Singapore’s investment-friendly landscape has made it a premier regional hub, attracting a multitude of international firms engaging in conventional as well as new-age industries across Asia and the world. This is reflected from its impressive Ease of Doing Business ranking and strong network of free trade agreements (FTAs) and double tax agreements (DTAs).
Despite this, investors need to be aware of the risks presented by each avenue of investment. Determining the ideal route for market entry or expansion needs thoughtful consideration about the intended scope of investment, the nature of business activities, tax implications, and legal liability.
In this section, we discuss the various options that a business has for market entry into Singapore and overview the entity types, requirements, and processes, as well as some key considerations that will help ensure a company is set up for success.
Also find tips for what the procedures are for opening a bank account, managing IPR or closing a business, should the need arise.
Choosing a corporate structure
Singapore’s efficient business environment is demonstrated by the ease with which foreign investors can incorporate a business in the country. Registering a company can take as little as one day provided all the files are in order.
There are several options for foreign investors to choose from:
Branch offices
Foreign companies can establish branch offices to conduct any type of business activity that falls within the scope of the parent company.
Branch offices are not eligible for the tax exemptions and incentives available to local companies as ultimate control of the branch remains vested in the overseas parent company. As such, branch offices are regarded as an extension of the foreign holding company and is therefore taxed as a non-tax resident at the corporate tax rate of 17 percent.
Representative offices
A representative office (RO) serves as a short-term and temporary arrangement, designed to explore business opportunities and assess the feasibility of operating in Singapore or the region. An approved foreign company can establish an RO and operate for a period of one (1) year from its commencement. If an RO wishes to continue its operations beyond the first year, it can apply for an extension, which will be evaluated on a case-by-case basis. Extensions can be granted for a maximum of three years.
To be eligible for setting up an RO, companies must meet certain criteria. They should have been in operation for a minimum of three years in their country of establishment and have an annual sales turnover of at least US$250,000. Additionally, the RO should be represented by staff from their headquarters or employ a Singaporean citizen. Furthermore, the company must have less than five staff members.
The RO is confined to activities set out by Enterprise Singapore, which include:
- Gathering of information on markets and potential clients;
- Carrying out research to ascertain product/service information;
- Developing trade contacts and manage product enquiries;
- Participating in trade shows and exhibitions; and
- Gathering information on regulatory requirements for the set-up of a permanent entity.
Private companies limited by shares
The private company limited by shares, commonly known as a private limited company, is the most preferred type of entity among foreign investors in Singapore. This entity is the most flexible, advanced, and scalable type of business form. Below are some key characteristics of a private limited company that makes them an attractive option for foreign investors:
- A separate legal entity — the private limited company is a legal identity and separate from its shareholders and directors. Furthermore, this entity can also acquire assets, enter contracts, or enter debts in its own name.
- Foreign ownership — this entity can be 100 percent foreign-owned.
- Limited liability — the personal liability of the members that contribute towards the paid up capital is limited to the amount that was contributed towards the paid-up capital.
- Tax benefits and incentives — a Singapore private limited company is eligible for various tax incentives. For instance, the corporate tax rate of 17 percent is effective only for chargeable income above S$200,000 (US$147,000) with a 50 percent exemption on the next S$190,000 (US$139,000) of chargeable income. Furthermore, there is no capital gains tax.
- Ease in the transfer of ownership — through the selling of all or part of the shares of the private limited company, the ownership of the company is transferred, thus not requiring any complex legal documents or processes.
After the preparation and execution of the incorporation documents by all involved parties, the company can proceed to register officially with the Accounting and Corporate Regulatory Authority (ACRA). This process is conducted online and can typically be completed within the same working day. Once the registration is approved, the company becomes a legal entity. Upon incorporation, the paid-up capital must be immediately paid and transferred into the company’s bank account. The minimum paid-up capital is at least S$1 (US$0.73).
