Establishing a business in Singapore

A Q&A guide to establishing a business in Singapore.

This Q&A gives an overview of the key issues in establishing a business in Singapore, including an introduction to the legal system; the available business vehicles and their applicable formalities; corporate governance structures and requirements; foreign investment incentives and restrictions; currency regulations; and tax and employment issues.

To compare answers across multiple jurisdictions, visit the Establishing a business in... Country Q&A Tool.

This article is part of the global  guide to establishing a business worldwide. For a full list of contents, please visit www.practicallaw.com/ebi-global.

Contents

Legal system

1. What is the legal system in your jurisdiction based on (for example, civil law, common law or a mixture of both)?

Singapore's legal system is based on the English common law.

 

Business vehicles

2. What are the main forms of business vehicle used in your jurisdiction? What are the advantages and disadvantages of each vehicle?

The main forms of business vehicles in Singapore are:

  • Sole proprietorship.

  • Partnership.

  • Company.

  • Limited partnership (LP).

  • Limited liability partnership (LLP).

  • Business trust (BT).

Sole proprietorship

A business carried on by a sole person is a sole proprietorship. If he or she intends to carry on this business under a business name (as opposed to his or her full name), he or she must register that business name with the Accounting and Corporate Regulatory Authority of Singapore (ACRA) (Business Names Registration Act 2014 (No. 29 of 2014)). A sole proprietorship has no separate legal personality, and therefore cannot own property in its own name.

The advantages of a sole proprietorship are as follows:

  • Minimal formalities and regulatory requirements to register a business name.

  • Minimal statutory compliance requirements for the administration and operation of a sole proprietorship.

  • Easy to dissolve.

The disadvantages of a sole proprietorship are as follows:

  • The owner has unlimited personal liability for the debts and liabilities of the business.

  • It ceases to exist on the bankruptcy or death of the owner

Partnership

Two or more persons, who carry on a business with a view to profit, do so under a partnership (as defined under the Partnership Act (Cap. 391)). Persons who intend to carry on business under a business name (as opposed to their full names) must register it with ACRA (Business Names Registration Act 2014 (No. 29 of 2014)). A partnership has no separate legal personality, and therefore cannot own property in its own name.

The advantages of partnerships are as follows:

  • Minimal formalities and regulatory requirements to register a business name.

  • Minimal statutory compliance requirements for the administration and operation of a partnership.

  • Tax transparency, as each partner is taxed on an individual basis.

  • Easy to dissolve.

The disadvantages of a partnership are as follows:

  • Each partner is regarded as an agent of the partnership.

  • Each partner has unlimited personal liability for the debts and liabilities of the business (including liabilities for wrongful acts or omissions of other partners in the ordinary course of business).

  • Except for a partnership that is formed to carry on professional services, a partnership cannot be made up of more than 20 partners.

  • The bankruptcy/winding-up or death of a partner will lead to dissolution of the partnership.

Company

A company incorporated and existing under the Companies Act (Cap. 50) has a separate legal personality from its owners/members and can own property in its own name. For business purposes, it is usually in the form of a company limited by shares (that is, where the liability of its members is limited to the amount they have agreed to pay for their shares).

The advantages of a company are as follows:

  • A member of a company has no personal liability for debts and liabilities of the business.

  • A company has perpetual succession, and is not affected by the death or bankruptcy/winding-up of any member.

  • There is no maximum number of members, except for private companies that cannot have more than 50 members.

The disadvantages of a company are as follows:

  • Certain formalities and prior regulatory requirements must be met in order to incorporate a company.

  • Various statutory requirements apply to the administration and operation of a company.

  • Various statutory requirements apply to the dissolution of a company.

Limited partnership (LP)

An LP is a partnership consisting of a minimum of two partners, with at least one general partner and at least one limited partner (that is, a partner who is registered as such by a general partner under the Limited Partnerships Act (Cap. 163B)). An LP has no separate legal personality, and therefore cannot own property in its own name. A general partner is responsible for the actions of the LP and is liable for all debts and obligations of the LP. A limited partner is not liable for the debts and liabilities of the business beyond its agreed contribution, provided it does not participate in the management of the LP.

The advantages of an LP are as follows:

  • Minimal formalities and regulatory requirements for a general partner to register a limited partner under the Limited Partnerships Act.

  • Minimal statutory compliance requirements for the administration and operation of an LP.

  • Tax transparency, as each partner is taxed on an individual basis.

  • A limited partner has limited personal liability for the debts and liabilities of the business.

  • The bankruptcy/winding-up or death of a limited partner will not lead to dissolution of the LP.

  • Easy to dissolve.

The disadvantages of an LP are as follows:

  • A general partner has unlimited personal liability for the debts and liabilities of the business.

  • A limited partner cannot participate in the management of the LP if it wishes to continue to enjoy limited liability.

