Singapore is one of the most attractive destinations for foreign entrepreneurs looking to set up a business. Known for its business-friendly environment, robust legal system, and strategic location in Asia, the city-state offers a wealth of opportunities for entrepreneurs across various industries. However, like any business venture, setting up a company in Singapore involves specific legal requirements and processes. Here’s what every foreign entrepreneur should know before embarking on the journey of setting up a company in Singapore.
Choose the Right Type of Business Structure
One of the first decisions you’ll need to make when setting up a company in Singapore is selecting the right business structure. There are several options available, each with different advantages and requirements. The most common business structures for foreign entrepreneurs are:
- Private Limited Company (Pte Ltd): The most popular and preferred business structure in Singapore. This structure offers limited liability, which means that the company’s liabilities are separate from the owners’ personal assets. A Private Limited Company is eligible for tax incentives and has more credibility with investors and clients.
- Sole Proprietorship: This is the simplest form of business structure, where the business is owned by one individual. However, it comes with unlimited liability, which means the business owner is personally liable for any debts incurred.
- Limited Liability Partnership (LLP): A hybrid structure between a partnership and a private limited company. It combines the flexibility of a partnership with the liability protection of a private limited company.
Foreign entrepreneurs typically opt for the Private Limited Company (Pte Ltd) structure due to its legal protection, tax benefits, and ability to attract investors.
Nominee Director Requirement for Foreign Entrepreneurs
One of the key requirements when setting up a company in Singapore is having at least one local director. If you are a foreign entrepreneur and do not already reside in Singapore, you’ll need to appoint a local director. This individual must be a Singaporean citizen, permanent resident, or a foreigner holding a valid Employment Pass or Dependant Pass.
If you do not have a local director, you can hire a nominee director service. Many service providers in Singapore offer this service, and it typically involves a local director being appointed to meet the legal requirements. While the nominee director will not actively manage the company, they serve as the official representative in compliance with Singapore’s regulations.
Local Registered Address is a Must
Every company registered in Singapore must have a local registered office address. This is the address where official correspondence from government authorities, such as ACRA (Accounting and Corporate Regulatory Authority), will be sent. The address must be a physical location in Singapore, and it cannot be a P.O. Box.
Foreign entrepreneurs who do not have a physical presence in Singapore can use virtual office services that offer a local business address.
Company Secretary Requirement
Singapore law mandates that every company must appoint a company secretary within six months of incorporation. The company secretary plays an important role in ensuring that the company complies with legal obligations, such as filing annual returns and maintaining proper corporate records.
The company secretary must be a resident of Singapore and can be an individual or a corporate entity. It’s important to engage an experienced company secretary who is well-versed in Singapore’s regulatory framework.
Minimum Capital Requirement
Setting up a company in Singapore requires a minimum paid-up capital. The minimum requirement is SGD 1 for a Private Limited Company. However, while the nominal amount is low, it’s important to consider your business’s financial needs. For businesses that need to raise funding or attract investors, a higher amount of capital may be required.
Additionally, it’s important to note that if you plan to apply for an Employment Pass or a similar work visa, having a reasonable paid-up capital and a clear business plan will support your visa application.
Registering Your Company with ACRA
The Accounting and Corporate Regulatory Authority (ACRA) is the national regulator for business entities in Singapore. To set up your company, you’ll need to submit your application via ACRA’s online portal, BizFile+.
The application process is relatively simple and quick. Once submitted, ACRA typically processes and approves your company registration within 1 to 3 business days if all documents are in order. Upon successful registration, your company will be assigned a Unique Entity Number (UEN), which is the official identifier for your company in Singapore.
Taxation and Incentives
Singapore has a business-friendly tax regime, which is one of the reasons it is a preferred location for foreign entrepreneurs. The key tax benefits include:
- Corporate Tax Rate: The corporate tax rate in Singapore is 17%, one of the lowest in the world. Additionally, Singapore offers tax exemptions for new businesses, reducing the effective tax rate for the first few years of operation.
- GST (Goods and Services Tax): If your company’s turnover exceeds SGD 1 million annually, you’ll need to register for GST. The current GST rate in Singapore is 7%.
- Double Taxation Agreements (DTAs): Singapore has signed DTAs with over 80 countries, meaning you can avoid being taxed twice on the same income. This is particularly beneficial for foreign entrepreneurs operating internationally.
Employment Pass and Work Visas
As a foreign entrepreneur, if you plan to work in your company, you’ll need to apply for an appropriate work visa. The most common visa is the Employment Pass (EP), which is for foreign professionals, managers, and executives. To qualify for an EP, you must meet the following criteria:
- Have a job offer in Singapore.
- Be earning a minimum monthly salary (currently SGD 4,500 or more).
- Hold acceptable qualifications and experience.
Alternatively, foreign entrepreneurs can apply for an EntrePass, which is a visa specifically for individuals who wish to start and operate a business in Singapore. The EntrePass has its own set of criteria, including a requirement for a business plan and investment capital.
Access to Funding and Financial Support
One of the key advantages of setting up a company in Singapore is the access to funding and financial support. Singapore offers various grants, tax incentives, and financing schemes to help startups and foreign entrepreneurs grow their businesses. These include:
- Startup SG: A government initiative offering grants and equity funding for new businesses.
- Enterprise Development Grant (EDG): Provides financial support to help businesses grow, innovate, and internationalise.
You can also explore private venture capital and angel investors as sources of funding.
Ongoing Compliance and Reporting Requirements
Once your company is set up, it’s important to understand that there are ongoing compliance and reporting obligations. These include:
- Annual filing of financial statements with ACRA and IRAS (Inland Revenue Authority of Singapore).
- Maintaining proper corporate records, such as company registers and shareholder meetings.
- Filing annual returns to confirm the company’s financial standing.
While these requirements may seem daunting at first, Singapore offers excellent infrastructure and support for businesses to meet their compliance obligations.
Conclusion
Setting up a company in Singapore can be a rewarding experience for foreign entrepreneurs due to its ease of doing business, low tax rates, and strategic location. By understanding the key requirements and steps involved in registering your company, you can ensure a smooth and successful incorporation process. Whether you’re looking to tap into the Singaporean market or use it as a gateway to Asia, setting up a company in Singapore offers tremendous opportunities for growth and success.
