Singapore is an island city state often regarded as the bridge between the East and the West. In many ways, the business environment in Singapore exemplifies this East meets West culture.
Business transactions are generally conducted according to the practices of the West, but certain Eastern values are still very much entrenched in the society.
Government and Economy
Singapore is a Republic with an elected President. She has a parliamentary system based on the British model, a colonial legacy.
Singapore is social-democratic country. The Government takes an active role in setting the economic direction without stifling the spirit of free economy.
The Singapore legal system is largely based on the English common law system. Being a former British colony, Singapore received her laws from Britain. The influence of English law has decreased over the years as the judiciary and legal profession of Singapore mature.
Generally speaking, there are two major sources of law in Singapore: legislation and case law. There are also conventions binding on Singapore concerning some international matters such as air transport or sea shipment.
The courts in Singapore comprise the Supreme Court and the Subordinate Courts. The Supreme Court comprises the Court of Appeal and the High Court. The Court of Appeal is Singapore’s highest judicial tribunal. The Subordinate Courts comprises the District Courts, Magistrate Courts, Juvenile Courts, Coroners’ Courts and Small Claims Tribunals.
Apart from the Supreme Court and the Subordinate Courts, there are some other tribunals set up to hear disputes on specific areas of law in Singapore, notably the Syariah Court, Industrial Arbitration Court and Military Court.
A person who wishes to do business in Singapore may choose to operate the business through any one of the following business organisation structures:-
A company incorporated under the Companies Act (Cap. 50) is a separate legal entity from its owners. Several consequences flow from this separate legal personality. For example, a company may sue and be sued in its own name, own property in its own name and the owners of the company are generally not liable for the debts of the company.
There are various types of companies under the Companies Act (Cap. 50) and they may be categorised according to different characteristics (e.g. public companies versus private companies).
Private companies may be incorporated with one director and one shareholder, and are exempted from appointing professionally qualified secretaries. The single director and shareholder can be the same person, but a sole director also may not concurrently be the company secretary. At least one director must be ordinarily resident in Singapore.
The private exempt company may dispense with holding its AGM for any year, if this is unanimously agreed to by its shareholders voting at a meeting called to decide on such dispensation.
A director is the person responsible for managing the affairs of the company and providing it with directions. A director must make decisions objectively, act in the best interest of the company, and be honest and diligent in carrying out his duties.
Under the Companies Act, the minimum number of directors required is one.
A company must have at least one director who is ordinarily resident in Singapore.
Being “ordinarily resident in Singapore” means the director’s usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident or an EntrePass holder can be accepted as a person who is ordinarily resident here. Subject to compliance with prevailing laws and regulations on employment of foreign manpower, an Employment Pass holder may be accepted as a director who is ordinarily resident here. EP holders who wish to undertake a secondary directorship position in another company (apart from the company his EP is approved for), will have to apply for and be granted a Letter of Consent (LOC) before registering their directorship positions with ACRA.
Any person above the age of 18 years old can be a director of a company. There is no maximum age limit for a director. However, certain individuals (e.g. bankrupts and persons convicted of offences involving fraud or dishonesty) are disqualified from holding director positions.
Chief Executive Officer (CEO)
“Chief Executive Officer”, in relation to a company, means any one or more persons, by whatever name described, who —
(a) is in direct employment of, or acting for or by arrangement with, the company; and
(b) is principally responsible for the management and conduct of the business of the company, or part of the business of the company, as the case may be.
It is not compulsory for a company to appoint a CEO. It is the company’s discretion to decide whether to appoint a CEO. Such a person may be appointed as both a director as well as a CEO. The officers of the company will be the director, secretary and the CEO, if the CEO is employed in an executive capacity.
The role of the managing director may or may not be the same as the role of the CEO, and it will also depend on the designations used within a particular company. A managing director may be appointed separately from the appointment of a CEO.
Every company must appoint a secretary within 6 months from the date of its incorporation.
The company secretary must be residing locally in Singapore and he/she must not be the sole director of the company.
The Secretary may also be held liable for the company’s failure to comply with the law in certain situations.
The secretary of a public company must comply with section 171(1AA) of the Companies Act i.e. must possess at least one of the following qualifications:
Been a secretary of a company for at least 3 of the 5 years immediately before his appointment as secretary of the public company.
