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Company formation in Singapore

Many entrepreneurs from around the world find company formation in Singapore appealing, and there are numerous factors contributing to this interest. In the first place, it is important to highlight that Singapore provides an ideal environment for business growth, a vital consideration for entrepreneurs in their early stages. Singapore consistently ranks among the top three countries with the most straightforward and convenient business conditions in the world, according to the well-known "Doing Business" project.

When compiling this country ranking, various indicators were taken into account, including the ease and simplicity of the registration process, obtaining construction permits, property registration, favorable credit conditions, investor protection, taxation, international trade facilitation, contract enforcement, and the process of business liquidation.

The list of criteria is extensive, and Singapore ranks second in all of these categories, trailing only behind New Zealand. Additionally, in 2019, the International Institute for Management Development (IMD) recognized Singapore as the most competitive country.

Company formation in Singapore

Posted 14 September 2023

Summary

Territorial

17% of the profits earned within the territory of Singapore

Profits earned outside of Singapore and not remitted to Singapore are not subject to taxation

    Relative to other countries

    Thinking about business in this country?

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    Diane

    Diane, partner of GFLO Consultancy

    Advantages of Singapore company registration

    Company formation in Singapore is in high demand, and this can be credited to numerous advantages that come with starting and running a business in the country. Let’s highlight the most significant ones:

    1. Favorable taxation conditions. Singapore follows a local taxation system, meaning that profits earned outside Singapore and not remitted to Singapore are not subject to corporate income tax. This local tax approach is advantageous, especially if a company doesn’t plan to conduct activities within Singapore. However, if a business operates in Singapore and earns income locally or remits income to Singapore, the corporate income tax rate stands at a globally competitive 17%. Moreover, Singapore has established double taxation avoidance agreements with more than 80 countries;
    2. Singapore is a promising gateway to global markets. The nation maintains strong ties with various countries, including Indonesia, Thailand, the Philippines, Vietnam, Brunei, and other Southeast Asian Nations (ASEAN). Each of these relationships can offer additional opportunities for business growth and prosperity;
    3. Doing business in the country is as simple as Singapore company registration. The establishing process is fast and convenient, and businesses are free from burdensome formalities. Capital requirements are easily met, with a minimum paid-up capital of just 1 Singapore dollar for most business types. Licensing is generally not required for most lines of business. Singapore also lacks currency controls, operates on a local tax basis, and offers low tax rates. These factors make Singapore one of the most favorable jurisdictions for starting and operating a business;
    4. The Singaporean government actively promotes the growth of small and medium-sized enterprises (SMEs) in the country. It strives to maintain Singapore’s reputation as an attractive destination for investments. Each year, the Singaporean government allocates substantial subsidies to support SMEs, providing them with a strong start.

    Legal forms of business organization in Singapore

    Companies registered in Singapore can take several forms:

    • Private Company Limited by Shares: The members’ liability is restricted to the extent of their capital contributions, safeguarding them from personal liability for the company’s obligations. This company type can have a maximum of 50 members;
    • Public Company Limited by Shares: Similar to a private company, the liability of its members is limited to their capital contribution. However, there can be more than 50 shareholders, and shares can be freely traded on the securities market;
    • Public Company Limited by Guarantee: Instead of shareholders, this type of company has members who are liable for the company’s obligations up to a fixed guarantee amount. It’s often used for various non-profit purposes;
    • Exempt Private Company: This is the most common of business organization used for companies in Singapore. It allows a maximum of 20 shareholders, and legal entities are not allowed in the structure of an exempt company.

    The process of company formation in Singapore

    Registering a company in Singapore is relatively straightforward. To initiate the registration procedure, you will need a standard set of documents for shareholders and participants, which can be further clarified with our specialists. Additionally, you will need to provide the following information:

    • 2-3 preferred company names in order of priority;
    • The company’s structure, including the director, shareholder, and beneficiary. Please note that the Singaporean company structure requires at least one director to be a resident of Singapore;
    • The intended business line of the future company.

    Once you have collected and provided all the required documents and information, the typical company registration process in Singapore unfolds through the following stages:

    1. Checking the company name and selecting an acceptable one. The name-checking process takes approximately 1 day;
    2. Preparation of forms and other documents for submission to the Companies Registry;
    3. Company registration procedure with ACRA (Accounting and Corporate Regulatory Authority). The registration process typically takes about 3-7 working days from the moment when all the necessary information, forms and documents are submitted to the Registry;
    4. Drafting the requisite statutory documents for the registered company and ordering a corporate seal;
    5. Notarization and legalization of documents if necessary. The notarization process takes 1-2 days, while legalization, as of September 16, 2021, is done by affixing an apostille and takes 2-3 working days.
    Important:
    Singapore has been a signatory to the apostille convention since January 2021, and the apostille of documents has been possible since September 16, 2021.

