Essential Guide To Setting Up Business in Singapore As a Foreigner
Singapore is regarded as one of Asia’s first-world countries, as it has a very efficient infrastructure, stable socio-political atmosphere, free market economy and host of other things that make Singapore one of the best five places to set up a business as a foreigner. In 2011, it was the fastest-growing economy in Asia, moving past China with a 14.5 percent growth.
Many well-known entities, such as the World Economic Forum and World Bank, have ranked Singapore as one of the most competitive economies in the world.
Singapore is also been noted as being the easiest place a person can set up a company and conduct business. It can take a person less than one hour to set up their business in Singapore.
Singapore is full of people with different backgrounds (architecture, art, cultures and languages), which gives the area an eclectic feel. In fact, one in three people is not from the country, which pleasantly brings to the city the various lifestyles, cultures and religions people can enjoy.
Why Set Up A Business in Singapore As A Foreigner
There are a plethora of reasons foreigners choose Singapore as the place to begin or expand their business. We have put together 18 reasons entrepreneurs and MNCs chose Singapore when venturing into Asia.
- Itis easy to incorporate a business in Singapore
- It does not restrict foreign currency movement in and out of the country.
- It has agreement with over 50 countries on the avoidance of double taxation
- It allows 100% foreign ownership of incorporated companies in Singapore
- It does not has restrictions on the repatriation of profits from your business
- It does not impose capital gain tax on sale of business
- It does not has tax on dividends paid to the shareholders.
- It has one of the most productive and skilful workforce
- It’s regarded as Asia’s most politically-stable country
- It’s one of the least corrupt countries in global ranking
- It has a low corporate tax rate system
- It offers new Singapore companies tax exemption
- It’s safe for foreigners (in part to its welcoming nature of the different backgrounds and cultures)
- It does not has inheritance, death or estate taxes
- It’s ranked first in quality of living in Asia
- It has an effective public transportation network
- The city has some of the best healthcare services the world has seen
- Its educational system meets all international standards (one of the reasons families move to Singapore)
3 Ways In Which A Foreign Person Can Set Up Their Business In Singapore
Basically, foreigner setting up businesses in Singapore can be broadly divided into two groups.
- Foreign entities that want to establish in Singapore
- Foreign person that want to establish a local Singapore company
The first thing to contend with is how a foreign person can set up a Singapore company. Thankfully, it’s not that hard to do. There are three ways in which a foreigner can set up a business in Singapore:
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Register A Sole-Proprietorship If You Are The Sole Owner Of The New Business
Foreigners may apply for a sole proprietorship, but they still need to tap a Singapore resident to be their authorized representative. This person can be a Singapore citizen, EntrePass holder or Permanent Resident. If you want to live in Singapore and run the business, you must request for an EntrePass via the MOM website.
You’ll also need to do the following:
- Come up with an appropriate name and business address
- Complete the whole form on BizFile with a SingPass; without it, you must hire a registered filing agent (law firm, for example) to handle the application process for you.
Register A Partnership If There Are 2 or More Owners in The Business
Registering a partnership is similar to the sole proprietorship. Foreigners can register their partnerships in Singapore if one partner lives in Singapore. If all partners are foreigners, a person living in the country must be tapped to be an authorized representative. If you or a partner wants to live in Singapore, an EntrePass must be applied for through the MOM website.
You also need to do the following:
- Choose a good business name and address
- Fill out the whole from via BizFile+ using the SingPass. Without a SingPass, you have to hire a law firm to be your registered filing agent.
Set Up A Company If You Want A Separate Legal Entity For Your Business
The process to incorporate a company in Singapore is not the same as partnerships and sole proprietorships. In fact, the process is far more tedious and nerve-wracking. The best way in which to register a business new or relocating to Singapore is to create a private limited liability company.
A Singapore-style limited company is a distinct legal entity that gives shareholders protection from debts that surpass the capital amount contributed. You can find the rules of how to register a company in Singapore in the Singapore Companies Act. When you register or incorporate a business in Singapore, you can benefit from the country’s effective tax structure.
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What Is A Singapore Company?
It’s a business entity located in Singapore and is separated from its directors or shareholders. There are two kinds of companies – private and public companies. Public companies are listed on the Singapore Exchange (SGX) with at least 50 shareholders. Private companies, on the other hand, are not found on the SGX and have no more than 50 shareholders.
Shareholders are company owners who appoint directors to handle the company’s day-to-day activities. Under the Singapore Companies Act, any person over the age of 18 can register a company in Singapore.
Should You Incorporate A Company in Singapore?
Company owners have limited liability, which means they are not personally responsible for any of the company’s debts or legal actions the company faces. There are, however, additional compliance requirements these companies face including holding yearly general meetings and filing yearly returns. Not doing so could lead the Accounting and Corporate Regulatory Authority to penalize the company.
There is more work that goes into this process, and it can take five months or more for a company to be deleted from the register.
Any business with the potential for growth is regarded as having a suitable business structure. Registering the business as a company gives them other benefits as well.
What To Be Mindful Of Before Registration Of A Company in Singapore
Directors
One person – be it a Singapore citizen, EntrePass permittee or Singapore Permanent Resident – must live in the country to be tapped as the company director. You can appoint as many foreign directors as you want, but one must live in the country. They must also be 18 years of age and have had no bankruptcies or malpractice convictions.
Directors do not have to be shareholders.
There needs to be at least one shareholder for a private limited Singapore company, but no more than 50 shareholders for it. This shareholder can be a legal entity (trust or another company) or an actual person. Singapore companies are permitted 100 percent foreign or local ownership with new or existing shares can be issued or transferred to someone else once the company has undergone the incorporation process.
