This article was originally published by Patrick McGonagle and his team at Singapore-based corporate services provider, Duellix.
When it comes to establishing and growing a successful business, choosing the right location for incorporation is one of the first decisions you want to get right. Among the many options available, Singapore stands out as a great choice for entrepreneurs and companies alike.
Why incorporate a business in Singapore?
With its strategic location, pro-business environment, robust financial sector and extensive government support, Singapore offers many advantages that make it an ideal destination for incorporating your business.
- Strategic Location: Singapore is located in the heart of Southeast Asia, which is the ideal gateway to the region's rapidly growing markets. Its infrastructure, stable political regime and connectivity make it an excellent base for expanding into other markets. In addition to this the country has signed numerous free trade agreements (FTAs), facilitating trade and providing preferential access to larger markets around the world. It also provides easy access to China, India, ASEAN, Australia and New Zealand, as well as rapidly expanding nations like Indonesia, Malaysia, Thailand, and Vietnam.
- International Reputation: Singapore has gained a strong international reputation as a business and financial hub. Its reputation for stability, transparency, and the rule of law attracts global investors and business partners, while its stable political climate, strong governance and well-established legal system make it a secure and commerce-friendly place to do business. Read more >.
- Ease of Doing Business: Singapore boasts an efficient and transparent regulatory system, which makes it relatively easy to set up and operate a business. The company incorporation and filing processes are easy and straightforward, and most residents complete their individual tax returns online in a matter of minutes. The ability to carry out government related interactions through online platforms helps the ease of compliance in Singapore, and unlike in other parts of the world, it’s possible to pick up the phone or schedule an appointment to speak to a government representative in person. Read more >
- Favorable Corporate Taxation System: Singapore offers a competitive tax regime with attractive incentives for businesses. The corporate tax rate is capped at 17%, and all newly incorporated companies enjoy significant tax exemptions. Additionally, Singapore has double taxation avoidance agreements with many countries, reducing the tax burden on international business activities and allowing 100% foreign ownership of companies incorporated in Singapore. Read more >
- Competitive Personal Taxation: Although the cost of hiring has increased in recent years, the income tax rate is one of the lowest in the developed world, with a top tax rate of 24% for people earning over $1m. If you’re building a team in Singapore, this can help you attract talent, as can the absence of capital gains tax, which will favour founders and employees who own shares in businesses. Read more >
- Tax Incentives: As well as providing competitive rates, Singapore’s tax system offers various incentives to encourage entrepreneurship and investment. Notable tax incentives include:
- Start-Up Tax Exemption (SUTE): Eligible startups can enjoy full tax exemption on the first SGD 100,000 of chargeable income for each of the first three consecutive years of assessment. Additionally, a 50% exemption is available on the next SGD 100,000 of chargeable income.
- Partial Tax Exemption (PTE): After the initial three years of tax exemption under SUTE, startups can qualify for PTE, which provides a 75% exemption on the first SGD 10,000 of chargeable income and a 50% exemption on the next SGD 190,000.
- Tax Exemption for Foreign-Sourced Income: Singapore offers a "Foreign-Sourced Income Exemption" (FSIE) scheme, which allows qualifying companies to enjoy tax exemption on certain foreign-sourced income. This scheme helps companies that have expanded overseas or have foreign operations. Read more about tax incentives >
- Access to Funding and a Buoyant Financial Sector: Singapore has a well-developed financial sector with a strong banking system. There is also a thriving community of local and international investors, venture capital firms and private equity funds, which together provide funding opportunities for both startups and more established companies. Read more >
- Intellectual Property Protection: Singapore has strong intellectual property laws and a robust legal framework for the protection of trademarks, copyrights, and patents. This allows businesses to innovate, create, and protect their intellectual assets in Singapore with confidence. It’s also why Singapore was ranked second for IP protection in the 2014 – 2015 World Economic Forum Global Competitiveness Report. Read more about IP protection >
- Government Support and Incentives: The Singapore government offers various support programs, grants and incentives to promote both business growth and foreign investment into Singapore. For example, the Enterprise Development Grant (EDG) helps businesses subsidise qualifying project costs in areas like market access, productivity improvement and innovation. The Productivity Solutions Grant (PSG) offers funding for adopting pre-approved digital solutions and productivity-enhancing equipment. These grants tend to come with certain eligibility criteria, including 30% local equity held directly or indirectly by Singaporean(s) and/or Singapore PR(s). Foreigners looking to expand into or invest in Singapore will usually work with the Economic Development Board (EDB), whose mission is to create sustainable economic growth, vibrant business and good job opportunities for Singapore. If you can demonstrate a clear economic benefit to the country, get in touch with the EDB and ask for help. Their Investment Facilitation Division will be able to engage and assist you with growth plans in Singapore and advise on relevant government schemes.By taking advantage of Singapore's ecosystem of opportunities, businesses can thrive, access regional markets, secure funding, attract top talent, and enjoy a favourable regulatory environment.
