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Business know-how is bred, not born. Getting your business incorporated is one thing, but having it take off requires expertise.
We teamed up with our friends at E27 to discuss how we can help you with getting over some of the road bumps when launching your startup in Singapore and issues affecting businesses today; take a look at the full article and meet some of our team members.
Entrepreneurs are typically defined as people who aspire to build meaningful and innovative products. While their ambitions are noble, they are still bound by the fundamentals of building a company. That includes; sorting out accounts, and filing legal paperwork — tedious work but necessary.
E27 spoke with Sharon Lim who heads up our team of corporate secretarial professionals at Hawksford providing corporate advisory and support to clients to ensure that they are compliant with the regulatory requirements and maintain best practice, standards and corporate governance. With over 18 years of experience, she has worked for the likes of Rajah & Tann and Boardroom.
Incorporating a company isn’t just a simple matter of paying a fee and signing a few forms. Although startups are lean outfits that can consist of teams as small as two persons, they are still subject to stringent regulatory and compliance requirements. Thus, entrepreneurs would do well to engage a qualified professional firm to manage their back-end office administration such as company secretarial and accounting so that they can focus on their core business activities.
“One of our clients in the recruitment industry was using an online recruitment portal and they erroneously thought that they would not be subject to any additional requirements, such as the Employment Agency (EA) license,” says Sharon. Entrepreneurs need to note that even when they are operating in the online space, laws that govern their industry may still apply to them.
“The client went on to conduct business but found out that because he did not have an EA license, he could not secure business contracts as it wouldn’t be legal to conduct business without a license. He then came to Hawksford to seek help on EA license application.”
Also read: Want to know how ready your startup is to set up shop in Singapore? Take this quiz.
E27 spoke with Lee Meng Teng who heads up our Tax and Accounting team in Singapore - a senior chartered accountant with more than 15 years of professional experience. He has worked for the Big Four and Top 10 International Accounting Firms, and has good understanding of business environments across diverse industries.
Meng Teng strongly advises entrepreneurs not to be cavalier about their corporate taxes.
“When entrepreneurs start their business in Singapore, they are interested in the revenue and are eager to succeed financially. However, taxation should also be a priority. This way, they understand the tax implications in conducting their businesses, tax exemptions and tax benefits for Singapore companies,” shares Meng Teng.
“For example, many entrepreneurs adopt cash-basis accounting which makes more sense to them: ‘whatever I see in the bank is what I have.’ But the right way is to understand and maintain the accounting books on an accrual basis where revenue and expenses are matched to the period where the business transactions took place.”
In the event that the company fails to file its Annual Returns on time, a non-compliance rating of the company is published on the Business Filing Portal of ACRA. This could lead to a loss in potential deals and clients as it may imply that the company’s books are not in order, Meng Teng cautions.
The Singapore government actively encourages the growth of startups as part of its Smart Nation drive and has structured its taxation system to be startup friendly. Initiatives include; tax exemptions for new startup companies and tax deductions for qualifying IP related costs.
Subject to meeting certain qualifying conditions, startups enjoy full tax exemption for the first S$100,000 of their chargeable income for YA2019 and before. But that is said to change to 75 per cent (with effect from YA2020 onwards), as highlighted in Singapore’s Finance Minister Heng Swee Keat’s Budget 2018 speech.
Qualifying startups would continue to enjoy lower effective tax rates than the headline corporate tax rate of 17 per cent.
With such generous tax breaks, companies have more capital to spare, which can be channeled towards critical expenditure such as product development, hiring and market expansion.
Also in the Budget 2018 announcement, Minister Heng said the Singapore government will raise tax deductions on licensing payments for the commercial use of IP. The tax deductions for these will be raised up to 200 per cent and capped at S$100,000 per year.
The government will also raise tax deductions for IP registration fees (from 100 per cent to 200 per cent) as well as qualifying expenses incurred on R&D in the country (from 15 per cent to 20 per cent).
What all this means is that more startups can afford to spend on existing copyrighted technology to further their own innovations, and at the same time, patenting their own products.
