As a financial and services hub, Singapore is the de facto financial capital of the ten-member Association of Southeast Asian Nations ASEAN), which will establish the ASEAN Economic Community in 2015.
For companies interested in doing business with ASEAN and its 600-million strong single market and production base, the place to start is Singapore.
Companies in Singapore enjoy a low corporate income tax rate of 17 percent, no tax payable on dividends earned externally from its borders, and even tax incentives for SMEs wishing to establish operations in the country.
It is also possible to operate a Singapore company as a ‘shelf’ entity to take advantage of these benefits without going to the expense of setting up a full service office. As such, Singaporean companies are an excellent base from which to direct operations from ASEAN, thus qualifying for the intra-ASEAN free trade agreements and ASEAN free trade agreements with China, India and beyond.
Hong Kong remains an attractive location from which to hold investments into China. When it comes to Southeast Asia, however, Singapore’s close relationship with its fellow ASEAN members – Indonesia, Malaysia, the Philippines, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam – makes it an appropriate destination for all aspects of business in the region beyond the free trade access provided under the ASEAN Free Trade Agreement itself.
China (including Hong Kong) does have a separate free trade agreement with ASEAN. But this agreement is not as far reaching as the tax treatments that ASEAN members enjoy.
Furthermore, economic agreements such as the Regional Comprehensive Economic Partnership (RCEP) also enhance Singapore’s position as a base from which to reach out to destinations such as India and even Australia.
Requirements for Incorporation
What do companies need to know when setting up in Singapore? First, a professional services firm must be engaged to register on behalf of companies with non-Singapore National Registration Identity Card (NRIC) holders, non-Employment Pass holders and/or non-Dependant Pass holders in the role(s) of director, company secretary and/or shareholder.
The key points of Singapore company incorporation include:
- A Singapore private limited company should have at least one shareholder, but no more than 50
- The shareholder can be a person or another legal entity, with 100% foreign shareholding being allowed
- New shares can be issued or existing shares can be transferred to another person anytime after the Singapore company has been incorporated.
- At least one director must be a Singapore resident. A resident is defined as a Singapore Citizen, a Singaporean Permanent Resident, an Approval-in-Principle Employment Pass holder, or a person who has been issued an Entrepass, Employment Pass, or Dependent Pass
- There is no limit on the number of additional local or foreign directors a Singapore private limited company can appoint. Most companies will have at least two directors, as banks and other financial institutions usually require two signatories.
- The sole shareholder and sole director can be the same person, but non-shareholders can also be appointed as directors.
- A company secretary must be appointed within six months of incorporation and he or she must be a Singapore resident
- In the case of a sole director/shareholder, the same person cannot act as the company secretary.
- The minimum paid-up capital (also known as share capital) for registration of a Singapore company is S$1
- The paid-up capital can be increased any time after the company’s incorporation
- A physical (residential or commercial) local Singapore address must be provided as the registered address of the company.
- The premises of this address must be approved for business use by the Urban Redevelopment Authority (URA) and residential flats or properties can only be used under the Home Office Scheme. P.O. boxes cannot be used
Similar to Hong Kong, most Singapore companies are registered as private limited liability companies. Generally, a private limited liability company can be incorporated in 1-2 days. Company registration is completed online with the Accounting & Corporate Regulatory Authority (ACRA).
Incorporation will take between 14 days and two months if the application needs to be referred to other authorities for approval or review. Certain types of businesses (e.g. private school, spa, telecommunications) require licenses and permits, which can be obtained post-incorporation.
Each Singapore company must hold the first annual general meeting within 18 months of its incorporation, and no more than 15 months may elapse between subsequent annual general meetings (unless approval of the Registrar is obtained).
Private companies can dispense with annual general meetings if a resolution to that effect is passed by all members with voting rights at a general meeting of the company.
At the annual general meeting, directors should present a true and fair view of the company’s profit and loss accounts to their shareholders. Accounts presented at the annual general meeting should be made up to a date not more than 6 months before the annual general meeting.
Filing of Annual Return
Singapore companies must file an annual return with the ACRA within one month of the company’s annual general meeting. Particulars of the company officers, registered address, and auditors (if applicable) must be included in the annual return.
A company can engage the services of a professional firm or a service bureau to file the annual return on its behalf.
600 Million Consumers
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Bigger Than Japan in 2028
Source: IHS Global Insight
For non-ASEAN companies in the region and globally, setting up in Singapore (or another ASEAN member) will theoretically grant access to a transformed ASEAN region “with free movement of goods, services, investment, skilled labour, and freer flow of capital,” as ASEAN itself puts it.
“The ASEAN Economic Community (AEC) shall be the goal of regional economic integration by 2015,” the group declares. “AEC envisages the following key characteristics: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy.”
It’s a promise that the world’s companies should consider buying into earlier rather than late.
About the Author
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. This article was first published in Asia Briefing and was reedited for clarity and conciseness. For further details or to contact the firm, please visit www.dezshira.com.