FAQ on business set up
Why does it matter?
There are a number of alternative structures through which business can be conducted. Choosing the most appropriate structure for your business requires careful thought. Below we overview some of the most commonly asked questions and key matters to be considered.
What are the most common options?
The operating structure determines a business’s legal, financial reporting, auditing and taxation status. To assist with the future growth and development of the business while meeting the various needs of its owner(s), the operating structure requires careful selection to avoid the need to amend it at a later date that may be difficult and expensive to implement due to legal costs and taxation implications.
What are the major differences between these business entities?
Self-employment / Sole Proprietor, Partnership (General and limited partnership), Company.
What are the factors I should consider when deciding which entity is best suited?
|Sole – Proprietorship||Partnership||Limited Partnership (LP)||Limited Liability Partnership (LLP)||Company|
|Legislation||Business Registration Act||Partnership Act||Limited Partnership Act||Limited Partnership Act||Companies Act|
|Definition||A business owned by one person||An association of two or more persons carrying on business in common with a view to profit||A partnership consisting of two or more persons, with at least one general partner and one limited partner||A partnership where the individual partner’s own liability is generally limited||A business form which is a legal entity separate and distinct from its shareholders and directors|
|Owned by||One person / corporation (can be local, foreigner, company)||Generally between 2 and 20 partners. A partnership of more than 20 partners must incorporate as a company under the Companies Act, Chapter 50 (except for professional partnerships) (can be local, foreigner, company||At least 2 partners; one general partner and one limited partner. No maximum limit. (can be local, foreigner, company||At least 2 partners, no maximum limit. (can be local, foreigner, company, another LLP but must have one local manager)||Exempt Private Company –20 members or less and no corporation holds beneficial interest in the company’s shares Private Company – 50 members or less Public Company – can have more than 50 members (can be local, foreigner, company)|
|Legal Status||Not a separate legal entity Owner has unlimited liability Can sue or be sued in individual’s own name Can also be sued in business name Can own property in individual’s name Owner personally liable for debts and losses of business||Not a separate legal entity Partners have unlimited liability Can sue or be sued in firm’s name Cannot own property in firm’s name Partners personally liable for partnership’s debts and losses incurred by other partners||Not a separate legal entity
General partner has unlimited liability
Limited partner has limited liability
Can probably sue or be sued in firm’s name
Cannot own property in firm’s name
General partner personally liable for debts and losses of the LP
Limited partner not personally liable for the debts or obligations of LP beyond amount of his agreed contribution
|A separate legal entity from its partners Partners have limited liability Can sue or be sued in LLP’s name Can own property in LLP’s name Partners personally liable for debts and losses resulting from their own wrongful actions Partners not personally liable for debts and losses of LLP incurred by other partners||A separate legal entity from its members and directors Members have limited liability Can sue or be sued in company’s name Can own property in company’s name Members not personally liable for debts and losses of company|
|Registration Requirements||Age 18 years or above. Singapore citizen/ Singapore permanent resident/ EmploymentPass/ DependentPass holder. If owner not resident in Singapore, he must appoint a local manager who is ordinarily resident in Singapore Self-employed persons must top up their Medisave account with the CPF Board before they register a new business name, become a registrant of an existing business name, or renew their business name registration Undischarged bankrupts cannot manage business without court or Official Assignee’s approval||Age 18 years or above. Singapore citizen/ Singapore permanent resident/ EmploymentPass/ DependentPass holder. If owners not resident in Singapore, they must appoint a local manager who is ordinarily resident in Singapore Self-employed persons must top up their Medisave account with the CPF Board before they register a new business name, become a registrant of an existing business name, or renew their business name registration Undischarged bankrupts cannot manage business without court or Official Assignee’s approval||At least one general partner and limited partner. Both can be individuals (at least 18 years old) or body corporate (company or LLP). If all general partners are ordinarily resident outside Singapore, they must appoint a local manager who is ordinarily resident in Singapore Self-employed persons must top up their