Singapore boasts a favorable economic environment and offers a range of grants and enticing financial incentives to businesses. As a result, a significant number of multinational companies have selected Singapore as their regional hub in Asia.
The city-state benefits from a stable political and regulatory landscape, supported by an independent judiciary, which continues to attract investors worldwide on a daily basis. This conducive environment has propelled Singapore into becoming one of the premier global business centers.
Throughout this guide, we will navigate you through the comprehensive process of registering a company, within the dynamic startup ecosystem of the Lion City.
- What Are the Company Types Foreign Companies Can Choose?
- Tax Exemption Schemes and Rebates for Companies
- Company registration process in Singapore
What Are the Company Types Foreign Companies Can Choose?
Foreign firms can choose from 3 options to incorporate a company in Singapore:
- Subsidiary Company
- Branch Office
- Representative Office
Subsidiary Company
A Singapore subsidiary company is a private limited entity formed in Singapore and fully owned by a foreign parent company. It functions under its own name, with these notable characteristics:
- Legal Status: A subsidiary office is an independent legal entity distinct from its parent company. It is formally registered with Singapore’s Accounting and Corporate Regulatory Authority (ACRA).
- Limited Liability: The subsidiary office’s liability is restricted to its own assets and activities, safeguarding the assets of the parent company from the subsidiary office’s liabilities.
- Activities: A subsidiary office is authorized to participate in various profit-generating business activities. Nevertheless, it must adhere to any industry-specific regulations or limitations that may be in place.
- Taxation: The subsidiary office is required to comply with Singapore’s tax laws, including filing yearly tax returns and settling taxes on income generated within Singapore.
- Compliance: Similar to other business entities in Singapore, a subsidiary office must comply with regulatory requirements set by ACRA and other relevant government agencies.
Branch office
A Singapore branch office is established by a foreign company to operate in Singapore, acting as an extension of the parent company. It conducts business activities and represents the interests of the parent company in Singapore. Notably, the branch office must bear the same name as registered in its home country. Additionally, it must appoint a locally resident authorized representative, who must be either a Singapore citizen, Permanent Resident (PR), or hold a valid Employment Pass (EP) issued by MOM.
Key Features of a Singapore Branch Office:
- Legal Status: A branch office is not a separate legal entity from its parent company. It operates under the same legal identity and bears the same name as the foreign company.
- Parent Company Liability: The parent company is fully responsible for all liabilities and obligations incurred by the branch office, including any debts or legal issues of the branch office.
- Activities: A branch office can engage in profit-generating activities in Singapore, such as sales, marketing, and distribution, except those prohibited for foreign companies or those restricted to specific industries.
- Taxation: The branch office is subject to tax regulations in Singapore. However, unlike a subsidiary office, a branch office cannot enjoy local tax benefits.
- Compliance: A branch office must comply with the statutory and disclosure requirements as stated in the Companies Act.
Representative Office
Foreign companies can set up a representative office (RO) in Singapore to explore business opportunities before fully venturing into the local market. This allows them to assess Singapore’s business landscape and decide whether to establish a permanent presence like a branch office or subsidiary company.
Key Features of a Singapore Representative Office:
- Legal Status and Activities: An RO is a temporary establishment without legal status. Hence, it cannot take part in any revenue-generating trading or business activities.
- Parent Company Liability: Like the branch office, the parent company is fully responsible for all liabilities incurred by the representative office, including any debts or legal issues of the RO.
- Taxation: Since a representative office cannot generate income, tax regulations do not apply and it is unable to receive any tax benefits.
Tax Exemption Schemes and Rebates for Companies
To support corporate start-ups, the Singapore tax authority has implemented a scheme offering sizable tax exemptions to resident companies. The two most common schemes are:
Start-Up Tax Exemption Scheme
The Start-Up Tax Exemption (SUTE) tax exemption scheme aims to support new businesses and entrepreneurs in the country. This scheme is only available for the first three years of assessments. After this period, companies can apply for the partial tax exemption scheme (PTE).
To qualify, businesses must:
- Be a tax resident in Singapore; or
- Owned by no more than 20 shareholders (where all the shareholders are individuals; or
- At least one shareholder controls 10 percent of the issued shares).
