In 2014, Singapore’s high quality of life, conservative government, and infrastructure put it at the top of the list and still do, making it the best place to do business in the world. The Government of Singapore was proclaimed as the easiest place to do business by the World Bank. It is also considered the world’s fourth-best global financial and commercial hub. The powerful and transparent system, as well as the ecosystem where startups thrive, also made excellent entrepreneurs in the country. In only seven days, company incorporation Singapore can be completed. Here are a few tips and tricks to help make the process smoother, ensuring success.
Singapore offers many benefits as a location for business. It is a well-established financial hub, growing technology center, and prominent shipping location. In addition, its relative ease in company incorporation provides a distinct advantage over other countries. A financially stable and selectively internationalized population with high proficiency in English provides the final ingredient for a recipe for success. However, opening a representative office or company in Singapore is more than just putting together a fit team. Starting a business legally involves a lot of paperwork for company incorporation Singapore. Understanding the legal process and required documents for company incorporation in Singapore can help both prospective entrepreneurs and investors to make a smooth start to a business in Singapore.
Understanding the Process
If your company is a private one, there’s a limit on the number of shareholders where only up to 50 of your friends/family members can hold. The Ministry of Manpower in Singapore has a set of regulations that the company must fulfill if it is planning to hire foreign employees, ranging from company eligibility, students, work visa, and professional accreditation requirements. If all this is a little too much for you to fathom, you can seek professional help, which most employment companies provide. A company must always have a resident director, who typically must be a Singapore resident or someone who holds an Employment pass or a Dependent pass to qualify to be one. In fact, as a new business owner or company in Singapore, you’ll also have to put together a local advisory council whose roles are to help and advise you to do the right thing as you execute your business in Singapore. Given the level of impromptu and rampant entrepreneurs, business can often hit huge roadblocks when they are caught off guard with an error in their business practices that they aren’t really aware of. With the local council, entrepreneurs can have continuous insights and effectively stay through the loopholes in their business operations, allowing for accurate guidance through the unstable terrain. Such laws are sometimes confusing, and it is here where it is of most importance that you take the required steps before you create a Singapore company.
Most entrepreneurs will agree that starting their own Singapore company isn’t entirely headache-free. There are certain things that must be considered, validated, and implemented before starting a business, particularly for start-ups. In a constantly evolving city like Singapore, it could be quite confusing as an entrepreneur to know what and what not to do. So, before you start hustling, it is best to take your time and sit back to consider what are the required things to incorporate a company within this city. Here are a couple of important facts to remember when trying to move your business to Singapore.
Researching Singapore’s Business Environment
In addition to its open and welcoming – yet disciplined and effective – society and infrastructure, the Government of Singapore has designed several programs and incentives to attract business entities of various sizes and origins to the country. In recent years, Singapore’s startup and innovation schemes have gained international recognition in the startup ecosystem. Against this context of abundant opportunities for entrepreneurs and businesses in Singapore, it is not surprising that more than 33,000 new companies are incorporated every year. Further, Singapore offers a relatively simple and straightforward process for incorporating a company. Then again, company incorporation is also governed by certain stipulations, processes, and prescribed timelines. Often, if a potential entrepreneur or investor is not familiar with the Singaporean legal system, or has not previously participated in such a process, the various stipulations and procedures can appear formidable. In this write-up, we offer insights into the incorporation process in Singapore and discuss the various requirements, procedures, and timelines for a potential company owner (entrepreneur or corporate entity) looking to set up shop in Singapore.
