As Singapore is a commodity trade center connecting Asia and the wider world, opening a Singapore offshore company is one of the best ways for international investors to access the Asia market.
This means there have already been numerous investors putting up their venture capital to this land and work on the materialization of their small company into a large corporation.
But there is a common misconception when it comes to the offshore company in Singapore, which needs to be clarified.
Table of Contents
1. Singapore Offshore Company: A Misconception
An offshore company is a company operating in a jurisdiction outside of an investor’s home country. Companies legally move their business overseas usually for favorable tax treatments and relaxed regulations.
When it comes to offshore jurisdictions, there is an inclination to think that all offshore countries are tax havens.
A tax haven refers to a jurisdiction that requires very low or no tax liability from foreign individuals and businesses. Therefore, these places are often taken advantage of by multinational corporations for illegal activities such as money laundering and tax evasion.
Since Singapore is well-known for providing foreign businesses with favorable tax incentives, it is often thought to be a tax haven.
2. Is Singapore a Tax Haven Country?
The short answer is no. In general, all business-related activities are properly regulated in Singapore legal documents such as the Income Tax Act or the Companies Act.
As different from tax havens, the country’s legal framework guarantees a high degree of tax transparency with the international community while providing a favorable tax system that gives economic benefits to foreign entrepreneurs.
In addition, Singapore is also a member of many global organizations. Some of which include:
- The Financial Action Task Force (FATF), the oversight body of Anti-Money Laundering and Combating the Financing of Terrorism activities.
- The Common Reporting Standard (CRS) is a standard on the exchange of financial information on a global scale. This CRS was developed as part of the Automatic Exchange Of Information (AEOI) by the Organisation for Economic Co-operation and Development (OECD) and other tax authorities.
Singapore has modified its banking secrecy laws to prevent “harmful tax competition” practices and contribute to global jurisdictional tax transparency.
Singapore’s exchange of information on request overall score is rated as “Compliant” with international tax transparency standards, as assessed by the Global Forum. This is the highest overall rating given to a jurisdiction.
The above reasons are part of why there are numerous businesses emerging in this city-state every year.
Below are the reasons why you should also incorporate a company in Singapore.
3. Advantages of Opening an Offshore Company in Singapore
As being a financial center that attracts hundreds of investors to start their businesses, the Lion City possesses several key advantages to invest in.
3.1. Favorable Tax System
First and foremost, the city-state is widely known for its appealing tax incentives for foreign entrepreneurs. Those of which include:
- A flat 17% of corporate tax rate;
- A tax system based on the territory. This means income generated outside Singapore is not taxed unless it is remitted into the country;
- Single-tier tax policy, meaning there will be no tax on dividends and capital gains;
- Double taxation is removed due to Singapore’s large network with 80 countries worldwide on their Double Taxation Avoidance Agreements.
3.2. Tax Reliefs for Singapore Incorporated Companies
The Singapore government has introduced many attractive tax incentives to welcome foreign investments and support local entrepreneurship. Below are the two most popular and appealing tax schemes for businesses.
Tax Schemes for New Start-ups
For the first three YAs (years of assessment), companies that are newly popped up in Singapore will receive 75% exemption on the first $100,000 of normal chargeable income. They will also obtain a further 50% exemption if earning another $100,000 of normal chargeable income.
The eligibility for start-up entities to qualify for this tax scheme in the first three years include:
- The start-up is incorporated in Singapore;
- The start-up is a Singapore tax resident for the designated YAs;
- The start-up has a maximum of 20 shareholders, of which either all are individuals beneficially and directly holding the shares in their own names; or at least one individual is holding no less than 10% of the ordinary shares.
Partial Tax Exemption for Companies (PTE)
There is another tax benefit scheme that can be applied to all enterprises in Singapore, whether they are start-ups or long-established entities. It is called partial tax exemption or PTE. In terms of eligibility, all companies can benefit from this scheme as long as they do not enjoy the benefits from the tax scheme for start-ups at the same time.
The scheme includes:
- 75% exemption on the first $10,000 of normal chargeable income; and
- A further 50% exemption on the next $190,000 of normal chargeable income.
