Company formation:
Singapore

Singapore, a global financial hub, offers an environment ripe for businesses, characterized by a robust economy, strategic location, and growth-oriented policies.

The Republic of Singapore, renowned for its pro-business approach, strategic geographical location, and robust legal system, stands as a beacon for entrepreneurs worldwide. Its commitment to fostering innovation, coupled with a well-established infrastructure and a transparent regulatory environment, renders it a top choice for setting up businesses. Moreover, Singapore’s strategic placement in the heart of Southeast Asia provides effortless access to booming markets, further amplifying its allure for global businesses.

Why opening a company in Singapore?

Opening a company in Singapore is an appealing proposition for numerous reasons. Its stable political environment, seamless processes for business registration, and welcoming stance towards foreign investments make it particularly attractive. Additionally, the fiscal options provided by the local government are well-suited for both startups and established conglomerates, allowing for a conducive environment for growth and expansion.

Advantages

As an international business hub, Singapore offers a compelling blend of factors conducive to business. Entrepreneurs and established enterprises alike find it an attractive destination for their ventures.

Disadvantages

Despite the plethora of advantages, Singapore also presents certain challenges for businesses. It’s important for entrepreneurs to understand these potential pitfalls as well.

Most popular sectors to set up a company in Singapore

Popular sectors for setting up a company in Singapore include financial services, shipping, IT and software development, tourism, and biotechnology. Singapore’s strategic position as a shipping and financial hub, combined with its advanced infrastructure, makes it ideal for these sectors.

Fiscal system in Singapore

Singapore’s fiscal system is characterized by its transparent and competitive tax rates. It is designed to attract and retain both local and foreign businesses.

Taxes

Singapore offers one of the most efficient and attractive tax systems in the world. Personal income tax rates are progressive, starting from 0% and capped at 22% for residents. For corporations, the headline corporate tax rate is 17%, but with available exemptions, the effective tax rate can be much lower. Additionally, numerous tax incentives are available to promote business innovation, expansion, and growth. These incentives, available to both local and foreign businesses, vary by industry and the nature of the activity. Moreover, Singapore has no capital gains tax, and its dividend tax policy is framed to prevent double taxation. The tax year is the same as the calendar year, and filing tax returns is an annual obligation.

VAT in Singapore

In Singapore, the VAT system is known as the Goods and Services Tax (GST). It’s a consumption tax levied on the import of goods and services. The standard rate is 7%, but there are plans for its increase in the near future.

CFC Rules

As of now, Singapore does not have specific Controlled Foreign Company (CFC) rules. This means companies registered in Singapore but generating income overseas are not subjected to local taxes on that foreign-sourced income, unless it’s repatriated to Singapore.

Requirement

Local director

Every company incorporated in Singapore must have at least one director who is a resident of Singapore. This could be a Singapore Citizen, a Permanent Resident, or someone holding a valid employment pass/dependent pass.

Local secretary

All companies in Singapore are required to appoint a company secretary within six months of incorporation. The secretary must be a resident of Singapore.

Annual return

Companies in Singapore are mandated to file an annual return with the Accounting and Corporate Regulatory Authority (ACRA). This is a mandatory requirement to ensure that the company’s details are current and updated.

Audited accounts

Private limited companies in Singapore need to have their accounts audited every year. However, exempt private companies (EPCs) with an annual revenue of less than S$5 million are exempted from audit requirements.

Company types in Singapore

Private Limited Companies

In the vivacious economic landscape of Singapore, Private Limited Companies (Pte Ltd) establish themselves as a prominent figure, accommodating both the swelling tide of enthusiastic entrepreneurs and the discerning veterans of the business world. Being the most prevalent type of business incorporation, Pte Ltd companies cater to a vast array of industries and sizes, offering a versatile platform for business operations.

The fundamental allure of opting for a Private Limited Company resides in its ability to confer limited liability upon its shareholders. This quintessential trait, which ensures that the personal assets of the shareholders remain insulated from business debts and liabilities, invariably magnetizes investors and business owners who seek a secure and risk-mitigated environment for their capital.

