A Quick Guide for Foreigners Who Wish to Set up a Singapore Company (Singapore Private Limited)

 

Choosing Service Provider

Foreigners who wish to form a local company in Singapore must engage the services of a registered filing agent (eg accounting firm).  Accounting and Corporate Regulatory Authority of Singapore (ACRA) is responsible for incorporation etc.

 

Choosing Business Structure

The preferred business structure is Singapore Private Limited company mainly due to these reasons:

  • Most conventional structure
  • Simple and generally accepted by your customers/suppliers
  • Fast to set up ie between 1 to 14 days
  • Liability of the shareholders is limited to the capital that they have contributed
  • Clear division of shares

 

Choosing a Company Name

The name of Singapore Private Limited company ends with ‘PTE. LTD.’ or ‘PRIVATE LIMITED’ e.g. ABC PTE. LTD.

 

Choosing principal activity

A company must have at least one principal activity to a maximum of two. Please choose the principal activity or activities of your company. 

 

Appointing Directors

Every company must have at least 1 director who is locally resident in Singapore. He must be:

  • At least 18 years old;
  • Of full legal capacity;
  • A Singapore Citizen or Singapore Permanent Resident
  • Cannot be disqualified from acting as a director of a company e.g. an undischarged bankrupt.

Foreigner can be appointed as director along with at least one local resident director.

 

If you do not have a local resident director, you may invite your local Singapore friend or local Singapore relative to act as Local Director for the purpose of incorporation.  Please note that the local director will be taken to task  if the company failed to comply with any Singapore Law. 

Alternatively, you may wish to engage our local nominee directorship service but subject to high fees; and stringent due diligence and Know Your Customers (KYC) assessment. 

 

Appointing Company Secretary

A company must appoint a secretary. A company secretary must be:

  1. A natural person;
  2. Locally resident in Singapore.

 

We act as the company secretary for your company.

 

Shares and Shareholders

The company must have at least one shareholder. Shares can be 100% owned by local (person or company) or foreigner (person or corporation).

 

The minimum share capital must be at least $1 and have at least one ordinary share. Share capital can be denominated in any currency e.g. Singapore Dollar (SGD) or United States Dollar (USD).

 

Deciding Financial Year End

You need to determine the financial year end of the company e.g. 31 March, 30 June, 30 September or 31 December. The financial year end will determine the filing deadlines of corporate tax and ACRA Annual Return.

 

Appointing Auditor

Every company must appoint an auditor within 3 months of incorporation, unless it is exempted from audit requirements under relevant sections of the Companies Act.

 

Qualification Criteria

A company qualifies as a small company if:

 

(a) it is a private company in the financial year in question; and

(b) it meets at least 2 of 3 following criteria for immediate past two consecutive financial years:  

  1. total annual revenue of the company and Group ≤ $10m;
  2. total assets of the company and Group ≤ $10m;
  3. of employees of the company and Group ≤ 50.  

 

For a company which is part of a group:

(a) the company must qualify as a small company; and

(b) entire group must be a “small group”

to qualify to the audit exemption.

 

For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.

Note: Group means the Company + Company’s subsidiaries + Company’s Holding Company + Holding Company’s subsidiaries

 

Processing Time

A company can incorporated within 1 to 14 days. Generally, a company can be incorporated within one day subject to approval.

 

Bank Account Opening

Upon incorporation, you may proceed to open a Checking bank account in Singapore. At least 2 directors and all bank signatories must meet bankers in Singapore.  There processing time is at least 2 to 4 weeks.  We recommend local banks.

 

General questions from bankers are as follows:

  1. Describe the company nature of business
  2. Experience of Directors
  3. Purpose & Reason of Account Opening
  4. Name of 3 major suppliers and 3 major customers and their locations (e.g. ABC Company Pte Ltd – Singapore)
  5. Estimated volume of transaction (e.g. Outward TT – 10 per month)
  6. Estimated turnover for the company
  7. Estimated net profit for the company
  8. Estimated balance for the account set up
  9. Where will the initial source of fund be coming from?
  10. Company website (if any)
  11. Latest 3 months company bank statements from existing business and from new company
  12. Latest 3 invoices from suppliers and to customers from existing business and from new company
  13. Latest 3 contracts

 

Corporate Tax

Generally, a company is taxed at a flat rate of 17% on its chargeable income regardless of whether it is a local or foreign company. Inland Revenue Authority of Singapore (IRAS) is responsible for all kinds of taxes in Singapore. 