  • Except for an LP that is formed to carry on professional services, an LP cannot be made up of more than 20 partners.

Limited liability partnership (LLP)

An LLP is a partnership registered under the Limited Liability Partnerships Act (Cap. 163A). It has a separate legal personality from its partners, and can own property in its own name.

The advantages of an LLP are as follows:

  • Minimal formalities and regulatory requirements for partners to register as an LLP.

  • Minimal statutory compliance requirements for the administration and operation of an LLP.

  • Tax transparency, as each partner is taxed on an individual basis.

  • A partner has no personal liability for the debts and liabilities of the business, or for the wrongful act or omission of another partner.

  • An LLP has perpetual succession, and is not affected by the death or bankruptcy/winding-up of any partner.

  • There is no maximum number of partners.

  • Easy to dissolve.

The disadvantages of an LLP are as follows:

  • Every partner is regarded as an agent of the LLP.

  • An LLP must make an annual declaration of solvency.

  • Various statutory requirements apply to the dissolution of an LLP.

Business trust (BT)

A BT is a business enterprise structured as a trust and created by a trust deed, which provides for the trustee to legally own and manage the assets of the underlying business and the unit holders to assume beneficial ownership of the trust assets. A BT does not have a separate legal personality.

The advantages of a BT are as follows:

  • A unit holder of a BT registered under the Business Trusts Act (Cap. 31A) has no personal liability for the debts and liabilities of the business and its liability is limited to the amount of money that the unit holder expressly agreed to contribute to the venture.

  • The trustee-manager of a BT registered under the Business Trusts Act must be a company, therefore the BT is not affected by the death, bankruptcy or winding-up of any shareholder of the trustee-manager or of any unit holder.

  • There is no maximum number of unit holders.

The disadvantages of a BT are as follows:

  • Certain formalities and prior regulatory requirements must be met to register a BT.

  • Various statutory requirements apply to the administration and operation of a BT.

  • Various statutory requirements apply to the dissolution of a BT.

 

Establishing a presence from abroad

3. What are the most common options for foreign companies establishing a business presence in your jurisdiction?

The common options for foreign companies establishing a business presence in Singapore are as follows:

  • Registering a representative office with International Enterprise Singapore (if its activities will be confined to market research and feasibility studies).

  • Registering a branch under the Companies Act (Cap. 50) (in which case it will be personally liable for the debts and liabilities of the business carried on by its branch).

  • Incorporating or acquiring a Singapore company limited by shares (in which case, as a member of the Singapore company, it has no personal liability for the debts and liabilities of the business carried on by the Singapore company).

Appointing independent contractors, such as marketing agents, distributors and franchisees, will not be regarded as carrying on business in Singapore.

 
4. How can an overseas company trade directly in your jurisdiction?

An overseas company that intends to carry on a trading business directly (as opposed to effecting any trade through independent contractors) in Singapore should register a branch under the Companies Act (Cap. 50).

To register a branch, the foreign company must generally lodge the following with the Accounting and Corporate Regulatory Authority of Singapore (ACRA):

  • The name and the address of its registered office in its place of formation.

  • A certified copy of the certificate of its incorporation or registration in its place of formation.

  • A certified copy of its charter, statute or constitution.

  • A list of its directors and relevant information as required under the Companies Act.

  • A notice stating the names, nationalities and other identification particulars of one or more natural persons resident in Singapore, who are appointed as its authorised representatives.

  • A statement confirming that each of its authorised representatives has consented to act.

  • A notice of the situation of its registered office in Singapore.

  • A notice containing:

    • its registration number in its place of formation;

    • a description of the business that it carries on;

    • the type of legal form or entity; and

    • a copy of the latest audited financial statements of its head office (where the law in the place of its formation requires the preparation of these statements).

The foreign company must also make available for inspection at its Singapore registered office, among others, a copy of the memorandum of appointment or power of attorney appointing its authorised representatives.

The foreign company must update ACRA in respect of any change to the information or documents that it has lodged with ACRA, and it must file its financial statements with ACRA (see Question 9).

If a foreign company intends to engage in a business that relates to certain regulated sectors in Singapore, it may require licensing before it can commence the business.

 
5. What are the formalities for setting up a partnership?

Partnership

There are no formalities for setting up a partnership.

Two or more persons who carry on business in common with a view to profit is a partnership for purposes of the Partnership Act (Cap. 391). A partnership can be created by conduct, oral agreement or express written agreement.

Persons who intend to carry on a business as a partnership under a business name (as opposed to those persons' full names) must register their business name under the Business Names Registration Act 2014. If the partners are not resident in Singapore, they must appoint an authorised representative who is ordinarily resident in Singapore.

Limited partnership (LP)

A general partner must register at least one limited partner under the Limited Partnerships Act to set up an LP.