Moreover, a Pte Ltd offers a perpetuity of existence, ensuring the business entity continues to operate, undisturbed by alterations in the ownership or demise of shareholders. This continuous succession allows the entity to retain its business relations, contracts, and operational integrity throughout any unexpected occurrences.

Such stabilities and securities pave the way for an advantageous financial milieu, thereby enabling the company to attract investments and enhance its credibility amongst clients and competitors alike. Furthermore, Pte Ltd entities often find themselves amidst lucrative tax incentives, enjoying exemptions and breaks that substantially bolster their financial robustness.

Public Limited Companies

Embarking on the journey through the extensive and open realms of the Singaporean economy, Public Limited Companies (Plc) navigate through the vast oceans of public funding and diversified ownership. This form of incorporation doesn’t merely grapple with extensive capital requirements but also basks in the amplified scrutiny of the public and regulatory bodies, perpetually in the pursuit of transparent and equitable operations.

The inclusion of the public as a pivotal stakeholder inherently widens the capital horizon for Public Limited Companies, thereby providing them with the formidable capability to undertake substantial projects and investments. The allure of voluminous capital is juxtaposed with an intricate web of regulations and compliances, designed meticulously to safeguard the interests of the unsuspecting public.

Elegantly parading through the Singapore Stock Exchange, Plcs not only garner monumental financial support but also subject themselves to the watchful eyes of analysts, investors, and regulators. This dynamic interaction stimulates an environment where corporate governance and transparent operations don’t merely survive but thrive.

An intrinsic characteristic that delineates Plcs from their private counterparts is their ability to invite the general public to invest in their shares through the stock exchange. This characteristically dual-edged sword not only procures extensive capital but also necessitates stringent adherence to regulatory compliances, ensuring that the entity operates with utmost transparency and integrity, perpetually under the magnifying glass of public scrutiny.

General Partnership

A General Partnership in Singapore is a business structure whereby two or more individuals join forces to conduct business for profit. Engaging in this form of incorporation naturally incurs no minimum capital requirement, as it is not a separately legal entity. The entrepreneurs involved are personally responsible for the business debts and liabilities.

This form of incorporation is often adopted by professionals and small business owners who intend to jointly manage the company and share in its profits and losses. The primary motivation behind opting for a General Partnership may stem from its relative simplicity and ease of setup, often enabling a straightforward path to begin business activities.

The advantages of a General Partnership include ease of formation, distribution of profit and loss between partners, and direct management participation. However, partners should note the unbridled liability, meaning personal assets may be tapped to cover business debts and obligations. This becomes crucial in comprehending that financial and legal accountability extends beyond the realms of the business to the personal capacities of the partners involved.

Limited Partnership (LP)

The Limited Partnership (LP) in Singapore presents itself as a versatile and amenable option for those who wish to safeguard personal assets yet embrace the dynamism of partnership operations. Unlike the General Partnership, an LP provides a separation between those partners who actively manage the business and those who are merely investors.

The typical constituents of an LP involve at least one general partner responsible for the day-to-day operation and liabilities of the business and one limited partner, whose liability is restricted to their investment in the business. It serves as a suitable vehicle for business persons who seek to embark on ventures without subjecting themselves to extensive liabilities.

The LP finds a delicate balance, offering the allure of limited liability for some, combined with the operational input by general partners. Additionally, the LP offers flexible profit distribution among partners, lack of requirements for annual meetings or directors, and is not subject to the compliance rigours that other structured entities might incur.

Limited Liability Partnerships (LLP)

The Limited Liability Partnership (LLP) stands out as a notably resilient and preferred incorporation type for professional services in Singapore. It harmoniously melds the characteristics of partnerships and companies, thus establishing a separate legal entity that shields individual partners from unlimited liabilities.

An LLP provides a copious amount of flexibility in internal arrangements while ensuring that administrative and statutory compliance requirements remain on the leaner side, particularly in comparison to private limited companies. This type of incorporation is especially advantageous for businesses where joint profession practices are prevalent, such as in the legal, accounting, or consultancy sectors.

