There are various structures for individuals to do business in Singapore. However, the most flexible and yet advantageous structure, in our opinion, is a Private Limited Company. There are a few reasons why we recommend our clients to incorporate a company to do business in Singapore.
Limited liability for company owners
A Private Limited Company is a separate entity from its shareholders. The company can enter into legal contracts and business transactions with other companies or individuals. It is then liable for the outcome of these contracts. We tend to tell our clients that forming a company is like giving birth to another person. The financial liability of the shareholders is limited to the issued and additional paid-up capital in the company. Please note that this does not mean that the directors are not responsible for their actions.
New start-ups can take advantage of the government’s tax exemption scheme which was introduced in Year of Assesment (YA) 2005. Under the scheme, new companies are given full exemption on the first $100,000 of chargeable income and a further 50% exemption on the next $200,000. This applies to the first 3 years of assessment. This effectively means that new companies that earn less than $100,000 for the first 3 years of assessment pay no corporate tax at all. However, this tax exemption does not apply to investment holding companies or companies whose principal activity is that of developing properties for sale, investment, or both.
To qualify for this tax exemption, the company must fulfil these 3 conditions.
- It must be incorporated in Singapore
- It must be a tax resident in Singapore for that financial year
- The company must not have more than 20 shareholders throughout the basis period for that financial year where all of the shareholders are individuals “beneficially and directly” holding the shares in their own names; or at least one shareholder is an individual “beneficially and directly” holding at least 10% of the issued ordinary shares of the company.
Corporate Income Tax (CIT) rebates are given to all companies to help them deal with rising business costs. For the year of assessment 2017, the CIT rebate is set at $25,000. The Singapore government has consistently given CIT rebates to businesses. This pro-business mindset is what keeps Singapore competitive.
If you decide to start a company, only revenue expenses incurred after your business commences are deductible for tax purposes. The government gives a concession whereby revenue expenses incurred one year before the first day of the financial year in which you earn your first dollar of business receipt will be tax-deductible.
Government grants available
There are many government grants that are in place to help companies. The government has set aside a large portion of the budget for this purpose. There are grants like the Capability Development Grant (CDG) by Spring Singapore or the Market Readiness Assistance (MRA) grants among a whole host of other useful grants for companies.
Incorporating a Private Limited Company in Singapore is extremely simple and affordable. You may engage an ACRA filing agent to incorporate your company on your behalf.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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