Why do business in Singapore?
As Asia is the largest continent in the world, it’s obvious that any company should investigate the opportunity to break into this market. With Singapore boasting the most stable economy in South-East Asia, it’s the first place that many entrepreneurs and business leaders should look.
Singapore is widely considered one of the easiest countries in the world to do business and is ideally placed for trading with other nations. Singapore also offers appealing tax rates and breaks for companies, in addition to boasting a wide and varied pool of talented local employees.
Territory Data
|
Local currency |
SGD
|
Dialling code |
+65 |
|
Local time |
GMT +8
|
Pay periods |
12 |
|
World Bank Ease of Doing Business Ranking (1-190) |
2 |
||
|
Tax rates 2020 |
|||
|
Company tax |
17% |
Social security |
17% |
|
Wages tax |
0-22% |
VAT |
7% |
How to set up payroll in Singapore
If you are keen to start a business in Singapore and set up a payroll, start by finding a business premises. You’ll need a local address before you can register your business. After this, you can apply for a CPF Submission Number (CSN).
Once you have a CSN, if you are not a Singaporean resident you’ll need to start looking for your first, and most important, hire. A limited company in Singapore must have at least one local director. Pinpoint this employee before going any further with the registration process. Within six months of operation, you’ll also need to hire a company secretary.
When it comes to making hires, you’ll have a wide talent pool of native Singaporeans to choose from. If you wish to hire from overseas, the employee must apply for one of the following documents from the Ministry of Manpower:
- Employment Pass (professionals that earn SG$4,500 a month or more)
- Personalised Employment Pass (for higher earning, senior professionals)
- S Pass (mid-level staff that earn SG$2,500 a month)
- Work Permit (semi-skilled workers in manual or industrial trades)
It will be the responsibility of whoever manages your payroll to ensure that these legal requirements are met and satisfied. Your business can be fined up to $30,000 for hiring an employee illegally, and a custodial sentence is even a possibility.
Singaporean employment law and HR considerations
Employment law in Singapore is managed by the Singapore Employment Act, last updated in 2009. Contracts in Singapore are very basic, with few mandatory benefits. There is no legal requirement to offer sick pay, parental leave or a company pension, for example.
As an employer, you will pay 17% of your employee’s salary into the Central Provident Fund – basically, social security in Singapore. This contribution will reduce for employees aged 55 or over. At the time of writing, the employer contributions are:
- Employees aged between 55 and 59 – 13%
- Employees aged between 60 and 65 – 9%
- Employees aged over 65 – 7%
Employees, meanwhile, pay 20% of their salary into CPF. Again, these contributions drop after the age of 55. Those aged 55-59 pay 13%, dropping to 7.5% between the ages of 60 and 65, and 5% after 65. This is also the legal retirement age in Singapore, but employees are entitled to apply for re-employment at this age if they wish to continue working.
Employees in Singapore that earn above SG$5,999 PA must also make mandatory payments to MediSave. This is the central government scheme that finances hospitals in the country. These contributions are decided on a sliding scale, according to age and salary. The older the employee, the more contributions they make. As a summary:
- Employees aged 34 or younger pay
- 4% (salary between SG$6,000 and SG$11,999)
- 4 – 8 % (salary between SG$12,000 and SG$17,999)
- 8% (salary of SG$18,000 or above) – capped at SG$5,760
- Employees aged between 35 and 44 pay
- 4.5% (salary between SG$6,000 and SG$11,999)
- 4.5 – 9 % (salary between SG$12,000 and SG$17,999)
- 9% (salary of SG$18,000 or above) – capped at SG$6,480
- Employees aged between 45 and 49 pay
- 5% (salary between SG$6,000 and SG$11,999)
- 5 – 10% (salary between SG$12,000 and SG$17,999)
- 10% (salary of SG$18,000 or above) – capped at SG$7,200
- Employees aged over 50 pay
- 5.25% (salary between SG$6,000 and SG$11,999)
- 5.25 – 10.25% (salary between SG$12,000 and SG$17,999)
- 10.5% (salary of SG$18,000 or above) – capped at SG$7,560
Any employee in Singapore that earns above SG$22,000 PA will also need to pay income tax. As always, the tax rate is a sliding scale depending on the employee’s salary.
