[This is a draft write up.]
For many years, the business world has regarded Singapore as a stable, thriving and efficient entry point into the Asian market. Singapore’s strategic location at the crossroads of East and West has positioned the city-state as a major global business hub, and with its robust economy and strong talent pool, Singapore offers businesses the ideal landscape to invest with confidence.
Reasons for setting up business in Singapore
Ease of doing business
The World Bank has consistently ranked Singapore as the best country in Asia, and second best globally, to do business.
Gateway to Asia
Singapore offers extensive connectivity and has strong business cultural and linguistics links to the emerging Southeast Asian market. Home to more than 600 million people, of which 70 per cent are below the age of 40, ASEAN is on of the world’s largest untapped economies.
The 2017 Euromoney Country Risk Survey ranked Singapore first for having the most stable political climate, with lowest sovereign risk globally. Singapore topped the ranks again for the Economist Intelligence Unit’s 2018 projection of the best business environment worldwide for the next five years. Singapore has held this position since 2013.
Types of local entity structures
A sole proprietorship is a business owned by one person or one company.The sole proprietor has absolute say, but also unlimited liability, in the running of the business.
A partnership is a business formed by at least two, or a maximum of 20, partners.Partners have unlimited liability, and will be personally liable for the partnership’s debts and losses incurred by other partners. Partners can also sue or be sued in the firm’s name, and cannot own property in the firm’s name.
A company is a business entity registered under the Companies Act, Chapter 50. It has a legal personality (i.e. the rights to own properties, perpetual succession,and can sue or be sued in its own name). In contrast to sole proprietorships and partnerships, members of a company are not personally liable for debts and losses of a company. Companies tend to have higher set-up and maintenancecosts. Annual returns must also be filed. There are three types of companies:
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 - more than 50 members.
Limited liability partnership
A Limited Liability Partnership (LLP) gives owners the flexibility of operating as a partnership, while having a separate legal identity like that of a private limited company. Since the LLP has a legal personality separate from its partners, the partners of the LLP will not be held personally liable for any business debts incurred by the LLP. Registration costs are lower than that of a company, and there are fewer formalities and procedures to comply with. However, an LLP still needs to keep accounting records, profit and loss accounts, and balance sheets that sufficiently explain its transactions and financial position.
A Limited Partnership (LP) consists of a minimum of two partners, with at least one general partner and at least one limited partner. In contrast to an LLP, an LP
does not have a separate legal personality from its partners. While an individual or a corporation may be a general partner or a limited partner of the LP, the
general partner will be responsible for the actions of the LP and is liable for all its debts and obligations. The limited partner will not be liable for the LP’s debts and obligations beyond an agreed contribution, unless the partner took part in its management.
Setting up Business
There are a few options foreign companies can choose from when setting up business in Singapore.
Branch of Foreign Company
A business entity that could be set up is a branch of a foreign company. Unlike a local entity incorporated in Singapore with its own legal personality and liabilities, a branch is an extension of its head office incorporated overseas. As such, liabilities of the branch office in Singapore are extended to its parent company. A branch office is not eligible for the same tax benefits or rebates offered to a local entity.
Representative Office (RO)
An RO can be registered in Singapore as a temporary arrangement for conducting market research and feasibility studies. The key benefit of an RO: it allows a foreign entity to assess Singapore’s business environment before setting up permanently. As an RO cannot generate income or solicit business, it will not have to pay taxes. An RO that decides to continue its presence in Singapore should register as a legal business with ACRA and, if necessary, obtain the relevant licence to perform any regulated activity. To open an RO in the manufacturing, international trade, wholesale, trade and trade-related business sectors, approach Enterprise Singapore (ESG). To register an RO in the legal sector, visit the Legal Services Regulatory Authority (LSRA), a department under the Ministry of Law. A bank or insurance company should approach the Monetary Authority of Singapore (MAS) to discuss their plans for an RO.
Click here for more information and to learn more about the government agencies involved.
The main laws governing employment law in Singapore are the:
These Acts are administered by the Ministry of Manpower. There is also advice and some non-statutory guidelines issued by the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP), which authorities encourage employers to observe.
The employment relationship between employers and such employees will be governed by the Employment Act. The main purpose of the Employment Act is to maintain good employment standards and safeguard working conditions for employees. The Act extends to the entire employment process, starting from the appointment up to an employee’s dismissal or termination.
The Employment Act covers all employees (excluding public servants, domestic workers and seafarers) irrespective of their nationality. The Act is applicable to all employees who the employer appoints by means of an employment contract stating the terms and conditions of employment. The provisions of the Employment Act are not applicable to an independent contractor who the employer appoints on the basis of a fee to complete a specific assignment for the company. Any contract entered by the employer with the independent contractor forms a client-contractor relationship that is not covered under the scope of this Act.
The employment contract is an important legal document of a company as it defines the relationship between the employer and the employee. The general principles of contract law in Singapore are applicable to this contract. Like all contracts entered into by parties in Singapore, the employment contract is enforceable by law. Typically, the contract defines details such as employee’s scope of work, salary details, overtime payment, rest days, leaves etc. The Employment Act guarantees certain benefits to employees. These benefits include annual paid leaves, sick leaves, maternity benefits, paid public holidays etc. Employers must ensure that they fulfil all such requirements in the Act and also draft the terms of the contract accordingly.
The Income Tax Act of Singapore is the main governing statute for corporate taxation. The law provides for a single-tier corporate tax system. This means that tax paid by a company on its profits is the only tax on such income (i.e. dividends are tax-free to shareholders). A company does not pay taxes on capital gains or on foreign-sourced income that was already subjected to taxation overseas. Thus, the main tax a Singapore company should file is the corporate tax at the rate of 17%, which most often is significantly lower due to numerous tax incentives and tax exemptions available to Singapore-resident companies.
Singapore companies are required to complete their corporate tax returns by submitting annually two filings with IRAS (the Inland Revenue Authority of Singapore, the main government agency that levies and collects taxes in Singapore). These filings are as follows:
Estimated Chargeable Income (ECI)
All Singapore companies must file their Estimated Chargeable Income (ECI) within three months after the end of their financial year, for each financial year. ECI is the company’s estimated income after deducting tax-allowable expenses for the preceding financial year. Besides stating the ECI, a business is required to declare the company’s revenue on the ECI Form.
Corporate Income Tax Return
Companies are required to file a Corporate Income Tax Return with IRAS after submitting the ECI. The deadline is either November 30 for paper filing or December 15 for e-filing. The Income Tax Return provides a calculation of the actual tax that is to be paid to the tax authority. Companies must file their tax returns in any year based on the profits in the preceding year.
All Singapore companies in the course of their activity must follow market-based competition regulations. This branch of law promotes and seeks to maintain market competition by regulating anti-competitive conduct by any business. Competition law is known also as “antitrust law” or “anti-monopoly law”. The basic statute that regulates this field in Singapore is the Competition Act. The Act prevents unfair trade practices and restricts the formation of cartels and monopoly activity in trade.
Restrictive agreements and practices are governed by the Competition Act, which is administered and enforced by the Competition and Consumer Commission of Singapore (CCCS) (formerly known as the Competition Commission of Singapore), a statutory body established under the Competition Act.
In order to achieve fair competition between market participants, the act prohibits companies from the following three basic activities:
- Agreements that have as their object (or result) the prevention, restriction or distortion of competition in Singapore.
Companies’ agreements, decisions or concerted practices which involve the following are considered as having a detrimental effect on competition and are therefore deemed illegal:
- The fixing of purchase or selling prices or any other trading conditions;
- Limitation on or control of production, markets, technical development or investment;
- The sharing of markets or sources of supply; or
- Bid rigging or collusive tendering.
- Conduct that amounts to the abuse of a dominant position in any market in the country.
Typical examples of conduct that may be considered an “abuse of a dominant position” are as follows:
- Predatory behaviour toward competitors;
- Limiting production, markets or technical development to the prejudice of consumers;
- Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- Making the other party conclude the contract with additional obligations having no connection with the subject of the contract.
- Mergers or acquisitions that may result in a substantial lessening of competition within any market in Singapore for goods and services.
The law prohibits mergers or acquisitions that result in a substantial lessening of competition within any of the goods or services markets. However, certain mergers are excluded from these restrictions. These include transactions that are approved by regulatory authorities, are under the jurisdiction of any regulatory authority, belong to specified activities set out in the law (such as services of general economic interest which result in economic efficiencies that outweigh their adverse effects), etc.
Intellectual property (IP) refers to any man-made creation for which exclusive rights are recognized by the government. In Singapore, there are three mechanisms by which IP rights can be registered: a patent, a copyright or a trademark.
Singapore protects inventive designs and processes through the Patents Act. Singapore patents are protected internationally under the Patent Cooperation Treaty (PCT). Applications for patent protection in Singapore must be filed at the Intellectual Property Office of Singapore (IPOS). Application for patent protection overseas under the Patent Co-operation Treaty must also be filed at the IPOS. For applications for patent protection overseas filed by any person resident in Singapore, written authorisation must be obtained from the Registrar of Patents or a patent application must first be filed in Singapore.
Singapore’s Copyright Act protects original works as varied as novels, computer programs, films, paintings, sheet music and performances. It does not include ideas, procedures, methods, discoveries because it is the expression, not the underlying idea or discovery, that is covered. The author, or owner, of copyrighted material has the exclusive right to publish, perform, broadcast or adapt the work. He or she can assign all or part of the rights to others, so long as the agreement is in writing. He or she can also license the work to others; the license need not be in writing and can be exclusive or non-exclusive. The protections Singapore affords through copyright and the length of those protections varies by the type of work it is. In general, copyright ownership belongs to the person who created the work. However, works created during the course of employment may be owned by the employer if the terms of employment provide that. Commissioned works belong to the individual or group that commissioned them.
A trademark is a symbol, such as a brand name or logo that a business uses to distinguish its goods and services. In Singapore, you can register a trademark so that it is protected under the Trade Marks Act. Alternatively, you can seek protection without registering it under the common law right of “passing off.”
All Singapore companies are obliged to protect the Personal Data (PD) of their clients, employees, or any other individuals’ data the company may process. The two basic regulations that affect Singapore business in this area are the Personal Data Protection Act (PDPA) and the General Data Protection Regulation (GDPR).
Personal Data Protection Act (PDPA)
PDPA is Singapore’s law governing the collection, use, and disclosure (collectively called “processing”) of personal data by organisations in Singapore. The main purpose of the act is to ensure that a) all personal data is processed in a manner that respects the privacy and ownership rights of individuals; and b) organisations use such data for legitimate business purposes only.
PDPA relies on two main pillars for protecting consumers: the Do Not Call (DNC) Registry and general data protection provisions. Singapore companies are required to obtain the consent of an individual before they can collect, use, or disclose any personal information related to that individual. To comply with the law, Singapore businesses have to check their phone or fax based marketing efforts against the DNC Registry before engaging in marketing or else risk fines.
General Data Protection Regulation (GDPR)
GDPR is a European Union regulation on data protection and privacy. The document has extraterritorial implications, i.e. it also applies to companies that are not residents of any of the EU states. The GDPR applies to companies that are registered outside the EU but collect or process the PD of persons (residents) of the EU. So if your Singapore company collects and processes PD of clients, employees, or other persons who are residents of the EU, you must comply with the GDPR requirements.