Singapore has a well-established reputation as an attractive destination for business and finance. A testament to Singapore’s success in this domain is the number of top-tier multinational corporations that have chosen to set up their headquarters here. In recent years, many global firms have moved their head offices to Singapore or have established regional and global hubs here. A major reason for Singapore’s attractiveness as a business hub is the confluence of factors that make it conducive for not just large multinationals, but also startups and small and medium-sized businesses. Beyond Singapore’s business-friendly fiscal and tax policies, world-class technological and physical infrastructure, and strategic location, Singaporean society has developed highly professional and skilled talent in various niches that make it ripe for businesses of various sizes and disciplines. Further, it is also a highly open and accepting society that is well poised to welcome skilled individuals and entrepreneurs from across the globe who bring in diversity, creativity, and innovative ideas.
Choosing the Right Business Structure
Sole Proprietorships / Partnerships:
– The directors of a company (who are not shareholders) will usually not be liable for the debts and losses of the company (as compared to partners of a partnership who are liable for all debts and losses of the partnership).
– There is a greater ease in achieving equity financing, as you can bring in shareholders or transfer shares to raise capital for your business.
– Companies in Singapore are eligible for local tax benefits and incentives and are charged zero tax for the first $75,000 of chargeable income for the first three assessment years for new start-up companies that satisfy certain criteria (Rate: 8.5% for the next $300,000 of normal chargeable income for further 3 years).
– Lastly, there is a perpetual existence for companies, as the company lives on through succession, retirement, and death of its shareholders and directors.
Companies:
– You can make your own decisions, as you have complete control over the company. – There is no statutory audit for Sole Proprietorship. – Business losses can be offset against any other personal assessable income (e.g. Employment Income, Chargeable Income) from years 2006 and beyond, provided the conditions for claiming unabsorbed trade losses are fulfilled.
– The annual statutory compliance cost for Sole Proprietorship / Partnerships is generally lower.
Meeting the Legal Requirements
While drafting out the company’s memorandum and articles is a legal prerequisite for incorporation, it is also highly beneficial for the running of the business. These must be filed alongside the new firm’s application and above all else, they should be as clear and precise as possible. Memos and articles are essential documents in the company’s records that should guide everything the firm does: from how to elect directors and conduct shareholder meetings, to how decisions are to be made and how the company can borrow or loan money. OPUS Secretary is a valuable institution that has extensive experience in drafting such documents and its services come highly recommended.
To incorporate in Singapore, the minimum number of shareholders is one and the maximum is fifty. The minimum paid-up capital is just SGD $1 and there is no auditing requirement for exempt private limited companies during its incorporation. Furthermore, with a year in Singapore already being the minimum period to qualify for taxation, this practically means a firm would only be required to file one annual financial statement before becoming exempt. However, given the level of scrutiny these advantages can attract, it is absolutely imperative that paperwork be filed meticulously in case of an audit: even the exempt status of a company’s incorporation can sometimes be revoked if irregularities are found. Other requirements any firm must meet are to have at least one Singapore-resident company director, one company secretary who is a natural citizen, permanent resident or holder of a valid employment pass in Singapore, a physical office address in the country and observe the guidelines of Singapore’s anti-money laundering and countering the financing of terrorism laws. Being aware of these requirements and fulfilling them swiftly will ensure that an astute entrepreneur meets all of the requirements for setting up a company in Singapore without any hitches.
Essential Steps for Incorporation
On the date of the meeting, if the documents are in order, the process may finish within 1 hour – including a digital photograph which may be taken at our office. Thereafter, we obtain the consent to act as professional values – then and only then we can submit the application package to the authority. Normally, it will take 3.5-6 hours to get the Certificate of Incorporation. The time depends on the queue, if we are lucky to be queued first, we can collect the Certificate of Incorporation within 15 minutes. If there are a lot of applications online on that day, it may take more time than usual. After collecting the Certificate of Incorporation, we will arrange the bound and certify true copies within the next working day. The user can then start opening the corporate bank account, depositing corporate capital, and starting its business. All our service packages come with a 1-year Registered Office. During the course of operation, the company may replace the Registered Office at any time in the future. Other benefits may be added as clients need: Common seal, Opening corporate account, and Registered trademark of the company.
