a tax exemption on gains derived from:
    • Disposal of vessels registered with the Singapore Registry of Ships (SRS) and vessels owned or operated under the MSI-AIS award;
    • The sale of vessels which would subsequently be leased back to shipping companies;
    • The sale of 100% shareholding in a Special Purpose Company (SPC) that owns a vessel registered with SRS or a vessel under the MSI-AIS award;
    • The disposal of vessels under construction and new building contracts; and
    • Gains from the disposal of foreign vessels.

 

Tax incentives for Tourism Industry

  • Tax deduction for Inbound Tourism Promotion: Approved companies, subject to satisfying certain eligibility criteria, can deduct twice the amount of qualifying expenditure incurred in participating in overseas fairs or missions, from their taxable income.
  • Tax deduction for Participation in Local Trade Exhibitions: Approved companies, subject to satisfying certain eligibility criteria, can deduct from their taxable income, twice the amount of qualifying expenditure incurred in participating in international trade-oriented exhibitions that are held in Singapore.

 

Tax Incentive for Event Organizers

Event organizing Singapore companies that can bring mega events to Singapore are eligible for a 10% concessionary tax rate on the income derived from mega events.

 

Tax Incentives For e-Commerce Industry

To develop Singapore as an e-commerce hub, well-established e-commerce companies are eligible for a reduced tax rate of 10% for a period of five years on the income derived from e-commerce transactions with parties outside Singapore.

 

Tax Incentives for Approved Ventures

Income derived from approved investments of approved venture companies is eligible for a reduced tax rate of 0%-10% for a period as approved by authorities.

 

Tax Incentives for Insurance Companies

  • Captive Insurance Tax Incentive Scheme: Under this scheme, insurers can enjoy tax exemption on qualifying income derived from the carrying on of offshore insurance business for a period of 10 years. This scheme is valid until 31 March 2018.
  • Marine Hull and Liability Insurance Tax Incentive Scheme: Under this scheme, insurers can enjoy tax exemption on qualifying income derived from the carrying on of marine hull and liability insurance business for up to 10 years. A sunset clause will be introduced for the scheme and will apply until 31 Mar 2016.
  • Specialized Insurance Tax Incentive Scheme: Under this scheme, insurers can enjoy tax exemption on qualifying income derived from the carrying on of qualifying offshore specialized insurance business for a period of five years. The specialised insurance business lines under this scheme are Terrorism, Political, Energy, Agriculture Insurance and Aviation and Aerospace risks. The scheme is valid until August 2016.

 

Tax Incentives for Headquarters Activities

The Singapore government has introduced two specific schemes in order to encourage companies to use Singapore as their regional or global headquarters base.

  • Regional Headquarters Award: Under the (RHQ) Award, qualifying companies can enjoy a concessionary tax rate of 15% for five (3+2) years on incremental qualifying income from abroad, instead of the regular Singapore corporate tax rate of 17%. In other words, if applicant company satisfies all the minimum requirements by the third year of the incentive period, it will enjoy the 15% concessionary tax rate for an additional 2 years on qualifying income. This scheme applies to all companies that have their Asia-Pacific headquarters in Singapore.
  • International Headquarters Award: This tax incentive scheme is open to all entities that have setup a company in Singapore in order to carry out their headquarter activities. More specifically, companies that commit to exceed the minimum requirements of the Regional Headquarters Award, can enjoy an even lower concessionary tax rate ranging from 5% to 15% on incremental income from  qualifying activities.

 

Tax Incentive for Processing Services Company

Qualifying processing services companies are taxed at a concessionary rate of 5% on income derived from the provision of prescribed services to financial institutes. The tax break is given for a period of 5-10 years.

 

Tax Incentive for Legal Firms

Approved law firms in Singapore will enjoy a 10% concessionary tax rate on incremental income from qualifying international legal services for 5 years. The incentive is valid from 1 April 2010 to 31 March 2015. This will include all legal services connected to land and goods outside Singapore, and intangible legal services provided to overseas clients. Furthermore, approved law firms can avail of a 50% tax exemption on incremental qualifying income derived from international arbitration cases heard in Singapore.

 

Tax Incentive for R&D, Innovation, and Product Development Activities

  • Development and Expansion Incentive (DEI): The DEI encourages Singapore-based companies to move into high value-addition business activities, expand their operations in the country, and procure advanced machinery and equipment by offering a reduced tax in the range of 5%-10% on incremental income derived from qualifying activities.
  • Investment Allowance: Companies may claim capital allowance on plant and equipment used overseas in connection with their trade or business, subject to meeting certain conditions. Budget 2012 saw the introduction of a new Integrated Investment Allowance Scheme that will provide an additional allowance on fixed capital expenditure incurred for productive equipment placed overseas on approved projects with effect from YA 2013.
  • Pioneer Incentive Scheme: Companies from the manufacturing or services sector that engage in activities that raise overall industry standards may be eligible for full corporate tax exemption on qualifying profits for up to 15 years.
  • Productivity and Innovation Credit (PIC) Scheme: The PIC scheme is a tax benefit scheme that was first introduced in 2010 to encourage companies to engage in innovative and productive activities. Under the scheme, businesses can enjoy up-to 400% deduction or allowances on up to $400,000 of expenditure incurred in each of the following qualifying innovative activities. The qualifying activities include Research & Development; Intellectual Property registration; Intellectual Property acquisition; Design activities, Automation through technology or software; and training of employees. Note businesses will be allowed to combine the $400,000 expenditure cap per year for YA 2013 to YA 2015 into a new ceiling of $1,200,000 over the three years. Businesses with a low taxable income, can choose to convert up to S$300,000 of the tax deductions and allowances credited to them into a cash grant, up to a maximum of S$21,000 each year. Businesses can also exercise an option to convert upto S$100,000 of their expenditure into a non-taxable cash payout at a conversion rate of 30%. The cash payout rate will be increased from 30% to 60% for up to S$100,000 of qualifying expenditure from YA 2013 to YA 2015. Earlier the PIC benefits were applicable only to R&D activities performed in Singapore. However, effective YA 2011 PIC benefits will also extend to R&D done overseas.
GOODS AND SERVICES TAX

Singapore Goods and Services Tax (GST) Guide

Goods and Services Tax (GST) is similar to Valued Added Tax (VAT) in other countries and is a relatively new form of tax in Singapore. GST was implemented on 1st April 1994 in Singapore. The GST Act is modeled on the UK VAT legislation and New Zealand GST legislation. The Inland Revenue Authority of Singapore (IRAS) acts as the agent of the Singapore government and administers, assesses, collects and enforces payment of GST. Introduction of GST is seen as a means to lower personal and corporate income tax rates while maintaining a steady revenue base for the government. GST is an indirect tax as it taxes expenditure. The current rate of GST is 7%.