- Qualified person under the Legal Profession Act (Cap. 161).
- Public accountant registered under the Accountants Act (Cap. 2).
- Member of the Institute of Certified Public Accountants of Singapore.
- Member of the Singapore Association of the Institute of Chartered Secretaries and Administrators.
- Member of the Association of International Accountants (Singapore Branch).
- Member of the Institute of Company Accountants, Singapore.
A company shall appoint an auditor within 3 months from the date of its incorporation, unless it is exempted from audit requirements under Section 205B, or 205C, of the Companies Act.
A Singapore Company must have an auditor appointed within three months of its incorporation. However, this requirement is not essential for Companies exempted under audit requirements. Dormant companies (i.e. those which have not had any significant accounting transactions in a financial year) and small exempt private companies (i.e. private companies in the shares of which no beneficial interest is directly or indirectly held by any corporation and which has not more than 20 shareholders and which annual revenue is below SGD10 million) will not be required to have their accounts audited by an external auditor.
Branch of Foreign Company
Instead of incorporating a local company to conduct business, some foreign companies may choose to register a Singapore branch under the Companies Act (Cap. 50). A Singapore branch of a foreign company is part of the same legal entity as the foreign company at its head office and branches of the foreign company in other parts of the world.
Setting up a branch in Singapore may allow taking advantage of certain benefits in international tax planning. A foreign company incorporating a branch need not have any directors resident in Singapore but it must appoint at least 2 local residents (includes expatriates with employment passes) as its agents under a Memorandum of Appointment or power of attorney.
Once registered, the branch of the foreign company is subject to filing and reporting requirements under the Companies Act (Cap. 50). In addition to the audited accounts of its Singapore branch, the foreign company will usually also be required to file the accounts of its head office with the Registrar of Companies and Businesses annually. For this reason, not many foreign companies choose to register a branch. However, foreign banks and financial institutions may need to register branches to do business in Singapore in order to comply with capital adequacy requirements imposed by the relevant authority in Singapore.
Foreign companies in the manufacturing, trading, trade logistics and trade-related services sectors may establish a representative office in Singapore to undertake promotional and liaison activities on behalf of its head office or overseas branches.
A representative office may not engage in any trading or business, lease any warehousing facilities, conclude contracts, issue invoices/receipts, open/receive letters of credit or provide services for a fee.
It is supposed to be a temporary establishment for foreign companies to assess the business environment in Singapore before making investment decisions.
A sole proprietorship is an individual carrying on business on his own behalf. In order to carry out business as a sole proprietor, one needs to register the business under the Business Registration Act (Cap. 32).
Sole-traders are self-employed and pay income tax as well as Medisave on the profits made by the business. Sole Proprietorship is suitable option for any small business. After appointing Singapore Citizen or Singapore Permanent Resident as the manager, a foreign company or a foreign individual can also be registered as a Sole Proprietor in Singapore.
There are exceptions to registration, for example licensed hawkers and taxi drivers are exempt from registration.
Certain professions such as lawyers, accountants, doctors and architects are governed by other statutes and are therefore exempt from registration under the Business Registration Act (Cap. 32).
The sole proprietorship is not a separate legal entity. As such, the sole proprietor is personally liable for the debts of the business.
A partnership is defined under the Partnership Act (Cap. 391) as a relationship that subsists between persons carrying on business in common with a view of profit. The Act also sets out some rules for determining the existence of a partnership.
Like a sole proprietorship, the business of the partnership has to be registered under the Business Registration Act (Cap. 32). The minimum number of partners in a partnership is 2 and the maximum number is generally 20.
As a partnership is not a person in law, the income derived from a partnership cannot be assessed under the partnership’s name. The share of adjusted profit/loss from the partnership will be assessed under the individual partners’ names and taxes will be levied accordingly.
As far as third parties are concerned, each partner is jointly and severally liable for the debts of the partnership although the partners may agree among themselves on apportionment of liability.
Limited Partnership (LP)
A Limited Partnership is not a separate legal entity. A Limited Partnership has 2 types of partners viz. general partners and limited partners. The former are liable for all debts and obligations of the firm whilst the latter (who contributed capital or property at the time of entering into the partnership) would not be liable for the debts or obligations of the firm beyond their contribution. The limited partners do not take part in the management of the firm and have no authority to bind the firm.