From the moment of signing a consultancy agreement, clients can indicate the future company name and specify the list of activities the company will be engaged in. The name in English and Chinese will be sufficient, ideally 5 names in prioritized order. We assist the client in considering the suitable capital amount and shareholder structure. We provide the draft and support the client to finalize the registration forms 45B (in case of a local shareholder being an individual) and 45A (in case of local shareholders being corporate entities, or local shareholders are both individual and company). Then, the client just needs to provide a full set of working days and reasonable hours.
Registering Your Company Name
The company name must use standard form letters and can be written in almost any language. However, where the company’s name is not written in English where it is written in more than one language, an official translation must be provided alongside the original name. A company name that is the same as another key company may also be classified as a similar business company. This is the case where so many corporations that hold the key propose to take effect at the same moment, the same name as an existing key business civil company. The Act defines what a similar company is and what cases where, in fact, a key business brand can only apply if the Secretary of State sends a review. In fact, the name is a “like” or “no resemblance” – since in a “no stunt,” the company will survive. This means that in the future, even if so many companies applied under the same rule, the name would not be qualified as such.
Specifically, companies are not allowed to use words in its name deemed undesirable by the minister for finance. Also, the company’s name must not be undesirable in the opinion of the minister of finance. Where these views are required, the secretary may require the shareholder to seek the minister’s decision on the matter. There is also a wide range of abbreviations, words, phrases, anything else whatsoever, which is prohibited, or which cannot be used without the approval of the minister in order to terminate proceedings. The prohibitions apply not only to similar strings but also to related quantities. For example, “eco” covers the same rules as “environmentally friendly”.
New entrepreneurs often face the same dilemma when it comes to choosing a business name. They wish for something attention-getting and memorable, something that conveys a particular meaning or a cryptic set of messages. They also want to show forward momentum in a global sense from the get-go. However, the business name should reflect these attributes, while satisfying all the basic rules and legal requirements. This situation is like trying to sit on more than one chair at a time but is even more limiting.
Appointing Directors and Shareholders
These distinctions are important as one needs to ensure he is creating a company that best fits his business objectives—be it a private limited company specifically designed for friends and family investors, or a public company allowing for access to a wider pool of qualified investors. When selecting the company’s directors, participants must keep in mind that there are specific requirements based on the type of company they plan to form. A private company needs at least one director and cannot have corporate directors, while a public company must have at least three directors, two of whom must be “natural persons”. Further, at least one director must have his principal or only place of residence in Singapore.
Determining who the directors and shareholders are, in addition to the share capital, are key components in setting up the company structure. These details also directly impact the type of company one is setting up—for example, a private or public company. A private company typically restricts the right to transfer its shares, limits the number of its members to 50, prohibits any invitation to the public to subscribe for any shares or debentures of the company, and prohibits any invitation to the public to deposit money with the company for fixed periods (usually not carrying interest). Further, a private company must use the word “Private” as part of its name. The requirement to use the word “Limited” as the last word of the name is the same whether the company is a private or public one.
Preparing the Required Documents
Approval Notice of Company Name. After receiving the “approval notice for the company name,” the name will be reserved for a period of 60 days. Thus, the incorporation application has to be applied for in a 60-day period in order to complete the process.
Business Hours (Singapore Time): – Monday to Friday: 9 am to 5.30 pm – Saturday, Sunday and Public Holidays: Closed
– ACRA requires replies within 14 calendar days from the date of application. If the information required is not provided, the next insertion fee will be applicable.
Confirmation of Availability of Name is to be checked with the Company Registrar. Prior to finalizing on the company name to be used in the incorporation process, it is recommended to conduct the availability of the proposed company name through the online database of the Company Registrar in Singapore. A small fee is utilized for the checking process and is generally the fastest way in which you will gain approval. Typically, within only 1 hour of application, the company may proceed with the facilitation of the verification of the following:
– The name cannot be offensive to any party. – Its usage cannot be restricted and reserved for the government bodies.