Medisave account with the CPF Board before they register as a partner of a new LP, become a registered partner of an existing LP, or renew their LP registration Undischarged bankrupts cannot manage business without court or Official Assignee’s approval||At least two partners, who can be individuals (at least 18 years old) or body corporate (company or LLP) At least one manager ordinarily resident in Singapore and at least 18 years old Undischarged bankrupts cannot manage business without court or Official Assignee’s approval||At least one shareholder At least one director ordinarily resident in Singapore, at least 18 years old If a foreigner wishes to act as a local director of the company, he can apply for an EntrePass from the Ministry of Manpower Undischarged bankrupts cannot be a director and cannot manage a company without court or Official Assignee’s approval|
|Formalities and Expenses||Quick and easy to set up Easy to administer and manage Registration cost is minimal Less administrative duties to adhere to Must renew registration annually||Quick and easy to set up Easy to administer and manage Registration cost is minimal Less administrative duties to adhere to Must renew registration annually||Quick and easy to set up Easy to administer and manage Registration cost is minimal Less administrative duties to adhere to Must renew registration annually||Quick and easy to set up Fewer formalities and procedures to comply with than a company Registration cost is relatively minimal and fewer regulatory duties to adhere to than a company No statutory requirement for general meetings, directors, company secretary, share allotments, etc. Only an annual declaration of solvency must be lodged by one of the managers stating whether the LLP is able or not able to pay its debts during the normal course of business One time registration||More costly to set up and maintain More formalities and procedures to comply with Must appoint a company secretary within 6 months of incorporation Must appoint an auditor within 3 months after incorporation unless the company is exempt from audit requirements Annual Returns must be filed Statutory requirements for general meetings, directors, company secretary, share allotments, etc.|
|Statutory Audit Requirement||No requirement for audited report||No requirement for audited report||No requirement for audited report||No requirement for audited report but strongly encouraged||Need audited reports but exemption for private (exempt) companies with turnover of less than S$5 million|
|Filing of financial statements||None||None||None||Annual Declaration of Solvency or Insolvency to be filed by local manager||Yes but exception exists - do not have to file if company is private exempt company|
|Taxes||Profits taxed at owner’s personal income tax rates||Profits taxed at partners’ personal income tax rates||Profits taxed at partners' personal income tax rates (if individual)/ corporate tax rate (if corporation)||Profits taxed at partners’ personal income tax rates (if individual)/ corporate tax rate (if corporation)||Profits taxed at corporate tax rates|
|Any set-up tax exemption (i.e. tax benefit)||No||No||No||No||Yes, for newly set up companies for first 3 years of incorporation The corporate income tax rate is 0% on the first S$100,000 taxable income for each of the first three tax filing years, except for… . 8.5% tax on taxable income of upto S$300K The taxable income above S$300,000 will be charged at tax rate of 17% (conditions apply)|
|Continuity in Law||Exists as long as the owner is alive and desires to continue the business||Exists subject to partnership agreement||Exists subject to partnership agreement If there is no limited partner, the LP registration will be suspended and general partners are deemed registered under the Business Registration Act Once a new limited partner is appointed, the registration of the LP will be restored to “live” and general partners’ registration under the Business Registration Act ceases||The LLP has perpetual succession until wound up or struck off||A company has perpetual succession until wound up or struck off|
|Conversion allowed?||Can be converted to a Company||Can be converted to a Company or LLP||If no limited partner, the LP registration will be suspended and the general partners will be deemed to be registered as a sole-proprietorship or partnership under the Business Registration Act, Cap 32.||New registration of LLP||A company can convert “downwards” to become an LLP|
|Closing the Business||Fast and easier procedure By Owner – Cessation of business Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct||Fast and easier procedure By the partners – Cessation of business or dissolution of partnership Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct||By general partner – cessation of business or dissolution of LP Registrar can cancel registration if not renewed or where Registrar is satisfied LP is defunct|
What are the factors I should consider when deciding which entity is best suited to conduct my business activity through
What are the main advantages and disadvantages of these structures?