 

What is GST?

Also known as Value Added Tax (VAT) in many other countries, Goods and Services Tax (GST) is a consumption tax that is levied on the supply of goods and services in Singapore and the import of goods into Singapore. GST is an indirect tax, expressed as a percentage (currently 7%) applied to the selling price of goods and services provided by GST registered business entities in Singapore.

GST tax is charged to the end consumer therefore GST normally does not become a cost to the company. Businesses merely act as collecting agents on behalf of Singapore tax department.

 

What does GST mean for a Singapore company?

It means that if you are GST registered, you are required to collect GST tax from your customers for the goods and services rendered by you and then pay the tax collected to tax authorities. For example, if you charged S$100 for your services to a customer in Singapore, you must invoice your customer S$107 (S$100 for your service plus 7% GST tax). This GST amount invoiced collected on behalf of the tax authorities from the customer must subsequently be sent to Singapore tax department on a quarterly basis via GST tax filing.

 

Is my company required to register for GST?

GST is a self-assessed tax and businesses are required to continually assess the need to be registered for GST. GST registration falls into two categories: compulsory registration and voluntary registration.

Compulsory registration

Registering for GST is compulsory when

  • the turnover of your business is more than 1 million SGD for the past 12 months known as the retrospective basis OR
  • you are currently making sales and you can reasonably expect the turnover of your business to exceed 1 million SGD for the next 12 months – known as the prospective basis.

Please note that failing to register will attract penalties. There are anti-avoidance provisions to ensure that entities are not established merely to keep turnovers less than the threshold and thereby avoid registration.

Voluntary registration

You may apply to voluntarily register for GST if you are not liable to compulsorily register and you satisfy the following conditions:

  • Your annual turnover is not more than 1 million SGD, or
  • You only supply goods outside Singapore (out-of-scope supplies), or
  • You make exempt supplies of financial services that are also deemed as international services

The advantage of voluntary registration is that you can enjoy the benefits of claiming input tax incurred in the course of your business. This is especially so when you make purely zero-rated supplies (exports or international services). Please note, once you are voluntarily registered, you must remain registered for at least two years and you have to maintain all your records for at least five years, even after your business has ceased and you have deregistered from GST. You may also have to comply with any additional conditions that are imposed by the tax authority.

Exemption from Registration

If you make only zero-rated supplies you can apply for an exemption from registration, even if your taxable turnover exceeds the registration limits. This allows you to escape from the administrative requirement of GST registration, as you would only be reclaiming and not paying tax to the IRAS, since the cost to you is the input tax. IRAS will approve the exemption, if more than 90% of your total supplies are zero-rated and if your input tax is greater than your output tax.

De-registration

You can cancel your registration when your business stops or when your business is sold as a whole to another person or when your sales figures do not exceed 1 million SGD. You must submit an application form, along with other relevant documents to the tax authority within 30 days from the date of cessation.

 

Is a Singapore company required to collect GST tax?

No. Your company is required to register for GST and collect GST only if its annual turnover exceeds S$1 million.

When paying GST tax collected from customers, can the Singapore company offset the GST tax charged by its suppliers?

Yes. The GST charged by a company to its customers is known as output tax whereas GST paid by the company to its suppliers is called input tax. What you pay to (or claim back from) the tax authorities is difference between your output and input tax.

 

If a Singapore company is not GST registered, can it collect GST tax?

No. Goods and Services Tax in Singapore can only be collected by GST registered entities.

 

Must a Singapore company collect GST when exporting goods or services out of Singapore?

No. Export goods and services are called zero rated supplies and GST tax is not applicable.

 

If a company is not required to register, is it beneficial to register for GST?

It depends. If you are required to register for GST, you have no choice. Otherwise however, you should consider the following pros and cons of GST registration:

Benefits
To the government:

  1. It generates a stable and predictable tax income in both good and weak economic environment.
  2. It is an efficient tax due to the comparatively lower cost of administration and collection.
  3. It allows the Government to lower corporate and personal income taxes, which in turn encourages more foreign direct investment. This leads to overall economic growth.

To businesses and individuals:

  1. Most large, established businesses are GST registered – getting your business GST registered is often a signal to customers that your business is an established business and has certain size.
  2. GST is a fairer tax system. It taxes the self-employed and wage earners only when they spend their money.
  3. GST taxes apply only on consumption. Savings and investment are not taxed. This will encourage people to save and invest in productive activities.
  4. Cost of doing business is reduced, thereby contributing to lower prices. Businesses do not suffer a tax cost due to the multi-stage credit mechanism since the real taxpayer is the end-user.

Drawbacks

  1. The disadvantage of GST registration is the administrative burden that comes with discharging the duties and responsibilities of GST registration.
  2. One must either study the intricacies of GST or pay an accountant to undertake this work which in some cases can be a reasonably high cost.
  3. Being GST registered effectively increases your selling price by 7%. Your customers who are not GST registered would not be able to recover the GST you charge. So although your costs are reduced because you can recover GST, your customers might not be too pleased.
  4. GST can be a burden to lower income groups, especially during times of high inflation when the 7% tax is paid on the increasing price of daily essentials.

 

What kind of goods and services are subject to GST?

GST is charged on taxable supplies. A taxable supply, is a supply of goods or services made in Singapore, other than an exempt supply. A taxable supply can either be a standard rated (currently 7%) or zero-rated supply.

Most local sales of goods and provision of local services are standard-rated supplies.

Zero-rated supplies of goods and services are subject to 0% GST. A GST registered entity who makes zero-rated supplies is able to claim a credit for input tax paid on purchases of inputs. In Singapore, exports of goods and provision of international services are zero-rated supplies.

GST is not chargeable on exempt supplies, of which there are two categories – sale and lease of residential land; and financial services.

The difference between zero-rated and exempt supplies is that an entity who makes exempt supplies cannot claim input GST.

Out of scope supplies refers to supplies which are outside the scope of the GST Act. In general, they are:

  • Transfer of business as a going concern
  • Private transactions
  • Third country sales – refers to sale of goods from a place outside Singapore to another place outside Singapore
  • Sales made within Zero GST Warehouse

 

What is GST registration procedure?

A Singapore Goods and Services registration form (GST F1) along with the necessary supporting documents must be sent to the tax authority. An additional form (GST F3), giving details of all the partners must be completed, in the case of partnerships. Separate application procedures/forms are available for overseas companies, group registration and divisional registration. Overseas registrants are expected to appoint a local agent who will act on its behalf and must include a letter, along with the application form, stating the same.

The registration process takes approximately 3 weeks. Upon successful GST registration, you will receive a Notification of GST Registration letter. This letter will contain your GST number, your filing frequency and filing due dates as well as any other special instructions. You must file your GST returns electronically.

 

How to pay, charge and implement GST?

