One of the key prerequisites for your business success in Singapore is the real well-established economic substance, i.e. the presence and operation of your company in this jurisdiction. It involves certain costs, but they will pay off: the substance in Singapore significantly mitigates the risk of sanctions from the regulator. Besides, it is likely to reduce the tax rates and boost the prestige of the company.
This article is an updated outline of the mandatory substance requirements, costing, and our fee-based assistance to offshore companies in Singapore. Please note that such services are available only to business entities already incorporated in this jurisdiction. If you need our help in company opening, you should contact us to discuss and order the customized business registration package offer.
You are welcome to send us any questions about business opportunities in Singapore, the current economic environment, and the company registration details, as well as the banking and other issues. We can book for you a free private online consultation with our seasoned experts so that you can get detailed answers.
Advantages of offshore/midshore business in Singapore
Singapore is an exceptionally attractive place to live in. Let us name just a few benefits of maintaining your company substance in this jurisdiction.
- Low or zero-rate taxes: new companies are eligible for zero-rate taxes (including the zero-rated income tax). This incentive is to stimulate and support the overall business development in Singapore.
- No capital gains tax, no tax on dividends.
- The banking secrecy is similar to the Swiss banks’ commitments, with some reservations about beneficial owners (reflected in amendments adopted recently in Singapore in line with the macro-economic trends).
- The national currency stability: the Singapore dollar is the best option for long-term savings (if capital growth is the client’s secondary goal).
- The lack of exchange control and any restrictions on repatriation (withdrawal) of capital. This benefit is a nice little added value, even though it can hardly be the main reason for creating a real economic presence of a company in Singapore.
- A simplified procedure for obtaining a residence permit. Owners of a company with a real economic substance in Singapore can obtain a “long-term” residence permit, Entre Pass.
- 360-degree digitalization of business: companies in Singapore interact with government agencies exclusively online. Businesses without actual substance do not have this privilege, and their day-to-day operations are thus severely hampered.
- The high reputation: companies with substance in Singapore enhance the trustworthy status of the owner, win the respect of partners, and earn many advantages over competitors.
- The simplified procedure for opening bank accounts (personal, corporate). Companies without real substance may face significant difficulties, as banks often refuse to work with businesses without tangible economic presence.
- There is no bias against non-resident companies. Nevertheless, even non-resident companies are required to prove they have economic substance in Singapore.
Real substance requirements in Singapore
Do you still believe that the only proof of a company’s actual existence in a jurisdiction is its local brick-and-mortar office? This opinion is valid only to some extent, as the requirements for substance in Singapore are much more comprehensive.
Let us sum up the standard requirements set for economic substance of companies in Singapore.
1. A long-term lease / virtual address for the company office
This is the most important, yet not the only requirement. In many cases, it is possible to avoid high costs by booking a virtual office (as a temporary measure, before the company establishes its business in Singapore).
A virtual office can be a viable half-measure, as long as it meets a few basic requirements. The InternationalWealth experts are ready to help you with all the administrative chores and arrangements for efficient operation.
- telephone calls management
- fax communication management
- legal mailing address
- business / official correspondence forwarding.
Please note: the main advantage of a virtual office is the significantly lower costs (rent/purchase of the office facility, office equipment, furniture, stationery).
2. Tax residency status
The list of services is customer-specific. We will tailor the best package of services, so you won’t pay for features that you don’t need.
- Company registration with the Inland Revenue Authority of Singapore (IRAS) (the national tax authority)
- Tax Counseling
- Tax Residency Certificate.
Attention: The requirements to prove the real economic presence of the company in Singapore are very strict. Therefore we have to warn you against trying to comply with them through your arrangements without any assistance or advice from a seasoned expert.
Accounting services offered by InternationalWealth are quite varied – tailored for small companies, large businesses, and transnational corporations.
- Bookkeeping (subscription-based, on-demand)
- Maintenance, preparation and filing of financial statements of the company
- Filling out tax returns
- Auditor reporting
- Consultations on any issues of the company accounting (taxes, reports, control).
4. Document filing and storage
The corporate law in Singapore does not clearly require that the company’s documents must be kept in Singapore. But practice shows that this arrangement sometimes turns out to be extremely important.
Taking care of staff recruitment is a tedious occupation. But a staffed company is an important proof of a business’s economic presence in the country.
- sourcing / testing of candidates (in Singapore and other jurisdictions)
- documenting the actual employment
- computation of all payments (salary, vacation pay, sick leaves)
- сompany registration with the tax authority
- filing of mandatory reports.
6. Calls management
Calls management is part of the company office arrangements. If you already have an official legal address in Singapore, we will help you make it meet all the requirements of substance.
- your dedicated telephone line
- a business broadband (Internet) connection
- fax communication
7. Corporate website arrangements
In fact, it is not just a matter of finding a provider to host a company’s official page. This requirement involves full digitalization of information and services.
- the company’s web portal design
- the corporate e-mail address registration
- the domain name registration
- selection of the website hosting provider
- selection of optional web services.
8. Bank account
We highly recommend opening an account with a bank in Singapore. The procedure is quite complicated; the probability of failure is high. Therefore, this objective requires knowledge, expert counseling, diligence, action.
Our list of requirements is not exhaustive. In many cases, the company’s economic presence (substance) in Singapore meets the company-specific needs, and standard approaches are not sufficient. That is why we always ask clients to compile a list of their requirements and conditions.
