Why Use Singapore as a Base for ASEAN Expansion
Singapore is globally renowned as a business-friendly destination that offers a stable socio-political environment, free-market economy, highly efficient infrastructure, and an attractive tax regime.
As such, a primary advantage of Singapore is its ability to act as a centerpiece for the holding and management of regional assets. Holding companies are a vital component of any international expansion strategy, and Singapore offers investors a stable environment from which to administer operations in more speculative markets in Asia. The city-state has already attracted more than 37,000 international companies and 7,000 multinational companies that utilize Singapore as their regional headquarters.
Choosing your entity 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.
Prior to establishing a company, investors need to decide the type of business structure that suits their needs. There are five types of business structures in Singapore:
Sole proprietorship (one owner);
Partnership (two or more owners);
Limited liability partnership; and
Private company limited by shares.
Private company 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.
There 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.
A step-by-step guide to the corporate establishment
Incorporating a business in Singapore is efficient and cost-effective and can be broken down into several simple steps.
Step 1: Company name approval
The first step for foreign investors is to have their company name approved with the Accounting and Corporate Regulatory Authority (ACRA) — a statutory board under the Ministry of Finance responsible for the regulation of business activities, corporate service providers, and public accountants in Singapore.
Once a name has been proposed, the foreign investor should check if it has already been registered through the BizFile online portal as the proposed name cannot be identical to existing ones. Company names should also not be vulgar or offensive in nature. ACRA is usually swift with this process, often taking only a few hours to one day to approve. The only exception is if the business is in a field that requires a specific license, such as medicine, finance, and law. Also, the name application costs S$15 (US$11.02), which will be reserved for 120 days.
Step 2: Document preparation
Once the company name has been approved, the foreign investor can proceed with preparing the necessary documents for ACRA approval. These are:
A Company Constitution, also known as the Articles of Association;
The signed consent to act as a director by each director (at least one director must be a Singaporean citizen, permanent resident, or EntrePass holder);
The registered local address;
Signed consent to act as a company secretary (appointment must be done within six months after incorporation); and
Details of each shareholder (can have between 1-50).
The company’s corporate service provider is obligated by ACRA to conduct a Know Your Customer (KYC) due diligence in accordance with the international Anti-Money Laundering Act to verify the documents as well those of the stakeholders involved in the company. If all documents are in place, step 2 can be prepared within one day.
Step 3: Incorporation
If the incorporation documents have been prepared, the company can be officially registered with ACRA. The process is done online and only takes one hour. 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).
Singapore vs. Hong Kong
Hong Kong will continue to remain important for companies looking to tap the Chinese market, but Singapore will continue to serve as a magnet for multinationals that want to use the country’s innovation-led economy and generous investment and tax regime as a springboard for Southeast Asia.
For businesses that have not yet decided whether to target the market in China or Southeast Asia, Singapore is more likely to have a DTA or FTA that will benefit your business: Singapore has more double taxation agreements (DTAs) (90+) than Hong Kong (44), and more free trade agreements (FTAs) (26) compared to Hong Kong’s seven.
Source: Asia Briefing