Be noted that all these programs take effect from YA 2020 onwards, which is to replace the programs of YA 2019 and before.
3.3. Business-friendly Environment
Pro-business environment – the investment-encouraging environment in this financial hub is demonstrated through its relaxed business incorporation regulations. In fact, it only takes about one to two days to register a company.
Ease of doing business – Singapore was ranked the second easiest country to do business in the world in 2020, according to the World Bank’s Ease of Doing Business 2020. As a result, doing business in Singapore is efficient and time-saving because of the transparency and little bureaucracy in the political system.
Full Foreign Shareholding Ownership – Another advantage would be the absence of the country’s foreign ownership restrictions. In Singapore, foreign individuals are guaranteed to secure rights and influence in a company, as 100% of foreign stockholding is allowed in all sectors.
Deposit Insurance Scheme – Singapore offers the Deposit Insurance Scheme. For those who are looking for some sort of insurance program that guarantees the protection for their bank deposits, this program would be what they are looking for.
3.4. Singapore Dollar – A Strong Currency
Singapore possesses a strong currency in Asia. In fact, the Singapore Dollar (SGD) is the 12th most traded currency in the world and the 3rd most in Asia. This means it is easy to use SGD for trade and investment with other economies in the world.
The price stability and a long record of low-to-stable inflation that Singapore has been experiencing over the last decades have also allowed businesses to have more confidence when using the currency in this country.
4. How to Set up an Offshore Company in Singapore
You can easily establish a company in Singapore by following these simple steps.
Step 1: Company name registration
There are a few requirements when you name a company.
- The name must be distinctively different from other existing ones.
- The name shall not contain any words that bear an offensive or sensitive meaning.
- The name shall not refer to a connection with any Singapore government agencies.
Step 2: Company profile submission
After registering for the name, you will be required to provide a list of items of information related to your company, which includes:
Brief information of business activities – this is to ensure that your company’s business lines do not fall into the list of activities prohibited by the Singapore government.
Details of directors, shareholders, and secretary of the company
- Your company must have at least one director whose residence status is Singapore;
- All other directors can be either local or non-local providing that they are at least 18 years of age and have a good credit history.
- 100% of foreign ownership shareholding is allowed;
- Shareholders can be either local or foreign individuals/companies;
- A paid-up capital of SGD $1 is required at the time of your company incorporation.
- A secretary must be appointed within 6 months after your company incorporation;
- He or she must be a local Singapore citizen or permanent resident.
Address of the company – your company must have a physical office address in Singapore. The office address can be registered as either a residential or commercial address, providing that it is not a P.O. Box.
Any other documents as required by the registered filing agent.
Nowadays, the company registration procedure has been computerized. It is possible to complete the registration online on the government website of BizFile+. However, the registration process will require the provision of a valid SingPass which is a digital identity given to Singapore citizens and residents.
If you are a foreign individual or business and this is the first time you register a company in Singapore, you do not have such an account. This means you cannot log into BizFile+ and register a new company on your own. will not be able to obtain it.
However, this does not prevent you from setting up a business in Singapore. The solution is to use an accredited incorporation service to facilitate your company registration, according to the Accounting and Corporate Regulatory Authority (ACRA) – the government agency that oversees all the business registration in Singapore.
Our BBCIncorp service can help you cover all the incorporation requirements easily. Our company offers you a full package of incorporation service. All you need to do is to provide some necessary documents and make a payment.
Step 3: The result
After the ACRA (Accounting and Corporate Authority of Singapore) approves the incorporation of your company, they will send you an email attaching a standard identification number called UEN (Unique Entity Number). This is also an official announcement for your business to be started.
If you wish to learn more about the incorporation details, read more on How to Set Up a Company in Singapore for Foreigners.
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Singapore is an offshore jurisdiction that allows overseas investors to come and establish their company in a legal and legitimate way.
This is because the country provides beneficial tax policies to foreign businesses while operating a reliable legal system that guarantees a tax-paying international standard.
To learn more about the procedures to set up an offshore company in Singapore, contact one of our professional consultants for timely help!