Out of a population of 5.74 million, 4.71 million inhabitants in Singapore are Internet users, making the Internet penetration rate to be 82%. To access the Internet, the persons in Singapore mostly use their smart phones, laptops or desktop computers. This is based on figures released in “Digital in 2017: Southeast Asia”, a report produced by Hootsuite and We Are Social, looking at Internet, social media and mobile use across this region.
Before taking the entrepreneurial plunge, here are the five tips you should know before asking you the question how to start an online business in Singapore.
Understand the market
It is an exciting time to start an online business given that the ecommerce market in Singapore is projected to grow to S$7.5 billion by the year 2025 according to Google and state-owned investment company Temasek in their report on the ecommerce markets in Southeast Asia. The flourishing ecommerce industry is attributed to a growing young population, the high Internet speed and penetration rate, an increase in wealth and a better payment ecosystem. If you are in need of inspiration for potential business opportunities in Singapore, click here. As a first step, the entrepreneur should conduct research to better understand the market, its target clients, its competitors and the market need for the future business’ products or services. To this end, the entrepreneur should come up with a business plan which will aid him to gauge the feasibility of his business idea, to outline the business’ operational and financial objectives, to secure funding and to potentially attract investors.
Know the regulatory regime
An online business can be easily started, taking the form of a website or a blog for instance. However, before creating one’s online business, it is vital to know Singapore’s regulatory regime with regards to the ecommerce industry. In terms of Internet content, online business owners need to know that they are bound by the Internet Code of Practice as set out by the Infocomm Media Development Authority. In terms of the nature of the business activities, business owners should be familiar with the Second Hand Dealers Act as stipulated by the Deputy Commissioner of Police; the Common Gaming House Act and the Public Entertainment Act for any promotional activity; and the Singapore Code of Advertising Practice and Consumer Protection (Trade Descriptions and Safety Requirements) Act for web advertising.
Register the business
After gaining a thorough understanding of the market and regulatory landscapes, the entrepreneur can now register his business. In Singapore, an entrepreneur can choose from a variety of business structures of which the most common type is the private limited company structure. This is because a private limited company structure offers a business a legal entity status, a limited liability and a host of tax incentives. To register for such a structure, the entrepreneur should proceed online to the BizFile. BizFile is the online filing and information retrieval system of the Accounting and Corporate Regulatory Authority. This process is typically a quick affair, taking a mere 15 minutes to complete if all documents and payment have been submitted. Upon successful application, the new business owner will receive a Unique Entity Number, also referred to as UEN. Read more about the registration options and processes here.
Learn about the taxation regime
The entrepreneur should be familiar with the taxes applicable to his ecommerce business, namely the Goods and Services Tax (GST) and the income tax. The Inland Revenue Authority of Singapore (IRAS) notes that if a company supplies goods or services in Singapore through the Internet or other type of electronic media, GST will be collected, similar to a traditional commerce. Currently, the rate of GST is 7%. It is to be noted that a business entity must be GST registered in order to charge the tax. If the ecommerce business owner has exported goods himself or through a freight forwarder, the goods are exempt from GST. In addition, should the physical delivery of goods be from a location outside of Singapore onwards to another place, GST will not be applicable. For more details about the GST application on ecommerce entities, click here. With regards to income tax for ecommerce, the IRAS states that if the business operations sustaining the ecommerce transactions are being conducted in Singapore, the derived income will be considered Singapore sourced and therefore taxable in Singapore. The breakdown of the chargeable income and accompanying tax applications can be found here.
Find out about funding
As a new business owner, a healthy cash flow is crucial to ensure that the business is being run well. It is useful to know about the various funding avenues available to new businesses. These include angel investment and venture funding from the likes of 500 Startups, Golden Gate Ventures, and Sequoia Capital. The Singapore government offers a variety of funds for new businesses ranging from funds for mentorship, technology to loans. Find out more about the various funding schemes by StartupSg here.
Do you need help navigating the regulatory and taxation requirements for your online business? Contact AM Corporate Services today for a personalised session on how we can help you and your online business get off the ground.