Self-employment / Sole Proprietor
|Advantages||Disadvantages||Income tax rate|
|Advantages||Disadvantages||Income tax rate|
|Advantages||Disadvantages||Income tax rate|
||First Three Years of Income Tax Filings
FAQ on company set up
What are the general requirements for company set up?
What basic information needed for company set up?
How long does it take to incorporate a company?
The timetable for the incorporation process; under normal circumstances are set out as follows -
|Application for approval and reservation of name with the Accounting and Corporate Regulatory Authority (ACRA)||Usually 1 working day (provided no further referral / approval is required from other government bodies and all information pertaining to the proposed company is given to us to complete the incorporation procedure)|
|Preparation and execution of the incorporation documents in Singapore (if all the directors / subscribers are available in Singapore to sign the documents)||2 to 3 working days|
The time frame for incorporation (with local director/ shareholder) is usually around 3 working days (1 day for name reservation and 2 days for incorporation, subject to all requested information made available to AM Corporate Services beforehand and receipt of payment on our invoice). However, if the documents have to be sent overseas for execution by the directors / subscribers, the time taken will depend on when these documents can be returned to us for submission to ACRA. Please note that with effect from 13 January 2003 the ACRA does not issue hardcopy of Form 9 (Certificate of Incorporation). Only an E-Notice confirming incorporation will be transmitted to the applicant’s email address. If you require a hardcopy of certificate of confirmation of incorporation from ACRA, this can be purchased from ACRA at S$50.00.
Are there any special conditions for a single director and shareholder company?
None. Director and shareholder can be same person. The only restriction is that you have to appoint a qualified company secretary.
Can I convert my sole-proprietorship to a one-director company?
Yes, the owner of the sole proprietorship business can be the sole director and the shareholder of the company. You will need to appoint a qualified company secretary.
How to open corporate bank account after incorporation?
Generally most banks have the following requirements for opening a corporate bank account for Singapore companies:
Documents required for opening of corporate bank account
Document Signing Requirements
Most banks will require the authorised signatories and majority of the directors to be physically present in Singapore for the signing of forms and documents for the opening of the corporate bank account. However, some banks will accept the signing of these forms and documents at one of their overseas branches or in front of a Notary Public or before a Singapore Embassy in the country where you reside.
What important issues I need to consider after setting up the Company?
How do I engage your services for setting up a company in Singapore?
FAQ on immigration matters (for foreigners setting up companies in Singapore)
What are the types of pass available and what are they?
Singapore's Work Pass framework are as follows:-
Unskilled or semi-skilled foreign workers pursing employment in Singapore are required to obtain Work Permits in accordance with the Employment of Foreign Workers Act. The Work Permit (WP) is for foreigners who:- Want to work in Singapore; and • Earn a monthly basic salary of not more than $2,000. • Who are from an approved source country (depending on the sector which the worker is going to be employed in). A prospective employer must first apply to the Controller of Work Passes for a WP before employing a foreign worker. All foreign workers must be at least 18 years old at the time of the WP application.
The S Pass was created to bridge the gap between the Employment Pass and the Work Permit. S pass applications are evaluated on a points system. The evaluation system contains four main categories, namely, salary, educational qualifications, number of years of working experience and job type. Salary is a critically important factor for S pass qualification: a foreign national's monthly wage cannot be below S$2,200. S pass holders who earn more than S$4,000 may apply for dependant pass for their family members (spouse and unmarried children below 21 years).