 

  1. As a GST registered entity, you are responsible for charging GST on supply of goods and services and remitting the GST charged to IRAS.
  2. You can either charge GST on top of your selling price or absorb the GST by treating the price as GST-inclusive.
  3. As a GST registered trader you must show and quote GST-inclusive prices on all prices displayed, advertised, published and quoted verbally or in writing. Failure to display GST-inclusive prices to the public is an offence and carries a penalty. However, for goods and services subject to service charge (F & B industry), prices displayed may be GST-exclusive.
  4. When billing customers, a tax invoice must be issued when the customer is a GST registered entity so that the latter can use it as a supporting document to claim input tax on the standard-rated purchases. It contains information on what is being sold and the respective GST charged and can be used to replace a normal invoice. Tax invoices must be retained for at least five years as part of your business records. Note that tax invoices are not required to be submitted along with your GST returns. In general, it is to be issued within 30 days of the time of supply. A tax invoice need not be issued for zero-rated, exempt and deemed supplies or to non-GST registered customer.
  5. When payment has been made to you, you must issue a serially printed receipt to the payer if a tax invoice or simplified tax invoice has not been issued by you.
  6. You must keep records of all your business transactions that affect your GST declarations. Additionally, keeping of a GST account (summary of the totals of your input tax and output tax for each accounting period) will facilitate your completion of GST returns.
  7. You should make your input tax claims in the accounting period according to the date of the tax invoice or import permits.

 

How to file GST returns?

As a GST registered entity, you are required to submit a return, (GST F5) to the tax authorities based on your accounting cycle, normally on a quarterly basis. In your return, you will indicate the total value of your local sales, exports and purchases from GST registered entities, the GST collected and GST claimed for that accounting period. GST Returns are now filed electronically. Once you have started to e-file your GST F5, your next GST return will be made available online by the end of each accounting period. You can e-file your GST F5 one day after the end of the accounting period. You must ensure that IRAS receives your return not later than one month after the end of your prescribed accounting period. If there is no tax due for the said period, you must still submit a ‘nil’ return. Penalties will be imposed if you file the GST return late. This is regardless of whether the net GST declared is a payable or refundable amount.

You must pay the net GST within 1 month after the end of your accounting period. Penalties will be imposed if you are late in making the GST payment. GST refunds will usually be made within 30 days from the date of receipt of the return.

 

Are there any GST Schemes to help businesses?

The Singapore Government has introduced several assistance schemes relating to GST. These schemes generally help to ease the cash flow for businesses and help create a pro-business environment.

  1. Tourist refund scheme, allows tourists who buy goods in Singapore from participating GST registered retailers to claim a refund of the GST paid if the goods are brought out of Singapore
  2. Cash Accounting Scheme, is specifically for small businesses whose annual sales do not exceed SGD 1 million.
  3. Under the Gross Margin Scheme, GST is chargeable only on the gross margin of your goods.
  4. The Major Exporter Scheme (MES), is designed to help the cash flow of major exporters who have significant imports.
  5. Under the Approved Contract Manufacturer and Trader (ACMT) Scheme, you are not required to charge GST when you are instructed by your overseas customer to deliver your finished goods to his customers in Singapore. As per theApproved Marine Fuel trader (MFT) Scheme, you are not required to pay GST when you purchase marine fuel oil from a local GST registered supplier.
  6. The Hand Carried Exports Scheme, is if you wish to zero-rate your supply of goods made to an overseas customer and your goods are hand-carried out of Singapore via Changi International Airport.
  7. Under the Zero GST Warehouse Scheme, businesses can transform their warehouses into zero-GST warehouses to minimise red tape and bypass the GST process.
  8. Approved Third Party Logistics Scheme, allows you to import goods belonging to yourself or your overseas principal without paying GST upon importation.

 

Are there any industry specific GST guidelines?

Singapore tax department has prepared GST guides for each industry which provide you with specific information on how GST affects your sector.

WITHHOLDING TAX

Singapore Withholding Tax Guide

Singapore withholding tax (also known as tax deduction at source in many other countries) is applicable to certain types of payments to non-resident individuals and companies. In general, withholding tax is the tax charged to a non-resident company or individual that derives income from a Singapore source for services provided or work done in Singapore. When a Singapore company or individual pays a non-resident for services, a percentage of that payment must be withheld and handed over to the Inland Revenue Authority of Singapore (IRAS), hence the term withholding tax. Withholding tax does not apply to Singapore resident individuals and Singapore resident companies.

 

Withholding tax at a glance

In general, the following factors determine the applicability of withholding tax in Singapore:

  • Was the income derived from a Singapore source? Withholding tax applies to income from a Singapore source only.
  • Is the payment receiving party non-resident in Singapore? Withholding tax applies only to non-resident entities.
  • Was the service / work done in Singapore? Withholding tax applies only to cases where service provided or work done was in Singapore.
  • What was the nature of payment? Only specific types of payments attract withholding tax.

Further details are provided below.

 

Withholding tax for non-resident companies

A non-resident company for Singapore tax purpose is the one that is either incorporated in a foreign country or a Singapore-incorporated company but is treated as non-resident for tax purpose.

A Singapore-registered company is considered tax resident in Singapore if the control and management of its business activities is conducted inside Singapore. If the company is managed outside Singapore, it is deemed to be non-resident. An example offered by IRAS is that of a Singapore branch of a foreign company, which is treated as non-resident because the business is essentially managed by the overseas-based parent company.

Only certain types of payments attract withholding tax for non-resident companies. Specifically:

  • Interest, commission, fee in connection with any loan or indebtedness – If your company is charged interest on overdue trade accounts and interest on credit terms paid to a non-resident supplier, then withholding tax applies. Payment of withholding tax is also required for any fees as a result of a commission or loan that is paid to a non-resident. When determining withholding tax under these instances, it is only relevant for transactions where the business is deemed to have taken place in Singapore. Withholding tax rate for this type of payment is 15%.
  • Royalty or other payments for the use of or the right to use any movable property – Any royalties due to a non-resident company is subject to withholding tax, either a certain percentage or at the prevailing corporate rates. It is also due on payments for exploiting commercial, scientific, technical or industrial knowledge for business activities or hiring a foreign expert to render these skills on your behalf. Withholding tax rate for this type of payment is 10%.
  • Management fees – Under certain conditions, taking into account factors such as Double Taxation Agreements and whether or not a company is permanently established in Singapore, withholding tax may apply for payment due to foreign entities that provide management services or help you manage your business. Withholding tax rate for this type of payment is as per the prevailing corporate tax rate.
  • Services rendered – If you hire a non-resident company to provide services, such as installing equipment, technical support, training, consultancy and other work that takes place in Singapore, then withholding tax will be charged. This also applies to any monthly allowances paid to employees of the non-resident company. Again, the payment of withholding tax is only for work done in Singapore. If services are provided remotely, such as via the Internet, then you do not have to withhold payment for tax purposes as it is considered outside Singapore. Withholding tax rate for this type of payment is as per the prevailing corporate tax rate.
  • Rent – The rent paid to a non-resident company that leases movable property in Singapore is subject to withholding tax. Withholding tax rate for this type of payment is 15%.

