1. Registration of Singapore Business Structures for Foreigners
Singapore Private Limited Company (“PTE LTD”)
This is a locally incorporated company where the maximum number of shareholders is limited to 50. It is statutory required to appoint at least 1 Singapore resident individual (“ordinarily resident”) to the board of directors of the company. There are no minimum capital requirements for a Singapore PTE LTD Company. It will however need to file audited accounts with the Company Registry each year unless it is exempted because it qualifies as an Exempt Private Company (“EPC”).
A PTE LTD is subject to Singapore Income Tax (“SIT”) at 17% however generous exemptions are available for small to medium enterprises. The first S$10,000 of net assessable profit is 75% exempt with the next S$290,000 net assessable profit 50% exempt from SIT.
The advantage of using a Singapore PTE LTD Company is that it is a legal person in its own right and does not have potential cross liabilities as in the case of a branch.
Singapore Exempt Private Limited Company (“EPC”)
A company incorporated in Singapore may qualify as an Exempt Private Company, depending upon its turnover and shareholders. Where a private limited company has a turnover of less than S$5million and all shareholders (not exceeding 20 in number) are not themselves incorporated (i.e. natural persons whether or not resident in Singapore), then the company would be exempted from audit. A directors’ statement would instead be filed with the unaudited accounts, and an appropriate income tax return made to the Inland Revenue Authority of Singapore. Exempt Private Companies enjoy a tax break on the first S$100,000 of net assessable profits for the first three years after incorporation. Profits exceeding S$100,000 will be taxed as per a normal PTE LTD.
Singapore Limited Liability Partnership (“LLP”)
The LLP was created by the Limited Liability Partnerships Act 2005. The essential feature of a limited liability partnership (“LLP”) is that it combines the organisational flexibility and tax status of a partnership with limited liability for its members. It is essentially a vehicle that gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company. The individual partner’s own liability is generally limited. The LLP is seen as a corporate body but has a legal personality separate from is partners meaning its partners will not be held personally liable for any business debts incurred by the LLP.
The LLP can do anything that a natural person could do. It has the ability to enter into contracts, own assets and will continue in existence in spite of any change in membership. Its existence as a separate legal entity makes it more closely akin to a company than to a partnership. The concept is similar to that of the US Limited Liability Corporation, a US legal entity which is not generally subject to US taxation. As it is a partnership no tax is assessed on the LLP but profits are only taxed in the hands of the partners. If the LLP does not trade in Singapore or derive income from Singapore, no Singapore tax will be payable by a non-resident partner making it possible to create Singapore structure which is not liable to Singapore tax provided that the trading activities take place entirely outside of Singapore, the profits are generated from a non-Singapore source and the profits are not remitted back to Singapore.
An LLP has to have at least 2 partners (no maximum limit), a registered office and needs to appoint a local (individual) manager and is required to keep accounting records- profits/loss accounts and balance sheets. However no accounts need to be filed with the Company Registry but the local manager is required to file an annual Solvency Declaration.
Following from above, the LLP is typically used where the profits can be distributed between partners in a flexible manner and not according to fixed proportions as per the number of shares by each shareholder as with a PTE LTD. Furthermore, there are less statutory filing requirements for a LLP if both partners are non-Singapore residents. The disadvantage may be that banks are less willing to provide trade financing to an LLP by virtue of it being a relatively new business structure under Singapore law and also because they cannot verify the amount of capital at risk contributed to the LLP by the partners.
Singapore Branch of an Overseas Company
This structure is basically an extension of your existing company, a so-called branch. It is thus not a separate legal entity. What this means is that there is no separation of liabilities. If as a result of the business in Singapore, the branch incurs any liabilities these liabilities will apply to the entire parent company in its original country. Creditors can thus claim the assets of the main entity in the parent country in case of a law suit.
A branch will need to appoint 2 resident (individual) agents and have a registered office in Singapore. It also will need to keep separate accounts in relation to its own financial transactions. The branch accounts together with the main entity’s accounts will need to be filed annually with the Company Registry.
2. Professional Management and Trade Services
Often people think that as long as the company is set-up in Singapore that means it will automatically be considered tax resident in Singapore by default. However, this is not true. For a local company to be considered a tax resident in Singapore and not tax resident in the country where its original owner resides, the Singapore Company must be locally managed and controlled (this includes the negotiation and signing of contracts and executing of agreements etc.) from Singapore by a Singapore-based director.
We can assist with the establishment of these company structures and provide the statutory required individuals either as agents/managers/directors. We can also assist with the opening of corporate bank accounts. Depending on the bank chosen, the initial deposit ranges from a minimum of SGD500 to SGD30,000. We can also fully manage the company by also taking care of the trade financing requirements. Please be advised that our appointed directors will be executive directors with full control of corporate bank accounts.
