September 19, 2012 Workshop Starting Your Own Business In Singapore Speaker : Asha Dixit, FCCA Money Matters For Expats Pte Ltd 583 Orchard Road #09-853 Forum Singapore 238884 Tel: 63728778 Fax: 63728777 Email: info@moneymatters.com.sg www.moneymatters.com.sg By Asha Dixit, 1
SINGAPORE Singapore has one of the most open economies in the world and has long been recognised as one of the best cities for business and the best place in Asia to live and work. English is the language of administration and commerce and is widely spoken across the island. Apart from strong pro-business and regulatory policies, other factors such as the country s strategic geographic position, excellent infrastructure, favourable tax regime, a highly-skilled and cosmopolitan labour force have made Singapore business very conducive and attractive for companies and industries as well as global investors. 2
Singapore, being the only Asian country with a AAA rating, is one of the top international financial centers. The legal and judicial system here is robust and efficient and Singapore is reputed for its tough stance against corruption. The public transportation is well-integrated and convenient to use, and the communications networks are world-class, so getting wired up is easy. Singapore's corporate tax rate is one of the lowest in Asia-Pacific and it also offers the advantage of having a comprehensive network of Double Tax Agreements with more than 60 countries. 3
Some of the numerous accolades awarded to Singapore:- - Ranked second for Economic Freedom (Source: 2011 Index of Economic Freedom) - 2nd in the world for having the best protection of intellectual property (Source: The Global Competitiveness Report 2011-2012, World Economic Forum) - has the best labour-employer relations in the world. (Source: The Global Competitiveness Report, 2010-2011, World Economic Forum) - Singapore maintains top position in BERI s 2010 Labour Force Evaluation Measure Report - The world s easiest place to do business (Source: Doing Business 2010 Report, World Bank) - The least bureaucratic place for doing business in Asia (Source: 2010 Asian Intelligence Reports on Bureaucracy in Asia, Political and Economic Risk Consultancy) 4
Economic Outlook 2011 and 2012 According to Singapore s Ministry of Trade & Industry (MTI), the Singapore economy grew by 4.9% in 2011. Economic Outlook for 2012 Earlier this year, MTI forecast Singapore s economic growth to be between 1.0 to 3.0% in 2012 but has now narrowed the growth forecast to 1.5 to 2.5%. Performance in Second Quarter 2012 Singapore economy grew on a year-on-year basis in the 2 nd quarter of 2012, compared to 1.5% in the preceding quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 0.7 per cent, reversing the 9.5 per cent growth in the previous quarter. 5
Guide for Foreigner Before starting a business in Singapore - You must be at least 18 years of age. - You must not be an undischarged bankrupt or you must have obtained the permission of the High Court or the Official Assignee if you are planning to register a business entity in Singapore. - You must not be disqualified under Sections 149, 149A or 154 of the Companies Act. - Since all transactions must be lodged online, you need to have your NRIC No or Fin No and SingPass in order to log into the online system. - A SingPass is a common password that allows the user to transact with different Government agencies online. - You need to be a local resident with an Employment Pass, EntrePass, S Pass or Dependant Pass to be eligible to apply for a SingPass otherwise you will have to engage a professional firm (law firm, accounting firm or corporate service provider) or service bureau - to file or submit any online application. 6
Guide for Foreigner Before starting a business in Singapore Whether you are planning to start an online shop or run a business from your home; as long as it is an activity that is carried out on a continuous basis to make profit, you need to register your business. Before registering your business, you should first find out about the different business structures, & choose one that meets your need:- How much capital are you prepared to 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, compliances requirements of the different business vehicles? Is the business vehicle easy to close? 7
Types & Features of Business Features Sole Proprietorship A business owned by one person If owner is on dependent pass or not resident in Singapore, he/she must appoint a local manager who is ordinarily resident in Singapore Not a separate entity Owner has unlimited liability Can sue or be sued in the name of sole proprietor or business name. Sole proprietor is personally liable for all debts and losses of business. 8
Types & Features of Business Features Sole Proprietorship Advantages Sole proprietor has absolute (100%) say in running the business. Quick & easy to setup & close and cost is minimal. Easy to administer & manage. Less regulatory requirements to comply with. Disadvantages Business will exist only as long as the owner is alive and desires to continue the business or can find some one else to transfer the business to. If owner wants to expand business, it will be difficult to get finance assistance or loan from Financial Institution. 9
Types & Features of Business Features Sole Proprietorship Compliances & Regulatory Requirements Must renew registration annually. Any changes must be filed with ACRA within 14 days. Note that a sole-proprietor who is a Singaporean & Singapore PR, he or she is is considered self-employed and must top up his/her Medisave account with the CPF board before renewal of the business. Taxes Profits taxed at owner s personal income tax rates (if it is owned by individual) 10
Types & Features of Business Features Closing the Business Sole Proprietorship By Owner Cessation of business Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct 11
