Singapore is built on its ability to harness globalisation and is known for being business friendly. But doing business in this jurisdiction is not without its challenges, so having local experts to help is crucial.
The World Bank's Doing Business 2020 report ranks Singapore second in the world for 'ease of doing business', thanks to its many assets which are essential in the knowledge economy. In TMF Group's Global Business Complexity Index 2021, Singapore is ranked as one of the least complex jurisdictions in Asia in terms of its business practices. Competitive tax rates and a strategic location make it a preferred destination for businesses looking to expand in the Asia Pacific region.
However, doing business in Singapore is not without challenges, as demand from global businesses is providing tough competition, increasing business costs and is also squeezing the labour market.
Starting a business
Starting a business in Singapore is relatively easy but keeping up with rules and regulations, especially regulatory changes, can be difficult for many new businesses - particularly those entering the market from abroad.
New businesses must register online with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+, where a name search can be conducted and filing for the company incorporation can be completed. A Singpass ID and a CorpPass, used for carrying out government activities online, will be required in order to log into BizFile+.
The importance of company directors
Under the Singapore Companies Act, every company in Singapore is required to have at least one director who must be ordinarily resident in Singapore. Directors must be natural persons; corporate directors are not allowed. Directors owe fiduciary duties to the company and it is the responsibility of the directors to ensure that statutory obligations of the company are complied with, for example the holding of an annual general meeting and filing of annual returns (including financial statements with ACRA, where required). In instances of serious breaches or non-compliance with regulatory requirements, local authorities may impose monetary penalties and, in severe cases, take action against the officers (ie, the directors and secretary) of the company.
Complying with the Common Reporting Standard
Singapore has committed to implementing the Common Reporting Standard (CRS) and the first exchange took place in September 2018. Under CRS, new entities will be classified for CRS purposes. A Singapore financial institution (SGFI) that is treated as a reporting SGFI is required to register for CRS with the Inland Revenue Authority of Singapore (IRAS), perform due diligence on all financial accounts that it maintains and report all reportable accounts that it maintains or file a nil return (if it does not maintain any reportable accounts) with the IRAS.
Opening a corporate bank account
With the implementation of global information exchange regulations, such as the Foreign Account Tax Compliance Act (FATCA) and CRS, companies that set up a bank account in Singapore can expect stricter compliance checks from banks, such as 'Know Your Customer' requirements. They will be required to provide information regarding company shareholders and ultimate beneficial owners, among others, depending on their CRS classifications.
Paying taxes
Singapore has a territorial tax system and some form of taxes are administered by the IRAS. Companies will need to register for a CorpPass to access the IRAS portal in order to pay taxes. Companies seeking to get a Singapore tax residency certificate may be required to pass the 'management and substance' test imposed by the IRAS.
Obtaining work passes
Non-nationals who wish to reside and work in Singapore will need a valid working pass sponsored by the employing company. Labour legislations imposed by the Ministry of Manpower have made it more difficult in recent years to obtain a working pass. All applications are assessed on a case-by-case basis. Preliminary assessment is based on the individual's academic qualifications, salary package, relevant work experience and suitability for the job, along with the sector the prospective employer operates within.
High operating costs
The cost of opening and running a business in Singapore can be relatively high compared to other Southeast Asian countries. The strong Singaporean currency makes paying employees locally more expensive. Limited land supplies also mean that rental costs for offices or retail spaces can be twice as high as in neighbouring Asian countries.
Labour shortage
While Singapore is well known for having the " world's best professional workforce", the government's strict employment limits on foreign workers can make it difficult to bring in manpower from other countries.
Trading across borders
Singapore has historically acted as a global trading centre and is one of the most competitive regions in the world for trading across borders when it comes to cost. Businesses in Singapore can benefit from double taxation agreements that Singapore has with other countries. However, it is important to note that certain goods are restricted from being imported into Singapore, and require approval or a special licence from the relevant government agencies. Businesses are also required to obtain an import permit online and pay the duty or goods and services tax due at the time of importation.
Culture
Singapore is a multi-racial society comprising Chinese, Malay, Indian and Eurasian communities. There are four official languages: English, Mandarin, Malay, and Tamil; with English being the widely spoken language for business and administration purposes.
TMF Group
We have the local knowledge to help you navigate complexity, wherever you operate. Whether you want to set up in Singapore or are looking to streamline your existing Singapore operations, talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
