Singapore: Introduction to Doing Business in Singapore

Last Updated: 9 September 2003
Article by Melisa Goh

A foreign company is not allowed to carry on business in Singapore or acquire a place of business in Singapore unless it is registered with the Singapore Registry of Companies and Businesses ("RCB"). Under the Singapore Companies Act (Cap. 50), a foreign company may register itself as a branch, or may incorporate itself as a local private limited company.

The following factors should be taken into consideration in deciding whether to incorporate a branch or a local subsidiary:

  • Separate legal entity - a local subsidiary is a separate legal entity from its parent company. On the other hand, a branch is not a separate legal entity from its head office.
  • Registration Fees - the registration fee payable for the incorporation of a local subsidiary is presently S$300.00, whereas the registration fee for the registration of a branch is calculated on a sliding scale, starting with a minimum of S$1,200.00.
  • Taxation - there are different tax consequences for a local subsidiary and a branch. Although both are taxed at the same corporate tax rate, a branch may not be able to take advantage of numerous tax incentives available only to companies resident in Singapore. Singapore residency for tax purposes is determined by whether the control and management of the company is exercised in Singapore. A non-resident will also not be entitled to favourable withholding tax rates relating to certain categories of payment made to the residents of countries with which Singapore has concluded double taxation treaties. Payments made by a branch to a Singapore resident will also be subject to withholding tax under Singapore law, though it is possible to obtain a waiver from the Comptroller of Income Tax if the requisite requirements are satisfied.

Representative Offices

A foreign company may consider registering a representative office in Singapore if it is keen to test the business environment in Singapore before deciding to invest here. Representative offices are opened as temporary facilities for foreign companies to explore business opportunities in Singapore.

Representative offices may only carry out promotional and liaison work in Singapore. They are prohibited from carrying on any business activities in Singapore.

Incorporating a Private Limited Company in Singapore

We will be pleased to assist you in the incorporation of a private limited company in Singapore. We set out below a summary of the details relevant to, and information required for, such incorporation.

  • Proposed Name of company - Every private limited company must have the words "Private Limited" or "Pte Ltd" as part of and at the end of its name. A company cannot be registered under a particular name unless that name has been reserved for use with the RCB. Reservation of names must be made in the prescribed form and may be reserved for two months from the date of lodgment of the prescribed form.
  • Memorandum of Association - The memorandum of association of a company contains the objects of the company. It also contains a list of powers that can be exercised by the company in achieving those objects. It must state, inter alia, the name of the company, the objects of the company, the amount of the company's share capital and the manner in which the share capital is to be divided into shares of fixed nominal values, and the names, addresses and occupations of the first subscribers.
  • Articles of Association - The articles of association are a company's rules for internal management. The articles, when registered, bind the company and the members as if they were a contract under seal and set out the members' rights and liabilities vis-à-vis the company. A company may sue a member and a member may sue the company to enforce or restrain breaches of the articles.
  • Authorised and Paid Up Capital - The authorized or nominal capital of the company represents the ceiling of the capital available for issue. Any allotment of shares beyond the authorized capital is void. A company need not allot all the shares in its authorized capital. The issued capital is the amount of authorized capital that has actually been subscribed by shareholders. The issue capital may either be wholly or partly paid up by the shareholders. Each company must have a minimum of two issued shares.
  • First Subscribers - The first subscribers of the company must be any two natural persons. For ease of incorporation, these two subscribers should be present in Singapore to sign the incorporation papers. If necessary, we would be pleased to provide nominee subscribers for the purpose of incorporation.
  • Directors - The Companies Act provides that there must be a minimum of two directors, of whom at least one must be ordinarily resident in Singapore. "Ordinarily resident" may be interpreted to connote residence in Singapore with some degree of continuity and apart from temporary and accidental absences. The directors must be of full age and capacity. Each person to be appointed as a director must execute a consent to act in the prescribed form.
  • Registered Office - From the date of incorporation, each company must have a registered office in Singapore to which all communications and notices may be addressed and which shall be open and accessible to the public.

Setting up a Branch Office in Singapore

Before a foreign company can be registered in Singapore, it is necessary to reserve a name for it under the Companies Act. This reservation must be made in the prescribed form and once approved, the reservation is effective for two months from the date of lodgement of the reservation form.

The following information must be provided in the application for the reservation of name:

  • The name of the foreign company
  • The country of incorporation of the foreign company
  • The date of incorporation of the foreign company
  • The capital structure of the foreign company
  • The principal activities of the foreign company
  • The other countries in which the foreign company is registered (if any)

After the Registrar has approved the name, the foreign company must effect registration in Singapore before it commences business. We will be pleased to assist you in the registration process.

We set out below a summary of the documents that the foreign company must lodge with the RCB for registration:

  • Certificate of incorporation - The foreign company is required to submit a certified copy of the certificate of its incorporation or registration in its place of incorporation or origin or a document of similar effect. The certification must be done by the issuing body no earlier than three months prior to its lodgment with the RCB.
  • Memorandum and articles - It is also required to submit a certified copy of its charter, statute or memorandum and articles of association or other instrument constituting or defining its constitution. The relevant document must be certified no earlier than three months beforehand by the overseas official authority which incorporated the company, a notary public, or a director, manager or secretary of the company in the form of an affidavit.
  • Particulars of Directors - The foreign company must further furnish a list of the directors of the foreign company together with each director's residential address, nationality, occupation, passport number (if any) and date of appointment as director. If the director is a director of any public company or subsidiary of public company in Singapore, then the name of such company in which he is director must be provided. If the list includes directors resident in Singapore who are members of the local board of directors, a memorandum duly executed by or on behalf of the foreign company stating the powers of the local directors must be furnished.
  • Agents - Every foreign company is required to appoint at least two natural persons resident in Singapore (residents include foreigners with employment passes) as its agents in Singapore to accept on its behalf service of process and any notices required to be served on the company. The agents will be appointed by way of a memorandum of appointment of agent. The memorandum, and an affidavit verifying the execution of the memorandum, must be submitted to the RCB.
  • Notice of situation of registered office - A foreign company must have a registered office in Singapore to which all communications and notices may be addressed and which shall be open and accessible to the public.
  • Statutory declaration - The foreign company must also submit a statutory declaration in the prescribed form made by the agents of the foreign company.

Taxation

Tax on income of a corporation

Singapore tax laws only tax income of a corporation that is derived from a source within Singapore or received in Singapore from outside Singapore. There is no precise definition of "source" in the Singapore Income Tax Act and consequently, each commercial activity has to be carefully examined to determine the source from which it generated income. Income is regarded as received in Singapore from outside Singapore if the income:

  • is remitted to, transmitted or brought into, Singapore;
  • is applied in or towards the satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; or
  • is applied towards the purchase of any movable property which is brought into Singapore.

In Singapore, income is assessed to tax on a preceding year basis. Essentially, this means that income earned by a company in a fiscal year will be taxed in the following tax year, referred to as the year of assessment. For example, income for the fiscal year ended in 2002 will be assessed in the year of assessment of 2003.

As discussed, Singapore incorporated companies and Singapore branches of foreign companies are both taxed at the same corporate tax rate.

Goods and Services Tax ("GST")

GST is a tax imposed on the supply of goods or services made in Singapore. GST is payable on any taxable supply made by a taxable person in the course or furtherance of any business carried on by him; and on the importation of goods into Singapore.

A "taxable supply" is a supply of goods or services made in Singapore other than an exempt supply. A "supply" refers to any form of supply made for a consideration. An "exempt supply" generally relates to financial services, leases and sales of residential properties.

GST is only required to be charged on a supply of goods and services made in Singapore.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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