I would like to establish a business entity in Singapore. Where do I start?
You can choose to register any one of the following business set up:
1. Sole proprietor or a partnership
2. Limited liability partnership
3. Limited liability company
4. Branch of foreign company
A limited liability company is the most common form of business entity in Singapore. Registration of all of the above business entities can be done online at the BizFile website of the Accounting and Corporate Regulatory Authority (ACRA).
How do I go about setting up a limited liability company?
You must submit your proposed company name, personal particulars of the initial subscriber(s)/director(s) and the proposed business activities to ACRA together with the prescribed fee. Once the company name is approved, you can then file the requisite information with ACRA.
An e-mail notification by ACRA will confirm that the company has been incorporated. The company can commence business operation from this date. A hard copy of the Certificate of Incorporation can be obtained from ACRA at a fee.
What is the criteria required for incorporation of a limited liability company?
A limited liability company can be incorporated with a minimum of one director who must be a natural person ordinarily resident in Singapore. Resident in Singapore includes a Singapore citizen, permanent residents, dependant pass holders or work pass holders. All additional directors of the company can be foreign individuals.
Likewise, a limited liability company need to have at least one shareholder who may be an individual or a corporate entity. There is no restriction on foreign equity participation in the Singapore company.
In addition to a resident director, there must be one experienced company secretary who shall be a natural person resident in Singapore. A lone director in the company may not also act as the company secretary.
Every company must maintain a registered office in Singapore where correspondence may be sent.
What are the annual compliance requirements of a limited liability company?
Every company is required to appoint an auditor to report to its members the annual financial statements of the company. Dormant companies and small private exempt companies (EPCs) are exempted from the need to appoint an auditor.
Dormant companies are those without business transactions and EPCs are those with no more than twenty shareholders and none of the shareholders is a corporate entity. In addition, the EPCs should have an annual revenue of less than $5 million.
Notwithstanding that no audited accounts may be required for dormant companies and EPCs, these companies are still required to prepare their annual accounts in accordance with the Financial Reporting Standards (FRS) in compliance with the Companies Act.
A limited liability company must hold its first annual general meeting (AGM) within 18 months from the date of incorporation. Thereafter, the company must hold its subsequent AGM once in every calendar year and not more than 15 months from the last AGM. At each AGM, the directors are required to lay before the members the audited/unaudited financial statements for the preceding financial year that gives a true and fair view of the affairs of the company.
A private company can dispense with the requirement to hold an AGM but must ensure that the same documents are made available to members through written resolutions.
Every company must file its Annual Return and/or audited/unaudited accounts with ACRA within one month of the date of AGM.
What is the requirement of a company with regards to preparation of its accounts?
All companies incorporated in Singapore are required to maintain books of accounts that sufficiently explains the business transactions and financial position of the company.
The accounting records must be kept at the registered office of the company or any other place the directors think fit. If the accounting books are maintained outside Singapore, sufficient records must be maintained in Singapore to facilitate the preparation and/or audit of its financial statements that reflect accurately the financial position of the company.
Generally, most businesses will have to maintain the following accounting records: monthly bank statements and bank-in-slips with proper narration of payments received, invoices file in running order, suppliers’ invoices whether paid or unpaid, payment voucher file, petty cash file and a fixed assets register.
How often must accounts be prepared for submission to the authorities?
Accounts must be prepared on a twelve monthly basis for submission to the relevant authorities. The accounts must be prepared in accordance with FRS in compliance with the Companies Act. Every director of the company will be penalized in the event of non compliance.
The Companies Act requires every company, except for those exempted in accordance with the provisions of the Act, to appoint an auditor to report on the company’s financial statements. The auditors are to ascertain whether proper books of accounts are maintained to report on the true and fairness of the financial statements.
As a new set-up, there are very few business transactions and my company do not require the services of a full time accountant. Can we outsource our accounting functions ?
There are many professional firm that can perform the accounting and administration functions for your company. Depending on the amount of financial transactions, you can choose to have the accounts prepared on a monthly, quarterly, half-yearly or yearly basis. The professional firm will usually assist in finalizing the accounts based on FRS and submit same to the authorities on your behalf after obtaining your concurrence on the accounts prepared.
A good consultant will be able to advise you on tax planning opportunities available prior to finalizing the year end account.
Do we need to acquire an accounting software to do my accounts ?
The choice of whether to acquire an accounting software is up to the company. We would encourage the use of suitable accounting softwares which are relatively cheap in the market today. A simple and good accounting software for small businesses can be purchased for less than S$1,000.
What about Goods and Services Tax (GST) ? Do we need to register for GST ?
Yes if your annual turnover exceeds S$1 million in a year. Companies with annual turnover of less than S$1 million in a year can still opt to voluntarily register for GST provided that they remain registered for at least two years.
It may be beneficial for small businesses to register for GST as such businesses can then claim back the GST paid on their purchases, office rental, capital and other operating expenditures. However, the amount of GST claim must be substantial enough and outweigh the cost of additional administration work involved as GST registered companies are required to file their GST returns quarterly. Hefty penalties are imposed if the GST returns are not filed within the stipulated deadlines.
What is the corporate tax structure and tax rate in Singapore ?
