How to do business in Singapore in 2022?

A foreign individual or company may engage in business activities in various forms, such as share repurchase, financial or real estate investment, entrepreneurship or the formation of a partnership. While share buybacks, company mergers or real estate investments are subject to stamp duty, there is no legislative requirement for the extraneous nature of economic activities. However, this is not the case for a company registration.

One of the requirements to do business in Singapore is that at least one of the directors, officers, partners or managers must be a local resident. There are two situations:

1. If you are an overseas resident and wish to register a sole proprietorship or partnership in Singapore:

In this case, you must appoint at least one director or employ a legally authorized local manager resident in Singapore to manage the company if you wish to continue to reside outside Singapore. To qualify as a “resident”, the person must be a Singapore citizen, permanent resident or an EntrePass or Employment Pass holder.

2. You are a foreign entrepreneur residing in Singapore and you wish to create and doing business in Singapore:

It is possible to waive this requirement by submitting an application for an “Entrepreneur Pass” (EntrePass) to the Ministry of Manpower (MOM). Thus, eligible foreign entrepreneurs can obtain the EntrePass before incorporating a company or within six months of incorporation from the Accounting and Corporate Regulatory Authority of Singapore (“ACRA”). It is also possible, with a Dependant’s Pass (DP), to apply for a Letter of Consent (“LOC”) from the Ministry of Manpower once the company is registered in order to independently manage the business.

Influenced by the Civil Code and the Companies Act, the formation of a company in Singapore follows a particular process set out in statutory requirements.

The process is as follows:

Creating a company abroad is not limited to filing an application for incorporation. It is advisable before any administrative step to research the state of the social and fiscal regulations in order to determine the type of company adequate to the desired economic activities.

There are four main options to do business in Singapore:

The representative office is a simple but temporary structure (one to three years maximum). Limited in its actions, since it cannot carry out any commercial activity, and devoid of legal capacity, it represents above all an effective means for foreign companies to study the Singaporean and regional market, with a view to creating a commercial structure later on and doing business in Singapore.

Private Limited Company is an independent legal entity with no life span and a liability limited to the partners’ contributions. This legal structure, which is more widespread, benefits more easily from a stable and sustainable development thanks to the ease of raising funds.

Foreign companies doing business in Singapore may choose to operate through a branch office. However, unlike the subsidiary, the branch is treated by the Singapore jurisdiction as an extension of the foreign company rather than a separate legal entity. This includes the absence of limited liability, the exclusion of a tax exemption on profits and a limited scope of activity.

The sole proprietorship is simple to set up and less expensive to run than a corporation. It must be registered annually and is not a separate legal entity from the owner. Thus, liability is not limited. The owner is directly liable for debts and income generated by the entity is not subject to the corporate tax rate. Sole proprietorship is not an option for foreigners. Instead, they should form a private limited company.

For most corporations, there are several requirements for formation and registration:

First, registration of a company is conditional upon obtaining official approval of the company’s name. This means that the application must first be submitted to ACRA.

Subsequently, at least one authorized local resident director must be appointed. The director must not be bankrupt and free from any charge of professional misconduct.

The company must have a share capital of at least SGD1, which can be increased at any time.

Finally, for doing business in Singapore, any registration must contain the registration of an address attached to a residential or commercial property.

In addition, for the Private Limited, there are three other requirements:

Registration of a company or sole trader is done entirely online and with ACRA using BizFile (a portal on the ACRA website).

Only individuals with a Singpass account can submit an application on BizFile. Foreign individuals and companies must use the services of registered filing agents such as law, accounting or company secretarial firms.

Foreign companies wishing to establish a representative office in Singapore can contact certain government agencies depending on the sector of activity.

Regardless of the country, every company is subject to tax standards. Singapore has one of the most attractive tax regimes in Asia.

Regardless of tax residency status, all Singapore-based companies are required to pay corporate tax or foreign income tax on income transferred to Singapore. When setting up a company, an accounting year end, called the company’s fiscal year end (“FYE”), must be decided. Accounting periods can be as short as 12 months or as long as 52 weeks.

Finally, under the Companies Act, companies incorporated in Singapore are required to file annual returns with ACRA and must also submit the date of their annual general meeting (“AGM”) and the company’s financial statements.

Corporate income tax is assessed on the basis of the previous year’s Singapore tax rate of 17%. As stated above, a sole proprietorship is not considered a company and will be subject to the personal income tax rate of around 20%.