Information on Singapore Company Formation

The Republic of Singapore is a Commonwealth country located at the tip of the Malaysian peninsula and occupying an area of 622 sq. kilometers. Singapore was formerly part of Malaysia. Malaysia gained independence from Britain in 1957. Eight years later in 1965, Singapore broke away from Malaysia and became a sovereign state in its own right. Because of its close past connections with Britain, the business language remains English and the English common law system applies.
 
Local currency is the Singapore Dollar.
 
There is an excellent professional infrastructure with good legal services. Most of the large accountancy firms have offices in Singapore as do most of the major international banks. Communications are excellent with state of the art telecommunications equipment and an airport which serves as a regional hub for over 100 destinations.
 
Singapore did have strict bank and trust secrecy laws but recent developments indicate that Singapore will commit to greater transparency and will make it easier for foreign tax authorities to request information under tax information exchange agreements.
 
Singapore Companies 
 
A Singapore incorporated company may be resident or non-resident depending on its place of central management and control and the origin of its trading income. A company which has the majority of its directors resident outside Singapore (there must always be one Singapore-resident director) and does not carry on business in or derive profits from Singapore will generally only be taxable on income remitted to Singapore.
 
The utilization of Singapore’s network of Double Taxation Avoidance Treaties is restricted to those companies which are resident in Singapore i.e. they are centrally managed and controlled in Singapore.
 
A company incorporated in Singapore may qualify as an Exempt Private Company (“EPC”), depending upon its turnover and shareholders. A private limited company which has a turnover of less than S$5million and all shareholders (not exceeding 20 in number) are not themselves incorporated (i.e. natural persons, whether or not acting as nominees, whether or not resident in Singapore), would be exempted from audit and public filing of accounts. A directors’ statement would instead be filed, and an appropriate income tax return made to the Inland Revenue Authority of Singapore. EPCs also enjoy a tax break on the first SGD 100,000 of net assessable profits for the first three years after incorporation. 
 
Incorporation Requirements
 
A company can only be incorporated upon the approval of its proposed business name. The proposed name can only be accepted if it is not identical name, undesirable, or restricted. Singapore companies have the following characteristics:
 
Taxation
 
Singapore’s tax system is based on the principles of source and remittance meaning only profits that are derived from or arise in Singapore and any foreign sourced profits remitted back to Singapore are subject to tax. The current rate of Singapore Income Tax (“SIT”) is 17%. Every Singapore incorporated company enjoys partial tax exemptions. The first S$10,000 of chargeable profits is 75% exempt from SIT and the next S$290,000 of chargeable profits is 50% exempt from SIT. This means that the first S$300,000 of net assessable profit is only effectively taxed at approximately 8.5%. Profits exceeding S$300,000 are taxed at the normal 17% SIT rate.
 
An EPC is exempt from tax for the first three years after incorporation for the first S$100,000 of chargeable profits. The next S$200,000 profit is 50% exempt from SIT and any profit exceeding S$300,000 taxed as usual at 17%.
 
Dividend income from other Singapore companies is not subject to tax. Foreign sourced dividends remitted back to Singapore are normally taxable but they can be totally exempted from tax if the following conditions have been satisfied: 1) the country from which the dividend was paid has a headline tax rate of 15% or higher, and 2) the dividend must have suffered taxation either because it is paid out of taxed profits or has suffered withholding tax. Capital gains are not subject to SIT. Singapore has currently entered into 82 comprehensive agreements for the avoidance of double taxation (“DTA”s).
 
Directors
 
A minimum of one director is required. Details of directors must be filed with the public registry. Corporate directors are not permitted. One director must be a resident of Singapore and this director remains personally responsible for the compliance by the company with the Singapore Companies Act and may continue to be liable for those obligations even after resigning. Because of this in cases where we act as a director, an amount of S$3,000 will have to be deposited in order to guarantee such compliance. This amount may be returned when business operations cease and the company has been wound up in the manner required by law.
 
Shareholders
 
Singapore companies can be incorporated with a single shareholder. Details of shareholders are available at the Public Registry. Anonymity can be achieved by the use of nominee shareholders.
 
Annual Reporting
 
With the exception of EPCs, all Singapore companies must prepare full audited accounts and must keep a copy of such accounts at the registered office address. EPCs only need to file management accounts accompanied by a Director’s Declaration in a prescribed format on the public register.
 
Time scale 
 
Once the preferred name is approved incorporation is usually within the same day with a computer generated confirmation from the Registry. An original Certificate of Incorporation will be issued upon request.
 
Restrictions on Name & Activity
 
Names which suggest any connection to any head of state, government undertaking or enterprise are generally prohibited and certain words which suggest specialist activity can only be used when the appropriate licences have been obtained. If such names are used the name approval may be delayed with 2 – 4 weeks.
 
Local Requirements 
 
A Singapore incorporated company may be resident or non-resident depending on its place of central management and control and the origin of its trading income. Where a company has the majority of its directors resident outside Singapore (there must always be one Singapore-resident director) and does not carry on business in, or derive profits from, Singapore it will generally only be taxable on income remitted to Singapore. The utilization of Singapore’s network of Double Taxation Avoidance Treaties is restricted to those companies which are resident in Singapore. Properly structured arrangements can therefore gain access to these treaties.
 
The current rate of corporation tax is 17%, with partial tax exemptions available up to S$300,000 of chargeable profits, thereby reducing the effective tax rate to 4.25% for the first S$10,000 of profit and 8.5% for the next S$290,000 of profit.
 
An Exempt Private Company is exempt from tax for the first three years after incorporation for the first S$100,000 of chargeable profits. A Singapore resident company is only taxed on Singapore source income and foreign income which is remitted to Singapore. Where a company seeks to access Singapore’s network of 60 ratified double taxation treaties, management and control in Singapore will be a fundamental requirement.
 
Annual Reporting
 
Non-exempt Singapore companies must prepare full audited accounts and must keep a copy of such accounts at the registered office address. Exempt Private Companies only need to file management accounts accompanied by a Director’s Declaration on the public register.
 
For more information, please contact us at info@multilysis.com
Office Address: 5 Amathountos street,
Pirilides Building, 4th-5th Floor,
3105 Limassol-Cyprus 51252, 3503