Setting up a private limited company in Singapore is the best means to start a business in Singapore, one of the finest places to do business in the world. It is safe to incorporate. The registration is fast and simple. The taxation is favorable. Many support schemes are available for tax reduction.
As a matter of fact, you can register a private limited company in Singapore in only 24 hours. This blog will show you not only just that but also what it takes to maintain the company.
1. Definition of a Private Limited Company in Singapore
You can understand a private limited company in Singapore as a company that is owned by a maximum of 50 people. These people are called “shareholders” and they can be either an individual or another company.
And you may encounter the phrase “Pte. Ltd.” everywhere in Singapore. It stands for “private limited”, indicating the type of company.
2. Advantages of a Private Limited Company in Singapore
Here’s a fact. Private limited company is the most registered type of entity in Singapore. Why? Simply because its benefits outweigh those of others.
Separate legal status: a private limited company is a distinct entity. It can enter contracts and agreements; apply for loans; buy and sell property; sue and be sued in its owned name.
Members’ limited liabilities: since a private limited company is a separate entity, as a shareholder, you will not hold any personal liability that goes beyond the capital contribution (or your shares, in other words).
Single-tier corporate tax system: an income is only taxed once at the company level. As a shareholder, you will not be taxed on your dividends. Double taxation is avoided.
Clear laws and regulations: all companies in Singapore are well regulated by the Singapore Companies Act. There is always an up-to-date online version of the Act. You can check it here.
Easy setup: your company in Singapore can be registered in just 1 day. The best way is to engage an incorporation service. This section of “how to set up” will be discussed later. Keep on reading!
Favorable taxation: a private limited company is liable for tax-exemption schemes which will help you reduce the corporate payable tax in Singapore. The corporate tax rate is at 17%.
Medium compliance requirements: to maintain a private limited company in Singapore, you mainly need to file with 2 government agencies. Your company can also be liable for many exemptions (from filing financial statements for example) when meeting certain conditions.
3. Disadvantages of a Private Limited Company in Singapore
There are not so many disadvantages to this kind of company when compared to other types. But here are the main two.
Compared to sole proprietorship and partnership, a private limited company has to comply with more requirements to set up and maintain. More paperwork needs to be done.
Furthermore, Pte. Ltd. companies in Singapore cannot call for capital contribution from the general public. In order to do so, it needs to go public, hence becoming a public company.
4. Registration Requirements of a Private Limited Company in Singapore
Ready to start your entrepreneur journey? Here are what you need to fulfill to register a private limited company in Singapore.
Local director: according to the Companies Act, your company must have and maintain a local director who locally resides in Singapore.
What if you cannot find anyone to fulfill this incorporation requirement? Opt for a nominee-director service! The person is literally just there to help you set up and maintain the company. He/she will not take part in your corporate daily tasks.
You can even become a local director yourself by getting an Employment Pass. This work pass allows foreigners to be employed in high-level positions in Singapore companies. This means your company will hire you as its director. By the time you move to Singapore and take the job, you will become a local resident in Singapore.
The application process for the Employment Pass usually takes around 6 months. Until then, you will still need a nominee director.
Company secretary: the Companies Act states that this position cannot be left vacant for 6 consecutive months. So, you have to appoint a secretary within 6 months after setting up your private limited company in Singapore. This person also needs to be a resident in Singapore.
Registered office address: your company has to get a local registered address in Singapore. It needs not to be the address where the business is conducted.
Paid-up capital: 1 single dollar is enough for the registration of a private limited company in Singapore.
Auditor: Your Singapore company must appoint an auditor within 3 months after the incorporation. However, if the company is exempted from the auditing requirement, no auditor is needed. Generally, this exemption applies when your company is considered a “small company”.
5. Setting Up a Private Limited Company in Singapore
For your information, the Accounting and Corporate Regulatory Authority (or ACRA for short) is the national agency that governs all business registration in Singapore.
You can quickly have your company established by following these formation steps.
Step 1. Engage an Incorporation Service
You must have a SingPass account to register a new company in Singapore on your own. Otherwise, you need to find an incorporation service to get the registration done. The provider can easily help you cover all the incorporation requirements above.
Our service package includes everything you need to set up a pte. ltd. company in Singapore (a nominee director, a corporate secretary, a local registered address, application filing and submission).