This structure may appeal to passive investors who want limited liability and do not wish to play an active role in the management of the firm. It can be used for private equity and fund investment businesses.
Limited Liability Partnership (LLP)
A Limited Liability Partnership is a separate legal entity. It has characteristics of a partnership and a company. Like a company, the Limited Liability Partnership has perpetual succession and it can own property in its own name. The LLP is a body corporate and has legal personality separate from its partners. Any change in the partners of a LLP does not affect its existence, rights or liabilities.
Any individual or body corporate may be a partner in a LLP. This includes a natural person, company, foreign company or another LLP. Members of a Limited Liability Partnership are also generally not personally liable for the debts of the Limited Liability Partnership.
The members may agree on how profits and losses are to be shared as well as how the business is to be run. In this respect, it resembles a partnership.
This structure may appeal to professionals who wish to enjoy the benefit of limited liability whilst organised as partnerships.
Approvals, Licences and Permits
Apart from registration with the Registry of Companies and Businesses, certain businesses are subject to further regulatory control by other government agencies in Singapore. Special approvals or licences may have to be obtained before the relevant business activity can commence. Some of the businesses which require special approval or licence include finance companies, insurance companies, travel agents and private schools.
There are several options available for resolving civil disputes in Singapore including:-
Going to trial at a court of law has been the traditional dispute resolution mechanism. These days, getting a trial date in Singapore is relatively fast. The Singapore Courts have also embraced technological advancement by introducing a slew of information technology initiatives such as electronic filing and videoconferencing facilities to allow witnesses outside Singapore to testify in court. The vision is to develop a paperless litigation system and to achieve a more efficient way of presenting cases in court.
One important consideration here is that a judgement of the Singapore Court is only enforceable in Singapore and in countries with which Singapore has entered into bilateral or multilateral treaties for reciprocal enforcement of judgements. A Singapore Court judgement would not be enforceable, for example, in the United States of America.
This is basically a consensual process by which parties to a dispute submit their differences to one or more impartial persons known as arbitrators for a final and binding decision. It is less formal than a trial and hearings are conducted in private, therefore ensuring confidentiality.
The Singapore International Arbitration Centre provides facilities for international and domestic commercial arbitration and its rules are based largely on the UNCITRAL Arbitration Rules and the Rules of the London Court of International Arbitration with some modifications.
One main advantage of this dispute resolution mechanism is that an arbitral award may be enforced domestically and internationally in over 120 countries (including the United States of America) as a judgement of the courts in the enforcement country.
Mediation is a voluntary process in which a neutral party known as the mediator helps the parties to negotiate with each other to resolve their dispute amicably. To a certain extent, the success of this dispute resolution mechanism hinges on the desire of the parties to reach an amicable settlement.
This dispute resolution mechanism may therefore be ideal for parties who wish to maintain their business relationship. The mediator will not impose his views on the parties, and it is up to the parties whether they wish to come to a settlement.
The Singapore Mediation Centre provides mediation and other alternative dispute resolution services. The suite of services currently available on the website include:-
- Neutral Evaluation
- Singapore Domain Name Dispute Resolution Policy
Some of the government agencies and bodies responsible for promoting foreign investment and administering incentives to investors include:-
Economic Development Board
The Economic Development Board is the lead national agency responsible for planning and executing strategies to sustain Singapore’s attractiveness as a global hub for business and investment. It administers a number of incentive schemes such as the Pioneer Incentive scheme and the Development and Expansion Incentive scheme.
It works closely with other agencies to promote innovation and develop human, intellectual, financial and cultural capital in Singapore.
Formerly the Singapore Trade Development Board and International Enterprise Singapore, Enterprise Singapore is the national agency to help Singapore-based companies who are willing and able to grow and internationalise successfully, and to encourage the growth of Singapore’s external economy.
It also promotes Singapore as a hub for Small and Medium-sized Enterprises (SMEs) by attracting enterprises from other countries to be based here, so that they can collaborate with International Singapore Companies (ISCs) to venture into the region.
