With its strategic location, first-world infrastructure and pro-business climate, Singapore is an ideal place to experiment and test the waters. We look at the options that expatriates can consider when setting up a company in Singapore.
Voted as the top choice in Asia and the second best choice by expatriates for career progression, financial well-being and quality of life, Singapore has one of the largest proportions of expatriates in the world, with expatriates and non-residents making up 30% of the population.
While there are several options in terms of business structure, most business owners typically opt for a private limited company structure, which offers the most flexibility and is a very commercially feasible option.
Option A: Private Limited Company + Employment Pass
This is the most common option that expatriates opt for when they decide to become a business owner in Singapore. Admittedly, the process may seem oddly reverse in order, as the company is incorporated in Singapore before the expatriate’s employment pass is applied for. Here are the key processes that expatriates should be aware of:
Having topped the World Bank’s annual survey of 189 economies on the Ease of Doing Business for the last ten consecutive years , potential business owners can be assured that incorporating a business is generally a fuss-free process, especially if a reliable professional corporate services provider (“CSP”) is engaged to assist.
Do note however, that with growing international concerns regarding money laundering, there have been more stringent screening processes put in place, hence potential business owners who have criminal records or are politically exposed persons may find that it may not be possible to incorporate a company in Singapore.
In general, potential business owners would do well to ensure that they have the following documentation and information on hand, before incorporating their business:
- At least three options for their preferred business name, which should not contain any misleading words, such as the use of “Singapore” or “Authority” or vulgarities etc. The business name should also not be too similar to another company’s business name.
- Principal Activities of the company
- Information on the first shareholders of the company, such as their full name, identification documents, registered address etc.
- A registered office address in Singapore that is not a P.O. box
To learn more, visit AsiaBiz’s Singapore company registration guide.
In addition, business owners will also need to consider the need to have a local resident director, before a company can be incorporated, as it is a statutory requirement. A company secretary would also need to be appointed, within six months from the company’s date of incorporation. Typically, most CSPs would be able to provide nominee local directors and a company secretary to fulfil both requirements.
Submission of Employment Pass Application to the Ministry of Manpower
Similar to how the application for a company to be incorporated is submitted via the Accounting and Corporate Regulatory Authority’s (“ACRA”) electronic portal called Bizfile, the Ministry of Manpower (“MOM”) also has a similar electronic portal, known as the Employment Pass Online (“EPOL”). MOM also does accept paper applications, however submissions through the electronic portal are generally processed approximately two weeks faster.
However, there are several conditions that need to be satisfied, before MOM will approve the application for an Employment Pass, as follows:
- Fixed monthly salary of at least S$3,600 (effective 1 January 2017)
- Candidate is qualified with relevant degrees, professional qualifications or specialist skills*
- Work experience
- Job profile
*Do note that the Ministry of Manpower (“MOM”) has additional requirements for candidates who submit certificates from tertiary institutions from India and China.
Expatriates may also note that the MOM has announced more stringent requirements for pass holders in the recent years, hence it may be prudent to consult an experienced employment agency before making the application.
Employment Pass holder is appointed as director of the company
Subsequent to the incorporation of the company and approval of the Employment Pass, an application can be made through Bizfile to appoint the Employment Pass holder as a director of the company.
Compliance wise, a director’s resolutions in writing would need to be prepared to acknowledge the appointment of a new officer of the company. A CSP would be able to assist with the preparation of this document and will retain the original in the company’s minutes book, which will be reviewed by auditors during their annual statutory audit.
Option B: Private Limited Company + EntrePass
The key difference between Option A and Option B is that an EntrePass is applied for, instead of an Employment Pass. Unlike an Employment Pass, the application criterion for an EntrePass focuses on the business and its potential contributions to Singapore, rather than the individual’s skills and qualifications.
To obtain an EntrePass, one needs extensive preparation. Some of the requirements stipulated by MOM are:
- Applicant must have a relevant background
- Submission of a 10-page business plan
- Minimum issued and paid up capital of S$50,000
If possible, the applicant’s EntrePass application will include brochures, press releases or any other business collaterals from previous or existing entrepreneurship ventures. In addition, the applicant should have experience that is relevant to the proposed business activities of the new company, e.g. a shoemaker would most likely not be approved if he proposes to set up a bubble tea shop.
This business plan should detail the proposed company’s business goals and objectives. Naturally, industries in their infancy with high value, or show potential to grow (such as the IT industry) will be able to benefit from more government incentives and are more likely to receive support from recognised research institutions or government-approved incubators, which is another one of the requirements for an EntrePass. Currently, the Singapore government leans towards businesses that utilise new, innovative technologies or which foray into niche areas that the local economy currently lacks.
In addition, the business plan should also reflect the company’s commitment to employ local employees. Given Singapore’s high literacy rate, employers will be spoilt for choice when looking for skilled labour – unless the industry that they are in requires a unique skill or ability. The table below summarises the number of local jobs that a company should create in order to maintain the EntrePass.
|No. of years after award of EntrePass||Local jobs created*||Minimum TBS**||Type of Employment Pass issued|
|5 or more||10||S$400,000||P1|
Do note that local employees engaged will need to be employed as full-time staff and receive monthly salaries, as well as CPF contribution.
Issued and paid up capital of S$50,000
Typically, most companies can incorporate with a minimum issued and paid up capital of S$1.00, which does not need to be substantiated by any documentation. However, for a company to be tagged to an EntrePass, it will be required to show that the company has a corporate bank account with at least S$50,000.
To open a bank account, one would be required to provide your passport, as well as be physically present. In addition, the bank will also require a copy of a director’s resolutions in writing, which should be certified by a director and the company secretary. This document can be prepared by a professional corporate service provider.
Ultimately, the biggest reason why many choose an Employment Pass over an EntrePass is due to the difference in waiting time required. While an Employment Pass can be obtained in approximately 2 work weeks, a EntrePass takes a significantly longer time to process, as it is reviewed by SPRING Singapore and MOM. Given the more stringent requirements due to the recent tightening of foreign labour policy, it would also be prudent for prospective applicants of an Employment Pass or EntrePass to consult an experienced employment agency. The employment agency will be able to advise and review the application, as well as liaise with the MOM on the applicant’s behalf.
With its pro-business policies, tax incentives, reliable first-world infrastructure, established tax treaty networks and strong government support, Singapore is arguably the best place for entrepreneurs to kick-start their businesses and expand to the region.
Planning to setup a company in Singapore?
Our incorporation specialists can help you! Call us at +65 6320 1877 for a free consultation.