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Why Foreigners must Incorporate their Companies in Singapore

Last modified: December 8, 2017
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Singapore government provides numerous benefits for registering a new company. These are also available to the startups owned by the foreign nationals. The entrepreneur-friendly attitude of Singapore is boosting the number of company incorporation in Singapore.

Leading a Singapore Company from the Front

Companies in Singapore1Foreigners need to have a work pass to work in Singapore. Even the shareholders acting as the directors of the foreign companies need either the Employment Pass or the Entrepreneur Pass. They need it to take an active part in the management of company’s operations.

Employment Passes are awarded to those having university degrees. While those who do not have university degrees, but have skills and tons of experience, are eligible for applying for the Singapore Entrepreneur Pass or EntrePass.

Note: The minimum paid-up capital for an entrepreneur having Entrepass is $50,000. The amount is an assurance of your monetary stability to support the business and sustaining your stay in Singapore. The minimum paid-up capital for an entrepreneur having Employment Pass is $1.

For registering your company, you need to apply to the governing authority of businesses and public accountants, the Accounting and Corporate Regulatory Authority (ACRA) of Singapore. It also acts as the Company Registrar in Singapore.

Pre-Registration Requirements for an Entrepass Holder to Setup Company in Singapore

  • You must be 18 years of age or above
  • At least one local Singapore resident director
  • At least one shareholder
  • At least one company secretary
  • You have to produce a bank statement of at least $50,000 of a Singapore-based company bank account for verification
  • A registered physical address for the company office
  • You should not be an undischarged bankrupt. If you are, then you should have a permit from the High Court or Official Assignee
  • You should not have been disqualified under the sections 149, 149A, and 154 of the Singapore Companies Act
  • Your company should be registered as a Private Limited Company
  • You should hold at least 30% of shares in your registered company
Note: If the foreign entrepreneurs wish to run a company in Singapore without relocating to Singapore, they do not need a work pass. However, they need to appoint a local nominee director to take charge of the company’s activities.

Incorporate company in Singapore is one of the easiest incorporation processes and involves only 2 procedures. The World Bank has ranked Singapore at the topmost position for the ‘ease of doing business.’

Singapore Tax Rates are More Attractive Compared to that in Other Asian Countries

Singapore has one of the most attractive tax rates in the world. They are lower than the tax rates in most of the developed countries. It is no wonder why a lot of foreigners and professionals want to relocate to Singapore.

It is better to have a company that is completely based in Singapore. This means that the business should have tax residency in Singapore. Moreover, to get tax residency status for a company in Singapore, the directors meeting must be held in Singapore.

Incorporate a Tax-resident Singapore Company

Companies in Singapore

Some tax benefits only apply to companies with tax residency in Singapore. These are as follows.

  • Tax Exemption for the Start-up Companies: For a new start-up, there is a full tax exemption for the first three years on its chargeable income of up to S$100,000. The next, S$200,000 is taxed at 8.5. Its chargeable income above S$300,000 is charged at 17%.
  • Partial Tax Exemption: All the existing Singapore companies enjoy a tax rate capped at 8.5% on their chargeable income of up to S$300,000. That above S$300,000 is charged at the rate of 17%.
  • Single-tier Corporate Tax: In Singapore profits are taxed only once. The shareholders do not need to any pay tax on the dividends received if the company has filed its corporate income tax.
  • Tax exemption on Foreign-based Resources: This is indicated under the section 13 of the Income Tax Act. The companies with Singapore tax residency get tax exemption on foreign-sourced dividends and foreign branch profits.
  • Registering for Goods and Services Tax (GST): The GST registration is compulsory for the companies if their turnover exceeds S$1 million. Doing so allows them to claim input tax that they paid on their purchases of goods and services. The companies must file for the GST registration within 30 days from the time the company has become liable.
  • Avoidance of Double Taxation: During the cross-border trade, the companies are taxed twice (in the source country and in the country where they operate). Singapore has overcome this problem by signing more than 70 double taxation avoidance treaties with the other countries. By the virtue of these treaties, Singapore registered companies are taxed only once during the cross-border trade.
Note: Singapore taxation system charges 0%-17% of corporate income tax to the non-resident companies on income generated in the country. Their real loss is that they do not qualify for most of the tax exemptions, benefits or the incentives.

As you can see, Singapore company incorporation in the form of a tax resident company really helps you in establishing a profitable business in Singapore.

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