    Tips to keep in mind when conducting business in Singapore

    • A Singapore-based company’s structure must have at least one director who holds Singaporean residency, as well as a secretary who also qualifies as a Singapore resident. Meeting this requirement increases the likelihood of opening an account with a Singaporean bank. It also reflects the trustworthiness of a Singaporean company in its interactions with government, tax authorities, financial institutions, banks, and business partners.
    • Singapore operates on a single-tier taxation system, making all established tax rates final. This simplifies tax calculation and promotes ease of doing business in Singapore.
    • Since January 2021, Singapore has been a signatory to the Hague Convention (1961), which abolishes the requirement for the legalization of foreign official documents dated October 5, 1961, or later. As a result, the affixing of an apostille on documents issued within Singapore has been possible since September 16, 2021.

    Taxation in Singapore

    Taxation matters in Singapore fall under the jurisdiction of the Inland Revenue Authority of Singapore (IRAS).

    The key factor in the taxation of a company in Singapore is its residency status. A company is considered a tax resident if:

    • Its control and management are carried out from within Singapore;
    • The company conducts its business activities within Singapore.
    Important:

    The key criterion for determining the location of control and management of the company is the place where the Board of Directors’ meetings are held, during which major decisions are made.

    As Singapore follows a local taxation system, the location of business operations and the source of income from those operations play a significant role in determining the taxable base. If a company earns income outside Singapore and does not remit it to Singapore, that income is not subject to corporate income tax.

    Profits earned abroad and remitted to Singapore in the form of dividends, branch profits, or service income to resident companies are not taxed in Singapore, provided that this income has been subject to tax in the foreign jurisdiction where it was earned, with a minimum tax rate of at least 15%. In other cases, profits earned and remitted to or received in Singapore are subject to the base corporate tax rate of 17%. However, in practice, the rate is often lower due to Singapore’s system of tax exemptions, incentives, and deductions.

    Corporate Income Tax

    17% of the profits earned within the territory of Singapore. Profits earned outside of Singapore and not remitted to Singapore are not subject to taxation.

    Capital Gains Tax

    None.

    VAT

    In Singapore, VAT is called The Goods and Services Tax (GST). The current rate is 7%.

    Preparation and submission of reports in Singapore

    Every company registered in Singapore is required to submit annual financial statements reflecting its current financial status and business performance. These financial statements must be prepared in accordance with the Singapore Financial Reporting Standards.

    The first financial reporting period for a company in Singapore can be up to 18 months. Subsequent reporting periods have a duration of 12 months. You must determine the end date of your financial period, with common choices being March 31st, June 30th, September 30th, and December 31st. It’s necessary to retain financial data for at least 5 years after the end of the reporting period.

    Financial statements must undergo a proper audit at least 14 days before they are presented to the company at its annual general meeting. An auditor’s report should be attached to the financial statement.

    However, it is also worth noting that “small” companies in Singapore are eligible for an audit exemption. “Small” companies are defined as private companies that meet at least 2 of the following 3 criteria:
    1. Their total annual revenue is ≤ 10 million SGD;
    2. Their total assets are ≤ 10 million SGD;
    3. The number of employees is ≤ 50.
    If we are referring to a group of companies, all companies within the group must qualify as “small” companies.

    Company law also regulates reporting for so-called “dormant companies,” which are companies that either have not conducted any business since their incorporation or have not engaged in business since the end of the previous reporting period. Dormant companies are exempt from the requirement to file annual financial statements.

    Conclusion

    Company formation in Singapore attracts investors and entrepreneurs worldwide. Starting a business in Singapore is simple, and the country offers convenient business conditions, favorable taxation, and well-developed infrastructure, which provide an excellent foundation for profitable investments and business operations.

    This jurisdiction is prestigious, while also offering highly favorable conditions for establishing a company and conducting entrepreneurial activities, making Singapore the choice of many entrepreneurs.

    GFLO Consultancy experts are pleased to assist and help you with any inquiries, just get in touch or leave a request through the form right below.

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