Types & Features of Business Features Partnership A business owned between 2 and 20 partners. Not a separate legal entity If owners not resident in Singapore, they must appoint a local manager who is ordinarily resident in Singapore Partners have unlimited liability Can sue or be sued in firm s name Cannot own property in firm s name Partners are personally liable for partnership s debts and losses incurred by other partners. 12
Advantages Types & Features of Business Features Partnership Shared liabilities & responsbilities amongst partners. Quick & easy to setup & close and cost is minimal. Easy to administer and manage Less administrative duties to adhere to. Disadvantages If partners ideas differ or clash, it will affect the operation and running of partnership. Partners are personally liable for partnership s debts and losses incurred by other partners. If business needs expansion, it will be difficult to get finance assistance or loan from Financial Institution. Partners may not agree on additional funds to be vested into the partnership thus hindering business growth. 13
Types & Features of Business Features Partnership Compliances & Regulatory Requirements Must renew registration annually. Any changes must be filed with ACRA within 14 days. Note that partner who is a Singaporean & Singapore PR, he or she is is considered self-employed and must top up his/her Medisave account with the CPF board before renewal of the business. Taxes Profits taxed at partners personal income tax rates 14
Types & Features of Business Features Closing the Business Partnership By the partners Cessation of business or dissolution of partnership Registrar can cancel registration if not renewed or where Registrar is satisfied business is defunct 15
Types & Features of Business Features Limited Partnership (LP) A partnership with at least two partners - one a general partner & the other a limited partner. No maximum limit. Only the general partner can take part in the management of the LP. If all general partners are ordinarily resident outside Singapore, they must appoint a local manager who is ordinarily resident in Singapore Not a separate legal entity General partner is personally fully responsible for the actions of the LP and is liable for all debts and obligations of the LP. Limited partner s liability is capped at the amount of his agreed investment in the LP provided he does not take part in the management of the LP. Can sue or be sued in firm s name Cannot own property in firm s name. 16
Types & Features of Business Features Limited Partnership (LP) Advantages generally same as Partnership Disadvantages generally same as Partnership except : 17
Types & Features of Business Features Must renew registration annually. Limited Partnership (LP) Compliances & Regulatory Requirements Any changes must be filed with ACRA within 14 days. If there is no limited partner, the LP registration will be suspended and general partners are deemed registered under the Business Registration Act. Once a new limited partner is appointed, the registration of the LP will be restored to live and general partners registration under the Business Registration Act ceases. Taxes Profits taxed at partners personal income tax rates 18
Types & Features of Business Features Closing the Business Limited Partnership (LP) By the partners Cessation of business or dissolution of partnership Registrar can cancel registration if not renewed or where Registrar is satisfied LP is defunct 19
Types & Features of Business Features Limited Liability Partnership (LLP) A partnership where the liability of each individual partner is generally limited. At least 2 partners, no maximum limit. At least one manager ordinarily resident in Singapore. It combines the limited liability feature of a company with partnership while providing the owners with the operational flexibility in operational of a partnership. A separate legal entity from its partners Partners have limited liability Can sue or be sued in LLP s name Can own property in LLP s name Partners personally liable for debts and losses resulting from their own wrongful actions Partners not personally liable for debts and losses of LLP incurred by other partners 20
Advantages Types & Features of Business Features Limited Liability Partnership (LLP) Partners not personally liable for debts and losses of LLP incurred by other partners. Quick and easy to set up Fewer formalities and procedures to comply with than a company Registration cost is relatively minimal and fewer regulatory duties to adhere to than a company No statutory requirement for general meetings, directors, company secretary, share allotments, etc. Only an annual declaration of solvency must be lodged by one of the managers stating whether the LLP is able or not able to pay its debts during the normal course of business One time registration Disadvantages generally same as Partnership 21
Types & Features of Business Features Limited Liability Partnership (LLP) Compliances & Regulatory Requirements Must lodge Annual Declaration of Solvency. Any changes must be filed with ACRA within 14 days. Taxes Profits taxed at partners personal income tax rates 22
Types & Features of Business Features Closing the Business Striking off Limited Liability Partnership (LLP) Winding Up Voluntarily by members or creditors, compulsorily by the High Court 23
Types & Features of Business Features Company A legal entity separate and distinct from its directors & shareholders Must have at least one director who is a local resident Must have at least one shareholder, who does not need to be local Must appoint a company secretary within 6 months of incorporation Must appoint an auditor within 3 months after incorporation unless the company is exempt from audit requirements Exempt Private Company 20 members or less and no corporation holds beneficial interest in the company s shares Private Company 50 members or less Can sue or be sued in company s name Can own property in company s name Statutory requirements for general meetings, directors, company secretary, share allotments, etc. 24
