What is overseas / offshore company?
There is a common misconception that the use of oversea / offshore company means evading taxes and hiding money from the government, which is definitely not the case.
In fact, to set up an offshore company or relocate your existing business overseas is a crucial step toward internationalizing yourself and your assets.
The term Overseas / Offshore Company means a company incorporated in a country outside the country of the place of residence / incorporation of beneficial owners.
Again, this is typically pursued to realize various privacy, financial, legal or tax benefits for the owners.
Background of Singapore:
In over four decades, Singapore has established a successful financial centre of international repute in the heart of Asia Pacific. Singapore’s financial centre provides a broad range of financial services including banking, insurance, investment banking and treasury services for its domestic economy and Asia Pacific region.
Singapore is recognized as an well-established international business hub for entrepreneurs, corporations and venture of all sizes in the following aspect:
Over 200 banks have presence in Singapore and a growing number have chosen to base their operational headquarters here.
Singapore is the 3rd largest foreign exchange (FX) centre in the world, it houses the major global FX dealers.
Singapore Exchange (SGX) serves the listing of around 800 companies, nearly 40% of them are overseas companies.
With the appointment of an RMB clearing bank in Singapore in effect in 2013, financial institutions in Singapore are able to play a role as an offshore Renminbi (RMB) clearing centre to conduct RMB businesses and RMB liquidity, intermediating the growing trade and investment flows between China and the rest of the world.
Singapore is located in the heart of Southeast Asia, springboard to access markets of 2.8 billion people within a few hours flight.
Singapore’s Changi Airport serves over 100 airlines flying to 320 airports in about 80 territories worldwide. It is the busiest international airport in Southeast Asia.
Ports of Singapore is the world’s second busiest seaports by cargo tonnage.
Since Singapore officially gaining sovereignty on 9 August 1965, its politics has been dominated by the People’s Action Party (PAP). Under the leadership of the PAP, Singapore possesses an authoritarian, pragmatic, rational and legalistic political culture. Singapore government maintains economic growth and political stability under “paternal guidance” of PAP. In other words, Singapore is not administrated by politicians, but by bureaucrats.
Singapore has a multi-racial and multi-religious society with ethnic Chinese, indigenous Malays and ethnic Indians. English is the dominant language in businesses and is the main language used for education in Singapore.
Singapore is an well-developed knowledge-based economy, its manpower is educated and professionally qualified. Singapore has been ranked the top 10 wealthiest nation in the world by GDP (PPP) per capita for a decade.Reference: Open Data by The World Bank
Singapore’s FinTech (financial technology) ecosystem comprising of start-ups, technology companies, financial institutions, investors, research institutes, institutes of higher learning, innovation professionals, and government agencies.
Singapore’s Financial Sector Technology & Innovation (FSTI) scheme supports the creation of a vibrant ecosystem for innovation.
FinTech companies can use the open banking platform via application programming interfaces (APIs) for faster innovation and integration of new and legacy IT systems within the sector.
Quality of life
Singapore provides all of its residents with excellent public and private housing, top quality healthcare, a safe and healthy living environment, easy transportation, excellent education, an outstanding support system for businesses, entrepreneurs and corporations, and an endless selection of cultural and educational opportunities. Refernce: Quality of Life Ranking 2016 by Mercer
|Official Language:||Malay, Mandarin, Tamil, and English (English is commonly used working language)|
|Legal System:||English common law system|
|Currency:||Singapore Dollar (SG / Currency code: SGD)|
|Time Zone:||GMT +8|
Setup of company in Singapore:
For locals and foreigners, the most Singapore companies are registered as local private limited liability companies, we will focus on this.
- Type of Entity: Limited Liability Company (LLC)
- Ownership: private or public
- Liability: limited by shares (for public and private company) or limited by guarantee (for public company only)
- Place of incorporation: Singapore
- Legislation: Singapore Companies Act
- Regulatory body: Accounting and Corporate Regulatory Authority (ACRA)
- Tax department: Inland Revenue Authority of Singapore (IRAS)
- Shorthand of LLC:
- Dominant: Singapore private limited liability company = Singapore LLC
- Less common: Singapore public limited liability company = Singapore public LLC
- Rare: Singapore public limited liability company by guarantee = Singapore public LLC by guarantee
- LLC features (including local private limited liability company by shares):
- Separate Legal Entity: All type of LLC has its own legal identity, separate from its shareholders and its directors. It can acquire assets, bear debt, enter into contracts in its own name.
- Perpetual Succession: The established LLC exists by law, its existence does not depend on the membership of any of its members. Ease of transfer of shares or changes in shareholders ensures that company continues to exist even in the event of death, resignation, or insolvency of shareholders or directors.
- Ease of raising capital: You can raise capital for expansion or other purposes by bringing in new shareholders or issuing more shares to existing shareholders. Investors can purchase shares in a company where there is a separation between personal and business assets. Moreover, companies can loan money from banks on their own name.
- Credible image: An incorporated business entity usually commands a better image than a sole trader or a partnership and be taken more seriously by your potential investors, clients, suppliers and any other parties, since companies mean business and they possess potential to expand.
