Singapore remains a popular destination to live and work. People from all walks of life have moved to Singapore from all over the world. Recently, the city-state welcomed another high-profile resident, Mr James Dyson, who announced the purchase of two luxury homes, along with a desire to be nearer to the fastest-growing markets of his company.
Singapore offers a stable social, legal, and political climate for investment. People who are looking for discretion, safety and professionalism often find Singapore at the top of their list. Geographically Singapore is close to fast-growing markets such as China, Indonesia, Malaysia, Vietnam, Cambodia, or Myanmar. It is not only well connected by air, but its open and stable financial system is also attractive to many global businesses.
Not only does Singapore offer investment and profit opportunities, but it is also a safe place for people to enjoy the fruits of labour. The crime rate is extremely low, and Singapore’s multi-racial and secular identity makes it one of the safest cities in the world for people of all faiths, wealth or gender.
This article discusses the process by which foreigners (non-Singapore citizens) may set up businesses in Singapore and live there. There are a number of factors to consider:
- Ownership structure
- Regulatory, Compliance and Licensing
- Commercial contracts
- Grants and governmental support
A person who is not a Singapore citizen requires a pass to remain in Singapore. A common misconception is that foreign director of a Singapore company is automatically entitled to enter and remain in Singapore. A foreigner who is a director or shareholder still needs a valid immigration pass to enter and remain in Singapore.
Different passes are issued by the Singapore Government depending on the individual’s particular circumstances and reasons for wanting to reside in Singapore. Of particular interest to persons intending to set up a company and live in Singapore would be the employment pass, EntrePass and PEP. From our experience, some of the factors that the immigration authorities take into account in deciding whether or not to issue such a pass to a particular person are:
- Education level/Unique skills
- Financial performance of the company
- Background / General good character
Some examples of the passes that are issued by Singapore for professionals are:
- Employment pass
- Personalised Employment Pass (PEP)
Typically, passes are issued for a period of about 1 year at the commencement of the business based on commercial projections. The actual revenues and salaries paid will be reviewed during the time when the pass is to be renewed. Documentary proof of transactions and residence over the relevant period of time will be required.
Other types of passes are issued to lower skilled workers and family members who will not be working in Singapore:
- S Pass
- Work Permit
- Training employment pass
- Social visit/”Tourist” pass
- Long term visit pass
- Dependent’s pass
For individuals looking to make substantial investments into Singapore, the Global Investor Programme (GIP) accords Singapore Permanent Resident status (PR) to eligible global investors who intend to drive their businesses and investment growth from Singapore. A very strong business track record (e.g. turnover of S$50million a year) and successful entrepreneurial background to qualify.
There are several options for the ownership structure of the business. The more common ones are:
- Limited liability company
- Sole proprietorship
- Branch office
- Representative office
The limited liability company remains the most common option for many reasons. A limited liability company has a separate legal personality, can own property in its own name, hire employees, all while giving the flexibility to change its ownership proportions by trading shares or issuing new shares.
Having limited liability and separate legal personality means that the rights and obligations of the company are separate and distinct from its directors, employees, or shareholders. In practice, this means that these persons will not be directly responsible for the debts and any other responsibilities of the company.
Some of the basic requirements to set up a company are:
|1||At least 1 shareholder||Singapore companies can be 100% foreign-owned, and the shareholder may be an individual or a company|
|2||At least 1 local resident director||An individual who is either:|
|3||1 company secretary||Must be a local resident in Singapore and cannot be the sole director.|
|4||At least S$1 in paid-up capital||Can be in any currency as long as the amount is equivalent to S$1.00.|
|5||1 local registered address||This must be an actual physical address in Singapore, and not just a post office box.|
|6||Name||A unique name that will not be confused with an existing company. Restrictions apply on the use of names containing words like “Singapore”, etc.|
There are also other annual corporate secretarial requirements that need to be complied with each year, such as the filing of annual returns, taxes, etc.
Regulatory, Compliance and Licensing
Depending on the nature of the business, your legal advisors will advise on compliance with Singapore’s laws and regulations. For example, there are restrictions and licensing requirements on many financial services, such as remittance, foreign exchange, financing etc. Such businesses require government approval and licensing.
There are also broader regulatory regimes which affect a broad range of businesses, such as the Personal Data Protection Act, which sets baselines as to what kind of personal data a business may collect, and the extent which they may utilise that data.
Singapore has a competitive tax environment, with no capital gains or estate taxes for individuals. The maximum individual income tax is 20% whilst for corporates, it is 17%. Various tax calculations apply for company dividend payouts, Goods and Services Tax, etc.
The employment contracts will govern the commercial relationship between the business and its employees. It is important to consider that there are various statutory provisions under Singapore law that entitle employees to certain benefits that cannot be excluded by contract, for example, the entitlement to medical leave, written payslips, etc.
Important considerations to note in the employment contracts would be clauses setting out salary, entitlement to leave, probation periods, non-compete/non-solicitation, termination, confidentiality, etc.
Just like employment contracts govern the commercial relationship between the business and its employees, commercial contracts with suppliers, landlords, tenants, vendors, consultants, etc will govern the commercial relationship between them and the business.
Under Singapore law, there is broad freedom to contract and generally, there are few restrictions as to the type and nature of agreements that may be entered into between business entities. Unlike employment contracts, as there are few underlying statutes governing such commercial arrangements, these contracts tend to be more comprehensive and customised to the particular industry and commercial requirements.
Grants and government support
To encourage and promote foreign investment in Singapore, there are various government schemes that have been put in place by the Singapore Government. These schemes are constantly being adjusted to adapt to the changing needs of the country. At the time of writing, the following schemes are currently being offered:
- Pioneer Certificate Incentive (PC) & Development and Expansion Incentive (DEI)
- Finance & Treasury Centre (FTC) Incentive
- Aircraft Leasing Scheme (ALS)
- Research Incentive Scheme for Companies (RISC)
- Training Grant for Company (TGC)
- Intellectual Property (IP) Development Incentive (IDI)
- Resource Efficiency Grant for Energy (REG(E))
- Land Intensification Allowance (LIA)
How can we help you?
IRB Law has experience in guiding and setting up various business structures in Singapore. For more help, please don’t hesitate to get in touch for a no-obligation discussion.
“We engaged IRB Law to advise us on the appropriate company structure and share ownership scheme. They were professional and efficient throughout.”
Ben Rush, Founder, FrameIT