Reasons to Set up a Private Limited Company in Singapore
- Low taxes: Singapore has one of the lowest corporate tax rates in the region applicable to this business form.
- Easy incorporation: this business form can be easily set up by observing only a few key and mandatory steps.
- Distinctiveness: this refers to the fact that the company, the private limited company, is a separate legal entity from its founders.
- Ease of doing business: apart from the company’s characteristics, investors may wish to open a company in Singapore because of the favorable business climate.
What are the benefits of setting up a private limited company in Singapore?
- Facile succession: the company survives in time is not dependent on whether or not its initial members remain within the company,
- Easy capital raising: the corporation can increase its capital by admitting new shareholders or issuing more shares to existing ones.
- Easy ownership transfer: the ownership of the company can be transferred as needed (partially or in its entirety) without the need to pause the activities.
- Credibility: this business form is one that offers a credible image to clients and business partners, as opposed to the sole trader, for example.
What are the steps for the registration of the private limited company in Singapore?
- reserve the name: proposed names are quickly approved or dismissed through an online system.
- prepare the company documents: these will contain the company name, the business activities, the shareholding structure, the registered address, and other information.
- provide shareholder ID: the founders must provide ID copies and for non-residents a passport copy.
- register the company: this step is performed with the Accounting and Corporate Regulatory Authority and it is computerized.
- open a bank account: this is a post-registration step and the company founders can choose to open it with any of the bank branches available in Singapore.
- obtain a business license: this will only be required for some business activities, for example when opening a restaurant, travel agency or others.
There are several business fields that are regulated in Singapore and for which investors need to obtain additional licenses, in order to complete the process of setting up a private limited company in Singapore. Investors who wish to open a travel agency will need to obtain a license from the Singapore Tourism Board. Similarly, companies that function as an employment agency are regulated and require licensing from the Ministry of Manpower.
Those who are interested in setting up a company in Singapore that provides financial services should know that the regulating agency is the Monetary Authority of Singapore. It governs the licensing and control of banks, insurance companies, finance companies, trust companies and many other businesses in the financial services industry.
What are the post-registration steps when setting up a private limited company in Singapore?
Another important step after having successfully registered your new limited company in Singapore is to open a bank account. This can be done with any of the major bank branches in the city-state, as many foreign banks have established on the market. The choice depends solely on the investor’s preference and can be influenced by the banking facilities, e-commerce facilities within the same bank, the transfer fees and many others. The bank account should be opened after the registration of the business id complete and can be taken care of before applying for special permits and licenses.
Hiring employees is also an important stage after the actual registration of the new business. The work relationship is secured through an employment agreement, which is mandatory. Singapore has a highly educates workforce available, however, company owners may also hire foreign staff as they see fit. In this case, hiring foreigners is possible when they obtain the relevant work passes to live and work in the city-state. There are several types of permits and each has its own eligibility criteria. Investors should keep these in mind when hiring staff. One of our agents can provide details on these permits.
The office space from where the company will engage in its daily activities does not have to coincide with the registered address. The latter is mandatory when setting up a private limited company in Singapore, however, the actual headquarters may be located elsewhere, as appropriate for the business. Moreover, in certain industries, a virtual office may suffice while in others renting a large and equipped office space will be needed.
The taxation of a private limited company in Singapore
When the predicted annual revenue of the company is more than 1 million SGD, the business needs to be registered for the Goods and Services Tax (GST), the Singaporean equivalent of the value-added tax in other states. In 2019, the GST had a standard rate of 7%, with a 0% rate applicable to certain types of goods and services. One of our agents can help you both register the private limited company in Singapore and handle the taxation matters, including the GST registration if needed.
- the standard corporate tax rate is 17%;
- for the year of assessment 2020 (the income year 2019), 75% of the first 10,000 SGD of normal taxable income are exempt from taxation; moreover, 50% of the next 190,000 SGD of regular taxable income are exempt from tax;
- for qualifying new private companies, 75% of the first 100,000 SGD of normal taxable income and 50% of the next 100,000 SGD normal chargeable income can be exempt from tax for the first three consecutive years; this is subject to certain conditions.
- there is no withholding tax on dividends paid by resident Singapore companies; royalties paid to a non-resident company are subject to a 10% withholding tax (except for the case in which a double tax treaty applies and contains specific provisions on this matter).
The various tax advantages, most notably the low taxation regime and the percentages of the normal chargeable income that are exempt from tax, are an important advantage to all investors who are considering setting up a company in Singapore.
- for the tourism industry: a tax deduction for companies that promote inbound tourism and those that participate in local trade exhibitions.
- for e-commerce companies: a 10% tax reduction for a period of five years for e-commerce transactions with companies outside of the city.
- for R&D companies: 5-15% tad reduction under the development and expansion incentive, an investment allowance, a pioneering incentive scheme, a productivity and innovation credit scheme.
- shipping and maritime companies: the maritime sector incentive that allows for tax concessions for five years on qualifying income, shipping support services as well as withholding tax exemptions.
- events: companies involved in the organization of major events in Singapore can benefit from a 10% concessionary tax rate on the income derived from these.
Investors who wish to know more about taxation and reporting requirements can reach out to our agents who specialize in the regime for a Singapore limited company.
We invite you to watch a video on the private limited company in Singapore:
Tax compliance and reporting for a private limited company
After the business is incorporated and is ready to commence its activities, entrepreneurs will need to constantly comply with the accounting and reporting requirements so that the company remains in good standing according to the Accounting and Corporate Regulatory Authority. This is important for the company to maintain its legal status.
Companies in Singapore are required to prepare their financial accounts according to the Financial Reporting Standards. These include the director’s statement regarding the financial situation, the statement of comprehensive income and financial position, the statement of changes in equity, statement of cash flows and any additional notes that may be relevant to the financial statements. The annual return is filed within seven months from the end of the financial year.
Investors who set up small private limited companies should know that there are no mandatory audit requirements. A small company is one that meets two out of the following three criteria: have a total annual revenue of less than 10 million SG, have the total assets value of less than 10 million SG, have less than 50 employees.
A company in Singapore, regardless of its size, is also expected to hold the first Annual General Meeting within six months from the end of the financial year or within 18 months from the date of incorporation.
All of these requirements should be verified before setting up a private limited company in Singapore, as the authorities may update them from time to time.
Assistance for the registration of a private limited company in Singapore
Foreign investors who wish to move to Singapore to operate their private limited company will be required to apply for a special type of pass. The EntrePass, or the entrepreneur pass is designed for individuals who plan on starting a business and also staying to operate it. The initial pass duration is one year and the validity period for the subsequent renewals is two years. The eligibility criteria include the following: the applicant intends to or has already registered a private limited company with ACRA; for a registered company, it must be more than six months old, the applicant needs to be at least 21 years old. There are three different categories: entrepreneur, innovator, and investor. Certain businesses are not eligible for this purpose, and they include coffee shops, food courts, bars, and night clubs, massage parlors, employment agencies, and others. One of our agents who specialize in setting up a private limited company in Singapore can provide more details about each scheme.
The many advantages described in this article make Singapore is a popular location for company formation. The following statistics reflect this popularity through the number of incorporated legal entities:
- 15,901 new businesses were incorporated in the first quarter of 2016;
- the private limited company is the most popular business form, 8,228 of the new companies formed.
- the exempt private companies were the most numerous out of the private limited companies, their number is 7,333.