Variable Capital Companies
The Variable Capital Company (VCC), a new innovative corporate structure for all types of collective investment schemes (investment funds) in Singapore.
The VCC is regulated under its own legal framework through the Variable Capital Companies Act and offers more operational flexibility compared to investment fund structures currently available in the country through trusts, limited partnerships, or private limited companies.
This means fund managers can establish investment funds across both traditional and alternative strategies and as open-ended or closed-end fund strategies.
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Comparison of Business Entities in Singapore |
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Private limited companies limited by shares |
Branch office |
Representative office |
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Legal type |
Legal entity established as a regional holding company or subsidiary of a foreign holding company. Can be wholly owned by a foreign individual and/or corporate investor.
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Legal extension of a foreign holding company. |
Short-term, temporary arrangement with a limited purpose. |
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Business activities |
Business activities can be different from the parent company. The company must obtain the relevant business licenses for its operations in Singapore. |
Business activities, must be the same as the parent company. |
The RO is confined to activities set out by Enterprise Singapore, which include: Gathering of information on markets and potential clients. Carrying out research to ascertain product/service information. Developing trade contacts and manage product enquiries. Participating in trade shows and exhibitions. Gathering information on regulatory requirements for the set-up of a permanent entity. |
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Criteria for eligibility |
At least one shareholder. One Singapore resident director. One company secretary. Initial paid-up share capital of at least S$1 (US$0.74). Registered address in Singapore.
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At least one local representative (Singapore citizen, permanent resident of Singapore, or Employment Pass holder). Registered address in Singapore. Name of the branch office must be the same as the parent company.
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The parent company has been established for more than three years. The parent company has incurred an annual sales turnover of more than US$250,000. The foreign chief representative is from its headquarters; alternatively, the RO may appoint a Singapore citizen to fulfil the role of the chief representative.
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Liabilities |
No liability by holding company of its subsidiary. Liability is limited to the share capital subscribed in the holding company’s subsidiary. |
Parent company bears ultimate legal responsibility for all liabilities and must be registered with ACRA. |
Parent company bears liability for the activities and is responsible for financing operations. |
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Tax treatment |
Taxed at the flat corporate income tax rate of 17 percent. |
Taxed at the flat corporate income tax rate of 17 percent. |
Not applicable since a representative office generates no income. |
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Can the entity benefit from local tax incentives? |
Yes |
No |
No |
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Staff hiring |
Can hire local and foreign workers. |
Can hire local and foreign workers. |
The RO can only hire more than five employees; and A Singapore citizen must fulfil the role of Chief Representative. |
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Annual filing |
Required to file the annual returns and tax returns. |
The accounts of the parent company as well as the branch office must be filed |
Not required. |
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Entity validity period |
Perpetual succession until ceased. |
Perpetual succession until struck off, or the parent company is wound up or liquidated. |
The RO can be established for three years. Furthermore, during the three years, the RO must be renewed each year. |
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Overview of advantages |
Separate legal entity from its members and directors. Can undertake business activities that are different to the parent company. Eligible for local business incentives. |
No capital requirement to set up branch. |
No corporate income tax. Fewer compliance requirements. Enables the parent company to establish a presence in Singapore with minimal costs. |
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Overview of disadvantages |
Numerous statutory requirements. |
Activities must be in line with that of the parent company; and Unable to benefit from local business incentives.
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Unable to benefit from local business incentives. |
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Company set up requirements
The company set up process for a representative office, branch office, or private companies limited by shares differs. However, overall, businesses must pay attention to the following requirements:
Reservation of name
The company name must be approved by the Accounting and Corporate Regulatory Authority (ACRA) prior to starting the company registration process. The name application shall be submitted via ACRA BizFile for approval, which may be rejected if the name is identical, similar, or phonetically similar to a company that has already been registered.
Appointing key personnel
Depending on the type of entity chose for setting up in Singapore, certain personnel must be appointment within the time stipulated under Singapore’s Companies Act.
