FAQ

+ What business structure is allowed in Singapore?

1) Sole Proprietorship – The business is run by the owner itself without any partner. It is not a separate legal entity from the business owner and it can sue or be sued in the owner’s name. The business owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities.

2) Partnership – The business is run by at least 2 partners (owners) up to maximum of 20 partners. Profits and losses are divided among its partners in accordance to their agreement. It is not a separate legal entity from the partners and it can sue or be sued in the partner’s name. If there are more than 20 partners, then the business has to be registered as a company.

3) Company – It is a business entity registered under the Companies Act, Chapter 50. As a legal personality, it has rights to own properties, has perpetual succession and can sue or be sued in its own name. It usually has the words 'Pte Ltd' or 'Ltd' as part of its name.

4) Limited Liability Partnership – Known as LLP, it gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company. LLP has perpetual succession, thus any change in the partners of an LLP will not affect its existence, rights or liabilities.

5) Limited Partnership - The business is a partnership consisting of a minimum of two partners, with at least one general partner and at least one limited partner. An LP does not have a separate legal entity from the partners. An individual or a corporation may be a general partner or a limited partner. Appointing a local manager is mandatory if all the general partners are residing outside Singapore.

+ Which business structures to choose?

Choosing the appropriate business structure depends on your needs. Consider the following questions before deciding:-

• How much capital would you invest?
• How many owners will there be in the business?
• What liabilities and responsibilities are you prepared to assume?
• What risks are you prepared to take?
• What are the advantages and disadvantages among the types of business structure?
• Is the business structure easy to close?
• Where you envision your business going in the future?
• What will be the tax implications?
• What will be the reporting and administrative requirements?

+ Are foreigners allowed to set up a Company in Singapore?

Foreigners are allowed to set up a business by having at least one local director in the Company or if they wish to expand their business in Singapore, he can set up an extended branch office of his or her Company. Singapore law does not allow foreign individuals or entities to self-register a company. They must engage a professional firm to register a Singapore company.

+ What are the requirements for a non-resident who wants to work in Singapore?

The Employment Pass (EP) is the main type of work permit meant for company owners or skilled employees who will be working in Singapore.

+ What is audit?

Audit is an examination of records or financial accounts done by independent party.

+ When to appoint Auditor?

An auditor must be appointed within three months from the date of incorporation unless it is exempted from audit requirements.

+ When to audit accounts?

The Companies Act requires the financial statements of every company to be audited once every year. The audited accounts and reports have to be filed with the Registrar within one month after the AGM.

+ Why do we need to audit financial accounts?

The purpose of audit is to form an opinion regarding the reliability of the financial statements and the supporting accounting records of the company for a particular financial period. The objective of the process is to produce a value judgment of whether the financial statements disclose a “true and fair” view of state of affairs of the company.

+ What are the benefits of auditing accounts?

• It gives credibility to the company from the perspective of stakeholders such as investors, lenders, shareholders, customers, suppliers and authorities.
• It helps to identify weaknesses in accounting systems, internal controls and key areas for improvement.
• It helps in detection of error and fraud against the business.
• It gives overview of the financial standing and status of the company.

+ Who are exempted from audit requirements?

Under the Companies Act, Exempt Private Companies (EPC) with annual revenue below S$10 million are not required to have their accounts audited. However, they will need to submit their Directors’ Report (unaudited financial statements).

+ What is a Financial Statement?

It is a written record that conveys the business activities and the financial performance of a company. It is often audited to provide reasonable assurance about whether the financial statements are free from material misstatement. It includes statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and notes to the financial statement.

+ What income tax returns I need to file for my Company?

Estimated Chargeable Income (ECI), Corporate Income Tax Return (Form C/C-S) and GST Compliance.

+ What is ECI?

ECI is an estimate of the company's taxable income (after deducting tax-allowable expenses) for a Year of Assessment (YA).

All companies must file Estimated Chargeable Income (ECI) within three months from the end of their financial year except for companies that qualify for the administrative concession and those that are specifically not required to file.

+ What is Corporate Income Tax Return?

Corporate Income Tax Return is the final company's taxable income for a Year of Assessment (YA).

All companies must file the Corporate Income Tax Return by 15 December after the company’s financial year. The company is required to file also the supporting tax computation and financial reports if the revenue is more than S$5 million.

+ Is it still compulsory to file income tax return if my company did not make profits or is making loss during the year?

Yes, it is still compulsory. All companies are required to file a tax return on annual basis. The losses can be utilized to set off against future profits of the company.

+ Is it still compulsory to file income tax return if my company did not operate or is dormant during the year?

Yes, a dormant company still required to file income tax return unless it has been granted waiver for submission of tax return by IRAS.

+ What is the corporate tax rate in Singapore?

The corporate income tax rate is flat at 17% in Singapore. Companies are also entitled to partial tax exemption on their first $200,000 taxable income every year.

+ Are the company dividends distributed to shareholders taxable?

No. Singapore adopts one-tier corporate system. All dividends paid by a company are exempt from tax on the hands of shareholders.

+ What is GST? When do I become liable to register my company for GST?

GST is Goods and Services Tax. The company is liable to register for GST when its annual taxable revenue is more than S$1 million for the past year or can reasonably expect for the next year. A company has the option to voluntarily register for GST even the annual revenue is less than S$1 million, however the company needs to be GST registered for at least 2 years.

+ What needs to do when my company is GST registered?

Upon GST registration, the company must charge and account for GST at the prevailing rate 7% on its sold goods and services which is known as output tax. The company can claim also for GST on its purchased goods and services which is known as input tax. Upon filing, the GST payable will be determined by the difference of output tax less input tax.