Step 2. Provide the Required Documents
The next step is to supply the service provider with the required documents. They will tell you what papers are needed. Upon receipt, the provider will proceed to file an application and submit it to ACRA on your behalf. Generally, a standard application file will comprise of the following:
- The company name (cannot be the same as other existing business names)
- A short brief of the main business activity
- The local office address in Singapore
- The company’s constitution
- The information of the company’s directors (one of whom must be a local resident)
- The information of the company’s secretary
- The information of the company shareholders:
- Individual shareholders can submit their copies of passports or other residence proof
- Corporate shareholders must submit copies of their incorporation documents
Step 3. Get the Result
The registration of a private limited company in Singapore is rather fast, thanks to the adoption of modern technology. Once your application is received, it normally takes ACRA about 24 hours to process. However, the processing time can be extended to a couple of weeks, in case your application needs more examination or review from another government agency.
If your application is approved by ACRA, there will be an email sent back to you. This email can act as your company’s Certificate of Incorporation (electronic version). At this point, your private limited company in Singapore is successfully registered.
In this email, there will be a UEN and your company’s business profile. UEN stands for Unique Entity Number. This number is the identification of your company and it must be used whenever your company transacts with the government. Additionally, you can download your company business profile through a hyperlink in the mail. This profile comprises essential information about your new Singapore company.
6. Post-Incorporation Checklist for a Private Limited Company in Singapore
To actually start your business, company registration is not enough. You need to take a few more steps after setting up your private limited company in Singapore. Here is a checklist of what you should do next.
6.1. Apply for Additional Licenses
Other than the Certificate of Incorporation, certain business activities in Singapore require your company to obtain additional licenses and permits. Some typical activities are:
- Commodity trading
- Food & Beverage
- Event Management
- Real Estate
- Private Education
- Fund Management
You should consult the service provider to find out whether your business activities in Singapore need additional licenses. One of the fastest ways to obtain such papers is to go to the GoBusiness Licensing Website. It is a one-stop portal for online license applications and payment.
6.2. Open a Corporate Bank Account
Don’t get your personal money tangled up with your business. The best way to separate your assets from the company’s is to register a corporate bank account. The account will allow your private limited company in Singapore to transact with customers and partners, storing its income separately.
Singapore has a world-class banking system. There are many reputable banks in Singapore, both domestic and international ones. They are capable of providing your business with more than sufficient services. A reputable bank can also enhance your company’s image a lot.
There is no universal application process for all banks. The required documents and approval conditions vary according to different banks and your business activity.
So, the advice here is to seek assistance from professionals. Normally, the incorporation service provider can further assist you to open a corporate bank account, for an additional fee. You can consult them to find out the best bank option for your company in Singapore, and to get your application filed correctly.
BBCIncorp offers free support to bank account application with Singapore banks when clients choose any of our Singapore incorporation packages. Contact us to get the list of top Singapore banks where you can get your bank account opened.
BBCIncorp will help you prepare the application according to your business activity and the bank’s standard. A well-prepared application is a key to success! We will further arrange an interview between you and the bank’s representative. Some banks offer online meetings. Contact us for more information!
6.3. Register CorpPass Accounts
CorpPass is the only login method for your private limited company to transact with the Singapore government on their platforms. After setting up your private limited company, you need to register CopPass accounts. As the owner of the company, you can do this by yourself or assign the task to the secretary.
6.4. Determine the Financial Year End
Financial year end (FYE) is very important since it will determine your company’s basis period for taxation. Your company’s income earned in a financial year will be estimated and taxed in the following year (this following year is called the year of assessment). For example, if your company’s FYE is 31 March, the income earned from 1 April 2018 to 31 March 2019 would be taxed in 2020.
Financial year end is important due to one more reason. This date will set the deadlines for the annual requirements of your company. For example, your private limited company in Singapore has to file an annual report to the government within 6 months after the financial year ends.
Most companies in Singapore choose their financial year ends to be 31st December. Your company can follow this option. However, Singapore allows FYE to fall on any date throughout the year. If your company chooses to change its FYE different from 31st December or last more than one year, you need to inform ACRA of this.
7. Maintenance Requirements for a Private Limited Company in Singapore
To maintain the company annually in Singapore, here is what you need to do:
7.1. Pay Annual Fees
The maintenance fees include the following:
- Government annual fee
- Nominee director maintenance fee
- Local address maintenance fee
- Corporate secretary maintenance fee
7.2. Hold Annual General Meetings
Your company must hold an Annual General Meeting (AGM) within 6 months after the financial year ends. It is the meeting in which your company will present its financial health to the shareholders.
Your company can be exempted from the AGM requirement in Singapore if it sends the financial statements to all members within 5 months after the financial year ends.
7.3. Filing an Annual Report with ACRA
Your new Singapore company has to submit an annual report to ACRA within 7 months after the financial year ends. Essentially, the annual report can only be filed after:
- The AGM has already been held, or
- The financial statements have already been sent to all members (in case of AGM exemption).