Income of a company that is accrued in or derived from Singapore or received in Singapore from outside Singapore is subject to Singapore income tax. The existing corporate income tax rate is 18%.
The effective income tax rate is actually lower as the first S$300,000 of chargeable income is partially exempt from tax. A newly set up company can obtain exemption of up to the first S$100,000 of its chargeable income for the first three years of operation.
Foreign sourced dividend and foreign sourced service income received by a Singapore resident company is exempt from further Singapore income tax if such income is received from a foreign tax jurisdiction with a headline tax of at least 15% and such foreign sourced income has been subject to tax in the foreign tax jurisdiction.
When do my company need to file its annual income tax return?
The annual income tax return Form C is normaly issued by the Inland Revenue Authorities of Singapore (IRAS) in the first quarter of each calendar year. Companies are allowed up to the fourth quarter of the year to file its income tax return.
Notwithstanding the above, every company must submit an estimate of its chargeable income to IRAS within three months from its financial year end. This is to enable the IRAS to raise an advance assessment on the estimated tax payable by the company. The estimated tax must be paid within 30 days from the date of issue of the assessment unless the company applies to IRAS for payment by monthly instalments.
What if my company incurs a business loss during the year. Can such losses be carried over to the next financial year ?
Business losses and unutilized wear and tear allowances may be carried forward for offset against the future profits of the company provided that the shareholders and their shareholdings in the company remains substantially the same (ie. 50% or more) in the year of loss and the year where the loss are utilized for set off against the year when the profits are available.
Alternatively, the unutilized business loss and wear and tear allowance for the year may be used to set off against the profit of another company within the same group. The conditions for transfer of such business loss and wear and tear allowance is that the companies involved must belong to the same group, incorporated in Singapore and have the same financial year-end.
Under what circumstances do we require these services ?
Such are usually ad hoc engagements where the company requires an external consultant for a fixed period or engagement or on a project basis. It would include engaging a management consultant to assist in cash flow planning, financial planning for directors/shareholders, raising loans or facilities from financial institutions, budgeting and business forecasting, administration and payroll services, application of employment passes, etc.
As an independent consultant, we are able to take a fresh approach to your problems and offer you solutions accumulated through our years of experiences in similar industries. You do not need to commit to additional head count. In certain cases, you can even obtain financial assistance from the authorities to defray the cost of engagement of external independent consultants.
There are so many consultants in the market today. How do we decide which consultant we should work with ?
Choose an experienced and reputable consultant with a wide range of professional experiences. A good consultant must be able to advise on a broad scope of subject including matters involving company law, GST requirements, income tax planning opportunities, business forecast and cash flow planning. In short, the consultant must be able to value add to your business.
An experienced consultant takes a bird eye view on your business and offers a total business solution instead of one targeted at only a specific problem.
What are the professional cost involved in engagement of a consultant?
As in most professional services, the professional fees involved are based on time spent by the consultant on the engagement having regard to the degree of skills and expertise involved. Time cost for consultants can range from S$100 per hour for a junior consultant to S$500 per hour for a senior consultant.
In most instances, such fees are usually agreed upon prior to the commencement of the management engagement.
Does a company need to have their accounts audited annually ?
From 15 May 2003, private exempt companies with annual turnover of less than S$5 million in a financial year are no longer required to have their annual accounts audited. However, these companies are still required to prepare their accounts that comply with FRS.
In certain instances, the creditors, shareholders and/or bankers of the company may require that the accounts of the company be audited annually notwithstanding that the company may be exempt from audit under the law.
Apart from statutory audit, what other services would we need ?
Many companies tap on the expertise of the audit firm by engaging them to conduct internal audit assignment. Such impromptu engagement provide a check on the internal control system of the company. The experienced auditor will know where to target the common weaknesses of the company and offer solutions to tighten its internal control system.
It is also common to engage an auditor to do due diligence work on any merger and acquisition exercise. This provides a check on the correctness of financial statements prepared by the company that is being acquired.
How does a real estate agency relate with a consultant ?
In the course of setting up new businesses for foreign companies, we are sometimes approached to assist the company to identify suitable office locations as well as suitable accommodations for their expatriate personnel.
Our real estate team is familiar with the real estate market in Singapore and we can assist you to identify suitable premises at realistic market prices. Arrangements can be made to enable your expatriate personnel to view various locations before deciding on suitable premises.
What are the common terms and conditions of tenancy agreements in Singapore ?
Generally, the tenancy agreement is valid for at least a year or more with option to further renew for another one year period or more at a renewed rental to be mutually agreed between the landlord and the tenant. A two-month deposit together with the first month rental is usually called for by the landlord upon commencement of any tenancy.
Certain landlord may insist that the company has at least a minimum issued and paid up share capital before they are agreeable to sign the tenancy agreement. An expatriate individual must possess a valid employment pass in order to rent an apartment in Singapore.
What if we decide to acquire a property in Singapore instead of renting one ?
There is no restriction on foreigners owning commercial or industrial properties in Singapore.
In the case of residential properties, foreigners are only allowed to acquire non-landed properties such as high rise apartments and condominiums in residential projects of at least six storey high. Foreigners seeking to acquire landed properties must apply to the authorities for permission before they are allowed to acquire one.
Commercial, industrial or residential properties are available freehold or leashold.