Cost of company formation
|Legal address for 1 year||✓|
|Secretary services for 1 year||✓|
|Sending documents from Singapore||✓|
|Total cost of registration||from €2800|
|Services of a local director for 1 year||from €3000|
|Repayable deposit for company maintenance (a local director) provided that the risk level is standard||upon request|
|Annual maintenance||from €1800|
|Services of a local shareholder for 1 year||upon request|
|Services of an authorized signatory of a bank account for 1 year||upon request|
|Non-resident director and/or shareholder (including issuance and forwarding of a power of attorney)||€500|
|Legalization of documents||upon request|
* Provided that the risk level is standard.
The cost of accounting services and audit depends on the number of transactions and company’s turnover, and can be defined following the results of the first year of activity.
- Singapore is a state in South-Western Asia. The national currency – Singapore dollar (SGD). The official languages – English, Chinese, Malayan and Tamil.
- Legal system of Singapore is based on English common law, but has specific features that may be found in the national legislation.
- Singapore is a member of WTO, APEC, ASEAN, FATF, British Commonwealth.
- The main trade partners of Singapore are the United States, Japan, Malaysia, China, European Union and the Arab countries.
Advantages of Singapore
- Singapore continues to be one of the most business-friendly countries. For 2017 Singapore took the 2nd place in the world economic freedom ranking (after Hong Kong) as reported by The Heritage Foundation, and the 2nd place in Doing Business 2017 ranking according to the World Bank.
- Singapore has highly developed financial infrastructure, clear and sustainable regulatory framework and transparent administrative procedures.
- Reputation advantages: Singapore is not an offshore jurisdiction, being the largest and respectable financial center in the South-Asian region.
- No exchange control and capital flow restrictions.
Use of Singapore companies
Singapore company registration may be caused either by entry into new markets, or extension of international corporate structure, or simply by intention to run business in a place where the most favorable conditions have been created.
- First, Singapore companies may be applied as alternative to traditional offshore companies. In particular, Singapore companies do not pay taxes on income received from sources outside Singapore. The laws of Singapore do not restrict companies in choice of banks and countries for opening corporate bank accounts, as well as in number of such accounts. You may open a company’s account not only in Singapore, but also in banks of other countries. A Singapore company with a bank account opened outside Singapore may sale goods and render services, including online.
- Second, a Singapore company may serve as an intermediary (agent) in international supplies, import and export operations in Asian markets, being an attractive counterparty for foreign business partners.
- Third, a Singapore company may be act as a holding and use incentives and exemptions provided by double taxation agreements concluded by Singapore.
- Fourth, registration of a company in Singapore may be a good solution for organizing of real substantive business (having full-fledged presence within the country).
Types of companies in Singapore
The main sources of the corporate law of Singapore are Companies Act, Partnership Act, Limited Partnerships Act, Limited Liability Partnerships Act.
Forms of business registration in Singapore:
- private limited liability company;
- public limited liability company;
- limited partnership;
- limited liability partnership;
- branch or representative office of a foreign company;
- sole proprietorship.
Private companies having less than 20 members and having no legal entities – direct or indirect holders of beneficial interest in the company, are classified as Exempt Private Companies (EPC). Companies that meet the said requirements are automatically qualified as EPC and are the most popular corporate vehicle in Singapore, in particular for foreign investors.
Main features of Singapore private companies
- Name. The Register will not approve company names which are identical to the names of existing companies or partnerships in Singapore or the names found undesirable. Private companies with limited liability are marked by the ending “Private Limited” or by the abbreviated ending “Pte. Ltd.”
- A person establishing a company files with the registration authority the only founding document – constitution of the company. Private companies may use a model constitution in whole or in part as provided by the Companies (Model Constitutions) Regulations 2015.
- Shareholders. A company must have at least one member (of any nationality or residency).
- Shares and capital. A company may issue only registered shares, which may not be freely transferred to third parties unless otherwise approved by the meeting of members. Bearer shares are not allowed. A company must issue at least one share. The minimum paid-up share capital is 1 SGD. Capital may be formed either in local or in foreign currency.
- Directors. A company must have at least one director, the information of which is filed with the Register of companies. The same person may be the only director and shareholder of a company. Several directors may be appointed. All the directors must be individuals, and at least one of them must be resident in Singapore.
- Nominee directors are allowed, however from 2017 companies must keep registers of their nominee directors (not available to public) and provide it upon request of the competent authorities.
- Secretary. A company must have at least one secretary – an individual who is resident in Singapore and meets the statutory requirements.
- Registered office. A company must have a registered office in Singapore.
- Seal. A company may (but is not required to) have a corporate seal.
- Annual general meetings as a general rule must be held once a year not later than 15 months after the date of the preceding general meeting. Private companies may dispense from practice of annual general meetings by a decision taken at a general meeting.
All companies in Singapore must:
- maintain accounting records and keep the relevant documents for at least 5 years after the end of the financial year in which the relevant transaction took place;
- prepare and file financial statements (to ACRA – Accounting and Corporate Regulatory Authority);
- file tax returns (to IRAS – Inland Revenue Authority of Singapore).
“Dormant” companies (companies without sufficient transactions during the fiscal year), the shares of which are not traded on stock exchange, and not being subsidiaries in relation to companies the shares of which are traded on stock exchange, are exempt from the duty to prepare financial statements. The aggregate value of assets of such company must not exceed 500 000 SGD.
As a general rule financial statements must be audited, however “small” companies are exempted from audit. To be qualified as small company for the said purpose in a financial year, a private company must meet any two of the following criteria in each of the two financial years preceding the relevant financial year:
- Income of the company for each financial year does not exceed 10 000 000 SGD;
- Value of the company’s assets at the end of each financial year does not exceed 10 000 000 SGD;
- At the end of each financial year a company has less than 50 employees.