Types & Features of Business Features Company Advantages Members have limited liability. Members not personally liable for debts and losses of company. Company can be set up with as low as S$1.00 as paid up capital. Company enjoys tax benefits for the first three years. Easier to get loans and finance assistance from financial institutions compared to sole proprietorship and partnership. 25
Types & Features of Business Features Company Compliances & Regulatory Requirements A company must hold an Annual General Meeting and file Annual Returns for Company every year. Any changes must be filed with ACRA within 14 days generally with some exception which must within 30 days depending on the nature of the changes. Taxes Profits taxed at corporate tax rates Corporate tax must be filed with Inland Revenue Authority of Singapore (IRAS) Two tax filings: One is estimated chargeable income (ECI) and the other one is actual corporate tax return. 26
Types & Features of Business Features Company Disadvantages More formalities and procedures to comply with examples: Annual Returns must be filed with ACRA Corporate taxes must be filed with Inland Revenue Authority of Singapore (IRAS). Statutory requirements for general meetings, directors, company secretary, share allotments, etc. More costly to set up and maintain example may need to engage a professional firm accounting or corporate services provider to prepare statutory documents required for ACRA or IRAS. Process for closing or deregistration of company is more complex and more costly as process is more complex. Company must prepare a last set of financials, hold an AGM and file its annual return with ACRA, file corporate tax clearance with IRAS. The company can apply for strike-off only after IRAS will issue a statement that the company has no further tax liability. The application for strike off with ACRA must be signed by all directors and shareholders. It usually takes six months from the application before the company will be struck off the register if ACRA does not receive any objections. 27
Types & Features of Business Features Closing the Company Striking off Company Winding Up Voluntarily by members or creditors, compulsorily by the High Court 28
Non-Profit Entity (NPO) NPOs are commonly referred to as Voluntary Welfare Organisations (VWOs) in Singapore and can be registered under the law as a public company limited by guarantee, society, or charitable trust. are self-governed by a board of trustees or managing committee / governing council, comprising individuals who generally serve in a fiduciary capacity exist independently of the government produce benefits for others, generally outside the membership of the organisation are non-profit-making i.e. they are prohibited from distributing a monetary residual to their own members are eligible for full tax exemption only after receiving the charity status 29
Non-Profit Entity (NPO) Choice of type of NPO would depend on several factors - size and complexity - potential legal liabilities - how funds are being raised etc. Types of NPO Public company limited by guarantee Society Charitable Trust 30
Non-Profit Entity (NPO) Public company limited by guarantee - Company has no share capital - Has members instead of shareholders - Members guarantee/undertake to contribute a predetermined sum to the liabilities of the company which becomes due in the event of the company being wound up - Does not distribute profit to members - Exists as a legal entity separate of individual - Subject to ongoing public disclosure obligations and statutory control - Professional assistance required for incorporation and ongoing statutory compliance - More complex annual reporting requirements 31
Non-Profit Entity (NPO) Society Societies are registered with the Registrar of Societies (ROS) and are governed by the Singapore Societies Act. - Suitable for membership or volunteer based groups, especially smaller groups with strong community links and not heavily dependant on donations and external funding - Quick, easy and inexpensive to establish - Does not enjoy a separate legal identity status thus members are exposed to liability issues Statutory Requirements - Minimum 10 persons - Mandatory 3 key office bearers President, Secretary and Treasurer who should be Singapore Citizens or Singapore Permanent Residents - Must audit accounts - Must file Annual Returns with Registrar of Societies - Must draft a Constitution that governs the society 32
Non-Profit Entity (NPO) Trusts is licensed by the Monetary Authority of Singapore (MAS) and are governed by the Singapore Trust Companies Act. A trust is set out in a written document (trust deed) in which an owner or founder hands over property / funds to a group of people (trustees) who administer the assets for the benefit of other people (beneficiaries) for a stated objective example bursary, scholarship. - Limited public disclosure no auditor or audited financial statements unless required by the trust deed - Expensive and time consuming to establish & requires professional assistance - No independent legal personality - Control is with the trustees no accountability to a wider membership base Statutory Requirements - Must have a board of trustees - Must have a trust deed the constitution of the charitable trust, which sets out the framework within which the trustees must operate. 33
Non-Profit Entity (NPO) Applying for charity status After the non-profit entity (society, company limited by guarantee, trust) has been registered and obtained a legal status in Singapore, it is possible to secure charitable status. Being a charity is a matter of status, not of organisational structure. All charities in Singapore are governed by the Singapore Charities Act and must be registered with the Commissioner of Charities within 3 months of its set-up. Processing time takes about three months. There is no charge for registering a charity under the Charities Act. 34