E27 spoke with Jacqueline Low, Hawksford’s COO in Asia. She has acted as Company Secretary for several hundred Singapore-based firms over the past 20 years, and managed several corporate secretarial departments for businesses. Having been involved in businesses across Asia, particularly Malaysia, Hong Kong, Brunei and Vietnam, she has developed a unique understanding of how these different jurisdictions work and operate.
The Singapore government has always been welcoming of foreign talent, however, it aims to ensure that there is a real need for the external talent and establish how these skills and expertise can be transferred to local Singaporeans/PRs.
Employment Pass (EP) with Entrepreneur Pass (EntrePass): In Singapore, there are several types of work passes. EPs are usually reserved for employees of a company whereas, if you are a business owner looking to relocate your company to Singapore, you can apply for the EntrePass.
For an EP, several factors are taken into account: the person’s experience, credentials, company structure, activity and business plan.
At one time, the EntrePass scheme was popular for foreign entrepreneurs coming to Singapore to start their business. Considerations for approval were based on business plans, experience, relevance and ensuring that the business met the requirements for business spending and employing local Singaporeans/PRs.
About three years ago the scheme was tightened, and entrepreneurs faced more stringent requirements for example; they needed to be an Incubatee working with a government approved Incubator or needed to have funding from a government approved Venture Capitalist. However, there were entrepreneurs who do not meet these prerequisites, but had the capital and know-how to start a business, and therein lay the quandary.
In 2017, the Singapore government enhanced the rules by modifying the EntrePass scheme criteria. Entrepreneurial track record and business networks and achievements were added to areas of expertise making the criteria more relevant. This, together with the requirement of meeting business spending and local employment, continues to protect the Singapore core workforce while still attracting businesses to Singapore.
“At the end of the day, authorities want to know how the businesses will contribute to the Singapore economy and community. For example; paying taxes and hiring of local staff. This applies to all industries,” says Jacqueline. In short, if the entrepreneur has definite proof that they can run a company and add value to the local ecosystem, they would likely be eligible to stay.
Failure to file taxes properly and timely could prevent an entrepreneur or employee from securing or maintaining their EP. In their personal tax declaration, employees need to declare and be paid the salary amount that is reflected on their EP application. Non-compliance could adversely affect their EP renewal.
E27 spoke with Kerlyn Teoh who manages and coordinates client services at Hawksford, her role involves understanding a client’s requirement, anticipating possible challenges and delivering solutions that will give international clients one less thing to worry about.
If you have read this far, you would have probably figured out that starting a company isn’t a simply a matter of having the capital and business expertise to start one; there’s a lot of paperwork and checks involved, even for a country as business-friendly as Singapore.
Hawksford offer a complete suite of robust solutions to ensure a company’s business operations runs smoothly from Day 1. They take pride in maintaining a 98 per cent success rate for the companies who engage in their services to becoming successfully incorporated.
Find a corporate services team that carries a wealth of experience and have worked with businesses from different industries and backgrounds. They will be the ones ready to take the time to listen to the needs of the client, understand their requirements and tackle any challenges that they may not be aware of, enabling them to achieve their ambitions.
Hawksford also acts as a middle man between the entrepreneurs and tax officers, should the need arise.
“When a company comes to us, we ensure compliance is met with the local authorities and establish whether a license is required. Upon confirmation, we provide the statutory requirements in terms of filing, to ACRA and to IRAS as well. We facilitate regular and ongoing compliance checks and due diligence” shares Kerlyn.
Citing a client case, Kerlyn highlights how her team can also help entrepreneurs whose business filings are in disarray.
“There was a business which did not comply with the necessary requirements and hence were not compliant with the Companies Act, which is an offense. Their annual filings were also not done on time and the necessary registers were not set up which was in breach of the companies act,” says Kerlyn.
“We highlighted to the client about the necessary requirements, cleaned up their books and we looked through the records to see what gaps needed filling as certain items in the Companies Act were not fulfilled. Our assistance re-established their good standing with the authorities.”
It is safe to say that, the importance of engaging a reliable partner to manage corporate affairs should not be underestimated. Nitty gritty business administrative matters, if not put in order, would result in undue stress and unnecessary expense in the long run, distracting entrepreneurs from the very reason they started a business in the first place, to build innovative products.
E27 is a news platform connecting the startup community in Asia.
To learn more about our corporate solutions, contact us today.
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