Setting Up In Singapore

This section acts as a manual to understand the procedural requirements, as well as the support facilities in place for Singapore-based entrepreneurs.
Starting a business in Singapore is an easy process. Registering the firm takes just a short time, and is more or less guaranteed as long as you or your proxies have the correct visa documents, and are starting a business that is not highly regulated. This is not your problem.our approach.

What you should bear in mind, however, is that the difficulties in starting a business are universal, and you will face the same issues in Singapore as any other location in terms of getting people to pay for the products and services that you wish to produce. 

In some cases, Singapore presents particular challenges, especially the size of local market, and physical distance from Europe and the USA. In other cases, Singapore is especially advantageous, such as ease of setting up shop and operating, compared to countries like India or even France. You should be able to deal with the issues that follow before starting a business in Singapore. If not, then you should reconsider your approach.

Business Types

Decide the early structure of your company, be it a sole propietorship, partnership or company. There are many good reasons for choosing one over the other, and you should bear in mind that you can move from one kind to another in the future, as your firm grows. 

Setting up a business in Singapore may be done almost wholly online, as well as changing details and type of business later on. All the information you require is available on websites, and regulation will not likely stymie your need to get up and running. However, some businesses do require more due diligence than others.

There are 4 main types of business structures to choose from. They are:

01. Sole Proprietorship

This is a business firm owed by one person or one company. The owner has complete say over the running of the firm. For individuals this is the easiest option by far.
  • Not a separate legal entity
  • Owner has unlimited liability
  • Can sue or be sued in individual’s own name or in business name
  • Can own property in individual’s name
  • Owner personally liable for debts and losses of business
  • Profits taxed at owner’ personal income tax rates
  • Exists as long as the owner is alive and desires to continue the business
  • Cessation of business by owner

02. Partnership

This is a business owned by more than one individual and/or company. There must be a minimum of 2 partners, and a maximum of 20. After 20 partners, the business must become either a limited partnership or a company.
  • Not a separate legal entity
  • Partners have unlimited liability
  • Can sue or be sued in firm’s name
  • Cannot own property in firm’s name
  • Partners personally liable for partnership’s debts and losses incurred by other partners
  • Profits taxed at partners’ personal income tax rates
  • Exists subject to partnership agreement
  • Cessation of business by the partners

03. Limited Partnership

Limited Partnerships may have at least 2 partners, with no upper limit on partners. As the name suggests, the partners are not liable for the debts of the business, but they are accountable for debts and losses resulting from careless actions on their part.
  • Profits are considered to be part of each partner’s personal income and are taxed at personal tax rates.
  • The LLP is a legal entity in its own right, and can sue, and be sued, in its name.
  • Like a Partnership, there is no need to audit, or file annual returns. However, the manager must make an annual declaration to ACRA that it can meet its outstanding debts.
  • Partners are themselves personally liable for the debts of the partnership.

04. Company

Companies in Singapore may be public, or private. Public companies may offer debentures and publicly traded shares. Private companies, popular with not-for-profit ventures with less than 50 members are limited by guarantee.
  • Companies in their simplest form may have just one shareholder, with one share valued at just $1.
  • There must be at least one director and manager, and these may be the same person.
  • You must appoint a secretary within 6 months of incorporation.
  • Your registered office must be open and accessible to the public for not less than three hours between 9 am and 5pm on weekdays.
  • The first AGM must be held within 18 months of incorporation.
  • If your company is a private company with less than 20 shareholders, and less than 5 million dollars annual revenue, you need not appoint an auditor, audit accounts or file with ACRA. Otherwise, you must do all of the above and within one month of the AGM.
  • Members pay a nominal fee on winding up the company.

Letters of Support

Letters of support are commonly required by licensing bodies in Singapore, and are generally easy to acquire. Letters of support are given:

  • by individuals or companies committing to supporting a visa recipient
  • by government departments supporting the licensing of a business enterprise

The application procedure will state specifically which government department is required, the contact details of the department, and which letter. The department will publish the criteria for applying of the Letter of support, often as part of a distinct application form.
Singapore’s bureaucracy logically separates licensing authorities (where you get a Letter of Support) from license issuers.
Thus, although the Ministry of Education is the licensing authority for companies wishing to start educational companies in Singapore, they do not issue the license themselves, but issue letters of support specifically related to the nature of the business. This amounts to having approved the industry specific requirements for the license application.

