Doing business in Singapore
Singapore is a primary hub in Southeast Asia due to several key factors contributing to its success as a business destination. First, its strategic location at the southern tip of the Malay Peninsula places it at the crossroads of major international trade routes, making it a gateway to Asia and an important hub for global trade. This has helped attract many multinational corporations, who have established their regional headquarters in Singapore, taking advantage of the city-state’s excellent connectivity to major markets across the region.
Secondly, Singapore has a highly developed infrastructure, including world-class ports, airports, and a modern transportation system that is efficient and reliable. This infrastructure has helped to facilitate the smooth movement of goods and people, further reinforcing Singapore’s position as a key logistics hub in the region.
Thirdly, Singapore has a highly educated and skilled workforce, with a strong emphasis on education and training, which has helped to attract foreign investors looking for a highly skilled talent pool. In addition, the government has implemented policies to promote innovation and technology, including generous research and development grants and investment in cutting-edge technologies such as artificial intelligence, robotics, and cybersecurity.
Finally, Singapore is known for its pro-business environment, transparent and stable legal system, low tax rates, and comprehensive network of double tax treaties. The government has also implemented various incentives and schemes to attract foreign investment, such as the Global Investor Programme and the Economic Development Board’s “one-stop-shop” for investment support.
The primary purpose of this guide is to provide a basic understanding of Singapore, including an overview of its tax system, the available types of companies, and the requirements for immigration. This guide is a helpful starting point for investors contemplating setting up a business in Singapore. For comprehensive assistance, please do not hesitate to contact our team in Singapore, the full contact details can be found in this guide.
Types of business structures
In Singapore, there are different types of structures for doing business:
- Representative office (‘RO’): It is a unique entity with no legal status and does not generate any profit but acts as a cost center to the parent company. The representative office structure is often chosen by foreign businesses keen to explore opportunities in Singapore with market research and feasibility studies. It represents a temporary arrangement since it can be renewed for three years. After this period, the foreign corporation must establish a permanent business structure or terminate its presence in Singapore.
- Branch Office: A branch office does not exist as a separate legal identity from its foreign parent company since it is considered a “legal extension” of the foreign parent company. Thus, the liability of a branch office extends to its foreign parent company. It must share the same name and constitution as the parent company and cannot carry out different commercial activities from that of the parent company. Therefore, it is taxed as a non-resident entity without benefitting from any tax benefits and incentives in Singapore.
- Local Company: A local company is a legal entity separate and distinct from its shareholders and directors; it has the right to own property, has perpetual succession, and can sue or be sued in its name. There are three different types of companies:
- Private company limited by shares (50 members or less) and Exempt Private Company (20 members or less and no corporation holds beneficial interest)
- Public company limited by shares (more than 50 members)
- Public company limited by guarantee
- Variable Capital Company (VCC) is a new type of legal vehicle tailor-made for collective investment schemes (CIS). It is incorporated under the Variable Capital Companies Act, which took effect on 14 January 2020, and complements the existing suite of investment fund structures available in Singapore.
- Sole Proprietorship (single owner) or Partnership (at least two and max of twenty owners): This entity is the easiest to set up with almost negligible compliance norms and costs. A natural person who is a resident in Singapore above 18 years of age can set up a sole proprietorship. This entity is not a separate legal entity from its owner, who has unlimited liability for debts and losses of the business, individual tax rates apply to its chargeable income, and its registration must be renewed annually or every three years.
- Limited Partnership (LP): This entity type involves quick setup procedures. It is easy to manage with minimal registration costs and fewer compliance regulations to adhere to. Its registration requires annual renewal, and it is formed between at least one General Partner (GP) bearing unlimited liabilities and one Limited Partner with limited liability (but with no role in the management). At least one local manager must be an ordinary resident.
- Limited Liability Partnership (LLP): This business structure has fewer formalities, procedures, and regulatory duties to comply with. It requires at least two partners with limited liabilities. It is a separate legal entity from its partners, and it needs at least one local manager to be an ordinary resident in Singapore of at least 18 years of age.
