SINGAPORE COMPANY FORMATION

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Singapore is vastly becoming a favorable business city. Enjoying brilliant business infrastructure, political stability and close economic relationships with many leading economies of the world. Now is the time for entrepreneurs worldwide to register their company in Singapore.

As of the 1st of January 2013, Singapore has implemented a corporate tax system (Single Tier corporate income tax system) whereas a Singapore Company’s stakeholders will not pay tax twice. In this respect the tax paid by the Company on its taxable income is the final tax and any dividends paid to the shareholders of the Company will be tax exempt.

To set up a company and start doing business in Singapore a company must be incorporated with the Accounting and Corporate Regulatory Authority (ACRA) Singapore. Most Singapore companies are registered as private limited liability companies. A private limited company in Singapore is a separate legal entity and shareholders are not liable for the company’s debts beyond the amount of share capital they have contributed (hence the term limited liability).

 

KEY BENEFITS

Singapore Company Formation and Its Advantages

  • Singapore companies are taxed at a lower rate than personal income. To encourage local entrepreneurship, the Singapore Government has confirmed a full tax exemption for newly incorporated companies;
  • Zero tax (0%) for new Singapore companies on the first S$ 100k annual profits for the first 3 years;
  • All companies are to enjoy 8.5% corporate rate tax profits up to S$300k and above that a flat 17%;
  • There are no dividend or capital gains taxes in Singapore;
  • The tax system within Singapore is to the point and stable;
  • There aren’t any restrictions for foreigners as shareholders or directors of a Singaporean company;
  • There is only a requirement for one director and shareholder in order to create a limited liability company;
  • In place is a concept of Territorial Taxation that allows foreign source trade profits to be unaffected by Singapore income tax as long as it is repatriated within Singapore;
  • Tax credits for foreign taxes paid are available within Singapore;
  • however they are subject to some conditions;
  • Exhaustive Double Tax Agreement Systems are in place with over 60 agreements signed and approved within other regions.
 

SINGAPORE TAXES

 

There are a number of reasons why investors choose Singapore to establish their operations. One of the biggest reasons why people do so is the fact that it’s very easy to setup as well as operate a business. Singapore’s tax regime is renowned for its great corporate as well as personal tax rates, favorable tax relief measures, no capital gains tax, one-tier tax system as well as impressive double tax treaties.

Singapore companies enjoy very attractive tax exemptions and incentives. Your company pays approximately 8.5% for the first $300,000 annual profits and 17% flat after that. There are no capital gains or withholding taxes on Singapore companies. Excellent tax benefits and business reputation of Singapore are the key reasons why entrepreneurs from around the world prefer to form a company in Singapore.

Income

Tax Rate Requirement

Corporate profits up to 100,000 SGD tax rate

0%

Corporate profits up to 300,000 SGD tax rate

8.5%

Corporate profits exceeding 300,000 tax rate

17%

Capital gains accrued by company tax rate

0%

Dividend distribution to shareholders tax rate

0%

Foreign-sourced income not brought into Singapore tax rate

0%

Foreign-sourced income brought into Singapore tax rate

0-17% depending on conditions

The particular tax incentives that are listed below will ensure that income tax rates for smaller companies are far less.

  • There is 0% taxation on S$100,000 taxable income: The first three tax years after which there has been an incorporation the corporate income tax rate is 0% just as long as the company meets the specific criteria; is incorporated within Singapore, is a tax residing within Singapore, doesn’t have more than 20 shareholders, at least one shareholder is an individual and holds at least 10% in shares;
  • 8.5% taxation on taxable income that doesn’t exceed S$300,000 – Each Singapore company is able to have a partial tax exemption that will factor to 8.5% taxation rate on taxable income up to the amount of S$300,000. Any taxable income that exceeds S$300,000 will be subject to a rate of 17%.

First 3 Years of Income Tax Filing

Taxable Income Amount (S$)

Taxation Rate (%)

>0 – 100,000

>0%

>100,001 – 300,000

>8.5%

>300,001 – 2,000,000

>17%

Following the First 3 Years of Income Tax Filing

Taxable Income Amount (S$)

Taxation Rate (%)

>0 – 300,000

>8.5%

>300,001 – 2,000,000

>17%

Below you will find the general tax exemptions and incentives that are available to Singapore resident companies. After these exemptions are applied to the taxable income of the company, the income tax rate for smaller companies will be far reduced.

No tax on S$100,000 taxable income- There will be 0% taxation on companies generating S$100,000 taxable income for the first three years as long as they meet the following conditions:

  • Is incorporated within Singapore;
  • Is a tax residing within Singapore;
  • Does not have any more than 20 shareholders, and at least one is an individual that holds over 10% of shares;
  • Taxable Income up to S$300,000 is subject to 8.5% taxation: Singapore resident companies have the ability to qualify for a partial tax exemption that equals out to 8.5% on taxable income up to S$300,000 per year. Any income that exceeds S$300,000 will be charged at the normal corporate taxation rate of 17%.