Non-Profit Entity (NPO) Charity Benefits - Enjoy automatic tax exemption - Gives a standing and credibility to the organisation Statutory Requirements - Submit financial statements and an annual report detailing activities conducted and proposed future plans - Ensure that accounting and donation records are maintained properly - Must audit accounts - Submit annual returns - Hold AGMs - Disclose fund-raising information online 35
Non-Profit Entity (NPO) Applying for Institutions of A Public Character (IPC) Status An approved IPC is an NPO with a charity status whose activities are beneficial to the community in Singapore as a whole, and not confined to sectional interests or group of persons based on race, creed, belief or religion. IPC are approved by the Commissioner of Charities to receive taxdeductible donations (i.e. donors are given tax deduction for donations made to these organisations). Most IPCs are charities, and the rest are sports/cultural associations. The processing time on applying for IPC status takes about two months. 36
Non-Profit Entity (NPO) Who can apply for IPC Status? 1. Hospital not operated or conducted for profit 2. A non-profit public or benevolent institution 3. A non-profit public authority or society which is engaged in research or other work connected with the causes, prevention or cure of disease in human beings, where the gift is for such activities 4. A university or a public fund for the establishment, maintenance, enlargement or improvement of a university 5. A non-profit educational institution or a public fund for the establishment, maintenance, enlargement or improvement of such an educational institution 6. A non-profit public or private fund for the provision, establishment or endowment of a scholarship, exhibition or prize in a university, or an educational institution 7. A public fund established and maintained for the relief of distress among members of the public 37
Non-Profit Entity (NPO) 8. A charitable institution or a body of persons or a trust established for charitable purposes only 9. An organisation not operated or conducted primarily for profit which is engaged in or connected with the promotion of culture or the arts or with the promotion of sports. Statutory Requirements - maintain Donation Records - post financial and non-financial information online - submit audited financial statements - submit an annual return of donations - submit an annual report detailing the use of donation money and proposed future plans -be administered by a group of independent trustees i.e. there must be independent control 38
Tax deductible donations Non-Profit Entity (NPO) Only donations to a charity that is an approved Institution of a Public Character are tax deductible (i.e. donors are given tax deduction for donations made to these organisations). Not all registered charities are approved IPCs. Donations made to a charity without approved IPC status is NOT income tax-deductible. Types of donations that normally qualify you for a tax deduction: - Cash Donations - Shares Donations - Computer Donations - Artefact Donations - Public Art Tax Incentive Scheme - Land and Building Donations If the donations or gifts are for a foreign charitable purpose, they are not tax deductible even though they are made to an approved Institution of a Public Character (IPC). 39
Non-Profit Entity (NPO) - IPC no longer needs to issue Tax Deduction Receipts as tax deductions for the donations will be automatically reflected in tax assessments based on the information from the IPC. Therefore individuals or businesses are required to provide your ID ie NRIC/Fin card number or business UEN number respectively when donating to the IPCs 40
Employers Obligations Employers are required to obtain work passes from the Ministry of Manpower. Employers are required to compile a return (Form IR8A or 8E) showing the total remuneration paid to each employee during the year to the IRAS. The tax liability of the employees will be determined based on the information provided by the employers and the information on other sources of income compiled by the employees. Employers are required to give notice to the IRAS within a stipulated timeframe and withhold all monies payable to employees, who are not Singapore citizens prior to cessation of employment. The money withheld by the employer will be returned to the employees, after all outstanding tax has been paid and tax clearance has been obtained. Employers are obliged to make monthly contributions to the Central Provident Fund for Singaporeans and Singapore permanent residents 41
Other Important Information You are responsible for ensuring that your information lodged with ACRA is up-to-date and accurate at all times, by filing any changes of particulars with ACRA. Generally, any changes must be filed with ACRA within 14 days Record Keeping Every business/company incorporated in Singapore must keep accounting records and these records can be kept outside Singapore. However, records sufficient to enable a profit and loss account and balance sheet to be prepared should be sent and kept in Singapore. The accounting records must be kept for five years from the end of the financial year in which the transactions or operations to which they relate are completed. 42
Conclusion and VERY important point The other important government department is IRAS. You are also responsible for ensuring that your residential address is always up-todate with IRAS to avoid non-receipt of any tax documents. IRAS will take whatever action necessary for non-compliance of filing of tax returns and non-payment of tax liability such as: - Penalty and composition fees for non-compliance - Appointment of Agent (your bank or employer) to recover outstanding tax liability - Court Summons - Notification to checkpoints preventing you from leaving Singapore 43
Question and Answer 44