Monetary Authority of Singapore
The Monetary Authority of Singapore regulates all elements of monetary, banking and financial aspects of Singapore. It oversees a wide range of tax incentives specifically for the financial sector. Tax under the Income Tax Act (Cap. 134), tax will be imposed on the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore. Hence, there are 2 bases of taxation in Singapore viz. territorial and remittance.
Under the territorial basis, income is liable to Singapore tax if the source of the income is in Singapore whilst under the remittance basis, income having a source outside Singapore is liable to Singapore tax only if it is received in Singapore, unless specifically exempt from tax.
Income tax is levied on the income of companies based on the prevailing corporate rate whilst income tax is levied on the income of individuals based on a progressive scale of rates.
Exchange Rate Used As Main Tool
Rather than raising or cutting interest rates like most countries, including the United States and China, Singapore’s central bank i.e., Monetary Authority of Singapore (MAS) uses the exchange rate as its main monetary policy tool to strike a balance between inflation from overseas and economic growth.
The exchange rate is managed against a basket of currencies of its major trading partners, and is allowed to float within a band that can be adjusted when monetary policy is reviewed. During reviews, the slope, width and centre of this band can be changed, adjusting the pace of appreciation or depreciation of the Singdollar.
A stronger currency, which corresponds to tighter monetary policy, counters inflation by making imports cheaper in Singdollar terms, while a weaker Singdollar helps lift growth by making exports cheaper abroad.
Corporate Income Tax
The corporate tax rate is at 17% currently. Tax will only be imposed at the corporate level and Singapore dividends in the hands of the company’s shareholders are tax exempt.
The Net Profit up to SGD100,000/- each year for the first three consecutive years are 100% exempted and a further 50% exemption on the next SGD200,000 of normal chargeable income which translates into a huge savings of SGD51,000/- in the first 3 years while establishing the businesses in Singapore till the Year of Assessment 2019 i.e., till the date 31-December-2018.
From the Year of Assessment 2020: Exemption at 75% on the first SGD100,000 of normal chargeable income; and a further 50% exemption on the next SGD100,000 of normal chargeable income for the first three years from the date of incorporation.
After completion of first three years, from the fourth year onward, the company is entitled with partial tax exemption.
Goods and Services Tax
A person who makes a taxable supply of goods and services in Singapore in the course or furtherance of his business is required to register himself as a GST-registered trader if the taxable supplies exceed S$1 million in a period of 12 months. The GST-registered trader has to charge GST on goods and service provided by him (i.e. output) and pay GST on raw materials, machinery and equipment and services purchased by the business (i.e. input). GST charged on output is known as output tax while GST paid on input is known as input tax. Where the output exceeds the input tax, the GST-registered trader will have to pay the difference to the Inland Revenue Authority of Singapore.
Where the input tax exceeds the output tax, the Inland Revenue Authority of Singapore will refund the difference to the registered business. With effect from 1 July 2007, the GST rate is 7% on domestic consumption.
Labour and Employment
The duties of an employer in Singapore are found in legislation and case law. Some of the main statutes that impose duties on the employer include:-
This Act protects certain classes of employees (as defined in section 2 of this Act) by providing minimum terms of service that cannot be contracted out or diluted to the detriment of these employees.
Whilst this Act covers the classes of employees referred to above, Part IV of this Act which deals with more basic terms of service such as rest days, shift work, holidays, retrenchment benefits, leave and hours of work only applies to workmen (as defined under this Act) and other employees whose monthly salaries do not exceed S$4,500.
Workplace Safety and Health (WSH) Act (Cap. 104)
“Factory” is defined in this Act. The WSH Act is the key legislation to effect the principles of the new Occupational Safety and Health framework. It replaces the Factories Act, with effect from 1 March 2006. There are various obligations on a person who uses or occupies a factory. These include observing obligations relating to registration, cleanliness, overcrowding, ventilation, lighting, drainage, sanitary conveniences and so forth.
Certain requirements under this Act have recently been extended to non-industrial buildings such as canteens, hotels, restaurants, laboratories and medical and veterinary centres.
Workmen’s Compensation Act (Cap. 354)
An employer is liable to pay compensation in accordance with the provisions of this Act if a workman under its employment is accidentally injured in the course of employment. “Workman” is a defined term under this Act.
