setting up a company in Singapore

Singapore’s tax system is based on the principals of source and remittance. Only profits that are derived from or arise in Singapore, or any foreign-sourced profits remitted back to Singapore are subject to tax in Singapore. Capital gains are not subject to tax. The current rate of Singapore Income Tax (SIT) is 17% – one of the lowest rates in the region. All Singapore resident companies are eligible for partial tax exemption of 75% on the first S$10,000 and 50% on the next $290,000, which effectively provides an 8.5% tax rate on taxable income up to S$300,000 per annum. Further tax concessions are also available for qualifying companies under various economic incentive programmes in the manufacturing, service, trade, investments and finance sectors. Dividend income from other Singapore companies is not subject to tax. Foreign-sourced dividends remitted back to Singapore are generally taxable but they can be completely exempted from tax if: the country from which the dividend was paid has a headline tax rate of 15% or higher; and the dividend has suffered taxation, either because it is paid out of taxed profits or has suffered withholding tax. Singapore has entered into over 80 comprehensive agreements for the avoidance of double taxation (DTAs).

A Singapore company is required to have a local registered office where all official documents, notices and court papers can be sent and where all statutory records are kept. The address must be a physical location and must be open to public for at least five hours during business hours. This is because people have the right to visit this office to inspect certain registers and documents, and to deliver documents by hand. In addition, Sovereign’s registered address service will receive incoming mail for your company and forward it to you as per your instructions.

A Singapore company is required to appoint a qualified company secretary to maintain the statutory registers and compliance in respect of meetings, resolutions and submissions. Sovereign will assist you to prepare and file the annual return with Companies Registrar and annual tax return with Inland Revenue Authority of Singapore (IRAS). The company secretary also has custody and use of the company seal and will ensure that any parties entitled to inspect your company records are able to do so.

It is a statutory requirement for every Singapore company to appoint at least one Singapore resident director. If you are based overseas and do not have a resident local director, Sovereign can provide one. This service can be provided on an annual basis if you do not intend to relocate to Singapore or on a short-term basis if you are intending to relocate to Singapore and apply for an employment pass. When you receive an employment pass, Sovereign can resign and you can take over as the local resident director.

Sovereign can assist you to prepare and file the annual return with Company Registrar and the annual tax return with IRAS.

Singapore has highly developed trust laws and other legislation to enhance its position as an international wealth management hub. In particular, a settlor can retain the power to make investment decisions and forced heirship laws are not enforceable against a Singapore trust if the settlor had the capacity to transfer the property from the jurisdiction in which the transfer took effect. The Monetary Authority of Singapore (MAS) regulates Singapore trust companies. In addition to advantages in respect of succession and estate planning, trusts can offer enhanced asset protection, continuity and confidentiality. Qualifying Foreign Trusts (QFTs) – where the settlor and beneficiaries are not resident in Singapore or are not a Singapore resident company – are exempt from Singapore tax on interest, dividends and rental income derived from outside Singapore, or gains derived from the sale of certain investments. Distributions to beneficiaries of QFTs are also exempt from Singapore taxes.

Singapore operates a territorial and remittance-based tax system, which means that only those profits that are sourced within Singapore or foreign-sourced profits remitted back to Singapore are subject to Singapore tax.

Sovereign works with a range of auditors and is able to accommodate all clients – irrespective of their size – so audit fees should not be excessive. Not all Singapore companies are subject to an audit of their financial statements. In order to save companies the time and costs of an annual audit, Singapore introduced the concept of a “small company” in 2015. A small company is exempt from the requirement for an annual audit and any private company qualifies as a small company if it meets at least two of the following three criteria:

• Total revenue does not exceed S$10million;
• Total assets do not exceed S$10million;
• Number of employees does not exceed 50.

Both jurisdictions boast excellent financial, legal, accounting and professional services standards and their banking infrastructure is world class. Singapore and HK are constantly vying for top spot amongst the world’s best financial centre – which means the high standards are maintained and fees remain competitive. As a special administrative region (SAR) of the People’s Republic of China (PRC), Hong Kong may be better suited as a regional headquarters for firms that have predominantly China-related business, whereas Singapore may be better suited to businesses operating in ASEAN countries and India.