This hybrid nature of an LLP, integrating the limited liability feature of a private limited company and the operational flexibility of partnerships, often renders it a desirable option for small to medium-sized business operations, as well as professionals aiming to provide services under a joint practice, ensuring a blend of collective expertise and individual or shared liability control.

Foreign Company Subsidiary

The Foreign Company Subsidiary structure in Singapore serves as a distinct legal entity, differentiating it from its foreign parent company. This incorporation type is exceedingly appealing for foreign enterprises aiming to capitalize on Singapore’s robust and transparent business environment.

The target audience for establishing a Foreign Company Subsidiary spans multi-national corporations, burgeoning startups, and small-to-medium enterprises that seek a fruitful expansion within Asian markets. The decision to choose this type of incorporation might be driven by the advantageous tax incentives, steadfast protection of intellectual property, and a politically stable climate that Singapore proffers.

Key advantages of opting for a Foreign Company Subsidiary include limited liability of the parent company, a low corporate tax rate, and the ability to leverage a multitude of tax exemptions and incentives which are intricately designed to spur corporate growth and expansion.

Foreign Company Singapore Branch Office

The embodiment of a Foreign Company Singapore Branch Office is essentially an extension of the parent company, rather than a separately incorporated entity. It is generally more straightforward to establish, requiring less bureaucracy and setup time compared to other incorporation types.

It’s particularly suitable for businesses that intend to investigate the local market without committing to a full-fledged subsidiary. A Branch Office is ideal for companies in sectors like trading, consulting, or international services, where the main purpose is to facilitate transactions or provide services directly linked to the parent company’s core business.

However, it’s worth noting that financial liability is not limited to the branch but extends to the parent company. Furthermore, there’s a lack of eligibility for the tax incentives and exemptions that are available to local companies and subsidiaries.

Foreign Company Representative Office

A Foreign Company Representative Office in Singapore acts as a temporary setup and a non-legal entity in its own right. It’s often perceived as a transitory or exploratory stage for foreign businesses seeking to understand the Singaporean market dynamics before committing to a formal and long-term business entity in the nation.

Typically, multinational corporations, particularly in their infancy stages of understanding the Singaporean market, would be the most logical candidates for establishing a Representative Office. This would offer a risk-averse yet functional approach to analyzing market opportunities and conducting research without a colossal financial commitment or expansive legal formalities.

The crucial advantage here lies in its ability to engage in non-profit-generating activities like market research and coordinating the parent company’s activities. It provides a low-risk medium for businesses to explore and navigate through the market dynamics, regulatory environment, and business opportunities prevalent in Singapore, thereby facilitating informed decisions regarding future investments and strategic alignments.

Sole Proprietorship

Sole Proprietorship is an incorporation type that is predominantly sought after by individuals who aspire to govern their own businesses in Singapore. This model is inherently straightforward to establish and necessitates minimal bureaucratic involvement, propelling it to be a favorable option among single-owner businesses.

Individuals who are ardently keen on rendering personalized services, or embarking on small-scale business ventures, commonly gravitate towards the establishment of a Sole Proprietorship. The primary motives behind this preference can be accredited to its simplistic structure and minimal compliance obligations.

Choosing to operate under a Sole Proprietorship offers a plethora of advantages. Most notably, it permits the individual to exercise unbridled control over the business operations, thereby enabling the seamless implementation of decisions and strategies. Moreover, from a fiscal perspective, this model is advantageous as it allows the business to be taxed at the owner’s personal income tax rate, which might be significantly lower compared to the corporate tax rate.

Nonetheless, it is imperative to acknowledge that the Sole Proprietorship model does not distinguish between the business entity and the owner. Consequently, the owner is personally accountable for all liabilities and debts accrued by the business. Thus, while it provides unequivocal control, the owner must navigate through the challenges with astuteness and prudence to safeguard their financial integrity.

Common questions