Private limited company
It is the most preferred business structure by foreigners doing business in Singapore. This entity has a separate legal personality, can benefit from any tax incentives and schemes, engage in business operations different from those of its parent company, and is suitable with the scale of most business activities with limited liability for the shareholders. In addition, foreign parent entities can own 100% of a subsidiary in Singapore.
A private limited company is a business entity incorporated under the Singapore Companies Act (Cap 50). A private limited company is the most advanced, flexible, and scalable type of business form in Singapore.
- Shareholder: The company must have at least one shareholder, who can be a natural person or a corporation and enjoy limited liability. A private company cannot have more than 50 shareholders. Local shareholding is not required.
- Capital: A minimum paid-up capital is SGD 1.00. The company’s capital can be increased at any time after the incorporation.
- Management: the company is managed by a director or a board of directors, of which at least one must be a legal resident in Singapore.
- Address: It must have a local and physical registered office address where the company will keep all of its statutory documents. This address cannot be a PO box.
- Secretary: The company must have a professional company secretary who is a local resident of Singapore and responsible for ensuring the smooth administration of the company, compliance with corporate governance, and other financial and legal regulations.
- Auditors: The company must appoint an audit firm to audit its accounts annually unless exempted by law. Audit exemption requirements relate to “small companies/small groups” and “relevant dormant companies.”
Annual General Meeting and Annual Return:
The company must hold the Annual General Meeting (AGM) to approve (among others) the financial statements within six months from the financial year’s end.
Under certain circumstances, private companies do not need to hold AGMs if they send their financial statements to members within five months after the FYE, provided that no member or auditor requests the AGM to be held.
The company must also file with the local registrar, Accounting & Corporate Regulatory Authority (ACRA), its Annual Return (AR) within seven months from the financial year-end. The AR should contain the details of the Officers, the Registered address, and the Auditors of the Company.
It is important to note that a company is exempt from audit requirements if it fulfills the criteria of “small company/small group” under section 205C of the Singapore Companies Act (Chapter 50) (the “CA”). If it also falls under the definition of “private dormant relevant companies” under section 201A of the CA, it shall be exempted from the requirement to prepare financial statements.
Companies must maintain a register of registrable controllers (RORC) and file the RORC information with the ACRA. A Registrable Controller is defined as an individual or a legal entity that has a “significant interest” (holds directly or indirectly ≥25% shares or voting rights) or exercises “significant control/influence” over the company (i.e., can appoint or remove the directors, amend the constitution and nature of company’s business).
The standard Corporate Income Tax rate is 17% and applies to local and foreign companies.
Singapore offers a range of tax exemption schemes:
|Partial tax exemption
|All companies can claim a 75% exemption of the first $10,000 and a further 50% exemption of the next $190,000 of chargeable income
|Tax exemption for new start-up companies
|A newly incorporated company that meets the qualifying conditions can claim a 75% exemption on the first $100,000 and a further 50% exemption on the next $100,000 of chargeable income for each of its first three consecutive Years of Assessment
Singapore taxes income on a territorial basis. Tax is imposed on all income derived from or accrued in Singapore and all foreign income remitted or deemed remitted to Singapore, subject to certain exceptions.
What is taxable
- Gains or profits from any trade or business
- Income from investment such as rental, interest, dividends (unless exempted), royalties, premiums, and any other profits from property
- Other gains that are revenue in nature
Deductions such as business expenses, capital allowances, and reliefs can be claimed to reduce taxable income.
What is not taxable
- Capital Gains
- Income Exempted from tax, such as
- Certain shipping income derived by a shipping company
- Foreign-sourced dividends, branch profits, and service income received by a resident company
- Gains derived by a company on the disposal of equity investments
Corporate Tax Returns
All companies in Singapore need to communicate yearly to IRAS their taxable income
- Estimated Chargeable income – within three months from the end of the financial year
- Form C / Form C-S / Form C-S (Lite) – subject to qualifying conditions- by 30 November (or 15 December for e-file) of the subsequent year
Individual income tax
Personal income earned by residents in Singapore is taxable. Examples of personal income are
- employment income
- income from trade, business, and profession
- rental income from properties
From the year of assessment 2024 onwards, Singapore Residents are taxed according to the following progressive rates
|Income Tax Rate
The following categories are considered Singaporean tax residents
- Singapore Citizen or Singapore Permanent Resident: or
- Foreigner who has stayed in Singapore:
- For at least 183 days in the previous calendar year; or
- Continuously for three consecutive years, even if the period of stay in Singapore may be less than 183 days in the first year and/or third year; or
- Foreigner who has worked in Singapore for a continuous period straddling two calendar years and the total period of stay is at least 183 days; this applies to employees who entered Singapore but excludes company directors, public entertainers, or professionals.