It is common to have an express written agreement to regulate the relationship between the general partner(s) and the limited partner(s) of an LP. The Limited Partnerships Act and the Partnership Act (to the extent that it is not inconsistent with the Limited Partnerships Act) must apply in the absence of, or in the event of any conflict with the provisions of any express written agreement.

Limited liability partnership (LLP)

Partners who intend to set up an LLP must register the LLP under the Limited Liability Partnerships Act. The LLP must appoint at least one manager who is ordinarily resident in Singapore.

It is common to have an express written agreement to regulate the relationship between the partners of an LLP. The Limited Liability Partnerships Act and the Partnership Act (to the extent that it is provided for by the Limited Liability Partnerships Act) must apply in the absence of, or in the event of any conflict with the provisions of any express written agreement for the LLP.

 
6. What are the formalities for setting up a joint venture?

There are no formalities for setting up a joint venture (that is, a business arrangement in which parties agree to work together in pursuit of a business or in relation to a specific project).

A joint venture can be either:

  • A contractual joint venture (that is, a purely contractual collaboration between parties).

  • An equity joint venture (that is, where the parties to the joint venture contribute capital and employ any one of the main business vehicles (see Question 2)).

It is not uncommon to set up a special purpose business vehicle by way of an equity joint venture in Singapore.

It is usual to have an express written agreement to regulate the relationship between the parties and to reduce the possibility of a court construing the parties' relationship as a partnership under the Partnership Act (Cap. 391).

 
7. Are trusts available in your jurisdiction?

Various trusts (such as business trusts, private trusts and charitable trusts) are utilised as business vehicles, as well as for wealth management and asset protection. In addition, a settlor can incorporate private trust companies. Singapore trusts are governed by the common law, the Trustees Act and the Trust Companies Act.

 

Forming a private company

8. How is a private limited liability company or equivalent corporate vehicle most commonly used by foreign companies to establish a business in your jurisdiction formed?

Regulatory framework

The main legislation governing the formation of companies is the Companies Act (Cap. 50).

A private limited liability company is incorporated on registration with the Accounting and Corporate Regulatory Authority of Singapore (ACRA). If the company engages in a business that is regulated in Singapore (such as banking, fund management and telecommunications), its incorporation requires the prior approval of the relevant regulators.

For more information on ACRA see box: The regulatory authorities.

Tailor-made or shelf companies

Although it is possible to purchase shelf companies in Singapore, tailor-made companies are more common. It typically takes only one business day from the filing of incorporation papers to incorporate a company in Singapore.

Formation process

To incorporate a company with ACRA, one must first obtain approval from ACRA for the proposed company name. On approval, the name is reserved for a period of 60 days during which time the shareholder(s) can at any time file the incorporation papers.

The incorporation papers include among other things:

  • The signed and dated constitution of the proposed company (unless it adopts the model constitution set out in the Companies (Model Constitutions) Regulations 2015).

  • Details of shareholder(s).

  • Details of director(s) (at least one of whom must be ordinarily resident in Singapore).

  • The proposed registered office address in Singapore.

  • The principal business activities.

  • The proposed share capital.

All filings with ACRA are conducted electronically. On incorporation, a notice of incorporation will be issued. ACRA will also issue a certificate confirming incorporation.

Company constitution

The Companies (Model Constitutions) Regulations 2015, which came into operation on 3 January 2016, set out a model constitution that can be adopted by a private company limited by shares.

The constitution of a company and any amendment to the constitution is available for public access via ACRA. The constitution must:

  • Contain the:

    • name of the company;

    • limited liability of the members;

    • full names, addresses and occupations of the subscribers to the constitution;

    • subscribers' intention to form a company in accordance with the constitution and where the company is to have a share capital, the subscribers' agreement to take the number of shares in the capital of the company set out opposite their respective names.

  • Restrict the right to transfer the company's shares, and limit its members to a maximum of 50, if it is a private company limited by shares.

The subscribers to the constitution are deemed to have agreed to become members of the company and on the incorporation of the company will be entered as members in the register of members (in the case of a private company, this will be in the electronic register of members kept by ACRA). The relationship between shareholders can also be regulated by separate shareholder agreements.

 

Financial reporting

9. What financial reports must the company submit each year?

Singapore companies

The Companies Act (Cap. 50) requires director(s) of a Singapore company to present shareholder(s) of the company at its annual general meeting the financial statements of the company, which comply with the accounting standards of the Accounting Standards Council. The financial statements must be audited unless certain conditions are met (for example, the company is dormant or has revenue not exceeding certain thresholds).

Singapore companies must file an annual return and their financial statements with the Accounting and Corporate Regulatory Authority of Singapore (ACRA) within one month of their annual general meeting.