An annual report is literally an update to ACRA about your company’s essential information:
- Type of company
- Office address in Singapore
- Details of company’s officers
- Details of company’s share: number of shares and share capital
- Financial statements (unless your company is exempted from this requirement)
- Date of AGM (if it is held) or an online declaration of exemption (in case of exemption)
Any director and secretary of your company or assigned third-party agent can file and submit an annual report to ACRA via BizFile+. This task can be done totally online and it should be an easy task. The annual reports of the following years will be pre-filled, you only need to check carefully and change irrelevant information before submitting.
7.4. Filing Tax Returns with IRAS
The Inland Revenue Authority of Singapore (IRAS) is the government agency responsible for tax matters. Your company needs to submit two tax reports to IRAS annually.
Estimated Chargeable Income (ECI)
ECI is an estimate of your company’s income (after deducting tax-allowable expenses) that will be subject to corporate tax in the year of assessment. Your company must file ECI via Singapore MyTax Portal within 3 months after the financial year ends.
Nevertheless, your private limited company in Singapore does not need to file ECI if it can meet the following conditions:
- Annual revenue is no more than $5 million for the financial year, and
- ECI is NIL for the year of assessment.
Your company will then report its actual income for taxation to IRAS via Form C or Form C-S. The form C-S is a simpler version in which there are fewer reporting fields. Your company qualifies for form C-S if it:
- Has an annual revenue of $5 million for the financial year
- Receives income that is only taxed at the rate of 17%
- Does not claim any of the following in the year of assessment: Carry-back of capital allowances/losses, Group relief, Investment allowance, Foreign tax credit and tax deducted at source.
If your company qualifies for Form C-S and its annual revenue is no more than $200,000, it will be eligible for Form C-S (Lite). This form is the easiest to file. It has only 6 fields to fill in.
As for the deadline, your company has to e-file this tax return no later than 30th November (effective from 2021). This task can be done online via Singapore MyTax Portal by your company’s authorized member or filing tax agent.
After submitting your tax reports, IRAS will examine them and send back to your company a Notice of Assessment by 31 May of the following year. The company will have to pay its corporate tax within 1 month after receiving the notice.
8. Other Exemptions for a Private Limited Company in Singapore
Certain exemptions will relieve your company from the burden of compliance. It will also help you save up the resources.
Other than the exemptions from the AGM requirement and ECI filing that have already been mentioned above, your private limited company in Singapore can be eligible for the following exemptions.
8.1. Audit Exemption
Your company can be granted an audit exemption (hence appointing an auditor is not required) when it is considered a small company. In the first or second year of incorporation, you need to fulfill 2 of the following 3 conditions:
- The company’s total annual revenue is no more than $10m
- The value of total assets is no more than $10m
- The number of employees is no more than 50
8.2. Financial Statement Exemption
Your private limited company in Singapore need not file a financial statement in the following circumstances:
- Your non-listed company goes in the “dormant status” for the whole financial year (meaning having no major accounting transactions, that said, certain transactions are allowed) and the value of total assets is no more than $500,000.
- Your company is an exempt private company. It is a private limited company that has less than 20 shareholders, none of whom are corporate entities.
Although exempted from filing financial statements, your company still needs to prepare and keep these papers internally, according to the Companies Act in Singapore.
If preparing financial statements and reports are troublesome to you, opt for an outsourcing service. It will help you file everything in the right way.
8.3. Tax Exemption
There are many tax schemes to help your company reduce its payable tax. Since your company is a private limited company in Singapore, here are the most two major tax exemption schemes that it can apply for:
The tax exemption scheme for start-ups: you need to meet certain not-so-hard conditions for this. When eligible for the scheme, your company will be entitled to a tax exemption of 75% for the first $100,000 and another 50% for the next $100,000. This scheme is only valid for 3 consecutive years of assessments.
The partial tax exemption schemes for Singapore companies: you do not need to apply for this. The scheme allows your company to have a tax exemption of 75% for the first $10,000 and another 50% for the next $190,000. Your company, by default, will benefit from this scheme after the start-up scheme expires (in case you apply for such start-up scheme).
If you want to know more about the corporate tax in Singapore, click here to read more about the subject.
Let’s wrap it up! The best way for setting up a private limited company in Singapore is to use incorporation services. They will help you fulfill all the minimum requirements to register a new company. If everything goes smoothly, you can expect the company to be formed in just one day.
To maintain a private limited company in Singapore, you will need to pay certain annual fees, hold annual general meetings (exemption possible), and file certain reports to the government. These tasks can be by yourself or entrusted to an authorized agent.
BBCIncorp can get everything done for you! Contact us now!