- Salary between SG$20,001 and SG$29,999 – 2%
- Salary between SG$30,000 and SG$39,999 – 3.5%
- Salary between SG$40,000 and SG$79,999 – 7%
- Salary between SG$80,000 and SG$119,999 – 11.5%
- Salary between SG$120,000 and SG$159,999 – 15%
- Salary between SG$160,000 and SG$199,999 – 18%
- Salary between SG$200,000 and SG$239,999 – 19%
- Salary between SG$240,000 and SG$279,999 – 19.5%
- Salary between SG$280,000 and SG$319,999 – 20%
- Salary of SG$320,000 or over – 22%
Altogether, expect to pay around 1.1725 times the annual salary of your employees when making hires to accommodate these contributions – maybe a little less if you hire a predominantly older workforce.
You will need to withhold these mandatory taxes and contributions from employee salaries and make the payments to the Inland Revenue Authority of Singapore (IRAS). The Singaporean tax year runs from January 1st to December 31st.
Setting up a subsidiary entity in Singapore
If you wish to open a branch of an existing business in Singapore, the authorities make this extremely simple.
You’ll need to pay SG$315 in fees and register your business with the Accounting and Corporate Regulatory Authority (ACRA). You may even be able to do this online using Bizfile+, but most overseas businesses need to hire a local agent to complete the legally compliant paperwork. This, naturally, will lead to more fees. The whole process can one tied up within a week, though.
An alternative – and a popular one at that – is to open a subsidiary limited company. In Singapore, this is known as a Pte. This process is still comparatively straightforward and is managed by ACRA as before. If you operate a separate limited company, your parent business will not be legally liable for any difficulties encountered while trading in Singapore.
Setting up a limited company in Singapore also comes with favourable tax rates. Corporate tax is charged at a flat rate of 17%, and for a Pte, this tax is only payable on income generated in Singapore. The first 75% of corporate earnings up to SG$10,000 are tax-free, and once profits exceed SG$190,000, the next 50% of earnings are also exempt.
These deductions are even more generous for a start-up business, making Singapore a great location for entrepreneurs and SME owners to trade.
Country nuances
If you’re keen to start trading in Singapore, there are a few things that you’ll need to know. Firstly, ahead of attempting to register a new venture, you’ll need a business address (a PO Box number is not acceptable) and at least one director that is a permanent resident of Singapore. A local bank account is not compulsory but recommended.
A limited company must have at least one shareholder, and no more than fifty. These shareholders can all be based overseas though, as long as the business has the aforementioned local director in place. You’ll only need US$1 in capital to establish your business.
Most business discussions in Singapore are conducted in English, though the country hosts an ethnically diverse population. A lot of business is conducted over lunch in Singapore, and whoever set the meeting will be expected to settle the tab. Be wary of the cultural and religious beliefs of potential business partners in Singapore – alcohol and red meat are best avoided.
You may be asked personal questions by potential associates. While this may seem jarring to western values, don’t clam up and avoid answering them. Singaporeans like to connect and forge a relationship with those they do business with. This can also extend to physical contact – you’ll be invited to shake hands more than you may consider necessary!
If you wish to endear yourself to Singaporeans, show an interest and knowledge of the country and praise the business accomplishments of your associates. This will get you much further than complimenting physical appearance or clothing. Most importantly, always be punctual. If you’re late to a meeting in Singapore, it is seen as a mark of disrespect. It will be assumed that you consider your own time more valuable than that of others.
Be measured in your responses when conducting business in Singapore, too. Raising your voice and growing animated is considered poor form, and you should never correct or criticise an associate in public. If you have a concern, arrange a meeting to address the matter privately and respectfully.
Setting up in Singapore FAQ
Expect to wait around eight weeks for a new business to become operational in Singapore, and a further four weeks before you can make your first hire. Branches can become operational in a matter of days.
If you wish, you can set up a branch of your existing business in Singapore. Most people prefer to start a new, separate entity though. These come in three possible forms:
• Private Company Limited by Shares
• Public Company Limited by Shares
• Public Company Limited by Guarantee
A Private Limited Company is the most popular option. These are identified with the suffix Pte in Singapore. A Pte is a separate legal entity from a parent business and experiences favourable corporate tax rates.
