Singapore is renowned for being a business-friendly nation with a competitive tax regime, making it an attractive destination for entrepreneurs looking to start a company. In this article, we’ll go over some key steps you can take to start a company in Singapore and pay low corporate and individual income tax.
- Determine your business structure
Before you start a company in Singapore, you’ll need to determine what business structure you want to use. There are three main types of business structures in Singapore:
- Sole proprietorship: This is a business structure in which one person owns and runs the business. It is the simplest and cheapest business structure to set up, but it doesn’t provide any legal protection to the owner.
- Partnership: A partnership is similar to a sole proprietorship, but with two or more owners. Like a sole proprietorship, it doesn’t provide any legal protection to the owners.
- Private limited company: A private limited company is a separate legal entity from its owners. It provides legal protection to its owners, and is the most popular business structure in Singapore.
2. Register your company
Once you’ve decided on your business structure, the next step is to register your company with the Accounting and Corporate Regulatory Authority (ACRA).
You’ll need to choose a name for your company and ensure that it’s available for registration. You’ll also need to provide details such as your company’s directors, shareholders, and registered address.
3. Open a corporate bank account
After you’ve registered your company, you’ll need to open a corporate bank account. This is where you’ll receive payments from customers and pay your business expenses. Singapore has a wide range of banks to choose from, and many of them offer low fees and competitive interest rates.
My dealings with DBS Bank has always been a good experience. DBS Bank is considered a good bank because of its strong financial performance, innovative approach to banking, commitment to customer service, strong presence in Asia, and commitment to sustainability. Doesn’t hurt that DBS is backed by the Singapore government! DBS Bank is majority-owned by the Singapore government through Temasek Holdings, which owns around 29% of DBS Group Holdings, the parent company of DBS Bank.
4. Apply for relevant licenses and permits
Depending on the nature of your business, you may need to apply for licenses and permits from government agencies such as the National Environment Agency or the Health Sciences Authority. You can find out what licenses and permits you need by using the LicenceOne website.
5. Hire employees (optional)
If you plan on hiring employees, you’ll need to register for the Central Provident Fund (CPF) and obtain work permits for any foreign employees. Singapore has strict employment laws, so make sure you’re familiar with them before you start hiring.
6. Pay low corporate and individual income tax
Singapore’s corporate tax rate is one of the lowest in the world, with a flat rate of 17%. However, there are also various tax incentives and exemptions available to businesses in Singapore. For example, newly incorporated companies can enjoy tax exemptions of up to S$100,000 on their first S$300,000 of taxable income for the first three consecutive years.
Singapore also has a progressive individual income tax system, with tax rates ranging from 0% to 22%. However, there are also various personal income tax reliefs and rebates available, such as the Working Mother’s Child Relief and the Parent Relief.
To be considered a tax resident in Singapore, you need to meet one of the following criteria:
a) Physical presence: You are physically present in Singapore for at least 183 days in a calendar year.
b) Economic contribution: You are physically present in Singapore for at least 183 days in a calendar year, and your employment or business activities are based in Singapore.
c) Employment pass: You hold an Employment Pass (EP) or S Pass, and your employment is based in Singapore.
If you meet any of these criteria, you will be considered a tax resident in Singapore for the entire calendar year. As a tax resident, you will be taxed on your income earned both in Singapore and overseas.
To register as a tax resident in Singapore, you will need to apply for a tax identification number (TIN) from the Inland Revenue Authority of Singapore (IRAS). You can apply for a TIN online through the IRAS website or in person at the IRAS office.
It is important to note that tax residency rules and requirements may change over time, and it is always best to consult with a tax professional or the IRAS for the most up-to-date information.
Starting a company in Singapore can be a straightforward process, and the country’s competitive tax regime makes it an attractive destination for entrepreneurs.
By following the steps outlined in this article, you can set up a company in Singapore and pay low corporate and individual income tax. All the best folks!
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