For tax based on prevailing corporate rates, non-resident companies are able to claim a refund for any expenses incurred by providing certified accounts to the IRAS for consideration.

 

Withholding tax for non-resident professionals

A non-resident professional (NRP) is defined as someone who has spent fewer than 183 days a year in Singapore during the course of providing services in the country.  Non-resident professionals are subject to withholding tax for any type of service, consultancy or other work provided for a fee within Singapore. NRPs include the following:

  • Foreign professionals, experts and specialists invited by government bodies, statutory boards or private organisations to provide technical expertise in Singapore.
  • Foreign speakers or academics conducting seminars or workshops in Singapore.
  • Queen’s Counsels.
  • Consultants, trainers and coaches.
  • Public entertainers.

Under the Singapore law enacted on May 3, 2002, income is defined as all wages, expenses and fees that are paid to the individual. This includes accommodation, airfare and other expenses on top of the actual fee for services.

If the NRP is informed that his or her services are to be withholding tax-free, then the amount received is considered as a net payment. The Singapore payer must still pay withholding tax and must work out how much is to given to the tax authorities on top of the amount paid to the NRP.

For individuals, the general withholding tax rate is a flat 15% of gross income except the following cases:

  • The withholding tax rate for royalty payments and payments for the use of scientific, technical, industrial or commercial knowledge and information, the rate is 20%.
  • Payment to non-resident company directors is subject to withholding tax rate of 20%. It applies to all forms of income, be it salary, bonus, director’s fees, accommodation, gains from stocks and shares and other payments.
  • The withholding tax rate for non-resident public entertainers is 10% until 31 March 2015.

 

Avoidance of double tax

Singapore has signed double tax agreements (DTA) with many countries in order to prevent companies and individuals being taxed by both jurisdictions. If a company operates out of a country that has a tax treaty with Singapore, the DTA may provide relief from double taxation, depending on the particular service provided and the provisions of the DTA.

SINGAPORE IMMIGRATION VISA

Singapore Immigration Visa Schemes

The purpose of this guide is to provide an overview of various work permit schemes available in Singapore for foreign working professionals and entrepreneurs. Singapore has become the ideal business and commercial hub in Southeast Asia, partly due to its creative immigration policies designed to attract seasoned entrepreneurs and working professionals from around the world.

 

Work Permit Schemes for Foreign Professionals & Entrepreneurs

Employment Pass Scheme

The Employment Pass (EP) is the main type of work permit meant for company owners or skilled employees who will be working in Singapore. Your fixed monthly salary must be more than S$3,300 (w.e.f. 1 January 2014) and you should be a degree holder from a reputable university. From 1 January 2017, your fixed monthly salary must be more than S$3,600  There is no official quota system limiting the number of EPs that can be issued.

  • Validity: An EP is initially issued for 1-2 years (at the discretion of authorities) and renewable as long as the applicant continues to be employed by the company.
  • Eligibility: Company owners and professional staff with tertiary education and relevant experience.
  • Quota System: There is no quota official system for EPs.
  • Permanent Residence Eligibility: Employment Pass holders are eligible to apply for PR in due course.

 

Entrepreneur Pass (EntrePass) Scheme

The Entrepreneur Pass (EntrePass) is a variation of the Employment Pass, and is the primary type of work pass for owners of newly incorporated (or to be incorporated) Singapore companies who wish to relocate to Singapore to operate their new business.

  • Validity: An EntrePass is initially issued for 1 year and renewable after that as long as the business remains viable.
  • Eligibility: Business owners who wish to incorporate a new company or have recently incorporated a company that is less than six months old. The business must fulfill one of the “innovativeness” conditions that were introduced in September 2013.
  • Quota System: There is no official quota system for EntrePass.
  • Permanent Residence Eligibility: Entrepreneur Pass holders are eligible to apply for PR in due course.

 

Personalised Employment Pass (PEP) Scheme

The Personalised Employment Pass (PEP) is a special type of Employment Pass that is not tied to a specific employer. The biggest benefit of having a PEP work permit is that you can switch jobs without re-applying for a new employment pass provided that you are not unemployed for more than six months. The biggest downside is that you are not allowed to start your own company as a PEP holder; since the pass is meant for you to be employed by a third-party employer. The eligibility requirements for PEP are quite strict.

  • Validity: PEP is issued for 3 years and non-renewable.
  • Eligibility: Well paid professionals who want to work in Singapore for an employer. PEP holders cannot start their own business in Singapore.
  • Quota System: There is no official quota system for PEP.
  • Permanent Residence Eligibility: PEP holders are eligible to apply for PR in due course.

 

S Pass Scheme

The S Pass is for mid-skilled employees who earn a fixed monthly salary of at least $2,200 (w.e.f. 1 July 2013). S Pass applicants are assessed based on employer’s quota eligibility and applicant’s qualifications. Instead of a degree, a technical diploma is acceptable for this kind of work pass.

  • Validity: S Pass is initially issued for 1-2 years (at the discretion of authorities) and is renewable after that as long as the applicant continues to be employed by the employer.
  • Eligibility: Mid-level technical staff.
  • Quota System: Yes. For more details on quota
  • Permanent Residence Eligibility: S pass holders are eligible to apply for PR; however, they may have to wait at least 4-5 years and have a stable job history in Singapore.

 

Miscellaneous Work Pass Scheme

The Miscellaneous Work Pass is issued to foreigners working in Singapore on short-term assignments. More specifically, you will be issued a Miscellaneous Work Pass if you are:

  1. involved in activities directly related to the organisation or conduct of any seminar, conference, workshop, gathering or talk concerning any religion, race or community, or political end;
  2. a foreign religious worker giving talks relating directly or indirectly to any religion; or
  3. a foreign journalist, reporter or an accompanying crew member not sponsored by any Singapore Government agency.

The other information about this scheme is as follows:

  • Validity: Short-term.
  • Quota System: No. Each application is considered based in its own merit.
  • Permanent Residence Eligibility: Miscellaneous Work Pass holders are not eligible to apply for PR.

 

Other Immigration Visa Schemes

Dependent Pass Scheme

A Singapore Dependent’s Pass (DP) is a family relocation visa issued to spouses and unmarried children (below 21 years) of Employment Pass holders with a fixed monthly salary of at least S$5,000.

 

Permanent Residence Scheme for Work Pass Holders

Holders of professional work passes are eligible to apply for permanent residence in due course.