Foreign highly skilled professionals, managers, executives, specialists or entrepreneurs who wish to work in Singapore need an Employment Pass to commence employment. The subtypes of employment passes (P1, P2 and Q1) are defined by the salary level, skills and qualifications of the foreign nationals. Singapore's Work Pass Framework sets apart P1, P2 and Q1 employment passes. The P Pass is intended for foreign nationals who hold acceptable degrees, professional qualifications or specialist skills and are seeking professional, administrative, executive or managerial jobs. A P1 Pass is issued if the applicant's monthly base salary is more than S$8,000 and a P2 pass is issued if the applicant's monthly base salary is S$4,500 to S$8,000. A Q1 Pass is issued to foreign nationals whose monthly basic salary is more than S$3,000 and who possess acceptable degrees, professional qualifications or specialist skills. The employment pass is tied to specific employer. Any change of employer requires a fresh application. The processing time for employment pass application takes about 5 weeks. Processing time may take longer during peak periods or when additional information is required. It has to be renewed upon the expiry of the approved period. It is important to note that Singapore law obliges the majority of pass holders of passes that no longer meet eligibility criteria to formally cancel them by surrendering the passes to the appropriate authority.
The Entrepreneur Pass (EntrePass) is a form of work pass for owners of newly incorporated Singapore companies (company must not be older than 6 months) or for a company to be incorporated in Singapore and is for those who wish to relocate to Singapore to operate their new business.
Validity: An EntrePass is initially issued for 1 year and is renewable after one year as long as the business remains viable.
Eligibility: Business owners who wish to incorporate a new company or have recently incorporated a company that is less than six months old. The business must fulfill one of the “innovativeness” conditions that were introduced in September 2013.
Quota System: There is no official quota system for EntrePass. Permanent Residence Eligibility: Entrepreneur Pass holders are eligible to apply for PR in due course.
Personalised Employment Pass (PEP)
This is a relatively new form of pass and foreigners who wish to work in Singapore may be eligible for the PEP. This is a special type of Employment Pass issued to top tier individuals based on their merits. This ensures that the PEP remains a premium pass for top-tier foreign talent and is in line with recent moves to raise the quality of Employment Pass holders. The PEP is independent of any employer; and hence the PEP pass holder can switch employers without affecting the status of the pass, and is also entitled to stay in Singapore for up to 6 months in between jobs and evaluate opportunities. With effect of 1 December 2012, the PEP is issued for a period of 3 years (previously 5 years), and is not renewable. The qualifying salary threshold has also been increased from $34,000 per annum to S$144,000 per annum. Availability of PEP to P1 Pass holders who earn a fixed monthly salary of at least $12,000 and overseas-based foreign professionals whose last drawn fixed monthly salary was at least $18,000. New PEP holders can bring in their parents, spouses and children The processing time for PEP application takes about 5 weeks. Processing time may take longer during peak periods or when additional information is required. Maximum unemployment period for PEP holder cannot exceed six continuous months. The PEP holder is not allowed to start his/her own business or engage in any entrepreneurial activities.
What is EntrepreneurPass?
The EntrePass is a form of Employment Pass for foreign entrepreneurs who wish to start business and relocate to Singapore. Application for EntrePass is usually done prior to incorporating a company in Singapore. It can also be done within 6 months of incorporation. Once the pass is approved, the company must be incorporated within 30 days of the in-principle approval letter. If the EntrePass application is rejected, you are not obliged to set up a Singapore company. The EntrePass application is vetted by both Ministry of Manpower and Spring Singapore. The processing of EntrePass takes about 6 to 8 weeks. Approval is granted for one and can be renewed upon expiry having met the qualifying criteria. The applicant must be sponsored by a well-established Singapore registered company or alternatively the applicant can furnish a Banker’s guarantee of S$3,000 once the application is approved.
A comprehensive business plan of not more than 10 pages detailing the following must be submitted with the application:-
Business idea – a short, self-explanatory summary covering the proposed business concept;
Product/service – the product and service offering;
Market analysis – the target market in terms of key customers, competition and market growth potential;
Market plan – how the product/service will be marketed or distributed;
Operation plan – resources needed to run the business;
Financial projections – projected sales and net profit before tax for three years and breakeven point;
Management team – key drivers of the business; and
Supporting documents – e.g. licensing agreements, product certifications, endorsements etc.
