Company Formation and Management Services
Singapore enjoys a good international reputation and is an attractive jurisdiction from which to base international business activities and as a major wealth management centre. The 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.
The current rate of Singapore Income Tax (SIT) is 17% – one of the lowest rates in the region – but once tax exemptions and incentives are applied to the taxable income, the effective tax rate for resident companies is reduced significantly. 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.
In addition, there is no capital gains tax and Singapore operates a single-tier tax regime such that once the income has been taxed at the corporate level, dividends can be distributed to shareholders free of tax. Further tax concessions are also available for qualifying companies under various economic incentive programmes in the manufacturing, service, trade, investments and finance sectors.
All companies in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA) and abide by the Companies Act, Chapter 50. There are five different entities to choose from – sole proprietorship, partnership, limited liability company, limited liability partnership and limited partnership – the most common and flexible option is to set up a Singapore limited liability company.
If the number of shareholders exceeds 50, it is deemed to be a public company. If the company has more than 20 but fewer than 50 shareholders, it is deemed to be a private company. Finally, if the number of shareholders is 20 or less – with no corporation holding any beneficial interest in the company’s shares – and the company has a turnover of less than S$5 million, it is deemed to be an Exempt Private Company (EPC).
An EPC is exempt from tax from the first three years after incorporation for the first $100,000 of chargeable profits. The next $200,000 profit is 50% exempt from SIT, while any profits exceeding $300,000 are taxed at 17%.
Capital gains are not subject to tax. 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 following conditions are satisfied:
- The country from which the dividend is paid has a headline tax rate of 15% or higher;
- 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). It has one of the most comprehensive networks in the world and the list is still growing.
Singapore companies are recommended for the following purposes:
- Active Business Companies – Singapore enjoys a number of advantages for companies carrying on trading operations. Singapore has a very friendly tax regime, very few restrictions on setting up a company and is a natural entry basis for anyone who wishes to trade with other ASEAN countries and China. Singapore has an excellent banking, legal and regulatory infrastructure as well as a highly educated and skilled workforce that speaks excellent English as well as multiple Asian languages. Singapore’s system of taxation is territorial and remittance-based so that business income is generally not subject to Singapore Income Tax (SIT) if it is not derived in or remitted to Singapore. Singapore therefore offers a very efficient platform for companies with global activities.
- Service Companies – Service companies have traditionally been based in offshore jurisdictions such as the British Virgin Islands but are coming under increasing pressure from their clients to be based onshore with onshore banking. Singapore is an increasingly popular jurisdiction for incorporations of new service companies. Care should be taken, however, when services are not provided in Singapore. Clients often assume that income resulting from services provided overseas can be considered as foreign-source income and therefore not taxable in Singapore. However, the position of the Inland Revenue Authority of Singapore (IRAS) is that income from the provision of services has its source in Singapore unless those services are provided through a permanent establishment (PE) outside Singapore. Nevertheless, given the generous tax incentives available in Singapore, corporation tax for service companies is generally very low.
- Holding Companies – Singapore has signed over 80 double tax treaties worldwide. Under these treaties, Singapore residents can benefit from reduced rates of withholding tax on the repatriation of profits from cross border investments. The absence of tax on capital gains and the lack of withholding tax on dividend payments to non-residents make Singapore an excellent location to register a holding company for cross border investments.
Foreign companies that wish to establish a presence in Singapore have the option of setting up a branch office, a subsidiary or a representative office in Singapore.
Once incorporated, Sovereign provides a domiciliary service, which includes the provision of company secretarial and registered office services. A Singapore company requires a local registered office where all official documents, notices and court papers can be sent and where all statutory records are kept for the company. The address must be a physical location, not just a post office box, 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.
As Sovereign acts as the company secretary and all statutory records of the company are kept in our office, our office address is typically used as the registered address. Our registered address service consists of:
- Providing our address as your company’s registered address with the Company Registrar;
- Receiving incoming mail for your company and forwarding it to you as per your instructions.
A Singapore company is also required to appoint a qualified company secretary who is able to maintain the statutory registers, remind you of statutory deadlines and assist you with statutory compliance in respect of meetings, resolutions and submissions. Sovereign can help you to prepare and file the annual return with Companies Registrar and annual tax return with Inland Revenue Authority of Singapore (IRAS).
Full management services from our own licensed corporate directors are also available and highly advisable in most cases.
Note: Ancillary services
In addition to providing incorporation, domiciliary and management (directorship) services, a range of ancillary services at competitive prices is available on request. These services include, but are not limited to: provision of dedicated telephone lines; office and personnel assistance; designated staff members (temporary or permanent availability); assistance with office relocation, introduction to real estate agents, government agencies and other third parties.