EMPLOYMENT PASS

Singapore Employment Pass Scheme

Employment Pass (EP) is a type of work visa issued to foreign professional employees, managers, and owners/directors of Singapore companies. There is no quota system limiting the number of Employment Passes that can be issued to a company. This guide provides detailed information about eligibility requirements, application procedure, processing timeline, and other relevant details about the Singapore Employment Pass. In this document, the terms “Employment Pass” and “Employment Visa” are used interchangeably.

The Employment Pass (EP) is normally issued for 1-2 years at a time and renewable thereafter. An EP enables you to work and live in Singapore, and travel in and out of the country freely without applying for Singapore entry visas. Possessing an EP also opens the door for potential Singapore permanent residence in due course.

 

Singapore Employment Pass Eligibility Requirements

The current salary threshold for the Employment Pass is S$3,300 a month.
From 1 Jan 2017, the salary threshold will increase to S$3,600 a month. 

The key facts and requirements for an Employment Pass type of work visa consist of the following:

    • Aside from the minimum salary, the applicant’s educational qualifications and work experience are also key considerations for the MOM in granting the EP.
    • A tertiary degree from a reputable university and relevant professional experience is important. Applicants should be educationally qualified with qualifications from reputable institutions. In some cases, your strong professional employment history and good salary may compensate for lack of good education. Your proposed employment in Singapore must be relevant to your prior experience and education.
    • The minimum salary requirement of S$3,300 is typically applicable to fresh graduates from good quality educational institutions; whereas older applicants who are experienced will need to command higher salaries in order to qualify.
      From 1 Jan 2017, the salary threshold will increase to S$3,600. 
    • There is no official quota system. Each application is reviewed by authorities based on the credentials of the employing company and the applicant.

The above is a general guideline only and the EP application is still at the discretion of the authorities. Successful applicants can bring in their families, and whether a specific family member is eligible will depend on the salary threshold of the EP-holder:

For immediate family members (spouse and unmarried children under 21 years of age), EP-holders with a minimum fixed monthly salary of $5,000 can apply for a family visa called Dependant’s Pass. Usually, the Dependant’s Pass (DP) application will be approved automatically if the EP application is approved. You can submit DP application(s) at the same time or at any time after your EP application is approved. The expiry date of the DP(s) will be tied to the expiry of the EP.

For certain other family members (such as common-law spouse, unmarried handicapped children above 21 years old, and unmarried step-children under 21 years old), EP-holders with a minimum fixed monthly salary of $5,000 can apply for a type of long stay visitor visa called Long-Term Visit Pass. For parents of the EP-holder, the EP-holder must be earning a minimum fixed monthly salary of $10,000 in order to apply for the Long-Term Visit Pass (LTVP). Similar to the DP, the Long-Term Visit Pass (LTVP) application(s) can be submitted at any time after the EP application is approved, and the expiry date of the LTVP(s) will be tied to the expiry fo the EP.

 

Documents Required for Employment Pass

The following documents are required for submission of Employment Pass visa application in Singapore:

  • EP Application Form 8. This form must be endorsed by the Singapore employing company
  • A copy of resume detailing the applicant’s work experience
  • Copies of educational certificates and past employment testimonials
  • A passport-size photograph taken within the past three months
  • A copy of the personal particulars page of the applicant’s passport
  • Copy of business profile for the Singapore company
  • Detailed description of the duties to be performed by the applicant
  • Detailed description of activities and/or products of the company
  • Additional supporting documents may be required on as needed basis

Any documents that are not in English must be officially translated into English.

 

Employment Pass Application Procedure and Timeline

Completed applications along with the required documents must be submitted to Singapore’s Ministry of Manpower (MOM) – the government body that processes EP applications. The application can be filed manually or online. The online application is generally quicker (if the company has already registered their EP Online Account), but an online application does not allow for attachment of all the supporting documents.

For an online application, once filed, the normal processing time can vary between 1-10 working days depending on the credentials of the employing company and the qualifications of the applicant. For a manual application, the MOM’s processing time can be anything from 3-6 weeks from the date of submission.

Please keep in mind the time frame for the overall application procedure can vary from a few days to a few weeks, depending on a number of different factors (such as the availability of the applicant’s documents, whether the application is submitted online or manually, etc.).

 

Approval and Collection of Employment Pass

When your Employment Pass visa application is approved, MOM will send an In-Principle-Approval (IPA) letter to the employing company’s address as specified in the completed application form. The letter has a 6-month validity and you should collect your Employment Pass before this time expires. You will need to come to Singapore to collect your Pass.

In order to issue the EP, MOM requires a copy of the IPA letter, passport, medical exam report, and any other documents that may be requested in the IPA letter. You may have to go through a medical test and produce the report when collecting your Employment Pass. The IPA letter will indicate whether or not you are required to go through a medical test (along with the list of tests). You can get the medical tests done in your own country through an established clinic/hospital, or you can get it done when you arrive in Singapore.

If you are overseas and require an entry visa, a one-time entry visa will be issued to you as part of IPA letter so you can enter Singapore and collect your Employment Pass. If you had applied for Dependant’s Passes and/or Long-Term Visit Passes for your family, you can collect these at the same time when collecting your EP.

Word of caution: An EP application is not approved as a matter of course, but is subject to review and approval by authorities. Therefore you should not make any relocation plans until you have received an In-Principle-Approval of your application.

 

Handling Employment Pass Rejections

The fact is that not all EP work visa applications are approved. MOM takes into account the applicant’s qualifications, work experience, and employer credentials when approving or rejecting applications. If the initial application is rejected, we will explore the reasons with MOM and, if appropriate, we will submit the appeal by addressing the issues raised by authorities. If the additional details submitted are satisfactory to MOM, your application will likely be approved. The processing of an appeal application can take 4-6 weeks.

 

Employment Pass Renewal Procedure

Generally three months before your EP is due to expire, an Employment Pass Renewal Form will be sent to your employer’s registered address. The renewal application should be completed and submitted to MOM at least four weeks before the pass expires. If your renewal application is approved, your employer will receive an approval letter. You will need to visit MOM office to collect your new Employment Pass.

 

 

FAQ

How can the Employment Pass be renewed or cancelled?

Renewals

Approximately 3 months before the expiry of EP, authorities will send a Renewal Notice to the Employer’s registered address. The renewal application should be completed and submitted to MOM at least 4 weeks before the pass expires. After the renewal application is approved, the employer will receive an approval letter. Normally there shouldn’t be any issues with the renewal as long as you are still employed with the company and haven’t violated any conditions of the EP. You should specially take note of the following:

  • The EP-holder should not engage in any other employment. Nor you should act as the director of any other company (unless you have secured approval from the MOM).
  • If there are any changes in the employment particulars and personal particulars (such as duties performed, salary revisions, change of designation, change of residential address, marital status, nationality, name, etc.), you or your employer is required to notify the authorities accordingly.