Foreign companies

Foreign companies registered with ACRA must file with ACRA a copy of their financial statements made up to the end of their last financial year, together with audited accounts of their Singapore branch within 60 days of their annual general meeting (or equivalent). ACRA can waive some of these requirements regarding the audit or form and content of the documents, upon the written application of the foreign company, if it is satisfied of any of the following:

  • It is impractical for the foreign company to comply, with regard to the nature of its operations in Singapore.

  • It would be of no real value, with regard to the amount involved.

  • It would involve expenses unduly out of proportion to its value.

  • It would be misleading or harmful to the business of the foreign company, or to any company that is deemed by virtue of section 6 of the Companies Act to be related to the foreign company.

On the other hand, ACRA can require the foreign company to supplement its financial statements.

The financial statements of a foreign company must be prepared in accordance with the laws of its country of incorporation. If these laws do not require the preparation of financial statements, ACRA can require the company to prepare these statements as if it was a public company incorporated in Singapore.

 

Trading disclosure

10. What are the statutory trading disclosure and publication requirements for private companies?

A private company in Singapore must include as part of its name ''Private Limited'', ''Pte Ltd'', ''Sendirian Berhad'' or ''Sdn Bhd''.

The name of a company (and its company registration number) must appear in legible and roman letters on all the following:

  • The company seal.

  • Business letters.

  • Statements of account.

  • Invoices.

  • Official notices.

  • Publications.

  • Bills of exchange.

  • Promissory notes.

  • Endorsements.

  • Cheques.

  • Orders.

  • Receipts and letters of credit purported to be issued by or on behalf of the company.

 
11. How do companies execute contracts or deeds?

A company can execute contracts and deeds under hand or seal.

Generally, contracts are executed by a representative signing under hand, and deeds are executed by affixing the company's common seal in accordance with the company's constitution (typically, in the presence of two directors of the company, a director and a secretary of the company, or a director of the company and any other person duly authorised for this purpose by the board of directors). The representative can be formally authorised by a resolution of the board of directors or by a power of attorney.

 

Membership

12. Are there any restrictions on the minimum and maximum number of members?

A Singapore company can be incorporated with only one member. There is no limit on the number of members that a public company limited by shares can have.

However, a private company limited by shares has a maximum of 50 members (this includes joint holders of shares that are regarded as one member, however, this does not include any person in the employment of the company or of its subsidiary, or any person who while previously in the employment of the company or of its subsidiary was and thereafter has continued to be a member of the company).

 

Minimum capital requirements

13. Is there a minimum investment amount or minimum share capital requirement for company formation?

There is no minimum investment amount or minimum share capital requirement to form a Singapore company. A company can be incorporated with a share capital of S$1. However, companies intending to carry on a business that is regulated in Singapore are subject to prescribed minimum share capital requirements.

 
14. Are there restrictions on the transfer of shares in private companies?

The constitution of a private company limited by shares must restrict the right of members to transfer its shares. The restriction can be in the form of requiring directors' approval prior to any transfer or conferring a right of first refusal on existing members.

 

Shareholders and voting rights

15. What protections are there for minority shareholders under local law? Can additional protections be given?

Minority shareholders enjoy the following protections:

  • The right to restrain the company from proceeding with ultra vires transactions.

  • Higher thresholds in voting majorities for certain corporate actions.

  • The right to obtain certain information and to inspect certain documents relating to the company's activities.

  • The right to be treated fairly.

If the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to a minority shareholder, it can apply to court to remedy the situation. The court has wide-ranging powers, such as:

  • Directing or prohibiting any act or cancelling or varying any transaction or resolution.

  • Regulating the conduct of the affairs of the company.

  • Authorising civil proceedings to be brought in the name of or on behalf of the company by the minority shareholders and on such terms as the court may direct.

  • Ordering the company or other shareholders of the company to purchase the shares of minority shareholders.

  • Ordering the company to be wound up.

Minority shareholders can obtain additional protection by entering into favourable shareholders' agreements, or setting out favourable terms in the company's constitution.

 
16. Are there any statutory restrictions on quorum or voting requirements at shareholder meetings? Must quorum or voting rights be proportionate to shareholdings?

Subject to any quorum requirements in the constitution, two shareholders are sufficient to form a quorum at shareholder meetings.

There are no statutory restrictions on quorum or voting requirements at shareholder meetings, and there is no requirement for quorum or voting rights to be proportionate to shareholdings, unless provided for in the constitution.

Voting can be by a show of hands, where each shareholder present at the meeting has one vote (regardless of the number of shares he holds) or through a poll, where each shareholder has one vote in respect of each share held by him. However, a proxy can only vote on a poll.

 
17. Are specific voting majorities required by law for any corporate actions (for example, increasing share capital, changing the company's constitution, appointing and removing directors, and so on)?

Singapore law requires a special resolution (that is, at least 75% of all the members present at the general meeting) to be passed for the following corporate actions:

  • Amending the company's constitution.