Company Secretary
The Singapore Companies Act demands a qualified secretary be hired for the company within six months of the incorporation process. This person must be an actual person living in Singapore. A shareholder or director may not be employed as the company secretary if there is only one director or shareholder for that company. The position must be filled at all times, and cannot be vacant for more than six months.
Paid-Up Capital
A Singapore company’s minimum paid-up capital is $1, which may also be raised at any time after the company’s incorporation.
Registered Address
For a Singapore company to be registered, a local address must be given for the company’s registered address, and it must be a physical address, not a P.O. Box.
If a person wants to use a residential address for the business address, they need to speak with the respective authority. Qualified occupiers should seek approval from the HDB before listing the residential address for the business address. And, private residential property owners must get approval from the URA.
Companies operating in Singapore must have an operational and public-accessible registered office in the country with normal office hours.
Corporate Tax
Singapore’s corporate tax rate is 17 percent. There are a plethora of tax incentives and exemptions for companies registered in Singapore. For example, a new start-up company will not have to pay tax on the first $200,000 of chargeable income. Singapore companies are also not subjected to dividend or capital gains taxes.
Necessary Documents
For a company to be incorporated in Singapore, the ACRA needs the following information and documents:
- Company name
- Registered address
- Brief synopsis of company’s activities
- Director’s particulars
- Company secretary’s particulars
- Business constitution
- Final day of company’s projected fiscal year end
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4 Ways A Foreign Company Can Be Registered In Singapore
If you have a foreign company that you want to set up in Singapore, you have four options in which to do this:
- Representative office
- Branch office
- Subsidiary
- Redomiciliation
Now, every option has some positive and negative aspects that people need to weigh carefully – extent of liability, tax exemptions, etc. If a foreign company wants to set up in Singapore, it must take each option into consideration and find the best one for them.
1) Representative Office
Another option is the setting up of a representative office. These offices are not like subsidiaries or branch offices in that there is a legal person and are considered an extension of the parent company. They cannot sign contracts, take part in trading or any activity that helps them make money. The parent company will be responsible for everything that happens within the representative office.
Since they do not make profits or produce revenue, they are not eligible for tax residence status. These offices are set up for market research and feasibility studies reasons. Since they are not incorporated entities, they do not need to meet any filing requirements.
Representative office registration can be done through the Enterprise Singapore website rather than the BizFile+ site. Companies should also hire a registered filing agent to handle the application process and be a point of contact for local authorities. The Enterprise Singapore website lays out what the required documents are for the application process.
These offices do not need a Singapore resident for an authorized representative. It does, however, need a chief representative from the parent company, and they must relocate to Singapore to manage the representative office’s activities.
Representative offices are permitted up to three years, and be renewed each year before their expiration date. For that reason, they are regarded as temporary solutions for companies that want to gather market intelligence before choosing a more permanent solution.
2) Branch Office In Singapore
The first way a foreign company can get into Singapore is to create a branch office. This office is noted as an extension of the parent company (not a lone entity). The parent company is to be held liable for all things happening in the branch office.
The branch office is not seen as Singapore resident entities, which makes them ineligible for different tax exemptions resident companies are privy to. Branch offices must carry out the business activity as laid out by the parent company and file audited accounts of their own and head offices.
Registering a branch office may be done through BizFile+, either from the country of the parent company or with the help of a registered filing agent to submit the application online for them.
This office must have one authorized representative who is a Singapore resident, EntrePass holder or Permanent Resident. The branch office name must be the same as the parent company.
Singapore branch offices are seen as short-term commitments since there are no investment opportunities involved. Parent companies tend not to open branch offices in Singapore because of the extended liability. The only reason a business opens a Singapore branch office is to garner some market share for a short period of time.
3) Subsidiary
Foreign companies also have the option for a subsidiary, which is a locally-incorporated private limited company with most of its shareholders a foreign-corporate or local entity. Foreign companies can completely own the subsidiaries incorporated in Singapore.
What makes subsidiaries different from branch offices? They are a distinct company onto themselves (not a part of the parent company). The foreign companies have limited liability and are not held accountable to the acts the subsidiaries carry out.
Subsidiaries are also treated like local tax residents and are given the same tax incentives and exemptions local companies can take advantage. Subsidiaries can also do things that are different from the parent company.
The registering of the subsidiary can be done through the BizFile+ site, either with the help of a registered filing agent or the parent company’s country. It’s better if a company hires a legal entity to assist in this process. The incorporation registration process for subsidiaries is similar to local companies.
The subsidiary company needs one authorized representative for the company – a Singapore resident. The subsidiary’s name does not have to match the parent company’s name.
The majority of foreign companies choose to set up a subsidiary because of the limited liability protection and tax benefits afforded to them.
4) Redomiciliation
This is the process in which a company moves registration from one locale to another. If you move your company to Singapore, it must not operate in its previous location and become a registered company in Singapore.
Foreign company owners who want to make use of the country’s stable political environment, economic ties to Asia and surrounding areas and its tax incentives should consider the idea of redomiciling their company to the country. It’s regarded as the most valuable of the four methods.
As noted earlier, each option to enter the Singapore market has its positives and negatives. A company must look at its business goals and how long they’ll be in the Singapore market before they choose an option. There are a multitude of factors that need to be considered before a Singapore company set up is pushed forth.
If you need an expert opinions in setting up a company in Singapore as a foreigner, leave a message on our CONTACT FORM and we will get a qualified consultant to assist you.
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