Cancellation

The employer has to cancel the Employment Pass within 7 days upon termination of employment. The EP holder will typically be given a 1 month social visit pass upon cancellation of the EP.

 

How long does it take to process Employment Pass?

When the Employment Pass application is filed online, it takes anywhere between 1 to 10 working days to receive the outcome notification from authorities. It may take longer during peak periods or when additional information is required from the various economic agencies.

When the Employment Pass application is filed manually, it takes anywhere between 3 to 6 weeks to receive the outcome notification from authorities. It may take longer during peak periods or when additional information is required from the various economic agencies

So why would anybody file an application manually?

When filing an application online, only very minimal information can be entered into the system and no supporting documents can be uploaded. This may not be a good idea for cases where the supporting documents can significantly enhance the chances of a positive outcome. We make the decision to file online or manually after carefully reviewing the client’s application and situation, and in consultation with the client.

When thinking about the timeline, keep in mind the following:

  • The company must be incorporated first before Employment Pass can be applied for. This can take anywhere from couple of days to couple of weeks depending on whether you are present in Singapore or overseas.
  • If you intend to submit the application online, and if the company is newly incorporated, the MOM will need to be prompted of the company’s particulars in order to activate the EP-Online system. This process can take up to 14 days from the day of notification to the MOM.
  • It may take certain amount of time for you to provide us with the completed application and supporting documents before we can file the application.
  • After the pass is approved, there are still certain formalities that will need to be taken care of such as the medical examination, the appointment for fingerprinting registration, collection of the pass, etc, which may take few more days.

 

As a company shareholder can I apply for Employment Pass?

If your company is less than 6 months old:

 

  • If you hold more than 30% shares, the authorities may ask that you apply for Entrepreneur Pass (EntrePass) instead of Employment Pass (EP). However if you prefer to apply for Employment Pass, it is still possible. In this case, authorities will review your EP application and may approve your EP or advise you to apply for EntrePass instead if they determine that the EntrePass is more appropriate in your situation.
  • If you hold less than 30% shares, you can apply for the Employment Pass.
If your company is older than 6 months:
  • You can only apply for Employment Pass

 

Does our company require a resident director service if we are applying for Employment Pass?

This situation applies to foreign individuals or companies who intend to incorporate a Singapore company and relocate to Singapore. As per Singapore Companies Law, each company must have at least one director who is ordinarily resident in Singapore. Therefore you will need to use a resident local director service on a temporary basis until your Employment pass is approved. Once your Employment Pass is approved and you have relocated to Singapore, you can replace the resident director with yourself as the local director in the company.

 

Can I apply for Employment Pass prior to incorporating my company?

No, unfortunately that’s not possible. Your company must be incorporated first before you can apply for Employment Pass.

 

Do Singapore work visa holders need to contribute to CPF (social security fund)?

No. Neither employment pass holders nor their employers (on behalf of EP holders) are required to make CPF or any other statutory fund contributions. CPF contributions are required only for Singapore citizens and permanent residents. CPF was established in 1955 and is basically a savings scheme to provide protection for locals (Singapore citizens and permanent residents) in their old age.

 

Is a medical test required when applying for work pass in Singapore?

When your Singapore work visa or permanent residence application is approved, authorities may require you to undergo a medical test. You will receive an approval letter that will indicate whether or not you are required to go through the medical test. Typically, the medical test includes a physical examination and some blood tests (to rule out serious diseases) and would usually require you to undergo an HIV Test and a Chest X-Ray. The physician would need to sign a form that will be attached to the approval letter.

For getting the medical tests done, we encourage you to come to Singapore and go to any clinic or hospital where they can give you the report on the same day.  Wherever you go for your medical examination, if time is of the essence to you, make sure you confirm when the report will be ready before you proceed with the exam. Also, make sure to check the approval letter on the latest government policies regarding the medical test.

If you would like to get your medical test done in your home country, you can do so through a reputable clinic/hospital and bring the report with you when you arrive in Singapore. Please be mindful that the medical report must be in English.

 

What are my chances of success with Employment Pass application?

The chances of an Employment Pass application depend on the credentials of the company and the credentials of the individual applicant. We will be able to advice you further once we are in touch with you.

ENTREPRENEUR PASS

Singapore Entrepreneur Pass (EntrePass) Scheme

The Entrepreneur Pass (EntrePass) scheme was launched in 2004 to lure foreign entrepreneurs with innovative business proposals. It is part of Singapore’s overall plan to become a regional business hub and attract the best business and entrepreneurial minds to the country. The terms “EntrePass” and “Entrepreneurs Visa” both refer to the Entrepreneur Pass scheme and are used interchangeably in this guide.

 

Introduction

The EntrePass scheme is designed for foreign entrepreneurs who wish to start a business and relocate to Singapore.

An application for EntrePass can be made before incorporating the Singapore company, and you would not be required to incur incorporation expenses until the outcome of the EntrePass is known. Once the pass is approved, you will generally be given 30 days to incorporate the proposed company and inject the necessary share capital.

The EntrePass allows you to bring your family (spouse and unmarried children under 21) to Singapore by applying for their Dependant’s Passes. EntrePass holders are eligible to apply for Singapore permanent residence in due course.

 

EntrePass Eligibility Requirements

In general, any foreigner above the age of 21 and with the requisite qualifications is eligible to apply for the EntrePass. The EntrePass scheme will be appropriate for you under the following conditions:

  • You wish to establish a business in Singapore and relocate to Singapore to run it. The proposed business idea must be entrepreneurial and innovative in nature, and able to create local employment.
  • You have an entrepreneurial and/or relevant background.
  • You plan to register your business as a Singapore private limited company and not as a sole proprietorship or partnership.
  • You have not yet incorporated your company, or the company is not more than six months old at the time of EntrePass application.
  • You plan to have at least 30% shareholding in the proposed business.
  • The company will have a minimum paid-up capital of S$50,000.
  • You are sponsored by a well-established Singapore-registered company or are able to furnish a Banker’s Guarantee of $3,000 issued by a Singapore-based bank upon approval of application.

In addition to the above, you must also fulfill at least one of the new “innovativeness” conditions:

  • The company is receiving monetary funding or investment of at least S$100,000 from a third-party Venture Capitalist (VC) or angel investor accredited by a Singapore Government agency.
  • The company holds an Intellectual Property (IP) that is registered with a recognised national IP institution.
  • The company has on-going research collaboration with an institution recognised by Agency for Science, Technology and Research (A*STAR) or Institutes of Higher Learning in Singapore.
  • The company is an incubatee at a Singapore Government-supported incubator.