Your EntrePass allows you to bring your immediate family (spouse and unmarried children below 21 years) to Singapore to live with you only if you are granted P1 or P2 status
Additional requirements for EntrePass
With effect from September 2013, the new revisions to EntrePass applications requires applicants to fulfill the following conditions in additional to the already existing requirements:-
The applicant must either:
Receive funding or investment (strictly monetary funding of minimum of S$100,000) from a recognised third-party venture capitalist or business angel who is accredited by a Singapore government agency; Hold an Intellectual Property (IP) recognised by an approved national IP institution; or Have research collaboration with a research institution recognised by Agency for Science, Technology and Research (A*STAR), or institutes of higher learning in Singapore; or Is an incubate at a recognised incubator supported by SPRING Singapore or National Research Foundation, Media Development Authority etc.
After six months of receiving the EntrePass, the applicant must submit all of the following to Ministry of Manpower via online submission:
Latest Company Profile from ACRA; Tenancy contract / proof of operating address; and Employees’ CPF statements.
The new revisions make it much harder to qualify for the EntrePass and will be granted to only those who meet the above requirements. The current criteria for renewal applications will also be amended in favour of a more progressive framework. The intention is to ensure that EntrePass holders are actively contributing to Singapore and is intended to raise the quality bar for foreign entrepreneurs who wish to set up businesses in Singapore.
What are the major criteria for obtaining EntrepreneurPass?
For an EntrePass the educational qualification is of little consideration while the applicant is assessed on the credibility of his proposed Business Plan and his business experience. Key factors are as follows:
Thus, a well prepared (which includes the above factors) Business Plan and the accompanying testimonials will play a significant role when officials determine the outcome of the application. There is no stipulation on the minimum capital injections or minimum turnover. No local Director or Shareholder is required to form your Company in Singapore, if your application is successful.
How to renew EntrepreneurPass?
The EntrePass renewal form will be sent to the employer about three months before the pass expires. Please complete the renewal form and mail it to MOM Work Pass Division at least two months before the pass expires.
Documents required for renewal of Pass
These documents are required for EntrePass renewal application:
The renewal application will be rejected if the above documents are not submitted to MOM.
The following optional documents can be submitted in support of the renewal application: Corporate bank statements for the past three months; Referral letters from customers; and Recent invoices issued/contracts awarded.
To qualify for renewal, the business venture has to be conducted based on the original declared business plans. It is a requirement to inform MOM if there are any changes that deviate from the original declared business plans. For all successful EntrePass applicants who submitted their applications from 1 September 2013 onwards, their renewals will be assessed based on the following criteria:
Progressive Renewal Criteria Framework
|No. of years after award of EntrePass||No. of local jobs created*||Minimum Total** Business Spending||Employment Pass (EP) Status|
Each newly issued and renewed EntrePass will be valid for a period of up to one year.
* Local jobs created refers to full-time employees (Singaporeans and Permanent Residents) employed by the company under a contract of service who have worked for at least three calendar months, and are receiving their monthly salary on time as well as CPF contributions similar to the industry norm. Only local workers paid at the prevailing salary threshold equivalent for full-time employment (existing salary equivalent for full-time employment is $1,000) would be considered full-time employees.
** Total Business Spending (TBS) = [Total Operating Expenses – (Royalties/Franchise Fees/Know How Fees to Overseas Companies + Work Subcontracted to Overseas Companies + Remuneration to Applicant & Immediate Family)]
Note: For existing EntrePass holders who applied for EntrePass before 1 September 2013, they must meet the progressive renewal criteria from 1September 2014 onwards. For more details,
It will take at least five weeks to process a renewal application. Processing time might take slightly longer during peak periods or when additional information is required from the various economic agencies. The outcome of the application will be sent to the EntrePass holder.
What are the major criteria for obtaining EmploymentPass?