  • Changing the company's name.

  • Capital reduction.

  • The removal of auditors.

  • The company entering into an amalgamation.

  • The company entering into a scheme of arrangement.

  • Winding up the company.

Higher thresholds apply to the following corporate actions:

  • All shareholders must approve a private company dispensing with holding an annual general meeting.

  • All shareholders must approve the giving of a shorter notice to an annual general meeting.

  • 95% of all shareholders must approve the giving of a shorter notice to general meetings other than the annual general meeting.

  • All shareholders must approve the addition or deletion of an entrenching provision in the constitution of the company.

 
18. Can voting majorities required by law be disapplied to protect a minority shareholder (for example, through class rights or weighted voting)?

The voting majorities required by law can be increased under a shareholders' agreement or the constitution to protect minority shareholders. Shareholders can agree to set a higher approval threshold for numerous ''reserved matters'', such as:

  • Any change in the nature and/or scope of the business of the company.

  • The dissolution, liquidation, or winding-up of the company.

  • Any amendment to the constitution of the company.

  • Any increase in the issued share capital of the company.

  • The issue or grant of any option over the unissued share capital of the company.

  • The issue of any new class of shares in the capital of the company

  • The issuing of any convertible securities by the company.

  • Any repurchase, cancellation or redemption of the company's share capital or any reduction, consolidation, subdivision or reclassification or other alteration of its capital structure.

  • The appointment or removal of, or change in, the auditors of the company.

  • The appointment of, or any subsequent change in, key or senior personnel of the company.

  • The establishment of any branch or representative office of the company

  • The entry by the company into any partnership or joint venture or co-operation agreement with any other party.

  • The adoption of, or any significant change in, the accounting policies of the company, other than as required by law or accounting policies generally accepted in Singapore from time to time.

Different classes of shares with different weighted voting rights can also be issued.

 

Sectoral restrictions

19. What are the conditions or restrictions on establishing a business in specific industry sectors? Are there industry sectors in which it is not permitted to establish a business?

Specific industries in Singapore that are regulated and require businesses engaged in these industries to be licensed include:

  • Banking.

  • Money lending.

  • Insurance.

  • Casino, gambling and lotteries.

  • Telecommunications.

  • Broadcasting.

  • Print media.

  • Real estate agencies.

  • Hotels and travel agencies.

 

Foreign investment restrictions

20. Are there any restrictions on foreign shareholders?

There is generally no restriction on foreign shareholders or the amount of investment. However, specific foreign shareholding restrictions can be imposed on the following:

  • A broadcasting company under the Broadcasting Act (Cap. 28).

  • A newspaper company under the Newspaper and Printing Presses Act (Cap. 206).

 
21. Are there any exchange control or currency regulations?

No exchange control or currency regulation is currently in force in Singapore.

 
22. Are there restrictions on foreign ownership or occupation of real estate, or on foreign guarantees or security for ownership or occupation?

There are restrictions on foreign ownership or occupation of residential real estate under the Residential Property Act (Cap. 274). Unless the prior approval of the Minister of Law has been obtained:

  • A foreign person cannot acquire certain residential property (generally landed property).

  • A foreign person cannot occupy landed residential property as a tenant for a lease term that exceeds a period of seven years (including any renewed term).

However, the Residential Property Act does not prohibit the acquisition of certain non-landed residential property (for example, condominiums) or the mortgage of any interest in residential property to a foreign person (who may therefore accept restricted residential property as security for loans).

A foreign person can also freely acquire, hold and dispose of non-residential property.

 

Directors

23. Are there any general restrictions or requirements on the appointment of directors?

At least one director of a company must ordinarily be resident in Singapore.

A person to be appointed as director of a company must meet all of the following requirements:

  • Must be a natural person with full legal capacity and of at least 18 years old.

  • Must have consented to act as a director.

  • Must not be disqualified or debarred from acting as a director under the Companies Act (Cap. 50).

A person is disqualified or debarred from acting as a director under the Companies Act where any of the following is satisfied:

  • A person who is bankrupt.

  • A person who has been convicted of any offence involving fraud or dishonesty, punishable with imprisonment for at least three months.

  • A person who has been a director in not less than three companies which were struck off the register within a five-year period.

  • A person who is subject to a court disqualification order.

  • A person who has been convicted of at least three filing-related offences under the Companies Act within a period of five years.

  • A person who has three or more High Court orders made against him compelling compliance with the relevant requirements of the Companies Act, within a period of five years.

Singapore law does not impose on directors:

  • Minimum educational qualifications or background experience.

  • Any requirement to hold shares in the company.

  • Any minimum or maximum length of time for which a director may be appointed.

  • A maximum age limit.

  • Any gender quotas.

  • Limits on the number of directorships that a person can concurrently hold.