We can further assist with the application of Employment Passes should you plan to send your staff over from abroad. That person can then take up the responsibilities of the statutory required local directorship.
3. Immigration Services for Foreign Employers, Entrepreneurs and High Net Worth Families
Highly mobile entrepreneurs, fund managers, professionals and high net worth families can also take advantage of what Singapore as an offshore jurisdiction has to offer. Singapore is not a tax haven but has a low tax environment where one’s affairs can be structured so as to pay very minimal taxes. This vibrant little city state with excellent communication and banking infrastructure is conveniently located in the middle of South East Asia at the cross roads of major transportation and trading routes. Singapore as such is the perfect place to be based for business as well as leisure. Our Singapore associates can assist with the relocation of head office functions of a multinational group so as to benefit from the favourable tax treaties that Singapore has signed. Incentives such as reduced corporate tax rates are available to a number of industries amongst others fund management business. High flying professionals are able to obtain permanent residency under the Landed Permanent Residency Scheme (“LPR”). High net worth families looking to establish an alternative beneficially taxed domicile can consider Singapore as immediate permanent residency is available to investors under a number of schemes. Below is a short summary of immigration schemes currently available in Singapore
EntrePass for Business Owners
Work visa for an entrepreneur looking to set up a new business in Singapore. Dependents can relocate with the successful EntrePass applicant. Qualifying conditions are that a genuine viable business is set up that ultimately needs to employ at least 4 – 8 local Singaporeans and sufficient operational expenses spent in Singapore. Business proposals will need to be approved first.
LPR Scheme for highly educated professionals under 45
Permanent residency for degree holders from a Top 100 university with an excellent track record in a profession that is in demand in Singapore. PR status is granted once a job in Singapore is secured.
Global Investor Program (“GIP”)
Entrepreneurs investing SGD2million in new businesses in Singapore or government approved venture capital funds can qualify for permanent residency for himself/herself and immediate family. A business plan will need to be approved first before investing the funds.
Financial Investor Scheme (“FIS”)
Under this scheme a high net worth individual (net assets exceeding SGD20million) and immediate family can obtain immediate permanent residency by either a) depositing SGD10million with a bank in Singapore to be held there for investment of 5 years or b) deposit SGD8million with a Singapore bank and purchase a residential property for own use valued at a minimum of SGD2million.
In general a permanent resident may apply for Singapore nationality after residing in Singapore for 2 years (Note: Singapore does not allow dual citizenship).
Please contact us for more information on immigration and relocation to Singapore.
4. Registration of Offshore Business Structures
For local Singapore or foreign clients, we are able to assist in the setting up of customized offshore business structures and special purpose vehicles (“SPVs”) to facilitate cross-border trades and investments. These will include the structuring of offshore holding / trading companies, setting up of offshore mutual / hedge / private equity / property funds, trusts and hybrid companies.
Some of the commonly recommended jurisdictions for these Offshore Financial Centres (“OFC”):
British Virgin Islands (“BVI”)
Isle of Man
Ras Al Kahmah (UAE)
Turks & Caicos Islands
Please contact us if you would like to know more about the registration of offshore business structures in above jurisdictions or many others.
5. Property Holding Structures
The use of Property Holding Structures has become increasingly common when investing in real estate overseas. When buying real estate in Australia, Singapore, UK, US or Thailand, one can face a number of issues such as stamp duty, title transfer taxes as well as inheritance tax. Below are a couple of examples of the issues faced:
In Singapore, real estate buyers and sellers both will to incur stamp duty charges when they invest in property. Furthermore, the transfer of legal title also bears some charges.
Buyer Stamp Duty
Buyers who purchase residential property in Singapore are required to pay a stamp duty known as the Buyer’s Stamp Duty. This is a fixed rate of 3% of the purchase price regardless of the type of residential property (landed or high rise apartments) minus the exemption amount of S$5,400.
Seller Stamp Duty (“SSD”)
Since January 2011, the Singapore Government has imposed a Seller’s Stamp Duty (“SSD”) for sellers who buy (or acquire) residential properties and sell (or disposed of) them within the first four years of acquisition.
The SSD rates are as follows:
- Holding period of 1 year : 16% of price or market value, whichever is higher
- Holding period of 2 years : 12% of price or market value, whichever is higher
- Holding period of 3 years : 8% of price or market value, whichever is higher
- Holding period of 4 years : 4% of price or market value, whichever is higher
After the 4th year, there will be no SSD imposed on Sellers.
With the use of Property Holding Companies, an investor can purchase real estate through these structures. This will mean that the title of the property/land will be owned by the company which may allow for an easier transfer of assets via a share transfer allowing savings on buyer’s and seller’s stamp duty as well as other title transfer costs.