About Singapore: A short history
Singapore’s recorded history began in the 2nd century AD when it was known as Temasek, meaning “sea town” in Javanese. It subsequently changed hands multiple times, culminating with the arrival in 1819 of Sir Stamford Raffles, who founded modern Singapore by signing a treaty with the Johor Sultanate to allow the establishment of a British trading post on the island and for it to become a part of the East India Company. Subsequently, in 1826, it formed part of the newly created Straits Settlement. It became fully independent in 1965. Both before independence (from 1959) until 1990, the country was led by (Harry) Lee Kuan Yew, a barrister credited with modernising the country.
Even a brief history of Singapore would not be complete without mentioning the Raffles Hotel (named after, but not connected to, Sir Stamford Raffles) and the Singapore Sling, a Gin-based cocktail invented c.1915 in the Raffles Long Bar.
Introduction to Singapore Company Formation
Singapore has become a popular destination for entrepreneurs and businesses looking to expand their operations. With its strategic location, political stability, robust legal framework, and business-friendly policies, Singapore offers a conducive environment for company formation. This comprehensive blog will explore the requirements and benefits of setting up a company in Singapore.
Why Choose Singapore for Company Formation?
There are several compelling reasons why entrepreneurs choose Singapore for company formation.
Firstly, Singapore has a strong reputation as a global financial hub and is regarded as one of the most accessible places to do business. The World Bank consistently ranks Singapore highly in its Ease of Doing Business Index. Singapore’s political stability and well-established legal system provide a secure and reliable business environment.
Another significant advantage of Singapore is its strategic location in Southeast Asia. With excellent connectivity and access to a large consumer market, setting up a company in Singapore allows businesses to tap into the vast opportunities in the region.
Furthermore, Singapore has a highly skilled and educated workforce, making it an attractive destination for companies seeking talented professionals.
Requirements for Company Registration in Singapore
To successfully register a company in Singapore, specific requirements must be met. Firstly, every company must have at least one shareholder, an individual or a corporate entity. Additionally, there must be at least one director who is ordinarily resident in Singapore. The company secretary, who handles administrative and compliance matters, must also be appointed within six months of incorporation.
Singapore companies must have a registered office address within Singapore. A Registered Office is where official correspondence will be sent and must be accessible to the public during normal office hours.
Foreign individuals can set up a company in Singapore, provided they comply with the requirements and appoint a local (nominee) director.
The Benefits of Incorporating a Company in Singapore
Incorporating a company in Singapore offers a multitude of benefits. Singapore offers an attractive tax regime for companies. The corporate tax rate is one of the lowest globally, at a maximum of 17%, with various tax incentives and exemptions available to eligible companies. Additionally, Singapore has an extensive network of double taxation avoidance agreements (DTAs), which reduce the tax burden for companies engaged in international transactions.
One of the key advantages is the limited liability protection enjoyed by shareholders and directors, which means that their personal assets are safeguarded, and they are not personally liable for the company’s debts and liabilities. Limited liability provides entrepreneurs peace of mind and encourages investment and business growth.
Singapore’s business-friendly policies and efficient regulatory framework make it easy to conduct business. The government has implemented various initiatives to support entrepreneurship and innovation, providing grants, funding, and resources to help companies to thrive. The presence of numerous international banks, venture capitalists, and angel investors further enhances the business ecosystem in Singapore.
Taxation System for Singapore Companies
Understanding the taxation system is necessary for companies operating in Singapore. Singapore adopts a broadly territorial-based tax system, meaning only income derived from Singapore is subject to tax. Foreign-sourced income is generally not taxed in Singapore, provided it meets certain conditions, which makes Singapore an attractive location for international trade and investment companies.
Regarding corporate tax rates, Singapore offers a competitive rate of 17%, which is significantly lower than many other countries. Additionally, tax incentives are available, such as tax exemptions for newly incorporated companies and specific industries or activities. These incentives, coupled with Singapore’s extensive network of DTAs, provide companies with opportunities to reduce their tax liabilities.
Singapore profits (Corporation) tax for new companies.
The corporate tax regime for new small Singapore-incorporated companies is designed to encourage entrepreneurship and foster economic growth.
In Singapore, newly incorporated companies can enjoy significant tax advantages. Under the Start-up Tax Exemption (SUTE) scheme, qualifying companies can claim a total tax exemption on their first S$100,000 of chargeable income (taxable profit) for the first three consecutive years of assessment.
A partial tax exemption is available for the subsequent S$200,000 chargeable income, with a 75% exemption on the first S$100,000 and a 50% exemption on the next S$100,000. These tax concessions mean that small businesses in Singapore can pay little or no tax during their initial years, allowing them to invest more in their operations, expand their workforce, and fuel innovation.
These favourable corporate tax rates mean it’s no surprise that Singapore has become a hub for start-ups and small businesses in SE Asia.
GST (aka VAT) obligations.
For new small Singapore-incorporated companies, understanding their Goods and Services Tax (GST) obligations and rates is important for smooth and compliant operations. GST, like VAT, is a consumption tax levied on the supply of goods and services in Singapore and includes digital downloads. As a new company, it is necessary to determine if your business meets the mandatory GST registration threshold of an annual taxable turnover exceeding S$1 million.
If your business is not required to register for GST, you can voluntarily register if it benefits your company. Once registered, you must charge GST on your taxable supplies and file GST returns regularly. The standard GST rate in Singapore is 8% in 2023, but certain goods and services may be zero-rated or exempted. Understanding the specific GST rates applicable to your business activities is essential to ensure accurate accounting and compliance with Singapore’s tax regulations. Seeking professional advice from tax experts or engaging accounting services can greatly assist new small companies in navigating the complexities of GST obligations and rates.
Companies must maintain proper tax records and comply with the tax filing requirements. Singapore companies are required to file annual tax returns, submit financial statements, and fulfil other tax-related obligations. Non-compliance can result in penalties and legal consequences, so companies should engage a local accountant to ensure compliance with tax regulations.
Compliance and Ongoing Obligations for Singapore Companies
Once a company is incorporated in Singapore, adhering to compliance and reporting obligations is important. Companies must maintain proper accounting records and prepare annual financial statements per the Singapore Financial Reporting Standards (SFRS). A qualified auditor must audit these financial statements unless the company qualifies for audit exemption.
For companies fulfilling the following conditions, no audit is required.
The total annual revenue of the company must not exceed S$10 million;
The total assets of the company for the financial year end must not exceed S$10 million;
The number of full-time employees at the end of the financial year must not exceed 50.
In addition to financial reporting, companies must hold annual general meetings (AGMs) to update shareholders on the company’s performance and discuss important matters. The AGM must be held within six months of the company’s financial year-end. Companies must also file annual returns with ACRA, providing details of the company’s officers, registered address, and shareholding structure.
Furthermore, companies must comply with various statutory requirements, such as maintaining a register of shareholders, directors, and significant controllers. They must also notify ACRA of any changes in the company’s particulars, such as changes in directors or the registered address. Companies demonstrate good corporate governance and maintain legal and regulatory compliance by fulfilling these ongoing obligations.
CONCLUSION
Singapore offers a highly conducive environment for company formation, with its solid legal framework, business-friendly policies, and attractive tax regime. By following the step-by-step guide outlined in this article and understanding the requirements and benefits of incorporating a company in Singapore, entrepreneurs can make informed decisions and set up successful businesses. While there may be challenges along the way, with proper planning, compliance, and a focus on differentiation, companies can thrive in the competitive Singapore market.
Take the first step towards establishing your company in Singapore today.