For easy consideration of your application, it is wise to avoid some of the following restrictions in the selection of name to be used for the company incorporation:
– Each shareholder’s personal particulars inclusive of: Name, passport number, address, date of birth, email address, mobile number, occupation. – Shareholding percentage, paid-up capital subscribed by each shareholder (minimum of S$1 is required), fully paid-up or partly paid-up (amount has to be indicated if paid-up capital is partly paid-up). – A minimum of one shareholder (can be 100% shareholding by one foreign individual or corporate entity or such other representing entity) and a maximum of 50 shareholders is allowed.
Before preparing your necessary incorporation form, it is important to have the following information of shareholders for the purpose of proper filing:
Opening a Corporate Bank Account
The bank signatory has real obligations for money laundering. To avoid abuse, Singapore has detailed onshore client due diligence rules. The Monetary Authority of Singapore (MAS) allows for a form of ‘detached’ bank account operation called escrow, where a designated escrow agent signs the company’s bank account. In this scenario, the escrow agent, using their own KYC data and credentials, would provide the bank with the necessary assurance required by the MAS, allowing actual company by any individual without their signature. For this facility, certain banks in Singapore may charge a small monthly fee once the escrow account is opened with them. In this way, a company can remain fully operational while meeting the requirements of de-risking within a reputable multilateral institution.
For bank signatories to meet their obligations, the bank or banks need to have proper Know Your Client (KYC) information on the company and all its officers. This would include, for example, the Certificate of Incorporation, Business Profile, and maybe the latest annual statement. Banks may additionally require bank signatories to be physically present in Singapore. Major banks in Singapore are all headquartered in the central business district. Once opened, a company bank account is a very useful asset, even for companies where transactions are not a regular occurrence. Even dormant companies often retain live bank accounts for potential charging of shares, capital, or for future transactions, so even at the point of forming your company, you should give some thought to the bank account that may be demanded of your company soon after establishment.
For a company to accept payment by cheque or make payments to its suppliers or employees, it must have its own bank account. For a company to open a bank account, the bank will require the following shareholder and director information for the bank’s records. Banks can require a wide range of additional information pending its own compliance rules and the residency statuses of the persons involved. Some sample banks in Singapore include DBS, OCBC, UOB, Citibank, HSBC, MayBank, and Standard Chartered.
Navigating Compliance and Regulations
It’s also important to adhere to the annual filing deadlines, which require the company to file its financial statements with ACRA within a period of 6 months from the end of its fiscal year, together with the annual return filing. In the wider instance, ease in incorporation also comes with measures to prevent corruption, better tax controls, and enhanced compliance with a quality legal framework. Fortunately, Singapore ranks relatively high in the international rankings for a number of these key components, recently being ranked the 4th least corrupt country in the world by Transparency International and leading the world rankings (Doing Business Report 2011) in the area of ease of tax compliance. These are just another number of benefits that are set to enhance the ease of doing business in the city-state.
Irrespective of whether your company is large or small, as a director, failing to adhere to statutory compliance responsibilities under the Companies Act, Chapter 50 will see the buck stops with you. It is after all an area where ignorance is not an excuse. Please make sure you understand what’s required of you as a director under the Act and respect it. Once this is understood and respected, the rest of the process will be relatively easy. Ensure that you adhere to the statutory returns and filing of compliance-related documentation. It should be noted that some of the compliance can vary depending on geographic location as well. With the advent of the BizFile system operated by the Singapore Accounting Regulatory Authority (ACRA), compliance-related issues such as access to the list of officers, request for information, and checks with the official register can be obtained in the shortest time possible.
