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Guide for foreigners looking to establish a business in Singapore
Why Choose Singapore for the expansion of your Foreign Business? For entrepreneurs and multinational companies considering to open a business abroad, Singapore is an attractive choice for the following reasons:
100% Foreign Ownership Policy
Unusual among its regional neighbors, the Singapore law allows local corporations to be 100% foreign owned. Parent companies that form Singapore-based subsidiary companies can enjoy all the benefits of Singapore incorporation.Attractive Tax Regime
Singapore taxes corporations at an attractive flat rate of 17%, but local companies, especially new companies, can take advantage of exemptions and tax breaks to pay a far lower effective rate. For example:
- Startups and new companies with a maximum of 20 shareholders (where at least 1 individual owns 10% of the share capital) can take an exemption of up to $125,000 on their first $200,000 of chargeable income for the first three consecutive years in business.
- Businesses that are not eligible for the start-up exemption can claim a Partial Tax Exemption which can be up to $102,500 for the first $200,000 in revenue.
Source: IRAS
Flexible Banking Facilities
Singapore is home to four local banks and as many as 117 foreign banks, this creates a competitive environment that leads to innovative banking products and pricing models. Foreign business owners in Singapore have many attractive banking options to choose from.Stable Political and social environment
Singapore enjoys more social and political stability than any of its regional neighbors and other world class business hubs. On a political stability scale from -2.5 to 2.5, The GlobalEconomy.com rates Singapore at an average of 1.24; Singapore is also a harmonious multicultural society, ranked first in Asia and eighth in the world on Mercer’s personal safety index.Registering a Singapore Company for Foreign Individuals
Like in other countries, foreigners starting a business in Singapore have various options in terms of the entities they can form or create, some entities however offer more flexibility for foreigners than others.1.Ordinary Partnership
An ordinary partnership resembles a sole proprietorship in nearly every way, however the business is owned by one or more partners, rather than one individual. Foreigners who operate an ordinary partnership in Singapore must appoint a local manager.
2. Limited Partnership (LP)
A limited partnership is a business entity that consists of one or more general partners (full liability, and one or more limited partners (limited liability). Like an ordinary partnership or sole proprietorship, an LP is not a separate business entity. If no general partner or manager is local to Singapore, a local manager must be appointed.
3. Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is a separate business entity, meaning it is legally a separate “person” from the partners and can outlast the death or departure of any partners. The newest business entity in Singapore, an LLP can have an unlimited number of partners with limited liability for business risk. Despite being a separate entity, LLPs are not eligible for many of the business tax exemptions Singapore is famous for, like the startup tax exemption. A Singapore LLP must have at least one local manager.
4. Private Company
Private companies are separate business entities provided for in the Companies Act, Chapter 50. Private companies are the most flexible business entity in Singapore, with the most advantageous tax regimes.
Private companies in Singapore vary in regulatory compliance burden based on the number of members. For example:
- Exempt Private Companies have 20 members or less and have no corporation with beneficial interest in the company. They also enjoy reduced regulatory compliance burdens.
- Private Companies consist of 20-50 members and have a standard compliance burden.
A private company must have at least one local director and a foreigner with an Employment Pass may act as local director of the company where he is employed - Public Companies are made up of 50 members or more and require higher levels of compliance.
Starting a business in Singapore
Singapore offers a great opportunity for businesses from all over the globe. Depending on their business goals, they can choose to form or register one of the following:
- Subsidiary Company
- Branch Office
- Representative Office
Government Assistance for Foreign-Owned Businesses
Singapore actively encourages local and foreign businesses and provides government-funded assistance programs.
Depending on the requirement of each assistance programs, Companies with at least 30% local ownership may qualify for local grant assistance programs, including:
- Startup SG Grants, an umbrella that encompasses a plethora of government-funded startup grants and loans.
- Automation Support Package (ASP) which encourages companies to implement automation strategies.
Singapore also offers incentives to foreign companies, such as:
- Research Incentive Scheme for Companies (RISC), a program to encourage the development of research capabilities for science and technology initiatives.
- Training Grant for Company, which encourages the expansion of employee capabilities in new technologies and skills.
- Productivity Grants, which creates efficiency in energy and labor practices.
More information can be found on government grants and incentive schemes can be found here
Restrictions for Foreigners
While Singapore encourages foreigners to open businesses in Singapore, some restrictions apply, notably the requirement of most business entities to have local managers or directors. In many cases, the foreigner may act as the local officer, but that role may depend on the foreign officer obtaining the appropriate pass.
Are Foreigners in Singapore on Certain Work Passes Allowed to Start a Business in Singapore?
Foreigners in Singapore must obtain a pass that stipulates the permissions of their residency or their visit. Certain passes offer more leeway in starting a business than others, including what entity the foreigner can legally set up.
|
Type of Pass |
Sole Proprietorship |
Partnership |
Company |
|
Not Allowed |
Not Allowed |
Holders of these passes may incorporate and own shares of accompany but may not be a director or employee of the company |
|
Not Allowed |
Not Allowed |
Holders of these passes may incorporate and own shares of a company,but they cannot be director or employee of the company |
|
Allowed |
Allowed |
Allowed |
How can Foreigners Open a Business in Singapore?
If you are convinced and ready to start your business in Singapore as a foreigner, here are the steps necessary to get your business up on its feet. Different requirements will apply to different industries, but most entrepreneurs will need to address the following:
Obtain a business licenseMany industries require business licenses to be obtained before operations can began. Business can apply for the licenses themselves or outsource to a trusted service provider like Hawksford. At Hawksford, we can assist you with obtaining the necessary licenses and permits for your business. We have an experienced team who are intimately familiar with the nuances of various industries in Singapore and can act as an extension of your team.
View our business licensing service here
Tax Planning and Accounting
Singapore offers favorable tax regimes for both individuals and companies. Foreigners setting up companies in Singapore should obtain guidance from a tax consultant experienced with Singapore taxation regimes to obtain the maximum tax benefit.
You can also outsource your accounting and tax requirements to Hawksford to stay compliant and meet annual filing datelines with ease
Learn more about our Tax and Accounting Services here.
Payroll
Singapore law requires employers to issue itemized pay slips to their employees, listing gross salary, deductions, and net salary. Employer returns for each employee (IR8A Form) be submitted annually to the Inland Revenue Authority of Singapore (IRAS) by 1 March.
Managing your workforce can be so simple when outsourced to Hawksford; you relieve your business from the administrative burden and free up time to do what you’re great at.
View our payroll page here
Data Protection
Singapore businesses must comply with the Personal Data Protection Act, which includes stipulations that data be accurate, secure, and not retained for longer than necessary. Foreign business founders in Singapore must establish protocols for compliant use and protection of data.
Hawksford offers a range of outsourced data protection services to suit your operational requirements, and ensure your business meets Singapore data protection obligations.
View our data protection services here
Immigration and Relocation
Foreign business owners who intend to reside in Singapore must obtain appropriate legal residency and employment status. This may require obtaining an Employment Pass, a Dependent Pass, a Long-Term Visit Pass, or an Entrepreneur Pass (EntrePass). It might also mean applying for Permanent Residency (PR) or even Singapore citizenship in the long run.
Hawksford can help entrepreneurs and foreign firms navigate Singapore’s immigration regulations when they require the service for themselves, their families, or their staff.
Learn more about our immigration services here