The Employment Pass (“EP”) comes with a valid stay visa for up to two years. The immediate family of the applicant will also be provided with a Dependent Pass to live, work and study in Singapore.
The Employment Pass is approved using the following criteria, based on a point system: Declared Salary of the applicant Age, Position, Educational Qualifications, Skills, Work Experience, State of the company.
The outcome of the application under EP is obtained within a shorter period of time and the probability for approval is higher compared to an Entrepass application. However, while incorporating a company a local Nominee Director is a prerequisite until the application is approved.
Can a spouse on dependent pass work in Singapore?
Dependant pass holders do not have an automatic right to work in Singapore. They must apply for a work pass independently. The employing company is required to submit the Letter of Consent application form to the Work Pass Division of the Ministry of Manpower.
Can you guarantee the approval of work passes?
We do not give any guarantees. All approvals or rejection are made by government authorities based on factors such as listed above and we don't make any false promises. However, if the application has all the above discussed factors, the chances of approval are excellent.
Can you assist with Permanent Residency (PR) applications?
Yes, we will be able to assist with PR application. The most common way to obtain PR in Singapore is through the Professional, Technical Personnel and Skilled Worker scheme. If you are a holder of the Employment Pass, EntrePass or S Pass, you and your spouse and unmarried children (under the age of 21) are eligible to apply for permanent residence. The Global Investors Program (GIP) is administered by the Singapore Economic Development Board to bring direct foreign investment into Singapore. Under this scheme, there are two options that an investor can choose. First option is that an investor can either invest S$2.5 million in a new business start-up or expansion of an existing business operation. The second option is that the investor can invest S$2.5 million in one or more GIP-approved funds (up to a maximum of 3 funds). The investor is also required to maintain the investments for a minimum period of 5 years commencing from the date of final approval of Permanent Residency. The Foreign Artist Talent Schemeis administered by the National Arts Council and Immigration and Checkpoints Authority of Singapore to attract foreign artists with exceptional talents to move in to Singapore. For more information on PR application procedures, do drop us and email and we will revert to your accordingly.
FAQ on corporate tax matters
How are income taxed in Singapore (scope of tax)?
Singapore tax system is on a territorial basis. A company, regardless of whether it is a local or a foreign company, will be taxed on its:
Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA. Example, your company's basis period for YA 2013 is from 1 Jan 2012 to 31 Dec 2012.
What is the definition of a company under Income Tax Act?
For taxation purposes, a "Company" includes:
A business entity incorporated or registered under the Companies Act or any law in force in Singapore. It usually has the words "Pte Ltd" or "Ltd" as part of its name; or - A foreign company registered in Singapore such as a branch of a foreign company; or - A foreign company incorporated or registered outside Singapore
A company does not include sole-proprietorship and partnership businesses registered in or outside Singapore
What is taxable income?
Capital gain is not taxable. Examples of receipts that are capital in nature are:
Gains on sale of fixed assets ,
Gains on foreign exchange on capital transactions.
Income may be exempted from tax under the provisions of the Singapore Income Tax Act. Some examples are: Exempt shipping income derived by a shipping company, Foreign-sourced dividends, branch profits & service income received by a resident company that satisfies the qualifying conditions.
What does resident and non-resident status means for a company?
In Singapore, the tax residence status of a company depends on where the control and management of its business is exercised. A company is tax resident in Singapore if the control and management of its business is exercised in Singapore. Generally, a Singapore branch of a foreign company is not treated as a Singapore tax resident since the control and management is vested with an overseas parent company. The basis of taxation for a resident company and non-resident company is generally the same. However, there are some benefits that a resident company can enjoy that a non-resident would not. These include:
What are the tax and effective tax rates?