Actual issuing of licenses (and visas) is carried out by more centralised government departments which bear in mind the support given by the government agency in completing the bureaucratic process in issuing licenses.

Licences and Permits

You may need a license or permit to operate your business, according to the nature of our business. These licenses must be applied for while registering the business. All the licenses you might require are on LicenceOne: https://licence1.business.gov.sg

This online service doubles as an online catalog of licenses required for certain business activities, and allows you to jump to the step of registering a business (BizFile) once you have chosen your business type.
Description of the business can be very significant in terms of gaining approval.

For example, if you create a kids club, describing it as kindergarten (educational) versus a recreation club will require different licensing.

Highly regulated, standards-compliant industries will require more time to evaluate, so ensure your business’ offering is correctly defined.

Certain keywords in the description of the business may cause your application to be referred for approval from other authorities in Singapore which license the appropriate industries.

For example, an academic education business would require support from the Ministry of Education, the appropriate licensing authority.
Step 1. Check Eligibility: www.acra.gov.sg

Step 2. Check Area of Business: licence1.business.gov.sg

Step 3. Register Your Business: www.bizfile.gov.sg

Alternatively, you may engage a third party corporate service provider to assist you in setting up.

Visa Issues

The average tertiary level educated or professionally experienced applicant should experience no issues whatsoever in applying for residence in Singapore. Hiring other foreigners is another matter, and can pose some awkward procedural constraints, though usually not showstoppers.
 
In general, it is extremely easy and straightforward to find a suitable pass for MBA graduates in Singapore. Visas are restricted mostly for people who could be considered social undesirables, or have little or no economic value to add to Singapore.

In theory, everyone within Singapore’s borders, except short-stay tourists, should have a pass which suits their reason for being in the country, especially when it is for business reasons. Although checks are not enforced, the process for getting a pass is so straightforward and usually quick, that there is little reason not to comply with regulations.
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Singapore Visa Types

Employment Pass: 
For foreign professionals, managers and executives. Candidates need to earn at least $3,600 a month and have acceptable qualifications.

EntrePass:
For eligible foreign entrepreneurs wanting to start and operate a new business in Singapore.

Personalised Employment Pass:
For high-earning existing Employment Pass holders or overseas foreign professionals. The PEP offers greater flexibility than an Employment Pass.

S Pass:
For mid-level skilled staff. Candidates need to earn at least $2,300 a month and meet the assessment criteria.

Dependant's Pass:
For spouses and children of eligible Employment Pass or S Pass holders.

Long Term Visit Pass:
For parents, common-law spouses, step-children or handicapped children of eligible Employment Pass or S Pass holders.

For more Visa Types, visit the MOM website here: https://www.mom.gov.sg/passes-and-permits

Employment Issues

Owner Requirements

For the purposes of registering a business, if the founders are not "ordinarily resident" in Singapore, meaning they cannot stay in Singapore for a long period of time, or do not have a local address, then someone else must be found to register the business, and act as manager. Undischarged bankrupts should seek legal advice before attempting to register a business in Singapore. 

Local managers must be at least 21 years old, and be one of the following:

  • Singapore Citizen
  • Singapore Permanent Resident
  • Employment Pass Holder
  • Approval-In-Principle employment Pass holder
  • Dependant Pass holder
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Employee Status

Any employee earning a salary must possess either one of: 

  • Work Permit
  • Employment Pass
  • Permanent Residency
  • Citizenship
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Different grades of Employment Visas are issued to foreign employees depending on the nature of their work and the salary ranges. Visa types according to salaries are computed based on monthly pay, not bonuses, or other allowances. 

Generally, students on a student visa may not earn money in Singapore without the written permission of the Controller of Immigration in Singapore. Exceptions are made for foreign undergraduates of Universities and Polytechnics, allowing them to work up to 16 hours per week without permission.

Simply be aware of your requirements. The Government will be a steadfast partner to enterprise in Singapore, but you must ensure that you play by the rules. 