For example, for a private limited company must immediately appoint at least one director who is ordinarily resident in Singapore, above the age of 18 without any history of misconduct or bankruptcy in their work history.
On the other hand, a Representative Office must have a foreign chief representative from its headquarters or, alternatively, a Singapore citizen to fulfil the role of the chief representative.
Registered address
Registered address must be a commercial business address in Singapore. Every company must ensure that their registered office is open and accessible to the public for a minimum of three hours during regular business hours on each business day. Business days refer to weekdays, excluding Saturdays, Sundays, and public holidays.
Minimum paid up capital
Paid-up capital is the sum of money that shareholders have given to a firm in Singapore in exchange for their shares. There is no statutory minimum paid-up capital for private limited companies, which are the most prevalent type of business entity in Singapore. A private limited company can be formed by business people for as little as S$1. As a result, startups and small businesses can create a legal organisation without having to invest a sizable sum of money up front. However, unique capital requirements may apply to certain industries.
Having said that, it's critical to remember that businesses should have enough money to meet financial responsibilities and do business as envisaged. To ensure the smooth operation of the business, it is advisable to carefully analyze the financial requirements of the company and set a suitable amount of paid-up capital.
Even if there isn't a set minimum, some companies may decide to have a greater paid-up capital to increase their credibility and financial stability, particularly when dealing with banks, suppliers, or customers that take this into account when determining the company's dependability.
FAQ: Other Considerations When Setting up a Business in Singapore
How can I choose the right way to enter Singapore?
Start With the Right Plan and Support. As with any foreign country, Singapore’s legal entity requirements, options and processes are unique, and establishing a legal entity requires the various costs of such an investment, time, and can bear other investment risks. Once invesments are made, reversing strategies can be more challenging so it is vital that a company avoid missteps from the outset.
To optimize the chances for success, a business would do well to have better
- Informed and guided business model;
- Selection of business partners or suppliers to work with;
- Options for initial service lines, products, and pricing models;
- Options to set up in the right locations and more.
Obtaining on-the-ground information and practical experience in the market, can significantly help in these areas, and help position an enterprise for successes in Singapore. Besides researching this Doing Business in Singapore guide thoroughly, it is advisable to leverage professional assistance for further guidance with pre-market entry, investment decisions, entity set up, and all business, operational and financial factors that will arise along the path to achieving your investment objectives. In this respect, the contributors of this Guide are available to provide this expertise, via the Chat or Contact us link buttons.
What are the steps to open a bank account in Singapore?
As a financial hub in Southeast Asia, Singapore hosts a variety of local and foreign financial institutions. As such, nearly all major foreign banks have a presence in the city-state and a Singapore-based corporate account can receive funds from any location worldwide, efficiently.
Singapore banks are set to request comprehensive information from foreign clients regarding their professional backgrounds and proposed business plans. Foreign-owned companies or individuals can expect to provide more detailed information compared to their local counterparts. The banks will conduct Know Your Customer (KYC) checks, which involve conducting thorough due diligence to verify identities and evaluate potential risks. This process may also involve identifying the ultimate beneficial owner (UBO) in corporate structures and gathering information on all intermediate corporate layers.
This is time consuming, and it will take clients several months to provide these in most cases. Banks may also request supplier, vendor and client contracts, a list of the top vendors and suppliers as well as countries and jurisdictions that the company will engage with. Most banks also have minimum account balances and minimum revenues that clients need to maintain - otherwise the account opening will be rejected. Clients should do their research and engage trusted advisors with a network of contacts in the banking sector to facilitate account openings.
How well developed is Singapore’s IP protection environment?
Singapore has one of the world’s most robust legal frameworks for intellectual property (IP). Singapore’s IP framework is comprehensive and effectively safeguards the various forms of IP – patents, trademarks, copyrights, and trade secrets. The Intellectual Property Office of Singapore (IPOS) – a statutory board under Singapore’s Ministry of Law – oversees IP protection in the country. IPOS has established a reputation for efficiency and reliability in helping businesses manage and protect their IP assets.