The employment income of non-residents is taxed at the flat rate of 15% or the progressive tax rate, whichever is higher.
Good and services tax
Goods and services tax Rates
- The standard rate of 8% (9% effective from 1 January 2024) applies to all supplies of goods and services made in Singapore unless the supply qualifies to be zero-rated or exempted for GST purposes.
- Zero-rated supplies include the export sales of goods and provision of international services (subject to satisfying certain conditions).
- Exempt supplies include the provision of specified financial services, sale and lease of residential land/ properties, and supply of investment in precious metals.
Registration, filing, and payment
- A person is generally required to register for GST if the total value of taxable supplies made in one year exceeds or is expected to exceed $1 million.
- Registration voluntarily is possible if taxable turnover is less than $1 million.
Stamp duty applies only to instruments relating to stock and shares registered in a share register kept in Singapore and Singapore immovable property. In particular:
- Buyer’s stamp duty on the acquisition of stock and shares is 0.2%
- Buyer’s stamp duty on the acquisition of property is 1% for the first $180,000, 2% for the next $180,000, and 3%
- Seller’s stamp duty of 5% to 15% applies to industrial property acquired on or after 12 January 2013.
Goods imported into Singapore are generally free of customs or excise duties, with the exemption of these categories – intoxicating liquors, tobacco products, motor vehicles, and petroleum products
Export duties are not levied on goods exported from Singapore.
Singapore has a withholding tax regime to ensure the collection of income tax from non-resident on income which are sourced or deemed sourced in Singapore
|NATURE OF INCOME
|Interest, commission, fee
|Payment for the use of or the right to use scientific, technical, industrial, or commercial knowledge or information
|Technical assistance and service fees
|Non-resident directors’ remuneration
Withholding rates can vary according to prevailing DTAs agreements
In this regard, Singapore has signed Avoidance of Double Taxation Agreements (“DTAs”), limited DTAs, and Exchange of Information Arrangements (“EOI Arrangements”) with around 100 jurisdictions, including Italy.
All foreigners who intend to work in Singapore must have a valid visa, here below are listed the main visa schemes
This type of pass is meant for mid-level skilled employees. Candidates must earn at least $3,000 monthly and meet specific eligibility criteria. S Pass are limited by a quota.
Employment Pass (EP)
For foreign professionals, managers, and executives, the fixed monthly salary must be more than S$5,000. There is no official quota system that limits the number of EPs issued. An EP is initially issued for 1-2 years and is renewable until the applicant continues to be employed by the company. From 1 September 2023, candidates must pass a two-stage eligibility framework. In addition to meeting the qualifying salary, candidates must pass a points-based Complementarity Assessment Framework (COMPASS).
Entrepreneur Pass (EntrePass)
The EntrePass is a variant of the Employment Pass. It is a work permit for newly established (or to be established) Singapore company owners who wish to relocate to Singapore to operate their business.
To be eligible, the company must meet several criteria, such as:
- Secure funding from a government-recognized investor;
- Have entrepreneurial or investment experience;
- Possess intellectual property, have a research collaboration with accredited research
- Hold intellectual property, collaborate with accredited research institutions in Singapore, or have extraordinary achievements in strategic areas.
It is initially issued for one year and is renewable afterward, provided the business remains profitable and there is no official quota system for EntrePass.
Personalized Employment Card (PEP).
The Personalised Employment Pass (PEP) is a type of employment pass that is not tied to a specific employer. The most significant advantage of having a PEP work permit is changing jobs without applying for a new employment pass, as long as the holder is not unemployed for more than six months.