Employers are not legally mandated to provide a private pension to Singaporean employees. Legal requirements begin and end with contributions to the Central Provident Fund and MediSave.
Yes, a business in Singapore must have at least one director that is a permanent resident of the country.
Employees and employers alike pay into the Central Provident Fund of Singapore. These account for social security taxes. Employers pay 17% of a salary to the CPF, and employees pay 20%. Contributions are capped at SG$1,020 (£550) for employers, and SG$1,200 (£650) for employees. These contributions are reduced for employees aged 55 or older. Employees also pay into MediSave. The older and higher-earning the employee, the larger these contributions are.
Probation for new employees usually lasts between three and six months in Singapore, depending on the seniority of the new hire.
Expect to pay around 1.1725 times an employee’s gross annual salary to make a new hire in Singapore once taxes and expenses are considered.
There is no minimum share capital required to set up a branch of a parent company in Singapore. If you wish to establish a Pte, the minimum share is the equivalent of US$1 in the currency of your choice.
It is not legally compulsory to have a Singaporean bank account to do business in this country. You will be welcome to set one up once your business is established, though.
Singapore formerly operated a six-day working week, but most businesses have now reduced this to five. The average working week for most employees is between 40 and 45 hours, from Monday to Friday.
Employment contracts in Singapore tend to be quite basic, so things like sick pay and maternity leave are considered supplementary.
A popular supplementary benefit in Singapore is the Work-Life Grant, or WLG. This is a lump sum paid to a business, used to enable employees to enjoy a flexible working pattern. This attracts employees, as it means they can build their workload around family commitments.
Senior Singaporean employees are entitled to apply for automatic re-employment once they reach the mandatory retirement age. This entitles the employee to keep working – and earning money – if they do not wish to retire.
Many businesses also tempt employees with additional insurance policies, such as life or health instance. Alternatively, you wish to offer a financial allowance for employees to purchase a policy of their choosing.
If their contract does not state otherwise, employees can be terminated at any time with written notice. No reason for the termination needs to be provided under Singaporean law. However, you will need to provide a severance package. This will vary in generosity, depending on how long the employee has worked for you. A notice period of up to four weeks may also be required, depending on the employee’s length of service.
The Ministry of Manpower dictates that Singaporean employees are entitled to at least 7 days of paid annual leave for their first year of service. This increases by 1 day for every year of service, capped at 14 days. Some companies offer 14 days as standard, skipping the steady accrual process. Singapore also celebrates 11 public holidays per year.
You will be welcome to set up a branch of your existing business in Singapore. Restrictions apply, though. Your branch will not be considered a separate legal entity to the parent company, meaning that liability for any mishaps lies with the main business; the business must trade under the same name, and conduct the same activities, as the parent company; and there will be tax implications. You’ll also need at least one representative working from the branch that is a permanent resident of Singapore.
When the time comes to set up payroll to remunerate your Singaporean employees, you can take one of four options.
• Remote Payroll – Ideal if you are opening a branch of a parent company in Singapore. You can bring in the services of a local business to release scheduled payments to your employees, while parent business takes care of the legal formalities and hiring and firing
• Local Payroll Administration – Your Singaporean branch will recruit employees and ensure they are legally entitled to work in the country, but an external company will deal with releasing payments and filing taxes
• Fully Outsourced Payroll – The costliest method, but the one that will create the least headaches for your business. A local Singaporean business will handle everything to do with payroll – from releasing payments to calculating holiday entitlement, filing tax returns and managing all legal needs
• Internal Payroll – You can manage everything to do with the Singaporean payroll from your parent business in the UK. That is cheaper than seeking external help, but it’s also a lot of work
EntrePass is short for Entrepreneur Pass, a scheme designed to attract the best and brightest business minds and investors to Singapore. This is the ideal solution for anybody looking to set up a new business in Singapore, rather than entering the company on an employment Visa working for a pre-existing business. It’s not easy to acquire though, so ensure you meet the necessary criteria.
