Over 7,000 multinationals businesses have already gone through the process of company registration in Singapore, benefiting from the perks of being located in a flourishing business environment. The country has maintained such a positive business environment that it consistently ranks as one of the leading countries in the world to do business by the World Bank.
The Aspen Trust Group reviews the ease and advantages of relocating a foreign business and applying for company registration in Singapore.
Singapore’s Business Environment
In just three decades, Singapore emerged as one of Asia’s wealthiest nations with a thriving business climate. Today, it is seen as an international trade center, with its international trade more than triple its gross domestic product. Its humble origins as a trading port founded in 1819 by the British East India Company as well as its location, water access, and free port status have made the modern business climate ripe for company registration in Singapore for international companies. The Port of Singapore has surpassed both Hong Kong and Rotterdam as the world’s busiest transshipment port.
According to the World Bank’s report on Doing Business, Singapore is currently the second best country after New Zealand. Other high ranks include 4th in Starting a Business, 3rd in Protecting Minority Investors, 7th in Paying Taxes, and 1st in Enforcing Contracts.
In fact, company registration in Singapore normally takes as little as one day through the Accounting & Corporate Regulatory Authority (ACRA). Find out the benefits of registering different companies in Singapore and the tax benefits of each structure compared with other jurisdictions.
Optimized Business Solutions with Company Registration in Singapore
The ACRA allows three types of company registration in Singapore, each with their own set of advantages and regulations for foreign companies. These are Private Limited Company, Sole Proprietorship, and Limited Liability Partnership.
Private Limited Company
Foreign entrepreneurs registering a company in Singapore can use the Private Limited Company structure to manage risk and liability while also optimizing tax solutions for their business.
The liability of this type of business is limited to the amount the shareholders invested in the purchase of shares. The ACRA allows for complete ownership of shares by foreign nationals and any individual over the age of 18 may incorporate a company in Singapore.
A Private Limited Company also comes with competitive corporate tax benefits and the company registration process is simple.
If a business has low risks, other options such as Sole Proprietorship, may be more advantageous as Singapore has strict compliance regulations in place for Private Limited Companies.
Sole Proprietorship
In a Sole Proprietorship, there are no partners and the business is owned by a person or company. As it is not seen as a corporate entity, the owner becomes responsible for the entire scope of liabilities and debts, and cannot put properties in its name. In order to set up a company, a foreign national will need to work with an incorporation consultant such as The Aspen Trust Group, but the company registration procedure is affordable and quick.
While this company structure does not come with the tax benefits of a Private Limited Company, there are fewer compliance requirements and the management and operation of a Sole Proprietorship is easy. Revenue from this company structure is taxed as personal income in Singapore.
Limited Liability Partnership
The last option for company registration in Singapore is a Limited Liability Partnership. With a separate legal identity, there is limited personal liability for its partners and moderate compliance requirements. One of the stipulations of registering a company as a Limited Liability Partnership is that at least 2 partners are required at all times. Similar to Sole Proprietorship, there are no corporate tax benefits included for this company structure.
Tax Exemptions of Company Registration Types
There are several considerations for which structure to choose when seeking incorporation in Singapore. These include number of owners or partners, and the ability to make all the business decisions; the initial investment; the limit of liability by risk assessment; ability to raise capital; and tax optimization solutions.
Of these, affordable tax rates are one of the most sought advantages of company registration in Singapore. Under a Private Limited Company, the business pays a corporate tax rate between 0 and 17% on taxable income, exempting the owners or the shareholders from having to pay this amount.
On the other hand, owners and partners of Sole Proprietorships and Limited Liability Partnerships are required to pay personal income tax on business income from 0-22%.
Singapore uses a single tier tax system in which business income is only taxed at the corporate level. This also means that the dividend between the shareholders is tax exempt. There is no capital gains tax in Singapore among other tax incentives for locally incorporated companies. Sole Proprietorship and Limited Liability Partnerships do not qualify for these tax exemptions.
One particular tax incentive for newly registered Private Limited Companies is full tax exemption on income up to S$1 million for the first three years. Chargeable income ranging from S$1 million to S$3 million is taxed around 8.5%.
Singapore also has double taxation treaties with more than 70 countries to keep taxation of multinational companies low.
Further, there are avenues for foreign nationals to set up a company as a Sole Proprietorship or Limited Liability Partnership and then later take steps to convert this business into a Private Limited Company.
Basic Requirements to Set Up a Company in Singapore
Foreign nationals registering a company in Singapore will need to complete the following:
- Establish a company name registered and approved by the ACRA
- Appoint one director that is either a Singapore Citizen or Permanent Singapore Resident
- Have a minimum of 1 shareholder (no more than 50)
- Establish a residential address
- Appoint one company secretary within six months of registration
- Have a minimum of S$1 initial paid-up capital
- Open a bank account
- Hire an incorporation company to assist in filing for the registration number and opening a corporate bank account
Incorporation in Singapore by Comparison
In comparison to other Asian destinations, company registration in Singapore is an excellent choice for multinational entrepreneurs. For one, the country has a comparable corporate (17%) and personal income tax rate (22%) when compared with Hong Kong (16.5%/17%), Taiwan (20%/40%), and Japan (30.62%/55.95%) while also having extensive double tax treaties, tax exemptions for both in-state and out-of-state income, and no foreign ownership restrictions or controls.
Even though Hong Kong has the closest comparable tax rates to Singapore, the average time to set up a company is a week to Singapore’s one day. Foreign company controls also limit the ease of doing business in Hong Kong and have caused many foreign nationals to prefer company registration in Singapore over Hong Kong.
Singapore is also in a geographically key location that connects Asia with both Europe and the Middle East, including a vast network of maritime transportation and flight routes for any type of business activity.
Moreover, Singapore is an international business center with a highly-skilled and advanced workforce as well as the capability to handle multilingual business activity. Attracting many talented foreign nationals and establishing robust business infrastructure, Singapore makes doing business profitable and easy. The government of Singapore has also backed policies that lead to more IP (Intellectual Property) protections and caters to businesses with an efficient legal system.
The Aspen Trust Group can help you with company registration in Singapore and explore which company structure will get you the best advantages for your business. Contact our professional consultants to get started and set up a company in one of the best Asian jurisdictions available for multinational entrepreneurs.