Corporate Tax Rates
|Tax rate on corporate profits for up to 300,000 SGD||8.5%|
|Tax rate on corporate profits above 300,000 SGD||17%|
|Tax rate on capital gains accrued by the company||0%|
|Tax rate on dividend distribution to shareholders||0%|
|Tax rate on foreign-sourced income not brought into Singapore||0%|
|Tax rate on foreign-sourced income brought into Singapore||0 – 17% (subject to certain conditions)|
Personal Tax Rates (From YA 2012 onwards)
|Tax rate on first 20,000
Tax rate on next 10,000
Next $ 40,000
Next $ 40,000
|Tax rate on income earned overseas
(subject to certain conditions) 20
|Tax rate on dividends received from Singapore company||0|
What are corporate income tax rates and general tax exemptions in Singapore?
Singapore’s corporate tax rate is a flat 17%. In order to make Singapore as an attractive investment destination, income tax rates in Singapore have been going down consistently. As in many jurisdictions, income tax rate in Singapore does not necessarily provide an accurate indication of effective corporate tax rate. The effective rate is normally lower than the headline tax rate due to applicable tax exemptions.
General Tax Exemptions Below are general tax exemptions currently available to Singapore resident companies. With these tax exemptions, the effective income tax rate for Singapore companies is reduced significantly. About the Tax Exemption Scheme for New Start-up Companies
With effect from Year of Assessment (YA) 2010
If your company is not excluded from the Tax Exemption scheme, it can enjoy the tax exemption if it meets the following qualifying conditions:
|Year of Assessment||Exempt amount for new start-up companies|
|2008 onwards||First $100,000 @ 100% = $100,000
Next $200,000 @ 50% = $100,000
Total $300,000 $200,000 – exempted
Thus charge income is (300k – 200K) 100k @ 17%= $17,000 tax
Tax saving is (200k @ 17%) $34,000.
Companies not eligible for the Tax Exemption scheme New!
As announced in Budget 2013, the Tax Exemption scheme does not apply to the following companies incorporated after 25 Feb 2013: A company whose principal activity is that of investment holding; and A company whose principal activity is that of developing properties for sale, for investment, or for both investment and sale.
Investment holding companies derive only passive incomes such as dividend and interest income, while the real estate industry typically incorporates a new company for each new property development. The start-up tax exemption for encouraging entrepreneurship is not intended for such companies. These companies will be given partial tax exemption.
Abuse of the Tax Exemption scheme
IRAS has observed some companies set up not for entrepreneurship and genuine commercial reasons but rather to take advantage of the tax exemption scheme. IRAS will take actions against such abuses. Normal companies and newly incorporated companies after the third YA are eligible for partial tax exemption.
What is partial tax exemption for existing company?
Effective from YA 2008, a partial tax exemption is given to companies on normal chargeable income* (excluding Singapore franked dividends) of up to $300,000 as follows:
|Exempt amount||Taxable amount|
|First $ 10,000||@ 75%||= $ 7,500||2,500|
|Next $290,000||@ 50%||= $145,000||145,000|
Tax payable (147,500 @17%)
Tax saving of (152,500 @ 17%)
Effective Corporate Tax Rate
The above general tax incentives mean very attractive tax rates. See illustration below for tax rate for various annual taxable income:
First Three Years of Income Tax Filings for Newly Incorporated Companies
|Taxable Income (S$)||Tax Rate|
|0 – 100,000||0%|
|100,001 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
Income Tax Filings after First Three Years
|Taxable Income (S$)||Tax Rate|
|0 – 300,000||8.5%|
|300,001 – 2,000,000||17%|
Are dividends taxed (One- tier corporate tax system)?
Singapore adopts a one-tier corporate tax system with effect from 1 Jan 2003. Under the one-tier corporate tax system, tax paid by a company on its chargeable income is a final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders. There is no withholding tax on dividend, if it is remitted to non-resident.
FAQ on individual tax matters
What is individual income tax?
You need to pay income tax on all income you have earned / received in Singapore. Overseas income which was received in Singapore (including those paid into a Singapore bank account) on or after 1 Jan 2004 is not taxable. This does not apply to overseas income received in Singapore through partnership in Singapore. Income tax is assessed based on a preceding year basis. For example, for Year of Assessment 2013, you will be taxed on the income earned in year 2012.