The most significant disadvantage is that a PEP holder cannot start his own business. The eligibility requirements for PEP are:
- For EP holders: a fixed monthly salary of at least $12,000;
- For overseas foreign professionals: a fixed monthly salary of at least $18,000 and the
- The last salary received must have been within six months before application.
PEP is issued for three years and is not renewable. There is no formal quota system for PEP holders, and holders can apply for PR in due course.
Overseas Networks & Expertise Pass
The Overseas Networks & Expertise Pass is personalized for top talent across all sectors, including business, arts and culture, sports, academia, and research. It allows eligible applicants to concurrently start, operate and work for multiple companies in Singapore at any time.
Candidates must earn a fixed monthly salary of at least $30,000 within the last year or a fixed monthly salary of at least $30,000 under their future employer based in Singapore. Individuals with outstanding arts and culture, sports, academia, and research achievements can qualify, even if they do not meet the salary criterion.
The pass duration is five years; subsequent renewals will be five years. Spouses of this pass holders can also obtain a Letter of Consent to work.
Pass holders may have their spouses, children, and parents join them in Singapore. Dependents can work in Singapore but must obtain a work visa under the prevailing qualifying conditions.
Foreigners can apply to become permanent residents of Singapore (PR) and enjoy most of the benefits and rights granted to citizens.
The benefits include:
- The right to live in the country without a visa or work restrictions.
- Priority for their children to study in public schools
- Greater freedom to purchase a property.
- Participation in the pension fund scheme.
At the same time, they need to make specific commitments, such as sending their children to compulsory two-year military service once they reach the age of 18.
The main scheme that foreigners can apply for PR is the “Professionals/Technical Personnel & Skilled Worker” scheme, reserved for foreign professionals working in Singapore when applying for permanent residency.
The other two schemes foreigners can apply for PR are:
- The Global Investor Program (GIP). Under this scheme, foreigners can apply by starting a business with a minimum investment of SGD 2.5 million;
- The Foreign Artistic Talent Scheme. To qualify for this scheme, foreigners must be well-recognized artists in their own country and have significantly contributed to Singapore’s arts and culture.
Global Anti-Base Erosion Rules
The government of Singapore has announced that it plans to implement the Global Anti-Base Erosion (GloBE) model rules and a domestic minimum top-up tax (DTT) for businesses starting from 1 January 2025. This move is in response to the international tax developments and the increasing adoption of the GloBE rules globally. With the introduction of these rules, large multinational enterprises (MNEs) with consolidated annual revenues of EUR 750 million or more will pay an effective tax rate of at least 15% on profits earned in the jurisdictions where they operate. This will negate the benefits of concessionary tax rates that MNEs enjoy in Singapore. While not all of Singapore’s key trading partners have adopted the GloBE rules, some MNEs with operations in Singapore could be subject to a top-up tax in their ultimate parent entity’s location if that location implements GloBE rules before 2025. Therefore, MNEs should review their holding structures to assess if any part of their operations is caught by the global minimum tax regime introduced in another jurisdiction.
Incentive scheme for qualifying donors with family offices in Singapore
In addition, the Singapore government has proposed a new tax incentive scheme for qualifying donors with family offices operating in Singapore. Under this scheme, qualifying donors can claim 100% tax deduction for overseas donations made through qualifying local intermediaries, capped at 40% of the donor’s statutory income. To qualify, donors must have an incentivised fund vehicle under the section 13O or section 13U schemes and meet the eligibility conditions such as incremental business spending of $200,000. This move aims to encourage philanthropy and make Singapore a centre for philanthropy in Asia.
Double Tax Deduction for Internationalisation (DTDi) Scheme
The Double Tax Deduction for Internationalisation (DTDi) scheme has been expanded to cover the costs of launching an e-commerce campaign on an online platform. This should help businesses reduce the costs of going online. However, it is unclear whether the definition of “campaign” will be interpreted strictly by the Inland Revenue Authority of Singapore (IRAS) such that the costs of setting up an e-commerce channel or webpage which is accessible to customers both in Singapore and overseas may not qualify for the new deduction claim.
