As a foreigner you are free to incorporate and operate a Singapore company. Along with incorporating a Singapore business, you may decide to relocate to Singapore under a relevant work permit scheme for personal or business reasons. Many foreign individuals state high tax rates in their existing country of residence as one of the important reasons for relocation to Singapore.
Foreigners are required to engage the services of a professional firm to incorporate a Singapore entity. There are many such firms in Singapore and the quality of service differs greatly from one firm to another. Make sure you hire a firm that offers cost-effective and high quality services.
Company Incorporation Considerations
Among the three types of business structures in Singapore i.e. Limited Liability Company (LLC), Limited Liability Partnership (LLP), and Sole Proprietorship (SP), setting up a LLC (often called private limited company) is the most preferred and most widely used incorporation vehicle used by foreign entrepreneurs. The reasons are clear:
- A limited liability company is the most flexible and advanced type of business entity available.
- A limited liability company is a legal entity on its own separate from its owners. Therefore its liabilities do not extend to its owners.
- A limited liability company enjoys special tax exemptions in Singapore not available to other types of business structures.
- A limited liability company has perpetual existence.
- Foreigners can be 100% owners of a Singapore limited liability company.
To learn more about limited liability company formation in Singapore, refer to Singapore company registration guide and Singapore company incorporation FAQs.
Personal Relocation Considerations
If you plan to move to Singapore to be actively in your company operations, you need to apply for a work permit of type Employment Pass or Entrepreneur Pass. Note that approval of a work pass is not a matter of course but subject to review and approval by government authorities. Each application is considered based on its own merits.
The key criteria for Employment Pass type of work permit is the educational qualifications and professional experience of the applicant. A tertiary level education is expected for Employment Pass applications. The other factors include applicant’s prior professional experience and share capital of the company. Entrepreneur Pass (known as EntrePass) is meant for business owners who lack tertiary level education but otherwise have good entrepreneurial background. Other requirements for EntrePass include a minimum investment of S$50,000 and hiring of local employees.
If however you don’t plan to move to Singapore but just need to incorporate a Singapore company, you are free to do so and operate your company from overseas. You are also free to visit Singapore on a typical visitor visa in order to look after your company matters as and when required. However in this case, you will need to identify a local resident director since at least of of the company directors has to be a local resident director. Many professional firms that offer incorporation services provide the services of a nominee local director.
Tax Considerations
Your company’s taxable income for the year will be subject to corporate tax in Singapore. There is no tax on capital gains or dividend distributions for Singapore companies. Any after-tax income of the company can be distributed to its shareholders anywhere in the world tax free. Corporate tax rate in Singapore is a flat low rate of 17%. Tax exemptions are available that make the effective tax rate for annual profits of up to S$300,000 less than 9%. It’s also important to note that Singapore companies can easily avoid any double taxation when conducting international trade. A Singapore company can claim tax credit for any tax paid overseas.
All in all, Singapore offers a very attractive proposition for establishing and operating a business for foreign entrepreneurs. In fact, Singapore is ranked as #1 in the world for ease of doing business by the World Bank. To learn more about Singapore advantages, see Why Singapore.