How do you incorporate a business in Singapore?
Although Singapore permits foreigners to own 100% of a Singapore-based entity, to set the business up you’ll need the help of a Singaporean or Permanent Resident (PR), or to enlist a service provider like Duellix, which has access to the right information and government portals.
Here’s the process, as outlined by partners at Duellix:
Step 1: Pick a company name.
Search for the name on the ACRA portal. You can do this yourself. If the name doesn’t already exist you’re good to go and can register it.
Step 2: Register the company name with ACRA.
For this you’ll need the help of a local service provider. They’ll register the name of your entity and state the type of business you’ll be carrying out. They’ll also produce the necessary documentation (including company constitution) and issue the company’s shares.
Step 3: Set up a bank account and capitalise the business.
Every company registered in Singapore requires capital. There’s no formal minimum amount, you can start with as little as $1, but if you intend to apply for Employment Passes for yourself and/or your employees, you should inject enough capital to demonstrate that the business can afford to pay the salaries it’ll owe to EP holders for a year, however, your chances of getting EPs approved increased with the amount of capital you deploy. There’s no need to maintain this amount on an ongoing basis - it’s really a one-time injection to assist with the incorporation process. There are many local banks, but the most popular with overseas founders are DBS, UOB, Maybank and Aspire. Each bank has its own charges and minimum balance requirements, but most corporate service providers can help you pick a bank that will suit your needs.
Step 4: Appoint a local director.
Every Singapore-based company needs a local director. Most, if not all, corporate services businesses will provide this, for a fee, but what some will not tell you is that you can become the local director yourself if and when you become a resident of Singapore, even if it’s by way of an Employment Pass. The best option seems to be to use a service provider to get you up and running, but take over the local directorship yourself once your visa comes through. If you don’t intend to be in Singapore yourself, your service provider will happily maintain this on your behalf.
Step 5: Appoint a corporate secretary.
All Singapore companies also require a corporate secretary. It is their job to help you with all ACRA-related administration (documentation, address changes, officer appointments, shareholder resolutions, share issuances, etc.) and to make sure you comply with Singapore’s rules and regulations.
Step 6: Specify a company address.
This is another requirement, although there’s no need to rent a brick-and-mortar space from day one. If you don’t have your own office you can simply rent and designate a virtual address. Take your time to pick the right partner here, though – switching is more painful and expensive than you might expect. Much better to pick an address that will stand the test of time. Been there, done that!
Step 7: Apply for a working visa.
If you’re planning to move to Singapore (or you’re there already in another capacity), you’ll need a valid working visa. This is increasingly difficult to achieve. As Singapore’s economy continues to expand, the government’s focus, quite rightly, is turned more and more to supporting its citizens. This means foreigners have to meet certain criteria in order to qualify.
Here are the most common options for visas along with hurdles, courtesy of our friends at WeNetwork Singapore:
- Employment Pass.
The most common solution is to apply for an Employment pass (EP). For this minimum salary requirements apply (which are regularly updated and depend on your experience, industry and seniority). Typically this minimum will fall between $5,000 and $11,500 per calendar month (N.B. Singaporeans always state their monthly salary, unlike the UK and US, where salary is usually an annual figure).
- The Entrepreneur Pass (EntrePass).
For the EntrePass there is no minimum salary requirement, but there are other limiting factors. For example, unlike with an Employment Pass, you cannot bring your dependents to Singapore on your EntrePass. Instead, this visa is aimed at serial entrepreneurs, who have either raised more than $100,000 in funding, are part of a recognised incubation programme), have achieved a notable innovation (for example holding protected IP) or are investors, with a proven track record of contributing to successful businesses.
- The Overseas Network and Expertise Pass (ONE Pass).
The ONE pass is a relatively recent addition and comes with the highest hurdles of all. Applicants either need a salary of no less than $30,000 per calendar month (last year and next) or can demonstrate specific outstanding achievements.
Step 8: Transfer directorship to yourself.
Once your business is up and running and you have the right visa, you can replace the nominee and step into the company as its sole resident director. As mentioned before, not all service providers will make this clear – some seem happy to continue earning their local director fees – so it can pay to be clear that this is what you want to do.
That’s all you need to know about incorporating a company in Singapore. Having run multiple companies based there, we cannot recommend it highly enough. It’s a great place to do business, and an even better place to live.
See you there sometime!
Thanks to Patrick and Dan from Duellix for giving us permission to publish their article here. Find the original here.