 

Board composition

24. What are the legal requirements for the composition of a company's board of directors?

Structure

The board of directors must act as single collective body

Number of directors or members

The minimum number of directors is one. There is no limit on the number of directors. There are also no limits (minimum or maximum) on the number of shareholders who are also directors.

A company's constitution can prescribe a higher minimum number and set a limit on the number of directors.

A company listed on the Singapore Exchange Securities Trading Limited is subject to the following requirements and/or guidelines:

  • The board of directors must comprise of at least two non-executive directors.

  • Independent directors should make up at least one-third of the board of directors or half the board of directors (where the chairman of the board and chief executive officer is the same person).

Employees' representation

There is no statutory right for employees to be represented at the board level.

 

Reregistering as a public company

25. What are the requirements for a business to reregister as a public company?

Membership

A private company limited by shares can convert to a public company by lodging all of the following with the Accounting and Corporate Regulatory Authority of Singapore (ACRA):

  • A copy of a special resolution determining to convert to a public company and specifying an appropriate alteration to its name.

  • A statement in lieu of the prospectus.

  • A declaration in the prescribed form.

On converting to be a public company, the following will cease to form part of the company's constitution:

  • Restrictions on a members' right to transfer shares in the company.

  • The limitation of not more than 50 members.

ACRA will issue a notice of incorporation, which reflects the entity's status as a public company.

The newly converted public company must, within 14 days after the issue of the notice of incorporation, lodge with ACRA a list of persons holding shares in the public company.

Share capital

There is no minimum share capital requirement. There is also no requirement for a minimum number of shares to be held by members of the public, or any net asset requirement.

However, if the company is listed on the Singapore Exchange Securities Trading Limited, at least 10% of the total number of issued shares (excluding treasury shares) in a class that is listed must be held by the public at all times.

 

Tax

26. What main taxes are businesses subject to in your jurisdiction?

The main taxes that businesses are subject to in Singapore include:

  • Income tax. This is imposed on a territorial basis (that is, chargeable on income sourced in Singapore) and on income sourced from outside Singapore which is received or deemed received in Singapore. Capital gains are not taxed, unless determined to be in the nature of income.

  • Goods and services tax. This is a domestic consumption tax levied on the import of goods into Singapore, and on all supplies of goods and services in Singapore (except those that are exempted or zero-rated).

  • Property tax. This is imposed on owners of land and immovable property in Singapore based on the property annual value, as determined by the Inland Revenue Authority of Singapore.

  • Stamp duties. This is imposed on documents relating to the lease, transfer or mortgage of immovable property, or the transfer or mortgage of shares registered in Singapore, as specified in the Third Schedule to the Stamp Duties Act (Cap. 312).

  • Customs and excise duties. This is imposed principally on petroleum, tobacco and alcohol products. Singapore is a free port and has relatively few excise and import duties.

  • Foreign worker levy. This is imposed to regulate the employment of foreign workers in Singapore.

 
27. What are the circumstances under which a business becomes liable to pay tax in your jurisdiction?

Income is taxable if it is accruing in or derived from Singapore, or received in Singapore from outside Singapore. A business is generally assessed for income tax in Singapore where the business is a tax resident or is deemed to have a permanent establishment in Singapore.

A business is deemed to have a 'permanent establishment in Singapore if there is a fixed place where the business is wholly or partly carried on in Singapore, including a place of management, a branch, an office, a factory or a warehouse.

Tax resident

A company will be considered to be a tax resident in Singapore if the control and management of the company is exercised in Singapore. The Inland Revenue Authority of Singapore takes into consideration the location of the company's board of directors meetings, during which strategic decisions are made, as a key factor in determining where the control and management is exercised.

Singapore tax residents are:

  • Subject to tax on income that is deemed to be sourced in Singapore or if sourced outside Singapore, received or deemed received in Singapore.

  • Eligible to enjoy tax benefits provided under the Avoidance of Double Taxation Agreements that Singapore has concluded with other jurisdictions.

  • Eligible to enjoy tax exemption on specific foreign-sourced dividends, foreign branch profits, and foreign-sourced service income, provided that all of the following three conditions are met:

    • the highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore;

    • the foreign income has been subject to tax in the foreign jurisdiction from which they were received (known as the "subject to tax" condition) (the rate at which the foreign income was taxed can be different from the headline tax rate); and

    • the Comptroller of Tax is satisfied that the tax exemption would be beneficial to the person resident in Singapore.

Non-tax resident

A non-tax resident person is only liable to pay tax on income that is accrued in or derived from Singapore. Therefore, non-tax resident businesses that are not operating in or from Singapore can remit their foreign-sourced income to Singapore without being taxed on such income.