 

Documents Needed for EntrePass

To apply for Entrepreneur Visa, the following documents are required:

  • Completed EntrePass application form
  • Documentary evidence to prove that you fulfill  one of the “innovativeness” requirements
  • A business plan in the prescribed format
  • A copy of your company’s bank statement showing funds of at least S$ 50,000, if the company is incorporated prior to the submission of application
  • A copy of your company’s latest business profile printout, if incorporated already
  • A passport-sized photograph taken within the past three months
  • A copy of the personal particulars page of your passport
  • Documentary evidence of your previous employment(s) and/or business venture(s), if any
  • Copies of your educational certificates, if any
  • Other documents that can be useful to solidify your application include licensing agreements, MOUs with potential customers/suppliers, product certifications, endorsements, etc.

All documents submitted must be in English or translated into English by a certified translation body. Your EntrePass business visa application must be sponsored by a Singapore-registered company or you will also be asked to provide a banker’s guarantee of S$3,000 upon approval of the pass (we will sponsor your application when you engage our service).

 

Business Plan for EntrePass

Along with your EntrePass application form, you will need to furnish a comprehensive yet concise business plan of about 10 pages in a prescribed format as below:

  • Business Idea: a short, self-explanatory summary covering your proposed business concept.
  • Product/Service: details of product(s) and service(s) you are offering.
  • Market Analysis: analysis of your industry potential in Singapore, target customers, key competitors, and potential for growth
  • Marketing Plan: description of how the product/service will be marketed or distributed.
  • Operational Plan: the operational plan description deals specifically with the internal operations and resources necessary to produce your product or service.
  • Management Team: summary of key management individuals who will run the business along with their roles.
  • Financial Projections: projected sales and net profit before tax for three years and the estimated break even point.

It’s useful to note that the EntrePass business plan is usually not the same as you would prepare when planning to raise, for example, venture funding for the business. Instead, it’s a simplified version and often the complexity will depend on the nature and size of the business you are planning to start. Still, preparing a good business plan might take considerable amount of your time and writing might not be your forte. When you engage our EntrePass application filing service, we will draft the business plan based on the information gathered from you.

 

EntrePass Application Procedure and Timeline

Once your EntrePass application, along with supporting documents, is ready, it must be filed with Singapore Ministry of Manpower (MOM). Your application will be reviewed by two government bodies – SPRING (Standards, Productivity and Innovation Board Singapore) Singapore and MOM. The application process works as follows:

  • The application is submitted to MOM.
  • Once submitted, the processing of Entrepreneur Pass application on the average takes about 6-8 weeks.
  • If your application is successful, you will be issued an Approval In-Principle (AIP) letter, after which you have 30 days to register your Singapore company, open a corporate bank account and inject the necessary share capital (assuming the company has not been registered yet).
  • MOM will require you to submit proof of company registration (ACRA business profile), and the injection of the minimum paid-up capital in the corporate bank account, before they can issue you a final approval letter (In-Principal Approval, or IPA, letter).
  • You may be required to go through a medical test and produce the medical report when collecting your EntrePass. Whether or not you need to go through a medical test will be mentioned in the IPA approval letter (along with the list of tests). You can get the medical tests done in your own country through an established clinic/hospital or you can get it done when you arrive in Singapore.
  • Once the final IPA approval letter has been issued, you must relocate to Singapore within 6 months of the approval date. If based on your nationality you require an entry visa to Singapore, a one-time entry visa is normally issued to you as part of the EntrePass approval letter.
  • If you had applied for Dependant’s Passes (DP) for your family, you can collect the DPs at the same time when collecting your EntrePass.

Within the first 6 months of receiving your EntrePass, you will be required to submit the latest ACRA business profile together with either the tenancy contract (as proof of operative address) or employee’s CPF statement to verify on-going business operations in accordance to the submitted business plans.  Failure to submit the documents at the end of the 6-month period will result in revocation of the EntrePass.

 

Company Registration Matters

You are not required to incorporate your new Singapore company until the EntrePass visa is approved. This works really well for those entrepreneurs who are less confident of their approval chances and don’t want to incur company registration expenses unless they are sure that they will be able to relocate to Singapore to run their business.

Once you have received Approval-In-Principle (AIP) letter from authorities, you will be required to register your Singapore company and open the corporate bank account within 30 days. This is usually not a problem because a company in Singapore can be registered in just 1-2 days.

 

Rejection Of EntrePass Application

If a) you meet the EntrePass eligibility requirements; and b) you have a good business background; and c) your business can create local employment opportunities, it’s unlikely that your entrepreneur visa application will be rejected. However, if your application gets rejected, an appeal can be filed within 90 days.

The processing of an appeal application can take another 4-6 weeks.

Do note the following example of businesses will not be considered for the EntrePass:

  • Coffee shops, hawker centres, food courts
  • Bars, night clubs, karaoke lounges
  • Foot reflexology, massage parlours
  • Traditional Chinese medicine (TCM), acupuncture, herbal dispensary
  • Employment agencies, geomancy

 

Should You Hire A Professional Firm?

It depends. If you are tight on budget and have the necessary time and experience to deal with preparing the business plan, going through application forms/requirements, submitting an appeal in case of rejection, etc., you can file the EntrePass application on your own. In all other cases, hiring a reputable professional firm to handle your EntrePass application will be a better choice for the following reasons:

  • An experienced professional firm will assist you in making sure that all the required and supporting documents are included and completed accurately so that delays are minimized and  your chances of application approval are maximized.
  • The firm will help you prepare the business plan as prescribed by authorities. Normally, you will need to give them the information about your proposed business venture and they will be able to draft a business plan accordingly.
  • The professional firm will sponsor your entrepreneur pass application so you won’t be required to provide S$3000 banker’s guarantee to authorities.
  • The firm will submit and track your application status with authorities, explore the reasons in case your application is rejected and file an appeal, if necessary.

Note, however, that the granting of an EntrePass is not as a matter of course but subject to review and approval by government authorities. A professional firm does not have any authority in the approval/rejection process.

 

EntrePass Renewal Guidelines

The Entrepreneur Pass is issued for one or two years at a time, which is decided solely by the authorities. Generally 3 months before its expiry, a renewal form will be sent to you by MOM. You should file the renewal application approximately two months before it expires. EntrePass renewal applications usually require the following documents (or as listed in the renewal reminder letter):

  • Latest copy of business profile from ACRA.
  • Latest audited accounts.
  • Highest educational certificates of local employees. Note that the local employees need to possess at least National Technical Certificate (NTC2), National ITE Certificate (NITEC) or vocational qualifications obtained after at least two years of full-time studies.
  • CPF statements for the employees.
  • Office Tenancy Agreement.
  • Other documentary evidence on the company’s activities such as office rental agreement, referral letters from clients, invoices issued, and/or contracts awarded. Note that the authorities want to make sure that you are actively doing business and that it’s not just a paper company.

