Singapore has, over the past few decades, transformed itself into one of the most successful countries in the world. Its advantageous taxation system, talented workforce, modern infrastructure and rock solid banking sector makes it one of the best countries in which to register a business. In this guide, I provide an overview of the most popular entity in Singapore, the LTD. I also explain how to register one and how to handle compliance.
An overview
Singapore is one of the world’s smallest countries. It has a brutal climate (unless you like hot and humid), virtually no natural resources and lacks any form of natural attractions (it has a few beaches, to be fair, but they are far from world class). What Singapore has is talent, and it has proven very resourceful at harnessing this talent, using it to build high value industries, not only in the service sector but surprisingly, in the manufacturing and petrochemical sectors.
The above, combined with the benefits mentioned in the introduction, and a relatively neutral stance when it comes to politics, makes Singapore a fantastic place to base a business operating globally, with a focus on growth. Do note that Singapore is not a suitable option for a business with no plans to setup local operations, and / or a business setup purely to be operated tax-free.
The most popular entity type in Singapore, and best suited for most types of businesses, is the LTD, or Limited company.
The Singapore LTD is essentially a standard corporation, managed by directors on behalf of shareholders, with a separate fiscal personality.
To register an LTD, you will first need to reserve a name. This is done directly with ACRA, Singapore’s business registry, via their website.
Once the name is approved, the registration forms can be filed immediately, also with ACRA, also via their website. Do note that non-residents must use a registration service to file the registration forms. Non-residents must also hire the services of a local director (often referred to as a nominee director). This is something to take into consideration as it will often add thousands of SGD in annual fees, and will require you to share your company books with that person.
In most cases, ACRA will approve the application within a day or two, and will send you your company documents in electronic form. You can then go ahead and open business bank accounts with most of the local banks (in some cases remotely), and payment processing accounts. I have written a guide detailing how banking works in Singapore, you can read it here. Do note that services such as Stripe and PayPal charge significantly higher fees in Singapore than they do in Europe and the US. If your business processes significant volume, it can make sense to use a payment processing subsidiary.
A Singapore LTD will be liable to tax on its profits, at the flat rate of 17%. Rebates are available for new companies, and long-running companies, in some cases bringing the effective rate to as low as zero. Do note that while Singapore is a territorial taxation country, it does not automatically exclude foreign sourced income. These conditions must be met:
a. “Subject to tax” condition;
b. “Foreign headline tax rate of at least 15%” condition; and
c. “Beneficial tax exemption” condition.
The above makes it impractical, and in many cases impossible, to run a Singapore LTD tax-free. An exception is if the Singapore LTD is non-resident in Singapore, and instead resident in a country that does not tax foreign sourced income.
Singapore LTDs are required to file an annual report with ACRA, an Estimate of Chargeable Income with IRAS (Singapore’s tax authorities) as well as a corporation tax return and financial statements. Companies with assets worth 10 million SGD or more and revenue of 10 million SGD or more will have to have their financial statements audited. Businesses not meeting this threshold are exempt from the audit requirement.
