4 Key steps when setting up business in Singapore

Having acclaimed second place in the World Bank’s Ease of Doing Business 2020, Singapore provides an ideal business ground to set up a company despite being a relatively small nation to approximately 5 million people. Singapore’s ability to attract foreign investments can be attributed to its pro-business policies, favourable tax systems and easy company incorporation processes. The first step before you start a business is to register a company in Singapore. Regardless whether you are an aspiring entrepreneur or experienced business owner, we will provide you with 4 key steps when setting up a business in Singapore.

As the Singapore government imposes few restrictions on establishing, owning and operating a business, this makes Singapore an attractive jurisdiction to business owners to start a business. Singapore company registration process is quick and simple, without needing individuals to travel to Singapore to register a company. There are minimal requirements for Singapore company registration, which includes:

  • At least one local or foreign shareholder
  • Minimum paid-up capital of $1
  • At least one director with Singapore residency
  • A company secretary who resides in Singapore 
  • A registered address in Singapore
  • Company name approved by ACRA 

4 Key Steps when setting up a business in Singapore

4 Key Steps when setting up a business in Singapore

1. Securing work visa

For foreigners looking to start a business in Singapore, it is mandatory to secure a Singapore work visa. There are two types of work visas which are applicable for individuals who wish to stay and work in Singapore, Employment Visa and Entrepreneur Pass (or EntrePass). 

a). Singapore Employment Pass (EP)

Singapore Employment Pass, or Singapore E Pass is the main type of work visa issued by the Ministry of Manpower (MOM). Holders of Employment Pass, such as foreign entrepreneurs, directors, general managers, shareholders and skilled professionals, are allowed to work for a minimum of 12 months in Singapore. There are 3 types of Employment Passes; P1, P2 & Q1. Depending on your fixed monthly salary and qualifications, individuals are eligible for the different types of Employment Passes. The minimum monthly salary for individuals who wish to apply for Employment Pass is $3,600 or above.

For first time applicants, the Singapore Employment Pass is valid for up to 2 years. Holders of Employment Pass are allowed to renew their pass if they remain employed in Singapore. The validity for Employment Pass renewal is up to 3 years.

b). Singapore Entrepreneur Pass (or EntrePass)

The Entrepreneur Pass, or EntrePass is a visa which allows foreign entrepreneurs who have the intention to start a new business in Singapore. The EntrePass is a visa for foreigners who lack educational qualifications or those who are not eligible for the Employment Pass, but have a proven track record of successful business experience. 

There are several requirements the applicant has to fulfil before applying for EntrePass, which includes owning a company with a minimum paid up capital of $50,000 and holding at least 30% of total shares in the company. It is more difficult to apply for the EntrePass as compared to the Employment Pass because of the additional requirement of at least $50,000 of paid up capital. This is to ensure that applicants with business acumen have the financial capabilities to operate a business in Singapore. Additionally, the EntrePass can be renewed on a yearly basis. 

2. Company registration with ACRA

a). Choosing an optimum business structure

Singapore offers different types of business entities for you to choose from, where each business entity caters to different types of business activities. Foreign companies that wish to operate business in Singapore can choose between these 4 business entities. This includes Limited Liability Company (LLC), Limited Liability Partnership (LLP), representative offices and branch offices.

Prior to Singapore business registration, it is crucial to fully understand your business model before choosing the most suitable business entity. Some considerations you should take into account include the type of business activity, tax obligations as well as potential personal liability. If you are looking to incorporate a company in Singapore, it is recommended to set up a Limited Liability Company (LLC). Regardless whether it is an onshore or offshore business, LLC is the most common business entity in the country.

b). Company name registration

Besides choosing a suitable business entity, you will have to register a company name with the Accounting and Corporate Regulatory Authority (ACRA) prior to company registration. ACRA is the regulatory body responsible for Singapore company registration. Company names are subjected to several guidelines, which includes not registering a name identical to another Singapore company and must not infringe on any trademarks. Name approval takes approximately an hour if all guidelines are met. Upon approval, the company can reserve the name for up to 120 days. Otherwise, the name will be released if the company does not incorporate that name within 120 days.

c). Appointing local director

It is mandatory for all Singapore companies to appoint a local resident director, which can be either a Singapore citizen, permanent citizens or holders of EntrePass/Employment pass. If a company is unable to appoint a local resident director, a Singapore nominee resident director can be provided to the company. Moreover, the appointed nominee director will not have any decision-making power in your company.

3. Opening corporate bank account

Opening a corporate bank account is essential when starting a business as it is not advisable to use a personal bank account for your business. A corporate bank account is crucial for your business transactions, asset protection, accounting and tax filing. All commercial banks in Singapore are governed and licensed under the Banking Act. Singapore is hailed as one of the most ideal jurisdictions for corporate account opening due to its stable banking system and thriving economy. All commercial banks in Singapore are governed and licensed under the Banking Act.

Your company can open a corporate bank account with reputable banks in Singapore including DBS, OCBC, UOB, Standard Chartered, HSBC and Citibank. It is recommended to open a foreign currency or multi-currency bank account if your company is a trading company or has large overseas transactions. To open a corporate bank account in Singapore, it is a requirement to travel to Singapore for face-to-face meetings with the banker.

Otherwise, your Singapore company can also open a corporate bank account in a jurisdiction of your preferred choice. On average, the corporate bank account will be opened within 4 weeks after company incorporation

4. Accounting and tax obligations

Singapore has one of the most competitive taxation systems in the world. This is due to its low corporate and personal tax rates, no capital gains tax and an extensive network of Double Taxation Agreements. 

Singapore uses a tiered tax system for both personal and corporate taxes. For corporate taxes, it is capped at 17%. New firms receive significant tax breaks during their first 3 years reducing their tax rate to 0% for the first S$100,000 of income. Moreover, there are no taxes imposed on capital gains accrued by the company, dividend distribution to shareholders and foreign-sourced income not brought into Singapore. For personal taxes, it starts from 0% and rises gradually to 22% for incomes exceeding $320,000. 

Value Added Tax (VAT), also known as Goods and Services tax (GST) in Singapore, has a rate of 7%. Singapore companies are required to register for GST if their taxable turnover exceeds $1 million during the last 12 months or expected to exceed during the next 12 months. For both situations, companies are required to register for GST within 30 days. GST registration is optional for companies that do not exceed the annual taxable turnover of $1 million. There are several business activities which are exempted from GST. Some examples are financial services and the sale and lease of residential properties. Moreover, exported goods and certain types of services provided to overseas clients are also exempted from GST. 

Moreover, Singapore has established 75 Double Taxation Agreements (DTA) and 8 limited treaties. These agreements ensure that businesses with income arising from cross-border economic activities between the two jurisdictions do not suffer from double taxation. Having an extensive network of DTA is a testament of Singapore’s excellent foreign relations and its global competitiveness as a business hub.

Singapore company registration is hassle-free if you are familiar with the entire incorporation process. Tetra Consultants strives to provide our clients with a seamless experience when setting up a company in Singapore. Our team of experts will ensure that your Singapore company can be operationally ready as soon as possible.

Originally posted 2021-06-11 00:54:46.