 
28. What is the tax position when profits are remitted abroad?

Dividends paid by a Singapore tax resident company are tax exempt. Capital gains are not taxed, unless determined to be in the nature of income. Therefore, a person making payment of these dividends or capital gains to a non-tax resident is not required to withhold tax on these payments.

A person making payment of interest, commissions, royalties and management fees to a non-tax resident (including payment to the Singapore branch of a non-resident company) must withhold tax on these payments. The withholding tax rates range from 10% to 22% (unless reduced by an applicable tax treaty).

The Singapore Budget 2014 granted a waiver of withholding tax on all payments of interest, commissions, royalties or management fees made to Singapore branches of non-resident companies on or after 21 February 2014. The waiver intended to reduce the compliance costs of payers making payments to Singapore branches of non-resident companies. Singapore branches of non-resident companies will still be taxed on these payments and must declare them in their annual income tax returns.

 
29. What thin-capitalisation rules and transfer pricing rules apply?

There is no thin-capitalisation regime in Singapore.

The Inland Revenue Authority of Singapore (IRAS) applies the arm's length principle to determine transfer pricing between related parties (including transfer pricing arrangements between branch and head office). The IRAS can make adjustments to the profits of related persons where transactions between them are not at arm's length.

 

Grants and tax incentives

30. Are grants or tax incentives available for companies establishing a business in your jurisdiction?

The Inland Revenue Authority of Singapore (IRAS) tax exemption scheme for new start-up companies

Under the scheme, qualifying new companies are given full exemption on the first S$100,000 of normal chargeable income and a further 50% exemption on the next S$200,000 of normal chargeable income for the first three consecutive years of assessment.

The tax exemption is open to all new companies, except companies whose principal activity is that of both:

  • Investment holdings.

  • Developing properties for sale, investment, or both.

To qualify for tax exemption for start-ups, the company must satisfy the following three qualifying conditions:

  • It is incorporated in Singapore.

  • It is a Singapore tax resident for the assessment year.

  • It must not have more than 20 shareholders throughout the basis period for the assessment year where either:

    • all of the shareholders are individuals who are "beneficially and directly" holding the shares in their own names; or

    • at least one shareholder is an individual "beneficially and directly" holding at least 10% of the issued ordinary shares of the company.

For more information, please see: www.iras.gov.sg/irashome/Businesses/Companies/Learning-the-basics-of-Corporate-Income-Tax/Common-Tax-Reliefs-That-Help-Reduce-The-Tax-Bills/.

Tax incentives for certain industries or activities

Tax incentive schemes targeting specific industries or activities include:

  • A concessionary rate of tax for approved operational headquarters.

  • An income tax exemption for shipping investment enterprises.

For more information, please see: www.iras.gov.sg/irashome/Schemes/Businesses/Applying-For-Tax-Incentives/.

Economic development board incentives

Available grants include:

  • Training grants to encourage manpower capability development in applying new technologies, industrial skills and professional know-how.

  • A Finance and International Headquarters Award, which provides a reduced corporate tax rate of 5% or 10% on incremental income from qualifying activities for substantive global headquarters activities carried out in Singapore.

For more information, please see: www.edb.gov.sg/content/edb/en/why-singapore/ready-to-invest/incentives-for-businesses.html.

 

Employment

31. What are the main laws regulating employment relationships?

The key legislation governing employment law in Singapore is the Employment Act (Cap. 91), which applies to all employees and for many aspects of the employment relationship, except as specified in the Employment Act. Contract and common law principles apply where the employee does not fall under the Employment Act or the issue is not addressed in the Employment Act.

Other statutes that regulate or impact on employment relationships include the following:

  • Child Development Co-Savings Act (Cap. 38A).

  • Retirement and Re-employment Act (Cap. 274A).

  • Trade Unions Act (Cap. 333).

  • Industrial Relations Act (Cap. 136).

  • Trade Disputes Act (Cap. 331).

  • Skills Development Levy Act (Cap. 306).

  • Workplace Safety and Health Act (Cap. 354A).

  • Work Injury Compensation Act (Cap. 354).

  • Employment of Foreign Manpower Act (Cap. 91A).

  • Central Provident Fund Act (Cap. 36).

  • Income Tax Act (Cap. 134).

  • Companies Act (Cap. 50).

 
32. What prior approvals (for example, work permits, visas, and/or residency permits) do foreign nationals require to work in your jurisdiction?

All foreign nationals who intend to work in Singapore must have a work pass issued under the Employment of Foreign Manpower Act (Cap. 91A) before they start work. Employers in Singapore engaging foreign nationals to work in Singapore must ensure that they hold a valid work pass.

The type of work pass depends on the academic and professional qualifications, skill level and fixed monthly salary of the relevant foreign worker. Work passes include the:

  • Work permit, which allows semi-skilled foreign workers in the construction, manufacturing, marine, process or service sector to work in Singapore.

