Singapore has attained a longstanding international reputation as one of the easiest places to do business, providing a strong regulatory environment, stimulating taxation and an ideal location in Asia. The pro-business environment has made it a favourable option for startups, multinationals and small and medium enterprises (SMEs) looking to enter, or expand within Asia. 

Although the benefits to establishing a company in Singapore are understood, there is a degree of difficulty in working through legal obligations, financial obligations and the ongoing obligations to remain compliant. It is important to understand these aspects of the process up front, in order to organise long-term success.

At Anbac Advisors, we help businesses navigate through the corporation process, with legal and financial advisory services, to help businesses build a strong base. Whether you are an entrepreneur commencing your first company or a multinational expanding in Asia, we provide certainty that can lead to a successful transition into the Singapore business environment.

In this guide, we will outline legal and financial aspects of incorporating a company in Singapore, including the benefits, challenges and process for incorporation.

Why Singapore is an Attractive Destination for Incorporation

Singapore’s attractiveness as a global business hub is primarily due to its efficient, transparent and well-regulated environment. This has made Singapore one of the easiest places in the world in which to set up and run a company.

The city-state is always ranked in the top three in the World Bank’s Ease of Doing Business Index, with a fast and highly digitalized process for business registration. The majority of applications go through the BizFile+ system, administered by the Accounting and Corporate Regulatory Authority (ACRA), and businesses are established within one to two days. The incorporation system is designed to minimize bureaucracy and allow businesses to begin operating quickly and efficiently.

One major benefit of incorporation in Singapore is the very competitive tax regime. The corporate tax rate is 17%, the lowest in this part of the world, and start-ups enjoy significant tax exemptions for their first three years. There is no capital gains tax or dividend withholding tax allowing businesses to re-invest profits expediently.

Singapore allows for 100% foreign ownership of companies, which is not the case in many other countries. This permission provides entrepreneurs and investors the ability to keep full control of their business without having a local shareholder. Nevertheless, there must be at least one company director who is either a Singapore citizen, Permanent Resident (PR), or holder of an Employment Pass, EntrePass, or Dependant’s Pass.

Another factor for corporate incorporation is Singapore’s financial ecosystem. Singapore has a well-established venture capital (VC) community with local and international investors financing start-ups and high-growth businesses. The country has government grants and funding schemes to help businesses at all stages of development.

Situated in a strategic location at the heart of Southeast Asia, Singapore is a gateway to the 660 million people of the ASEAN market, with strong logistics and trade infrastructure that allows businesses to access the region and world markets with ease.

Finally, Singapore offers political stability, a transparent legal system, and low levels of corruption, which allows businesses to operate in a safe and predictable environment. The country also implements pro-business policies and strong intellectual property (IP) protection laws, making it an appealing location for companies wishing to protect their innovations and investments.

Key Legal Considerations When Incorporating in Singapore

When establishing a business in Singapore, you must comply with relevant legal requirements and regulatory obligations. One of the first things to consider is the legal structure of a business, as the structure influences liability, taxation, and operational flexibility. The three most common business structures in Singapore are the Private Limited Company (Pte. Ltd.), a Sole Proprietorship (SP), or a Limited Liability Partnership (LLP).

For most businesses, Private Limited Companies (Pte. Ltd.) are a popular choice because they have a separate legal entity, provide limited liability for shareholders, and offer attractive tax exemptions/concessions. This is the best choice for long-term growth and scalability. A Sole Proprietorship (SP) is the best option for a small-scale business, where the owner is personally liable for all debts and obligations. Limited Liability Partnerships (LLP) are generally a good option and are used by professional service suppliers (e.g. law firms and consultancies), as they offer limited liability protection and an alternative partnership structure.

To incorporate a business in Singapore, there are a few minimum requirements that businesses must satisfy. Businesses must have at least one director that is either a Singaporean citizen, a PR, or a holder of a valid pass. Companies must have at least one shareholder that is either an individual or a corporate entity and foreign ownership of companies is permitted in full. Businesses must appoint a qualified company secretary to ensure regulatory filings are submitted within six months after incorporating. Businesses must have a registered office address in Singapore, and PO boxes are not accepted. The minimum paid-up capital for incorporation is SGD 1, but a company will commonly inject more capital depending on the needs of the business.  

Once a company has been incorporated, it must meet regulatory requirements, including the filing of annual returns with ACRA, maintaining accurate financial records in accordance with Financial Reporting Standards (FRS) and the filing of corporate taxes with the Inland Revenue Authority of Singapore (IRAS). Businesses in certain industries, such as finance, health care and food services, need additional licenses and approvals from governmental agencies. Non-compliance with legal obligations can result in financial penalties, suspension of business activities, or legal consequences.

Key Financial Considerations When Incorporating in Singapore

Effectively managing financial obligations is essential for the continuity of business activity. The corporate taxation framework in Singapore is extremely competitive and contains tax exemptions which drive down the effective tax rate. After launching, businesses can benefit from partial tax exemptions. Newly incorporated startups can also take advantage of the Start-Up Tax Exemption (SUTE) Scheme, which offers 75% exemption on the first SGD 100,000 of chargeable income for the initial three years of chargeable income, and a 50% exemption on the next SGD 100,000. After the three-year window the business is not still considered a startup, it can enjoy tax exemption on chargeable income.

Singapore provides multiple government grants and funding programmes for businesses. One example is the Enterprise Development Grant (EDG), which assists businesses with business transformation and internationalization projects. Additionally, new startups can apply for the Startup SG Founder Grant, which provides up to SGD 50,000 to support company growth. The other significant programme for SMEs is the Productivity Solutions Grant (PSG), which assists with the adoption of technology solutions and automation tools to improve productivity and efficiency. 

 

Although Singapore is relatively business-friendly, companies should be aware of the cost of doing business. Office rental rates vary depending on the location, with premium locations such as Marina Bay and Raffles Place charged at the highest rates. The cost of talent acquisition and salaries must also be factored in, as Singapore has a highly skilled, and competitive workforce. The cost to hire an Employment Pass (EP) holder is currently a minimum of SGD 5,000 monthly; this salary rate increases for higher-skilled positions. Similarly, there will be regulatory and compliance costs to budget for including corporate secretarial service hiring tax consulting and auditing services.

Challenges of Incorporating in Singapore

Although there are many advantages, businesses incorporating in Singapore do have some challenges. Compliance with legal obligations involves company procedures and ongoing reporting and filing. These detailed requirements may be particularly complicated for a new business. Depending on the location, the operational costs for businesses, such as office rental, salaries and professional fees, can also be relatively expensive. When starting a corporate bank account, account establishments may face strict Know Your Customer (KYC) due diligence processes, which can include Anti-Money Laundering (AML) reviews, which can also take time. Finally, since Singapore has a domestic market of about 5.9 million residents, businesses must also come up with a regional or global strategy for expansion early on in order to grow the business over time.

Conclusion

Establishing a company in Singapore creates unparalleled business opportunities, but achieving success requires thoughtful financial planning, regulatory compliance and well-executed strategy. Understanding the legal and financial environment can help businesses maximize the potential of Singapore’s vibrant business environment.

Anbac Advisors offer professional assistance for businesses working through the incorporation process, compliance management, and financial strategy optimisation. Whether a start-up, SME or multi-national, our expertise will ensure your business is structured for long-term success.