This Act imposes other duties on the employer including compulsory insurance. Certain categories of employers are such as companies fully owned by the government, international shipping lines, international oil companies, banks and finance companies and employers of all persons employed otherwise than by way of manual labour are exempted from the requirement to take up compulsory insurance.
The Central Provident Fund Act (Cap. 36)
Employers are required by law to contribute to the Central Provident Fund (“CPF”). The CPF was essentially set up as an old-age savings scheme for employees. With time, the scheme has evolved into a comprehensive social security savings system providing financial security in old age in meeting the needs of its members in retirement, healthcare, home-ownership, family protection and asset enhancement.
Under the scheme, employers are to ensure that CPF contributions are paid monthly for its employees at the rates set out in the Central Provident Fund Act (Cap. 36). The employer is entitled to recover a percentage of that contribution from the employee through deductions from the employee’s wages. This occurs when wages are paid out.
For illustration purpose, the contribution rate applicable to an employee who is 50 years and below is currently 37% of the employee’s wages for the month (up to an ordinary wage ceiling as stipulated from time to time). The employer is entitled to recover from the employee an amount equivalent to 20% of the employee’s wages for the month (subject to caps stipulated from time to time).
The employer will also have to be mindful of other relevant legislation such as the Retirement and Re-employment Act (RRA) (Cap. 274A) because an employer who dismisses any employee (who is below the prescribed retirement age under the Retirement Age Act (Cap. 274A)) on the ground of age would be guilty of an offence under that Act. Currently, the prescribed retirement age in Singapore is 62 years. There are exceptions such as in the case of police officers, cabin crew and teaching staff of universities and polytechnics.
There are a number of other legislation affecting employment relations including those relating to employment of foreign workers, immigration, industrial relation, trade union and national service.
Intellectual Property Regime
Singapore is one of the best intellectual property regimes in the Asia-Pacific region. It has an established legal system for protecting and enforcing intellectual property rights, and has been constantly ranked amongst the top most IP-protective country in Asia.
Singapore is also a member of various intellectual property treaties, conventions and organisations such as the Paris Convention, Berne Convention, Madrid Protocol, Nice Agreement, Patent Cooperation Treaty, Budapest Treaty, Agreement on Trade-related aspects of intellectual property rights (TRIPS) and the World Intellectual Property Organisation (WIPO).
Initiatives to encourage greater commercialisation of intellectual property rights include the Patent Application Fund Plus (PAF PLUS) scheme administered by the Economic Development Board. aimed at encouraging inventors to patent their inventions and promoting innovation amongst inventors, start-ups and SMEs.
Singaporeans are generally quite accustomed to the Western style of doing business. For foreigners doing business in Singapore, it might be useful to know that:-
- Due to the high humidity and heat, jackets are generally not required for men at business meetings.
- One should avoid touching, hugging or kissing a member of the opposite sex at business meetings as the act might be misconstrued as a form of harassment. Handshake is a better option.
- When making introduction for the first time to members of some major ethnic groups in Singapore such as the Chinese, Malay and Indians, do note that:-
- The Chinese place their family name first followed by their personal name (e.g. Lim Lee Huang ).
- The Malays do not use a family name. They use their personal name followed by bin (son of) or binti (daughter of) before their father’s personal name (e.g. Mohamed bin Husain).
- The Indians use their personal name followed by s/o (son of) or d/o (daughter of) and the father’s personal name (e.g. Meena d/o Karthi).
Latest Singapore Rankings
Singapore remains the second-most competitive economy in the world after U.S.
The Global Competitiveness Index 4.0 assesses the microeconomic and macroeconomic foundations of national competitiveness, which is defined as the set of institutions, policies, and factors that determine the level of productivity of a country. The new index measures 140 economies against 98 indicators, organized into 12 ‘pillars’ or drivers of productivity, to determine how close the economy is to the ideal state or ‘frontier’ of competitiveness.
Source: World Economic Forum, The Global Competitiveness Index 2018 Rankings.
Singapore is ranked second among 190 economies in the Ease of Doing Business.
Source: World Bank, Doing Business 2018 Report
Singapore is the least corrupt nation in Asia and ranked 3rd in the world.
Source: Transparency International, Corruption Perceptions Index 2018
Singapore is the least corrupt nation in Asia since 1995.