Obtaining Necessary Licenses and Permits
Obtain Necessary Licenses and Permits: Each type of business in Singapore will require specific licenses and permits before they can fully operate legally. For example, marine trade businesses will need a permit issued by the Maritime Port Authority, while restaurants that wish to serve alcohol will require a liquor license given by the Liquors Licensing Board. In most instances, holding an Entrepreneur’s or Employment Pass for foreign individuals and residents in Singapore will also suffice. Check with the right authorities to ensure that you have all of the necessary licenses and permits in place before commencing business.
After ACRA has approved your application, they will hold on to it for two months. This will give you ample time to gather all necessary documents before you file for incorporation. There is also a S$15 fee for reserving a business name, and it must be renewed every sixty days at a closing fee of S$30. There is a cap of 120 days on how long ACRA will reserve a name – before the deadline, you must opt to either incorporate your company or cancel the reserved name.
Submit Business Profile: Before you can register your company, you will have to apply to reserve your business name with ACRA. You can only submit an application to the ACRA once you’ve finalized it and have all of the necessary licenses and fees ready – to avoid confusion and having to redo all of your applications, give yourself some time between these processes to prepare everything.
Complying with Tax Obligations
In terms of keeping track of tax obligations, companies are required to file ECI (estimated chargeable income) 3 months from financial year-end (FYE) to the Inland Revenue Authority of Singapore, IRAS, even if the company runs at a loss. Singapore adopts an advance tax system. This implies that companies are required to estimate the ECI and how much tax is required to pay based on their taxable income generated from their business activities yearly. ECI is a ‘declaration’ made by your company to IRAS to estimate the taxable income before the actual financial statements are prepared and finalized. Should the company have ECI, they are required to pay the estimated tax amount from the ECI 3 months from FYE and file their corporate income tax return on 30th November. For private limited companies not audited, Form C-S is used to assess and provide the required tax information directly to IRAS. Form C is used for those companies who are audited. Corporate Income Tax (CIT rebate) amounting to 25 percent with a cap at SGD 15,000 is applicable to all companies in paying their tax except those companies in the insurance industry.
Singapore is recognized for its pro-business environment and tax incentives for start-ups and companies investing in R&D, innovation-focused activities, or internationalization. The territorial tax system offers significant tax benefits for many companies. One important tax incentive to highlight is the Partial Tax Exemption (PTE) scheme. Benefits under the PTE scheme granted on the first SGD 200,000 taxable income are 75% for the first SGD 10,000 chargeable income and a 50% discount for the subsequent SGD 190,000. The Budget 2020 introduced a new tax incentive called Corporate Income Tax (CIT) Rebate, which lowers the corporate tax rate.
Understanding Employment Laws
A Strong Alliance? In international discourse, Singapore is often portrayed as an exceptionally pro-business entity, with labor unions perceived as relatively weak institutions. In reality, however, ties between Singaporean unions and employers (especially when compared to international practices) are tight, with the government engaging in consistent efforts to promote mutual trust. Union models have changed through the decades, but through a number of strategies, most prominently the Joint Execution Mechanism (JEM), labor associations have retained important roles in industry restructuring, salary representation, and service quality maintenance. Qualitatively, I have myself encountered similar sentiments throughout interviews with various entrepreneurs in different sectors who have expressed satisfaction with Singaporean union approaches – a contrast to the seemingly confrontational stances taken by foreign unions.
The Ministry of Manpower (MOM) is charged with the implementation and enforcement of the Employment Act, legislating employment regulations which include issues of leave eligibility, salary payment modes, and termination requirements. This is merely one part of the many structures built within the entity, as the Singaporean government operates under a so-called tripartite system of labor relations, defined by the cooperation of three entities: the government itself, employers, and employee unions. To this end, while the Employment Act serves to protect employee welfare, it is also the result of dialogue between the three parties, with MOM introducing various guidelines and revisions in accordance with relevant incentives and levels of maturity in negotiation. Given the tight cooperation of the so-called tripartite partners, however, Singapore’s high flexibility in tailoring labor relations to specific industries may also lead to negative consequences outside the sector, due to a phenomenon of spill-over.