The business venture has to be conducted based on the original declared business plans, in order to qualify for renewal.

For existing EntrePass holders who had applied for EntrePass before 1 September 2013, the criteria to be observed prior to 1 September 2014 are as follows:

ENTREPRENEUR PASSHOLDER

For all successful EntrePass applicants who submitted their application after 1 September 2013, there is a progressive renewal criteria to be observed, as follows:

ENTREPRENEUR PASSHOLDER RENEWAL

Additional Notes:

  • The processing time for renewals is at least 4-6 weeks
  • Local jobs created refers to full-time employment of Singaporeans and PRs for at least 3 calendar months, under a contract of service with monthly salary and CPF contributions at prevailing salary threshold for full-time employees.
  • Total Business Spending (TBS) = [Total Operating Expenses – (Royalties/Franchise Fees/Know How Fees to Overseas Companies + Work Subcontracted to Overseas Companies + Remuneration to Applicant & Immediate Family)]

From 1 September 2014, ALL EntrePass holders are required to meet the progressive renewal criteria as described in the above table.

 

From EntrePass to Permanent Residence

EntrePass holders are eligible to apply for permanent residence in due course, which is subject to approval by the Singapore immigration authority. When you file your PR application, you should demonstrate that you are running a viable and innovative business, and that you will not become a financial burden on Singapore.

 

 

FAQ

How long does it take to process EntrePass application?

A rough timeline is as follows:

  • It takes about 2 weeks to draft the business plan and prepare the Entrepass application for filing.
  • Once filed, it takes authorities approximately 6-8 weeks to review the application and notify of the outcome.
  • The authority will issue you an Approval In-Principle (AIP) letter, after which you have one month to incorporate the company and inject the capital. Depending upon whether you are located in Singapore or overseas during this time, this process may take anywhere from a couple of days to a couple of weeks. The AIP deadline may be extended, subject to the authorities.
  • Once the authorities have been notified of the company incorporation and capital, they will take approximately 2 weeks to send the final approval letter (In-Principal Approval), after which you have 6 months to visit Singapore and collect your EntrePass.

 

Will you prepare a business plan for my EntrePass application?

Yes, as part of our EntrePass application filing service, we will draft a business plan for you. However, you will need to provide us the details of your proposed business venture, including evidence that you fulfill one of the innovativeness criteria.

 

I own more than 30% of a company. Should I apply for EntrePass or Employment Pass?

See below:

  • If you want to apply for a work visa before incorporating your company, you can only apply for the Entrepreneur Pass (EntrePass).
  • If you have a company and it is less than 6 months old, the authorities would usually recommend that you apply for EntrePass (not Employment Pass). Nevertheless, it is still possible to apply for an Employment Pass, and this is subject to the authorities.
  • If your company is more than 6 months old, you can only apply for Employment Pass. In this situation, the authorities will look into how active your company has been since incorporation and may ask for the company accounts, contracts, etc.

 

What are important factors for the success of EntrePass application?

Key factors include:

  • The quality of your business idea. Is it entrepreneurial in nature? Will it generate local employment? Does it have the potential to grow big?
  • The “innovativeness” of your business idea.  Do you have substantial funding from a venture capitalist or accredited angel investor? Are you undergoing any research collaboration with a recognized institution? Are you part of any incubation scheme in Singapore?
  • Your personal credentials. Do you have qualifications to pursue the proposed business idea? Is your previous experience relevant to the proposed business idea?
  • Proposed investment. How much money are you planning to invest into the business? Is it your personal money or borrowed money? Note that the minimum required amount is S$50,000.

 

Who is eligible to apply for Entrepreneur Pass?

Foreign owners of a newly incorporated Singapore company who will be relocating to Singapore to manage their company operations should apply for the Entrepreneur Pass, also known as EntrePass. You can apply for the EntrePass either before incorporation of the company or after the company has been incorporated (within 6 months of incorporation). If you are incorporating a Singapore company but don’t plan to relocate to Singapore to run your company, you do not require an EntrePass.

 

Is a medical test required when applying for EntrePass?

When your Singapore work visa or permanent residence application is approved, authorities may require you to undergo a medical test. This will be indicated in your approval letter. Typically, the medical test includes a physical examination and some blood tests (to rule out serious diseases) and would usually require you to undergo an HIV Test and a Chest X-Ray. The physician would need to sign a form that will be attached to the approval letter.

For getting the medical tests done, we encourage you to come to Singapore and go to any clinic or hospital where they can give you the report on the same day.  Wherever you go for your medical examination, if time is of the essence to you, make sure you confirm when the report will be ready before you proceed with the exam. Also, make sure to check the approval letter on the latest government policies regarding the medical test.

If you would like to get your medical test done in your home country, you can do so through a reputable clinic/hospital and bring the report with you when you arrive in Singapore. Please be mindful that the medical report must be in English.

 

I am not a shareholder in the company. Can I apply for EntrePass?

No. If you are not a shareholder or have less than 30% shares in the company, you cannot apply for Entrepreneur Pass (EntrePass). You can, however, apply for Employment Pass, assuming that you are going to be employed by the company.

 

Do I need to visit Singapore to apply for EntrePass?

No, you are not required to visit Singapore to apply for EntrePass. We can work with you via emails and document couriering in order to get the necessary work done. However, once your EntrePass is approved, you will need to visit Singapore to collect your EntrePass. You are also expected to relocate to Singapore after the Entrepass has been issued to you.

 

What is the definition of “total business spending” criterion for assessing EntrePass renewals?

Total Business Spending (TBS) is the total operation expense as indicated in the audited financial statements, except for: (a) royalties/franchise fees/know how fees to overseas companies; (b) work subcontracted to overseas companies; and (c) remuneration to applicant and immediate family.

 

Can I apply for an EntrePass with a longer validity period beyond 1 year?

A newly issued and renewed EntrePasses would be valid for a period of up to one year. If the applicant needs a longer duration, he or she will need to put forth the reason and it can be looked into on a case by case basis.

 

I am an existing EntrePass holder. Will I need to meet the new “innovativeness” criteria?

No. Existing EntrePass holders can continue to operate their businesses without the need to meet the innovativeness criteria. However, please note that you will need to ensure that you apply for renewal on time. If you are late in your application for renewal of your pass, you will be subjected to the new criteria.

 

If I have secured investment from a venture capitalist, how can I prove “innovativeness”?

You will need to provide a shareholder certificate as evidence of the investment by the venture capitalist (VC). If the company is not yet incorporated, the MOM may accept contractual agreements and may request for other documents to verify the commitment. Please be reminded that the VC must invest at least $100,000 into the company. It is advisable to seek confirmation from MOM as to whether the VC is recognized by them for purposes of the EntrePass.

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