How do you define Foreigners?
Foreigners refer to individuals who are not Singapore citizens or permanent residents. Foreigners are liable to tax in Singapore on all income accrued in, or derived from Singapore. The extent of your tax liability will depend on your tax residency status.
How much you need to pay?
The amount of income tax you need to pay depends on how much you earn in Singapore and whether you are considered a tax resident or non-resident for income tax purposes.
Who are tax residents?
You are considered a tax resident for a particular Year of Assessment (YA) if you are:
Tax residents may claim expenses, donations and tax relief to help them save tax. If you are a tax resident, your total income less deductions (expenses, donations and tax relief) will be subject to tax at progressive rates ranging from 0% to 20%.
Who are non-residents?
You are considered a non-resident for a particular YA if you are a foreigner:
who stayed/worked in Singapore for less than 183 days in the previous year who is a director of a company (without any employment pass)
Non-residents may claim expenses and donations to save tax. However, non-residents are not eligible to claim tax relief. If you are a non-resident, your employment income is taxed at 15% or the resident rate whichever gives rise to a higher tax amount. Director fees, consultant fees and all other incomes are taxed at 20%.
What are the Tax rates for resident individuals?
Refer to Personal Tax Rates above.
Is there any capital gains tax, inheritance tax, estate duty in Singapore?
Singapore does not impose any capital gains tax. Inheritance tax is a tax that you have to pay when you die which comes out of the financial estate that you leave behind. In Singapore, it is commonly referred to as Estate Duty. Estate Duty in Singapore has been abolished effective 2008.
FAQ on Good and Service Tax (GST) matters
What is GST?
GST (Goods and Services Tax) is a tax on domestic consumption. The tax is paid whenever customers buy goods or services from GST-registered businesses.
GST was first introduced in Singapore on 1 April 1994. Effective from 1 Jul 2007, the GST rate is 7%. The table below shows the GST rate over the years.
|1 Apr 1994 to 31 Dec 2002||3%|
|1 Jan 2003 to 31 Dec 2003||4%|
|1 Jan 2004 to 30 Jun 2007||5%|
|1 Jul 2007 onwards||7%|
Who is responsible to determine a trader's liability to register?
The onus is on the trader or businessperson.
Can I register if my taxable turnover is below s$1 million?
You need not register for GST if your annual taxable supplies do not exceed S$1 million. However, you can apply for voluntary registration if your annual taxable supplies are below S$1 million or if you have not started making taxable supplies but expect them to exceed S$1million in the next 12 months.
Should SME apply for voluntary GST registration?
Your voluntary registration is subject to the conditions that:
i. You make or intend to make taxable supplies; and
ii. You carry on a business and intend to make such supplies in the course or furtherance of that business.
After you have voluntarily registered for GST, you must remain registered for at least 2 years. The Comptroller may also impose other conditions on your GST registration.
Before you decide to apply for voluntary registration, it is advisable to consider carefully your ability to comply with all the responsibilities and obligations of a GST-registered person, and the costs you need to incur to comply with the GST law.
Points to note;
Increase in compliance cost (new accounting system, filing of GST returns and record keeping, etc.); Have to invest the time and resources to train staffs in accounting for GST; Heavy penalties for non-compliance (e.g., failure to file on time); Voluntary registration will inevitably increase in its sales prices (risk of losing price sensitive clients.
What are the Tax services you provide?
We provide taxation services to individuals, corporations, partnerships, clubs, associations etc. Our tax consultants are both qualified and experienced to deal with your tax compliance and tax planning issues. Our tax consultants will assist you to plan your tax affairs to minimize the incidence of tax and also to give you valuable advice on individual and cross border transactions.
Some of our tax services include:
How do I engage your services for tax matters?
If you wish to discuss further or take up our tax services, please send your email enquiries to email@example.com. Our tax consultants will provide you with a quote and their scope of services