  • S Pass, which allows mid-level skilled staff to work in Singapore.

  • Employment Pass, which allows foreign professionals, managers and executives to work in Singapore.

  • Personalised Employment Pass, which allows high-earning existing Employment Pass holders or overseas foreign professionals to work in Singapore.

  • EntrePass, which applies to eligible foreign entrepreneurs starting new businesses in Singapore.

  • Work Holiday Programme, which allows eligible students and young graduates to work and holiday in Singapore for up to six months.

The Fair Consideration Framework requires an employer to advertise a relevant job vacancy in the Jobs Bank administered by the Singapore Workforce Development Agency for a period of at least 14 days before the employer submits an Employment Pass for a foreign employee for that job vacancy, unless any of the following conditions applies:

  • The employer has 25 or fewer employees.

  • The job position is paying a fixed monthly salary of S$12,000 or above.

  • The job is to be filled by an intra-corporate transferee holding a senior position in the organisation or with an advanced level of expertise.

  • The job is necessary for short-term contingencies (that is, a period of employment in Singapore for not more than one month).

 

Proposals for reform

33. Are there any impending developments or proposals for reform?

The Ministry of Law and the Ministry of Finance plan to introduce various amendments to the Companies Act (Cap. 50) in 2017, in response to the recommendations of both the Insolvency Law Review Committee and the Committee to Strengthen Singapore as an International Centre for Debt Restructuring.

The prospective reform includes legislative amendments to enhance the corporate rescue and restructuring framework, including provisions relating to schemes of arrangement, judicial management and cross-border insolvency.

The Income Tax (Amendment) Bill 2016 proposes amendments in line with the 2016 Budget Statement, including the country-by-country reporting implementation and changes arising from periodic reviews of the income tax regime.

 

The regulatory authorities

Accounting and Corporate Regulatory Authority of Singapore

Main activities. The national regulator of business entities, public accountants and corporate service providers in Singapore.

W www.acra.gov.sg/home/

Singapore Economic Development Board

Main activities. A one-stop government agency, which facilitates and supports local and foreign investors in both the manufacturing and services sectors, as they move up the value chain to achieve higher sustainable returns and seek out new business opportunities.

W www.edb.gov.sg/content/edb/en/about-edb.html

Ministry of Trade and Industry Singapore

Main activities. The Ministry directing the formulation of policies related to the development of trade and industry in Singapore.

W www.mti.gov.sg/Pages/home.aspx



Online resources

Singapore Statutes Online

W http://statutes.agc.gov.sg/aol/home.w3p

Description. The official Singapore Government website for online publication of legislation.

Lawnet

W www.lawnet.sg/lawnet/web/lawnet/home

Description. LawNet provides materials on primary (case law such as the Singapore Law Reports, unreported judgments and legislation) and secondary (legal news, reference material, textbooks and journals) content.



Contributor profiles

Wong Liang Kok, Joint Managing Director

Tan Peng Chin LLC

T +65 6622 3840
F +65 6534 5433
E wonglk@tpclaw.com.sg
W www.tpclaw.com.sg

Professional qualifications. Advocate and Solicitor of the Supreme Court of Singapore; Notary Public and Commissioner for Oaths

Areas of practice. Banking and finance; corporate and commercial; mergers and acquisitions; technology and e-commerce; IP.

Non-professional qualifications. LLB (Hons), National University of Singapore; LLM (Merit), University of London

Professional associations/memberships. Life Member of Convocation of University of London; Law Society of Singapore; Singapore Academy of Law.

Sim Lin Piah, Director

Tan Peng Chin LLC

T +65 6622 3823
F +65 6534 5433
E simlinpiah@tpclaw.com.sg
W www.tpclaw.com.sg

Professional qualifications. Advocate and Solicitor of the Supreme Court of Singapore; Notary Public and Commissioner for Oaths

Areas of practice. Banking and finance; corporate and commercial; employment law; mergers and acquisitions.

Non-professional qualifications. LLB (Hons), National University of Singapore; LLM, University College London

Professional associations/memberships. Law Society of Singapore; Singapore Academy of Law.

Daniel Toh Song Yew, Associate

Tan Peng Chin LLC

T +65 6622 3823
F +65 6532 1808
E danieltoh@tpclaw.com.sg
W www.tpclaw.com.sg

Professional qualifications. Advocate and Solicitor of the Supreme Court of Singapore

Areas of practice. Corporate and commercial; mergers and acquisitions; shipping finance; financial regulatory.

Non-professional qualifications. LLB (Hons), National University of Singapore

Professional associations/memberships. Law Society of Singapore; Singapore Academy of Law.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1248106098041", "objName" : "Establishing a business in Singapore", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/0-597-4345?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "22e97be00:15b01bdc793:-262b", "analyticsSessionCookie" : "22e97be00:15b01bdc793:-262a", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }