Overview of Singapore Business Laws
The following are basic legislative acts that affect all Singapore companies when they conduct business in the country.
The main laws governing employment law in Singapore are the:
• Employment Act.
• Retirement and Re-Employment Act.
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.