In this article we’ll look towards Singapore: what are the benefits of Singapore, how you can incorporate in Singapore, what you should pay attention to and in which cases it could make sense to a foreigner having a company in Singapore.
Singapore has a lot of reasons why you should start your business there:
- One of the most developed and stable economies in Asia and in the world
- Member of ASEAN with easier access to markets of other ASEAN members – a market with over 670 million population (for comparison reasons: the total population in all countries of the EU all together – about 450 million)
- Strategically located within Asia-Pacific region
- Highly educated, English-speaking people (English is one of four official languages in Singapore along with Mandarin, Bahasa Melayu and Tamil)
- Was ranking at the top of Ease of Doing Business Reports of the World Bank (on the first and second places) for 15 years in a row (since 2006 till 2020 – the year when the report was terminated) and continues ranking in the tops in the successor reports “Business Ready”
- Very startup friendly ecosystem
- Legal and tax basis in general very business-friendly
- World-renowned location
- Perfectly well connected to the world – Changi Airport is one of the best airports worldwide with direct flights to 151 destinations. Within just four flight hours you can reach around 15 Asian countries including China, Hong Kong, India, Philippines
- One of the biggest and busiest cargo seaports in the world (part of the new Silk Road) – can be important depending on your business activities
- Stable and reliable banking sector
- Secure environment with a perfectly developed infrastructure
Now, let’s have a look at what is required for you can start a business in Singapore.
Singapore is part of the Commonwealth and with it you might find in Singapore many requirements which are identical or similar to the requirements of company formation in UK:
- Share capital starts from just one SGD only. Surely, it is recommended to have higher share capital if you wish to be perceived as a serious business partner, but from the pure requirement perspective, 1 SGD will do the work
- Quick and transparent incorporation process. Usually, it takes just about 1 week to get the company ready, assuming that all required documents are in place
- Requirement of having a corporate secretary. For those of you who are new to the topic: the Corporate Secretary does not have anything to do with an assistant reporting to a director. Corporate Secretary is an official function and has clearly defined tasks in the company structure, like observing important timelines and deadlines, especially in regards of official submission dates, organizing AGM, keeping records of the company, meetings and director’s decisions, just to mention some of them.
- Like in some other countries of the Commonwealth, you cannot avoid having a local Nominee Director. Some wrong information can be found on the web, that you do not really own your company in Singapore because of the local director. That is definitely WRONG! You can be the only owner and UBO of your incorporated company (surely, you can put also a holding company in between if it would make more sense for your overall business setup, but you would remain the only decision maker(s)). A Nominee Director is just legally prescribed by the Singaporean law and, as the name says already, it is a nominal function, without any decision rights. There is also no requirement that you need to provide him or her with any company shares.
In Singapore, you are exempt from the GST registration (an equivalent of VAT in other countries) if your taxable turnover does not exceed 1 million SGD per year. But you need to have proper accounting and file your tax declarations, even in the case if your company is a non-resident company and therefore your tax burden would be zero. In other words, even a non-resident company cannot avoid the obligation of an accounting and tax filing in Singapore.
Coming to non-resident companies: keep in mind that a non-resident company does not benefit from double-taxation treaties or any other incentives.
In certain cases, it can be more beneficial to have a resident company and to profit from the DTA, as well as from the tax rebates, which are regularly offered. For example, some DTA allow to take out dividends without any withholding tax on them. Another positive point of a resident company is the local bank accounts. It can be easier to open them with a resident company.
For internationally active companies the registered address would be sufficient to kick off and to do your business. It is not required to book a separate business address (along with the registered address) like it can be the case in UK or Ireland.
Data protection topic is also important in Singapore: having a registered company in Singapore, you would be required to name a DPO or Data Protection Officer. It can be anybody from your company, including the owner or director. The DPO is registered with ACRA (Accounting and Corporate Regulatory Authority) where also the company registration happens.
For startups who intend to be very active on the local market and eventually even to personally relocate to Singapore, there are incubation hubs where a startup company can reside during the first months or even up to a couple of years at lower costs than the standard office rental conditions. Overall, the startup ecosystem in Singapore can be mentioned as one of the best in the world as Singaporean government does a lot in the startup area as well.
Anyway, newly incorporated resident companies enjoy a special tax regime in Singapore which is valid for the first 3 years after the incorporation. If your company qualifies for SUTE – StartUp Tax Exemption – you will be tax exempt to 75% on your revenues up to 100.000 SGD per year and to 50% on the next 100.000 SGD. The startup should be a Singapore registered company, have no more than 20 shareholders and be tax resident in the affected assessment year.
In case you do not qualify for SUTE for whatever reasons, you can still apply for Partial Tax Exemption scheme which would allow you to save 75% on your first 10.000 SGD and 50% on the following 190.000 SGD per year.
Furthermore, companies in certain business areas, like R&D, IPR license acquisition, patents, trademarks etc., can apply for Productivity and Innovation Credit (PIC). The incentive is a tax deduction of 400% of your expenses in the assessment year (capped at 400.000 SGD). There is also PIC+ scheme available with the maximum cap of 600.000 SGD. To qualify for PIC+ the revenue should not exceed 100 million SGD and the company should not have more than 200 employees.
There are also further incentives, like Investment Allowance Incentive, Pioneer Tax Incentive, Development and Expansion Incentive, which Singaporean government uses to support eligible businesses.
As you can see, there are different opportunities to be supported financially when starting your business in Singapore. In general, it is worth mentioning that contrary to EU (as an example) where you can apply for different incentive funds and get the money on your account, Singapore like many other Asian countries mainly follows another incentive scheme supporting businesses by tax reliefs at the beginning of their activity. This automatically incentivizes successful companies who generate revenues which would be stronger taxed in a regular case. By the way, the standard corporate tax rate in Singapore is 17% flat.
Even though there are also different grants offered to qualifying companies in Singapore if the companies have their focus on the areas defined as strategic one’s by the government. This can be, as an example, digitalization, innovation, aging society etc.
In which case a company in Singapore makes sense for you as a foreigner?
First of all, if you have a business oriented to Asian markets, you source products or services from Asia, or you offer your products or services there. Many big international corporations use Singapore as their Asian hub or headquarter country for regional activities. But it does not mean that you should restrict your activities to Asia only. Companies with a business address in Singapore are welcomed all over the world.
Digital nomads or small entrepreneurs with good business ideas can also benefit from the positive business environment in Singapore.
Secondly, if you play with ideas of relocating to Singapore personally, your own company may be a good starting point for it. We can discuss the personal relocation to Singapore in a separate article.
In the meantime, if you are interested in incorporating your own company in Singapore, do not hesitate to approach Singabiz. During the first introductory meeting we can discuss in all details your goals, your ideas, your requirements and identify the best possible approach for your endeavors in Singapore. The costs of the meeting will be offset against the incorporation costs should you decide to incorporate in Singapore with Singabiz. Should you just have a question, feel free to write us.