Parent or subsidiary company may use this exemption provided that such company is a “small company” itself, and the other companies of the group form a “small group”, i.e. the group satisfying on a consolidated basis any two of the three aforesaid criteria.
Confidentiality and beneficial ownership information regime
Information on directors, secretaries and shareholders (members) of Singapore companies is open to public for a prescribed fee. Electronic registers of directors, secretaries, members and CEO of companies must be kept and maintained up-to-date through the system of ACRA.
Companies must register their members (and events of their change) in real time mode in ACRA system (the date of submission of the information is deemed to be the date of commencement or termination of title to shares in a company). Information of change of directors, secretaries or other officers must be submitted to the system within 14 days after the change.
Information on beneficial owners of a company is confidential. In normal circumstances it is available to company’s secretary (local service provider) and the bank servicing the company’s accounts.
However, from 2017 Singapore companies are obliged to keep a register of their beneficial owners (“controllers”), i.e. individuals or legal entities that have a “significant interest” (more than 25% of shares) in a company or exercise “significant control” over it (e.g. have a right to appoint/remove directors, hold more than 25% of votes on issues that require voting of members, or exercise significant influence or control over the company).
The register of controllers is kept at the level of a company and is not available to public. Access to such register may be provided in cases specified by the law (in particular, to the regulator and other competent authorities).
Besides this, the law provides for an option to create a central register of controllers. In this case companies will have an extra duty of filing and updating information of their beneficiaries in the central register. In the meantime, the information kept in the central register, in case of its creation, will not be publicly available as well.
Corporate taxation in Singapore
Singapore applies taxation on a territorial basis. A company is obliged to pay tax on any income generated or derived from sources in Singapore, or on income remitted to Singapore from other countries.
Income of a Singapore-registered non-resident company received from sources outside Singapore and not remitted to Singapore is not subject to corporate income tax. Singapore companies in such case may be used in a way similar to “classical” offshore companies (e.g. the British Virgin Islands etc.) or to Hong Kong, but such companies cannot use the provisions of double taxation treaties concluded by Singapore.
The tax-free regime for a Singapore company may only be possible if:
- a company is managed and controlled from outside Singapore; and
- the company’s account is opened in a bank located outside Singapore.
A company is considered resident in Singapore if its management and control are exercised in Singapore.
“Control and management” means taking decisions on strategic matters, such as those on company’s policy and strategy. Where the control and management of a company is exercised is a matter of fact. Typically, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is a key factor in determining where the control and management is exercised.
Corporate income tax in Singapore
The standard corporate income tax rate is 17%.
The expenses incurred by a company may be deducted when calculating its taxable income provided that they are related to activities aimed at deriving income.
75% of the first 10 000 SGD of taxable income of a company, and 50% of the next 290 000 SGD are exempt from tax.
Newly established Exempt Private Companies have additional incentives in their first three tax years: full tax exemption of the first 100 000 SGD of taxable income, and 50% exemption of the next 200 000 SGD.
Dividends received from foreign companies and remitted to Singapore are exempt from tax in Singapore if they were received by a Singapore resident company from a jurisdiction with a standard tax rate not less than 15% and had been taxed in that foreign jurisdiction.
There is no withholding tax on dividends paid by Singapore resident companies.
Interest paid to non-resident are taxed at source at a 15% rate, unless otherwise provided by an applicable double tax treaty.
Royalties paid to non-resident are taxed at source at a 10% rate, unless otherwise provided by an applicable double tax treaty.
Other taxes in Singapore
Singapore has no capital gains tax.
Goods & Services Tax (GST) is levied on sales of goods and services in Singapore, and on import operations (analogue of VAT). The rate is 7%. A zero rate is applied to export of goods and international services.
A person must register as GST taxpayer if its turnover of GST taxable operations for 12-months period exceeds (or is reasonably expected to exceed) 1 000 000 SGD (around 765 000 USD). Voluntary registration is also possible with lower figures.
GST return is to be filed quarterly within 1 month after the end of the reporting period.
The law also provides for real property tax, stamp duty, social security contributions.
Singapore tax treaties
As at 2018 Singapore has 82 treaties for avoidance of double taxation (further – DTT) in force with the following states:
- Brunei Darussalam
- Chinese Taipei
- Czech Republic
- Isle of Man
- Korea, Rep. of
- New Zealand
- Papua New Guinea
- San Marino
- Saudi Arabia
- South Africa
- Sri Lanka
- United Kingdom
- Viet Nam
Tax residency certificate
Obtaining a tax residency certificate by a Singapore company (which may be required to be given to a foreign source of income when using DTT exemptions for payments made to Singapore) is not a simple procedure. A company must be managed and controlled from the territory of Singapore, and the company’s income must be remitted to Singapore. A company should not have features of a shell (“mailbox”) company, must have real office and key officers in Singapore.
When taking decision whether to issue a tax residency certificate to a Singapore company the tax authorities take into account not only formal documentation, but all relevant factors.
International exchange of information
Singapore took commitments on exchange of tax information upon request with all its DTT partner states, and with Bermuda which have a separate tax information exchange agreement (TIEA) with Singapore.
Singapore is a signatory of MCAA CRS (Multilateral competent Authority Agreement on Automatic Exchange of Financial Account Information) and enters into the practical phase of the exchange in September 2018. According to information of OECD portal as on March 2018 Singapore committed to send the financial account information on automatic basis to the competent authorities of 51 countries.
Singapore also committed to provide automatic exchange of country-by-country reports (CbC). Such reports are to be provided to IRAS by Singapore-based multinational groups of companies meeting certain criteria.