CPF Contributions

As an employer, you are obligated to make payments into the CPF (a type of social insurance) for each employee. The monies paid into the fund are allotted in three broad areas: 

  • Ordinary Account : Basic savings account
  • Special Account : For old age, and retirement-based investment
  • Medisave Account : For hospitalization expenses and approved medical insurance
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All Singapore Citizens and Permanent Residents are required to contribute to CPF. The purpose of the CPF is to take care of basic needs in old age, after retirement. Foreigners on Employment Pass are not entitled, or required, to contribute to CPF.

Self-employed (not under contract of service, though earning money) Singapore Citizens and Permanent residents are not required to pay into the Ordinary or Special accounts but must pay MediSave contributions.

Minimum amounts must be kept topped up in each type of account. However, you may contribute above the amount, as well as withdraw sums keeping the minimum amount in place. The Ordinary account is basically a savings account, which can be used, for example, to pay off a mortgage.

Tax Issues

Singapore has adopted a One-Tier Corporate Tax System, which means that all taxes paid by a resident company on its chargeable income is final and all dividends paid are exempt from tax in the hands of its shareholders. Tax is payable to IRAS, the Inland Revenue Authority of Singapore.

Self Employed (Sole Proprietors and Partners)

If you are a sole proprietor or a partner in a partnership, you may be considered "self-employed" and adhere to the tax regulations as specified in the link above. You must provide at least a Balance Sheet, and Trading Profit and Loss account as certified (by you) accounts.

For businesses with turnover of less than 100,000 SGD turnover / annum, you need only report Turnover and Adjusted Profit / Loss. For businesses with turnover of greater than 100,000 SGD / annum, your returns to IRAS must contain the following information in a 4-line statement of accounts:

  • Turnover
  • Gross profit/loss
  • Allowable business expenses
  • Adjusted profit/loss

Corporate Tax

Singaporean corporate taxation rates are 20%. More importantly, dividends paid to shareholders are exempt from tax once tax has been paid by the company on its earnings. Hence, a business person can set up a company as the only shareholder, bill all revenues to the company itself, not to the individual, pay corporate tax on the company’s earnings, and then declare a tax-free dividend to himself.

Note, however, that personal income tax is considerably lower than corporate income tax. Hence an individual wishing to defer earnings by allowing them rest in the firm will pay more tax than a sole proprietor whose income tax is based on the firm’s income. For a summary of the basics of corporate tax in Singapore, see Corporate Tax Basics.
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Tax Incentives for Startups

In order to steer economic development to high value add, hi-tech, products and services, firms which qualify as Pioneering Firms, those that introduce high-tech skills to the economy, are fully exempted from corporate income tax for 5-15 years.

Generally, tax incentives exist for startup firms whose number of shareholders number less than 20, and each of whom is an individual. Furthermore, certain R&D expenses can be deducted twice ("double deduction") from profits for the purposes of tax calculation. Visit the Inland Revenue Authority of Singapore for more on tax issues.

Premises

Well-serviced premises are never an issue in Singapore. You may even work from home under a Home Office scheme, or choose a professional services firm to domicile your business for you.

Virtual Office

Virtual Offices are useful to startups that wish to have a prestigious office address in the central business district, with full meeting/conference facilities, postal address services, a permanent phone number (with call forwarding), all at a tiny fraction of the cost of maintaining a physical office.

Incubators

Incubators are low cost offices with basic shared office facilities such as meeting rooms and internet and telephone access, often housing technology startups which may require space for product creation as well as "office work". 

Shared Office Scheme

Shared offices are professional-grade office facilities where some resources (like receptionists and meeting room facilities) are shared in common between tenants of the offices. The difference between shared and virtual offices lies in the tenant having:

  • Independent office work space not used by other tenants in a shared office.
  • Separate telecommunications facilities like email, phone and fax in a shared office.
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Home Office Scheme

The home office concept allows an entrepreneur or entrepreneurs to run their business from their home while registered as a business. A maximum of two non-residents (of that address) can be employed in this business.

In order to allow businesses to be run from the owner's home address, the Home Office scheme allows the business owner to register one's home address as the business address for a fee. There is currently a 3 year approval period, meaning that after three years the license must be renewed. 

Visit the Urban Redevelopment Authority website here.

Certain types of businesses which are considered to be likely to threaten harmony of the neighbourhood are disallowed. Knowledge-based industries such as private consulting practices or software development are favoured. 

Licensing is required, and the LicenceOne service will describe all the appropriate ones required, as well as allow you to purchase them. 
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