Source: The Political & Economic Risk Consultancy’s 2018 Report on corruption in Asia.
Singapore is ranked top in Asia for having the best protection of intellectual property.
Source: World Economic Forum, Global Competitiveness Report 2015/2016
Singapore is ranked top in South-east Asia, East Asia and Oceania and 5th in the world for innovation
Singapore remained top of the class for government effectiveness, regulatory quality and foreign direct investment outflows. Singapore was also the best performer for political stability and safety, market capitalisation, foreign direct investment inflows, high and medium-high tech manufacturing and high-tech net exports.
Source: Global Innovation Index 2018
Singapore will remain the best country in the world to do business in 2018-22. The overall business environment outlook score improves on the back of continued government efforts to improve the business environment. The country remains politically stable, with a technocratic approach to economic management that has a long track record of effective implementation. In particular, the government will focus on helping local private-sector companies to upgrade technologically and operate on an international scale.
Source: Business Environment Risk Intelligence (BERI) Report 2018
Singapore is the #1 seat of ICC Arbitration in Asia for the last 5 years and 4th most preferred seat of ICC Arbitration in the world
Source: 2015 ICC Dispute Resolution Statistics
Singapore is one of the five most preferred and widely used seats of arbitration
Source: Queen Mary University of London – White & Case, 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration
Singapore emerged for the fourth year in a row as the best place for expatriates to live and work.
Salaries for expats in Singapore are more than 30 per cent above the global average, according to the survey. Many said they moved to Singapore to advance their careers (45 per cent) and improve their earnings (38 per cent).
Source: HSBC survey – Oct-2018.
Singapore is the best country for developing human capital.
It ranked first out of 157 economies, beating South Korea, Japan and Hong Kong into second, third and fourth positions, respectively.
Singapore’s effort to invest in its human capital will allow children born today to fulfill 88 per cent of their potential to be productive when they grow up, given that they get a full education and enjoy good health.
Source: Report released by the World Bank on 11-Oct-2018.
Historical Summit in Singapore
Singapore was chosen to hold the historical summit. Singapore is a neutral player in the region and both the United States and North Korea have embassies here. Singapore’s diplomatic relations with North Korea stretch back four decades. American diplomats also work closely with Singapore on many strategic issues, and it has been a long time United States trading partner and ally. Singapore has also played host to many other bilateral meetings, and is increasingly becoming a hub for regional diplomacy in Asia.
The United States President Donald Trump and Chairman Kim Jong Un of North Korea’s State Affairs Commission held historic talks on 12-Jun-2018 in Singapore and signed a joint declaration in which Pyongyang vowed complete denuclearisation in return for security guarantees from Washington. The two sides also agreed to establish new bilateral relations and build a lasting and stable peace regime on the Korean peninsula.
Living in Singapore
Suffice to say that living conditions in Singapore are among the best in Asia and inflation rate in Singapore is also comparatively lower than most other countries. The standard of hygiene is high while the crime rate is low.
Some Best Reasons to LIVE in Singapore
- Singapore Airlines is voted one of the top 20 safest airlines
- Singapore has the best education system in the world
- Singaporean dishes are included in the ‘World’s 50 Most Delicious Foods (Readers’ Pick)’
- The highest paid citizens in the world live in Singapore
- Singapore is one of the safest countries in the world
- Singapore is listed as one of the top tourist destinations
- Singapore is providing a convenient transport system
- Singapore makes sure with relatively safe environment
- Singapore is clean and orderly
- Singapore provides easy access to the outdoors (eg. Parks and Beach)
- Singapore is providing with great public libraries
|Source of Information, Guidelines, Compliance, Laws, Rules & Regulations is from the relevant authorities of Singapore|
|Details of Source||Name of Authorities|
|· Corporate matters such as Companies, Businesses, etc||· The Accounting and Corporate Regulatory Authority (ACRA)|
|· CPF matters||· CPF Board|
|· Fair Employment Practices (FEP)||· Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP)|
|· Immigration matters & Student Passes||· Immigration Checkpoints Authority (ICA)|
|· Taxation and GST||· The Inland Revenue Authority of Singapore (IRAS)|
|· Skills Development Levy (SDL)||· SkillsFuture Singapore Agency|
|· Work Passes||· The Ministry Of Manpower (MOM)|