Investment Law Overview

Singapore utilizes the 'Economic Expansion Income Tax Act (Relief from Income Tax) Act - Chapter 86,' which was introduced in 1967 to promote investment.
The law's objective is to attract investments to Singapore and encourage Singapore-based companies to diversify their investments across ASEAN, China, and India.
The primary goal is to grant the authority to provide tax benefits to industries and products that the ministers of relevant ministries consider essential for the public interest.
The categories of benefits provided by sector are as follows:

• Pioneer industries and services: Tax exemptions for up to 15 years.

• Development and expansion incentives: A tax rate discount of 5% or more for less than 20 years.

• Export of services: Tax exemptions for up to 10 years.

• Foreign debt for production equipment: Tax exemption or tax rate discount.

• Preferential investment: Tax deduction for losses.

• R&D and Intellectual Property Management Hub: Income Tax Exemptions.

• Preferential treatment for overseas investment: Postponement of tax payment for overseas losses.

These incentives are determined through negotiations with the Singapore Economic Development Authority (EDB).
Incentives are primarily determined by comprehensively considering four factors: Total Business Spending, Investment Amount, Job Creation, and Business Activity Types (Marketing, Regional Headquarters, R&D, Manufacturing, etc.).
The scope of incentives is not limited, and flexible decisions are made by assessing whether the project has contributed to economic development.
Tax reduction can range from 0%, and the tax reduction period can extend for 5, 10, 15 years, or more.

Since there is no specific law exclusively governing foreign investment attraction, foreign-invested companies follow laws related to the establishment and investment of local corporations.
The following laws apply in this regard:

Companies Act (Company Act): General procedures related to the establishment of a corporation, registration of foreign companies (establishment of branches/representative offices), management, stock, liquidation, accounting, audit, administrative affairs, and responsibilities, etc.

Control of Manufacture Act: In the case of manufacturing in specific fields, the procedures and criteria for obtaining prior permission before establishing an enterprise. Income Tax Act (Income Tax Act): Provisions regarding tax imposition criteria, tax credits, calculation of taxation, and tax rates related to income tax. Others: Labor Act, Industrial Relations Act, Environmental Law, etc.

The Singapore government strengthened and extended corporate tax refunds in its 2020 budget announcement, allowing corporations to receive partial tax exemptions on their first $200,000 of income.

General Procedure

The general investment entry process in Singapore is as follows.

• Investment preparation (establishment of investment purpose, selection of investment methods, selection of investment gifts, selection of investment areas, etc.)

• Preliminary investment consultation and application for permission (investment probability, incentive check)

• Online application for company name (biz file)

• Submission of documents for application for company establishment (registration)

• Submitted document review, registration authorization (ACRA)

• Enter company-related information computer systems

• Issuance of The Certificate of Incorporation

The company registration process in Singapore is largely divided into two stages: approval of the company name (trade name) and application for company registration.
All procedures are carried out through BizFile (www.bizfile.gov.sg ), a website operated by the Accounting Enterprise Administration in Singapore.
In addition to the company registration process, submitting annual audit reports after company registration, and registering various changes such as trade name and address are also carried out through Bizfile.

General Procedure

Other high-tech industries, capital-intensive industries, and high-tech industries are all subject to investment encouragement.

Restrictions and Prohibitions (By Industry)

The investment areas restricted by Singapore are as follows:

• Prohibition of sectors related to the public interest

  • Weapons and ammunition manufacturing, public services (electricity, gas, water supply), telecommunications systems, etc

• Control of equity ownership of highly publicized enterprises

  • (e.g.) newspapers, airlines, shipping companies

Restrictions on the financial sector are on an easing trend and shares in securities firms can be acquired up to 70 percent under permission from the Singapore Stock Exchange.
In the past, foreign ownership of local banks was only possible up to 40%, but the restriction was lifted in May 1999 due to financial opening measures.
In addition, domestic financial services of foreign banks have been fully opened.

Special Economic Zones and Free Trade Zones

Introduction to Special Economic Zones

Singapore is a free trade zone for the entire country, and does not designate a separate free economic zone or an individual or complex foreign investment zone.

Investment conditions by region (cost)

Singapore does not discriminate between general domestic companies and foreign-invested companies, and although there are areas where industrial complexes are concentrated by region, there is no program to provide separate investment incentives for these industrial areas or specific areas.
Therefore, the sale and rental costs of all industrial and factory sites, and the purchase and rental costs of commercial buildings are calculated based on the market price regardless of domestic and foreign companies.