Businesses must not be:
- An investment holding company; or
- Engaged in the property development industry, either for investments or for sale
Partial Tax Exemption
Companies that do not qualify for SUTE may be eligible for the Partial Tax Exemption (PTE) scheme. Starting from YA2020, all companies in Singapore benefit from a Partial Tax Exemption (PTE). This entails a 75% exemption on the initial $10,000 of normal chargeable income, followed by an additional 50% exemption on the subsequent $190,000 of normal chargeable income. In total, each company can enjoy up to $102,500 in exemptions for each YA. It’s important to note that this amount has been reduced compared to previous years.
Company registration process in Singapore
Step 1: Fulfill the Eligibility Criteria
Before proceeding with the application to establish a Singapore private limited company through ACRA, you need to meet the following criteria:
- Have at least one shareholder, who can be an individual or a company, with the option to have multiple shareholders, up to a maximum of 50. Foreign shareholders are allowed, and there’s no restriction on full foreign ownership.
- Maintain a minimum paid-up capital of $1. You can increase the capital later as needed by informing the relevant authorities.
- Appoint at least one local or resident director. While Singapore residents or foreign residents can serve as directors, corporate directors are not permitted. If required, you can utilize nominee director service.
- Employ a minimum of one company secretary who must be a Singaporean resident to ensure compliance with regulatory requirements.
- Have a local registered address where all official documents of the company will be stored; a PO box address is not acceptable.
Step 2: Choose a Company Name
To proceed, you must secure approval for your company name from the Singapore Registrar of Companies.
Provide your agent with 3-5 potential names, and they will verify their availability through the ACRA’s BizFile+ portal, reserving them for 60 days. If necessary, you can extend the reservation for another 60 days while completing your application. Consider the following tips for smooth acceptance of your company name:
- Ensure it’s unique and relevant to your business.
- Avoid using vulgar or obscene language.
- Adhere to copyright and trademark guidelines to prevent infringement issues.
Step 3: Prepare and submit the required registration documents
Once your company name is approved, you’ll need to gather and sign various documents for the registration process. These include:
- Brief details of your business profile and activities;
- Details of shareholders, directors, company secretary, and business structure
- If you’re a foreigner, a copy of your passport and proof of address dated within 3 months;
- If you’re registering a foreign company, provide the Certificate of Incorporation, Memorandum and Articles of Association (M&AA) and a shareholding structure to identify all the ultimate beneficial owners;
- Company Constitution;
- Consent by each company director;
- Appointed company secretary documents;
- Declaration of the company’s controllers;
Ensure that all documents are accurately prepared, signed, and submitted through your appointed agent, who will initiate the incorporation procedure via ACRA’s BizFile+ portal. Additionally, if any of your documents are not in English, make sure to have them translated by a reliable source.
Step 4: Finalize registration and initiate bank account setup
Upon submission, ACRA typically processes your application within an hour. Once your company is successfully registered, ACRA will issue a Business Profile (BizFile) that outline the corporate structure, encompassing details such as its primary business activity, registered address, shareholders’ and directors’ information, and the shareholding structure.
Following registration, several crucial tasks must be completed before commencing business operations:
- First board resolution: Directors must convene a meeting to pass resolutions appointing directors, secretaries, and other necessary positions. A resolution to initiate the opening of a corporate bank account may also be required.
- Ensure the appointment of a Company Secretary within six months of company registration if not already done.
- Obtain the necessary business licenses and permits tailored to your business activities before commencing operations.
- Register for Goods and Services Tax (GST) if your projected earnings for the next 12 months exceed SGD 1 million, providing relevant documentation for your forecast. Regular submission of GST returns becomes obligatory upon registration.
- Adhere to annual filing obligations, including filing annual returns with ACRA and tax returns with IRAS, to uphold your company’s legal standing.
- Adhere to employment regulations by complying with Singapore’s Employment Act when hiring staff, covering employment terms and other provisions. Additionally, ensure contributions to the Central Provident Fund (CPF) for Singaporean employees.
- Bank account opening: Travel to Singapore to open a corporate bank account, streamlining financial transactions and maintaining separation between personal and business finances or opt for a business account opening on a payment platform that may be fully completed online.
- Business insurance: Purchase appropriate commercial insurance to reduce liability in the event of work-related accidents.