Can I do business in Singapore without an entity?
Singapore is known for its business-friendly environment, robust economy, and as a gateway to the ASEAN market – attracting numerous foreign companies looking to expand their presence in Asia. While setting up a legal entity in Singapore is the common approach, businesses may prefer to explore other options for doing business without establishing an entity.
A company can choose from several business types options when aiming to enter Singapore: a Branch Office; a Representative Office, Variable Capital Company or Private Limited Company. Each of these types may require a significant investment to set up and may bring about certain amounts of risk to the investment.
Aside from setting up a corporation, there are a few other alternatives that are available that may help a company to get started doing business in Singapore such as
Representative office
One such type is a Representative Office (RO), which offers a low-cost entry option for many companies, and are among the most common for companies that are first-time entrants to the Singapore market. RO’s are often suitable for companies that may be seeking to gain a better understanding of the market with a smaller initial investment, and may be used to pave the way for a larger presence within the country in future years.
ROs are currently permitted to engage in the following activities:
- Gathering of information on markets and potential clients;
- Carrying out research to ascertain product/service information;
- Developing trade contacts and manage product enquiries;
- Participating in trade shows and exhibitions; and
- Gathering information on regulatory requirements for the set-up of a permanent entity.
However, despite its lower setup and running costs, an RO carries some disadvantages. Firstly, it is restricted from engaging in sales activities or issuing invoices, limiting its operational capabilities. Additionally, an RO is limited in terms of the number of employees it can hire and can only operate for a maximum of 3 years. This where an Employer of Record model or outsourcing and contractual agreements could be beneficial for businesses entering Singapore.
Employer of Record in Singapore: Get started without an entity
Global Staffing Solutions (GSS) is a market entry strategy and suite of services that can make it easier for businesses to operate internationally. Key within the GSS suite is the Professional Employer Organization service.
A Professional Employer Organization is a third-party entity that provides comprehensive HR solutions to businesses. PEOs typically handle various HR functions, such as payroll processing, employee benefits administration, compliance management, and risk mitigation.
By engaging in a contractual agreement with a PEO, businesses can delegate specific employer responsibilities, enabling them to concentrate on their core competencies while benefiting from streamlined HR management.
PEO’s offer businesses a valuable solution for HR management. The advantages of engaging a PEO, such as cost-effectiveness, compliance expertise, comprehensive benefits, and the ability to focus on core business functions, make them an appealing choice for companies seeking to optimize their workforce management.
Outsourcing and contractual agreements
Foreign companies can leverage outsourcing and contractual agreements. They can engage local service providers or agents to handle specific business functions, such as sales, distribution, marketing, or logistics. These agreements allow companies to access the local market while maintaining flexibility and minimizing costs. It is important to establish clear contracts and ensure compliance with local laws and regulations.
While a RO is an option for companies we would never recommend them. Set up and running costs are the same with private limited companies and the RO has several disadvantages, it cannot engage in sales activity or issue invoices, it can only employee are very small amount of employees and it cannot operate for more than 3 years. Therefore we always recommend a private limited company over an RO setup.
How difficult is it to close a business in Singapore?
To deregister a foreign company in Singapore, including a branch or representative office of a foreign company, the company must notify the Singapore Accounting and Corporate Regulatory Authority (ACRA) within seven days of ceasing business operations.
The procedures for closing a foreign company in Singapore can be done online through ACRA’s official business filing portal, BizFile. A Singapore personal access password (SingPass) is required to log in to the portal.
- The procedure to do so is as follows:
- Notification of cessation of business
- Settling outstanding tax matters and liabilities
- Cancelling registration for goods and service tax
- Application for striking off
- Notice by authorized foreign company representative of liquidation or dissolution of company
