Singapore is an ideal destination to incorporate and operate a company. As a country, Singapore enjoys a vibrant business landscape backed by robust political, economic and social stability. Furthermore, Singapore has among the lowest corporate tax rate globally at 17%, compared to countries like Australia (30%) and India (34%). Qualifying new companies enjoy full tax exemption on the first $100,000 of normal chargeable income, and 50% exemption on the next $200,000 for the first three years. In addition, there are also no dividend and capital gains taxes in Singapore.
On top of enjoying a favourable corporate tax structure, companies in Singapore get to enjoy myriad incentives such as grants through government agencies such as SPRING Singapore and IE Singapore.
For foreigners setting up a company in Singapore, there are requirements to keep in mind to ensure a smooth-sailing incorporation. The following are some points to note.
Appoint a local resident director
According to Accounting and Corporate Regulatory Authority (ACRA) guidelines, it is mandatory for a Singapore-registered company to have at least one local resident director. In order to qualify as a local resident, he or she must be:
- an individual above the age of 18 years old;
- a Singapore citizen, permanent resident, employment pass or EntrePass holder. If the local resident director is an employment pass holder, the employment pass must be issued by the company where the individual acts as director;
- not an undischarged bankrupt by a Singapore or foreign court;
- not convicted of fraud or dishonesty;
- and not charged for three or more offences in breach of the Companies Act.
Abiding by this guideline, overseas entrepreneurs or foreign companies need to appoint a local resident director to incorporate their business in Singapore. To fulfil this requirement, they can assign a foreigner to reside in Singapore. Otherwise, it is possible to appoint a nominee director to act as local resident director. This is a non-executive position in the company. A nominee director does not have any control over the management, financial or operational duties of the company.
Engage a local corporate service provider
Foreigners cannot incorporate a Singapore company. To incorporate a company, an individual has to log in to ACRA using a SingPass. Since foreigners do not have access to ACRA, they will need to engage a corporate service provider to do so.
As part of the incorporation process, the following is required.
- Company name
- Company Secretary
- Paid-up capital (at least $1)
- Registered address
In the absence of a local resident director, foreigners can engage the services of a corporate service provider to provide a nominee director. This service comes with a monthly nominee director fees. In addition, a refundable security deposit will be collected from overseas clients to safeguard the nominee director against risks he faces if the company runs into financial obligations that it fails to fulfil. This amount varies, depending on the scale, nature of business and number of staff of the incorporated company, amongst other factors. The security deposit will be returned when service with the corporate service provider ceases.
There are usually conditions involved in appointing a corporate service provider to be the nominee director. At Singapore Secretary Services, we have the set the following conditions:
- We are the appointed company secretary
- Client has to execute a nominee director’s indemnity agreement
- We prepare the unaudited financial statements
- Annual filing returns must be done by us
- We will be responsible for the company’s payroll services if there are local employees
- A copy of the company’s monthly bank statement must be sent to us
Other services rendered by a corporate service provider for incorporation are:
- Providing a registered company address
All incorporated companies must have a local Singapore address for legal purposes to receive official correspondences. This is also the address where all statutory records and registers are kept. For instance, it is mandatory for all companies to keep a Register of Nominee Director and Register of Controllers. Foreigners can use the address of the corporate service provider since it is responsible for maintaining all statutory books. A service fee is chargeable to provide registered address service.
- Providing a company secretary
Every company must appoint a company secretary within 6 months of incorporation. A company secretary must be a natural person and a local resident. If the company has only one director, the director cannot act as the secretary as well.
Undergo risk assessment
Corporate service providers have to exercise due diligence before accepting an overseas client. On top of completing paperwork required for incorporation, foreigners need to assist corporate service providers in their risk assessment of clients. Since most of this exchange of information can be conducted online, foreigners do not have to be physically present to incorporate a company, even though it is recommended for them to be present.
Open a business bank account
It is mandatory for companies to have a business bank account in Singapore. The following are items the bank needs in order to open an account for the company:
- A resolution approving the opening of a corporate bank account with signatories to the account.
- Company’s business profile obtained from ACRA
- Copy of Company’s Memorandum and Articles of Association
- Passport copy and residential address proof (i.e., utility bill or bank statement) of non-resident director/shareholder
- Singapore NRIC of local shareholder (if any)
- Copy of overseas company incorporation (copy should clearly show director’s name and registered company address)
As part of the bank’s due diligence, a foreigner might be required to come down to Singapore personally to facilitate the opening of a bank account. In fact, it usually takes a longer time to process a bank account opening if a director is not physically present.
Obtain business licenses
Depending on the nature of the business, foreigners may have to obtain a business license from the relevant authorities. Examples of such businesses are schools, restaurants and financial services firms. Foreigners have to obtain the licenses, if required, before the company can be incorporated. This is why it is advisable to obtain all relevant licenses as early as possible.