Changes to tax treatment for capital expenditure
Enhanced tax treatment on capital expenditure
In addition, there are enhanced tax treatment measures available to businesses for capital expenditure and renovation and refurbishment costs in the Year of Assessment (YA) 2024. Taxpayers will have the option of accelerating their capital allowance claims over two years, and there will be an irrevocable option to claim accelerated deduction on qualifying renovation & refurbishment (R&R) costs incurred in the YA 2024. However, companies should carry out scenario analyses and consider a number of factors to determine whether to opt for the accelerated claims.
The tax deduction scheme for approved expenditure on building modifications for disabled employees will be withdrawn from 15 February 2023, as it has become less relevant in view of other support schemes introduced subsequently.
There are also tax measures relating to submarine cable systems, including a withholding tax exemption, a writing down allowance, and an investment allowance. The proposed extension of these tax measures to 31 December 2028 should continue to encourage telecommunication carriers and other industry players to hub their networks in Singapore.
Enterprise Innovation Scheme
The Enterprise Innovation Scheme (EIS) is a new programme introduced by the Singapore Government to incentivize and support businesses in their research and development (R&D), innovation, and capability development activities. The EIS provides enhanced tax deductions for qualifying activities, allowing businesses to claim up to 400% tax deduction on their qualifying expenditure for five categories of activities.
The first category is staff costs and consumables incurred on qualifying R&D projects conducted in Singapore, where a qualifying project is one that is of advanced, leading-edge technology. The second category is qualifying costs for intellectual property registration, while the third is for acquisition and licensing of IP rights. The fourth category is qualifying training expenditure, and the fifth is innovation projects carried out with local institutions.
The EIS is more targeted than the erstwhile Production and Innovation Credit Scheme and is more generous, offering 400% tax deduction or allowance, which is higher than the current 100% to 250% deductions available. Businesses that are not profitable or not having sufficient profits to benefit from the tax deductions can opt for cash conversion and receive a non-taxable cash payout of 20% of their total qualifying expenditure across all qualifying activities, up to a maximum of $100,000.
The EIS benefits are applicable from YA 2024 to YA 2028, allowing businesses to enjoy enhanced deductions for investments in innovation and productivity, which they may have already made for YA 2024. The EIS aims to encourage businesses to invest in innovation and enhance their competitiveness while also preparing young talents for the workforce and promoting collaboration between businesses and local institutions.
Tax measures for the financial sector
What are the changes to the Financial Sector Incentive (FSI) Scheme and the Qualifying Debt Securities (QDS) Scheme in Singapore’s recent budget?
The Financial Sector Incentive (FSI) Scheme is a tax incentive aimed at enhancing financial intermediation and deepening capabilities in key financial services and banking activities in Singapore. Originally scheduled to lapse after 31 December 2023, the scheme will now be extended until 31 December 2028, with certain enhancements.
Under the FSI Scheme, concessionary tax rates of 5%, 10%, 12%, and 13.5% on income from qualifying banking and financial activities, headquarters and corporate services, fund management, and investment advisory services will be streamlined to two rates of 10% and 13.5% for different categories of FSI awards approved on or after 1 January 2024. The existing set of applicable concessionary tax rates will also be revised as follows:
- FSI-Capital Market (CM), FSI-Derivatives Market (DM), FSI-Credit Facilities Syndication (CFS) – increase from 5% to 10%.
- FSI-Fund Management and FSI-Headquarter Services – remain at 10%.
- FSI-Trustee Companies – increases from 12% to 13.5%.
- FSI-Standard Tier (ST) – remains at 13.5%.
The Qualifying Debt Securities (QDS) Scheme has been delinked from the FSI Scheme, and the requirement that a QDS has to be substantially arranged in Singapore will be rationalized. All debt securities issued on or after 15 February 2023 must be substantially arranged in Singapore by a financial institution holding a specified license (instead of an FSI company). For insurance-linked securities (ILS) issued from 1 January 2024 onwards, at least 30% of the ILS issuance costs must be paid to Singapore businesses, to the extent that the substantially arranged in Singapore requirement is not met. The QDS Scheme will be extended until 31 December 2028, and the scope of qualifying income will be streamlined and clarified to include all payments in relation to the early redemption of a QDS.