Substance in Singapore: the key aspects
The experts of Internationalwealth.info will be glad to cope with all the preparations. Your participation will be minimal. If you have decided to provide your company with an actual economic presence in Singapore, we will ask you to answer our basic questionnaire.
Details to be shared with us (the questionnaire for substance arrangements):
- Personal (passport) details
- Email address
- Contact details (phone, the second email address)
- Country of your tax residency
- Company name (or several projected variants)
- Types of economic activity (not more than 3), plus some additional – only if absolutely necessary
- Size of the authorized capital
- Need to hire a professional director, secretary, other staff
- Availability of a bank account(s), preferably in Singapore
- Need to open a foreign bank account(s).
- Account(s) in payment systems.
- Account(s) on crypto exchanges
- Approximate sums of incoming/outgoing payments (month, year), their purpose, quantity, the jurisdiction of the sender(s)
- Residence status of the main (major) buyers / consumers / suppliers / counterparties.
Accounting and reporting requirements in Singapore
Real economic presence does not exempt businesses from maintaining, preparing, and filing reports. The procedure is transparent and straightforward because the regulator does not aim to “strangle” the company, but there are many subtleties/tacit pitfalls. Therefore, when ordering the substance arrangements, you should discuss additional reporting services with our experts.
Annual Tax Return
- filed annually (submitted to ACRA)
- signatures of director, secretary are mandatory
- the duty in the amount of 20 SGD
- the Annual Return must include information on the Singapore company executives (director, secretary, shareholders), authorized capital, office (can be virtual), main financial indicators.
- accounting is mandatory
- audits are mandatory (exceptions are possible)
- the auditor is appointed by the director (there are serious qualification requirements)
- the annual report is submitted at the same time as the financial statements.
- submitted to IRAS
- the deadline is November 30
- application for DTA benefits is optional
- VAT is payable every 3rd month
- can be submitted remotely via myTaxPortal, by email or fax.
How much does the actual economic presence/substance in Singapore cost?
Much depends on the contents of the package of services. We will be glad to offer you special options. Basic packages are designed for start-ups with limited budgets. All-inclusive services are tailored for major corporations with extended economic needs.
Extended services are marked with * (the prices are computed on a year-round basis), ** – for monthly service.
- 1,500 EUR. Comprehensive digitalization of the Singapore company (domain registration/publication, corporate website, corporate email address, hosting fees)
- 5,400 EUR. Lease* of a workstation. Please note: the contract is concluded on behalf of the company
- From 36,000 EUR. Physical office* of the company (actual substance)
- 750 EUR. Employment agreement (preparation of the employment contract)
- 1,400 EUR. Legal engagement of the director** (part-time employment, 12 hours/month)
- EUR 2,700. Contributions to the pension fund* for each employee
- 750 EUR. Dedicated phone number.
- 2,700 EUR. Payment for communication services*
- 675 EUR. Managing outgoing e-correspondence* of the company
- 675 EUR. Hosting services* (Singapore server)
- 675 EUR. Domain rental*
- 1500 EUR. CavCharge (connection, setup, adjustment, use).
- 1500 EUR. The company plate in the business center.
Creating substance for a company in Singapore is a challenging task. But without a real economic presence, the business will be exposed to risks, and it will become impossible to claim tax benefits at all. If you are planning a long-term presence in Singapore, you should discuss with our experienced experts the issue of obtaining a substance (to book a free private consultation, please write to our email address: firstname.lastname@example.org).
How do I calculate withholding tax in Singapore?
The withholding tax is computed on the basis of certain types of payments of non-residents (important!) in Singapore. For example: 1) Interest, debt payments, commissions – 15%. 2) Any payments (e.g. royalties) arising from the use of immovable property – 10%. 3) Business management consulting services – taxed at the corporate tax rate. 4) Technical support and consulting services – as in (3). 5) Lease payments to (important!) non-resident company – 15%. Note the advantage of resident companies in Singapore – they do not pay the tax on dividends (only from a foreign source), from foreign affiliates, from fees for services abroad. The withholding tax rate for non-resident private persons is 15%.
I am interested in business in Singapore. Are there any disadvantages?
We would not call them disadvantages but, rather, reservations that can be resolved. 1) Expensive real estate. Though this is true in Singapore, it is quite possible to find some moderately priced listings. Anyway, after your business matures, this challenge will not seem too significant. 2) High salary expectations of local staff. Unless your business involves manufacturing capacities in Singapore, this restriction is not critical. 3) Limited domestic market. If your business is in the banking/financial sphere or focused on the international market, this observation does not matter. 4) Advanced requirements of banks. This peculiarity is typical for all developed jurisdictions. The situation is more favorable in classic offshore jurisdictions, but they also have some reservations.
I would like to get an EntrePass in Singapore. What documents should I prepare?
The list is as follows: 1) Entrepreneur’s Application form. 2) References from previous work. 3) Proof of previous work experience. 4) The elaborated business plan (maximum 10 pages, less is better here). 5) A recent photo (not older than 3 months). 6) A copy of the main pages of the applicant’s passport. 7) A printout of the business profile (company activities). 8) A bank statement (from USD 50,000). Please note that some additional documents may be required, as the Entrepreneur Visa provides many advantages, but it is not easily obtained. You are welcome to discuss these issues with our professional experts.