Singapore companies taxation on foreign income: Full tax exemption is granted on the first S$100,000 of chargeable Income for qualifying new companies for the first three years of assessment consecutively;

Corporation Tax: The rate of corporate income tax within Singapore is 17%;

Income Tax: Territorial taxation principals are in place within Singapore, so only income that is derived within the region is subject to such taxation. Any proceeds that come from sales outside of Singapore that have been received within Singapore are taxable. It’s required that prior approval is obtained by the Singapore Inland Revenue Authority before the profits can be claimed as non-Singapore income and be exempt from such taxation;

Taxation differences between incomes from other sources: Income that is considered to be foreign source is not taxable as long as it is not remitted within Singapore. This income is not classified as Singapore income if

  • There is a contract concluded outside of Singapore;
  • The services are rendered outside the region of Singapore;
  • The capital is employed outside the region of Singapore;
  • The title of the goods is passed outside of the region of Singapore;
  • The receipt of sales proceeds are outside the region of Singapore;
  • The payment of expenses accumulated within the provision of services or delivery of the goods is completed outside of Singapore;
  • The place where the goods are stored and maintained is outside the region of Singapore.

Capital Gain Tax or CGT: There is currently no capital gains taxation within Singapore;

Stamp Duty: Transactions that have securities are subject to 0.2% stamp duty. Exemption for stamp duty is set in place for offshore loan agreements and some other types of documents;

Interest: Any interest that is received will be subject to income tax. There is no separate tax treatment for foreign or Singapore source interest income. Any interest that is paid to residents outside of Singapore is subject to a withholding tax of 15% aside from interest that is regulated under the Double Tax Treaty;

Royalties: Any type of royalty income that is received will be subject to income tax
Any royalty income that is of a foreign source is exempt from income tax unless that royalty income is remitted to Singapore. Royalty that has been paid to non-residents of Singapore will be taxed at 15% unless it is regulated by a Double Tax Treaty;

Dividends: Any Foreign dividend income will not be subject to income tax.

As long as the control as well as management of a company takes place within Singapore, the company is considered to be a resident of the region. The phrase “control and management” does not have a specific definition by authorities, but it is generally accepted that it refers to the policy level decision making at the level of Board of Directors rather than the normal decision making as well as operations.

More often than not a company is considered to be a non-resident of Singapore as long as the directors manage and control the business as well as hold board meetings in a location outside of Singapore. This maintains to be true even if the lower level type of operations is carried out within Singapore. The residence of companies might change from one year to the next depending upon circumstances. A Singapore branch of a foreign company is typically not treated as a tax resident within Singapore as the control and management is done with a company overseas.

For resident companies, the basis of taxation is typically the same except when particular benefits are available to resident companies. These will include:

  • The Singapore resident company is eligible for the income tax exemption scheme that is available for new companies;
  • The Singapore resident company can take advantage of the income tax exemption o foreign-sourced dividends, foreign branch profits as well as foreign sourced service income that is under section 13(8) of the Income Tax Act;
  • The Singapore resident company is able to receive benefits under the Avoidance of Double Taxation Agreements or DTA that Singapore has concluded with the treaty countries.

Annual return submission: Each private company within Singapore is required to file an Annual Return with the ACRA that has all information pertaining to the company as well as its financial accounts reports.

Submission of Income Tax Returns: The deadline requirement for this submission is October 31st.

Audit: Companies that have a yearly turnover that exceeds S$5 million annual audited accounts must file and must also have their audit conducted by a qualified Singaporean accountant. Each exempt company is not required to have an audit and their annual accounts are able to be filed without an audit being conducted. This requires the following: shareholders are not to exceed 20, members of the company should be individuals rather than a corporation, and the yearly turnover should be under S $5 million.

 

SINGAPORE COMPANY CORPORATE AND LEGAL FEATURES

COMPANY NAME

A name must be approved by the Singapore company formation authority before they can be used.

DIRECTOR

Minimum of one individual director required who has to be resident of Singapore (being one of the following: Singapore citizen, Singapore Permanent Resident or Singapore Employment Pass/ EntrePass / Dependant Pass holder).

COMPANY SECRETARY

Singapore Resident Company Secretary is required. It has to be noted that in case of a sole director/shareholder, the same person cannot act as the company secretary. The company secretary must be a natural person who is normally resident in Singapore.

SHAREHOLDER

Minimum of 1 shareholder and maximum 50 shareholders. A director and shareholder can be the same or a different person. The shareholder can be individual or corporate entity.100% local or foreign shareholding is allowed.

REGISTERED ADDRESS

The registered address must be a physical address (can be either a residential or commercial address) and cannot be a PO Box.

PAID UP CAPITAL

Minimum paid-up capital is S$1 only. Paid up capital (in other words the share capital) can be increased any time after the Singapore company formation. There is no concept of Authorized capital for Singapore companies.

CONFIDENTIALITY

Anonymity as well as privacy is of high importance. There is no disclosure of the beneficial ownership to any authorities.