 

  1. Tax Exemption Scheme for New Start-Up Companies

Under the scheme, qualifying new companies are given the following tax rates for the first three consecutive Year of Assessments (YAs) where the YA falls in:

Chargeable income

(SGD)

Tax Rate
First $100,000 4.25%
Next $100,000 8.50%
Above $200,000 17.00%

 

2. Partial Tax Exemption for all companies

All companies can enjoy the following tax rates:

 

Chargeable income

(SGD)

Tax Rate
First $10,000 4.25%
Next $190,000 8.50%
Above $200,000 17.00%

 

Qualifying Conditions for Start-Up Companies

The tax exemption is open to all new companies except these two types of companies:

  • A company whose principal activity is that of investment holding; and
  • A company which undertakes property development for sale, for investment, or for both investment and sale.

 

To qualify for tax exemption for start-ups, eligible companies must satisfy these three qualifying conditions:

  1. The company must be incorporated in Singapore;
  2. The company must be a tax resident in Singapore for that YA;
  3. The company’s total share capital is beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where:

 

  • all of the shareholders are individuals; or
  • at least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company.

 

Determining Tax Residency of a Company

A company is either a tax resident or a non-resident of Singapore.

 

In Singapore, the tax residency of a company is determined by where the business is controlled and managed. The residency status of a company may change from year to year.

 

A company is a tax resident in Singapore when the control and management of the company is exercised in Singapore. “Control and management” is the making of decisions on strategic matters, such as those on company policy and strategy. Typically, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is a key factor in determining where the control and management is exercised.  

 

Conversely, a company is a non-resident when the control and management of the company is not exercised in Singapore.

 

The place of incorporation of a company is not necessarily indicative of the tax residence of a company.

 

Employment Pass (EP)

Employment Pass allows foreigners to work in Singapore. Your salary must be at least $3,600 a month, recognized degree and with relevant working experience.

 

If you are a Director / Shareholder of a new Singapore Private Limited company, you are able to apply for EP under the same company at least 6 months after the date of incorporation.

 

As an Employment Pass holder, you can get certain family members to join you in Singapore if you meet the eligibility requirements under Dependent Pass / Long Term Visit Pass.

 

All passes are subject to conditions and approval.

 

Goods and Services Tax (GST)

GST rate is currently at 7%.  Registration is compulsory once your total taxable turnover exceeds $1 million.

 

From 1 Jan 2019, Register for GST if your taxable turnover for a 12-month period at the end of each calendar year exceeds $1 million.

 

However, if you are certain that your total taxable turnover for the next 12 months will not exceed $1 million because of specific circumstances (e.g. large-scale downsizing of business) and can substantiate this with documentation, you will not be required to register for GST. If zero-rated supplies make up more than 90% of your total taxable supplies and being registered will lead to you claiming GST refunds, you may choose to apply for exemption from GST registration.

 

As a company, your total taxable turnover is the combined revenue, fees and income you earn from:

 

  • All your business activities
  • Sole-proprietorship businesses
  • Rental of commercial properties
  • Rental of furniture & fittings

 

Generally, the above will be your standard-rated supplies (GST charged at 7%) unless they qualify for zero-rating (GST charged at 0%). Standard-rated and zero-rated supplies are part of your taxable turnover; exempt supplies and transactions that are out-of-scope are not.

 

Zero-rated supply

 

Exempt supply

 

Out-of-scope

 

Export of goods from Singapore

 

International Services as described in Section

21(3) of the GST Act

 

Sale and lease of bare

residential property

 

Most financial services, e.g. bank interest

 

Third-country sales, e.g.

sale of goods from

China to India where

the goods do not enter

Singapore

 

Dividend income

 

 

Filing Requirements

Filing Task required Deadlines
ACRA filing of Annual Return

 

Accounting,

Financial statements,

Audit (unless exempted),

Annual General Meeting (AGM),

Annual Return

Within 6 months from financial year end
IRAS Estimated Chargeable Income (ECI)

 

Corporate tax computation,

ECI

Within 3 months from financial year end
IRAS Corporate tax (Form C/CS, tax computation)

 

Corporate tax computation,

Form C/ CS

By 30 Nov of each calendar year (By 15 Dec for electronic filing)
IRAS Individual tax filing

 

Payroll,

IR8A,

Employee files personal tax direct

By 15 April of each calendar year (By 18 April for electronic filing)
IRAS Goods & Service Tax filing Accounting,

GST computation,

GST filing

Within one month from each quarter end

 

Source: Extraction from www.acra.gov.sg, www.mom.gov.sg, www.iras.gov.sg