- Ease of transferring ownership: Ownership of a company may be transferred either wholly or partially, there is a separation between a company’s operations and its ownership. Ownership transfer can be done through the selling of all or part of its total shares, or through the issue of new shares to additional investors, no need for complex legal documentation.
- Tax benefits: Singapore LLC is an efficient tax entity. Singapore follows a single-tier tax policy in which once the income has been taxed at the corporate level, dividends distributed to shareholders are tax free, and there is no capital gains tax. The headline Corporate Income Tax rate for Singapore companies are fixed at 17% on their chargable income regardless of whether it is a local or foreign company. However, generous tax exemption are given to companies, the effective corporate tax rate after such tax benefits are 8.5% on their first SGD 300,000 chargable income and capped at 17%. New start-up companies can enjoy extra tax exemption, their tax rate is 0% on the first SGD 100,000 chargable income for each of the first three tax filing year. Meanwhile, generous tax rebats are directly given to companies as relief to rising operation cost. More details: Inland Revenue Authority of Singapore
Characteristics of Singapore Private LLC:
A private LLC is a category of LLC in which the shares are held by less than 50 legal persons and are not available to general public.The other LLC is Public Limited Liability Company which are not bounded by these 2 limitation.
Most privately incorporated businesses in Singapore are registered as private limited companies. A private limited company’s name in Singapore usually ends with Private Limited or Pte Ltd. in shorthand.
- Incorporation of a new Singapore Company; OR
- Purchasing a ready-made Singapore private LLC (shelf company)
- Allowed currencies: Any currencies
- Minimum issued share: One share
- Minimum capital: SG $1 (or equivalent in any designated currency)
- Minimum authorized share capital: No requirement
- Bearer shares : Not allowed
- No par value shares: No requirement
- Different classes of shares: Allowed
- Corporate director: Allowed
- Residential director: Required (at least one individual director who is either a Singapore Citizen, a Singapore Permenant Resident, or a holder of an Employment Pass/Entrepreneur Pass or a Dependant’s Pass with a residential address in Singapore)
- Minimum number of director: one
- Nationality/place of incorporation: No restriction
- Directors’ meeting: Required
- Corporate shareholder: Allowed
- Residential shareholder: Optional
- Minimum number of shareholder: one
- Nationality/place of incorporation: No restriction
- Shareholder and director can be the same entity
- Company Secretary: Required
- Minimum number: one
- must be a nature person who is ordinarily resident in Singapore
- in case of a sole director/shareholder, the same person cannot act as the company secretary
Registered Office Address:
- Local address as registered office: Required (P.O. box is not allowed)
Goods and Services Tax (GST) – commonly known as Value-added Tax (VAT) in other countries – is a tax on the supply of goods and services in Singapore and on the import of goods into Singapore. Goods exported from Singapore and international services provided from Singapore are exempt from GST. Reference: GST registered business – IRAS
- companies are liable to compulsorily register as a GST registered entity (known as GST Compulsory Registration).
- for companies only supply goods outside Singapore or supply exempted financial services, companies can go for GST Voluntry Registration to enjoy benefit of claiming input tax (the GST expense incurred in the course of business)
Accounts & Annual Return:
- Annual return: Required (no later than 30 days from the anniversary of the date of the incorporation)
- Audited accounts: Required (qualified “small companies” can be exempted from it)
- Privacy protection: Disclosure of registration number, entity names, business activities, registration dates, owners and officers of the company is required, and they are available online for public access. Reference: Singapore ACRA online service portal
- Change in domicile: Not allowed
- Mmerging two or more Singapore companies into one: Not allowed
General Procedures of Incorporation of Singapore private LLC:
The whole Singapore private LLC incorporation formalities can be handled without physical presence in Singapore of the owners.
Required information and documents by ACRA:
- Company Name
- Brief Description of Business Activities
- Shareholders Particulars
- Directors Particulars
- Registered Address
- Company Secretary Particulars
- Copy of passport, overseas residential address proof, and other Know-Your-Client (KYC) information such as a bank reference letter, personal and business profile, etc.
- Copy of registration documents such as Certificate of Incorporation and Constitution. if any of corporate directors/shareholders
- Copy of Singapore identity card (Singapore residential director of the company)
Singapore ACRA has computerized the whole incorporation procedure is computerized. Assume no delay on the government’s side, the procedure can be completed on the same day.
- Name Reservation: This is a distintive procedure comparing to other countries. The suggested company name must be pre-approved by ACRA as the first step. Generally the approval result will be ready within 1 hour after submission.
- Company Registration: This is the second step. The registration can be completed in one day after submission of all required information and settlement of governemnt fee.
- Post-registration: Once the private limited company is successfully incorporated, the soft copies of the following documents are issued:
- Company Business Profile: it is a summary of records which is also available to public access.
- Certificate of Incorporation (C.I.)
- Optional material: There are some items you can order upon incorporation of Singapore LLC:
- share certificates
- company seal
- company stamp
- hardcopy of C.I.