Sale and rental costs of industrial complex sites

Industrial sites in Singapore are classified into B1 and B2 zones according to environmental impacts.
B1 does not require the installation of a separate pollution buffer, but B2 is an industry that has the potential for environmental pollution and is obligated to install a pollution buffer of more than 50m by related government agencies.
In the case of Standard Factory, JTC mainly supplies it, and due to the nature of the city state, there are not many large factory sales.

• Industrial land: available on an open tender basis (www.place2lease.com )

• Apartment-type factory rental cost: JTC, an industrial complex creation government agency, calculates and announces the market price (the same applies to domestic and foreign countries)

Cost of Renting a Commercial (Office) Site

In the case of commercial buildings, purchase costs and rent vary greatly from region to region.
Singapore office sites total 7.3 million square meters, 30% of which are located in the Central Business District (CBD).
The CBD area is Singapore's financial and commercial center with convenient access and infrastructure, with a number of professional service companies such as domestic and foreign banks, multinational companies, law firms, and accounting firms.

Major Areas of Singapore

Changi Business Park

• Monthly Rent: Average of 4,562-46,183 Singapore Dollars (including VAT GST)

• Size: 110-1,113.58 square meters It is the closest industrial complex to Singapore Changi Airport, which was completed in 1997, and is the largest industrial complex in the east of Singapore.
  Approximately 7 minutes walk from Expo Station

• Tenant companies: IT-related companies' offices, research complexes, and financial companies are mainly located.
  (ex: IBM, Honeywell, Huawei, Ericsson, Citi Group, Johnson Controls, Cisco Systems etc)

• Website: https://www.jtc.gov.sg/industrial-land-and-space/Pages/changi-business-park.aspx

Marina Bay Financial Centre

• Monthly Rent: Per-Pyongyang Foot (psf) S$13.50 (including VAT GST)

• Size: 1,780-4,564 square meters Located in Raffles Place/Marina Bay, Singapore's First Central Business District (CBD) 2010 Singapore Financial Office Building completed in 2010 and located about 10 minutes' walk from Singapore Landmark Marina Bay Sands Hotel

• Tenants: One of Singapore's financial and commercial centers, it houses a number of professional service companies such as domestic and foreign banks, multinational companies, law firms, and accounting firms.
  (e.g., Clifford Chance, Clyde & Co., Nomura Trust, Woori Bank, etc.) LaunchPad One-North

Located in the Midwestern Industrial District of Singapore

• Monthly Rent: Average S$622-8,539 (including VAT GST)

• Size: 21.32-341.18 square meters It is a startup-only industrial complex in One North, an industrial district located in the midwestern part of Singapore.
  The One North Industrial District was built for companies in the future innovation industry and constitutes industrial complexes such as ICT, startups, biomedical, communication and media.

• Tenant companies: There are more than 500 startups and incubators in various fields such as ICT and biomedical.
  (ex: biorithm, Bellesomics, Xjera Labs, PaperplaneCo etc)

In Singapore, the process of establishing a company is relatively simple and efficient, requiring minimal time and effort.
Furthermore, there are no significant restrictions for foreigners looking to establish and operate a company in the country.
There are four primary types of legal entities that can be established, including subsidiaries or branches of parent companies, single companies, companies limited by shares/private companies limited by shares, limited liability partnerships, and limited partnerships.
Therefore, it is advisable to assess the tax implications and registration requirements for each type of company based on factors such as the company's size, business sector, strategic objectives, and its relationship with the parent company.
You can find essential information related to company registration through the Accounting and Corporate Regulatory Authority (ACRA).

Among these options, a corporation (subsidiary company) is the most commonly chosen type of entity when entering Singapore due to its ability to benefit from low corporate tax rates and tax reduction incentives.
Individual shareholder companies with annual sales exceeding S$5 million may also qualify for exemption from annual external audits.
It is also possible to establish branches or liaison offices either in Singapore or abroad to allocate funds and hire local employees.

As of 2020, there have been changes to corporate tax regulations.
The net income threshold for corporate tax refunds has been reduced from $300,000 to $200,000 annually, with a 17% corporate tax rate applied to profits exceeding $200,000 each year.

For new startups that have completed the incorporation process, corporate tax refund rates have been adjusted as follows (these rates apply to startups established from 2020 for the first three years):

Tax relief on the first $100,000 of net income (normal chargeable income: income taxable at 17% based on the current corporate tax rate) has been reduced from a 100% exemption to a 75% exemption.

A 50% reduction on an additional S$200,000 in profit for the current year (normal chargeable income: income taxed at 17%) has been reduced to a 50% reduction on an additional S$100,000 in profit.

Source: Inland Revenue Authority of Singapore (IRAS)

Startup Corporate Tax Reference Site

• Methods and examples of calculating non-taxable amounts: https://www.iras.gov.sg/media/docs/default-source/uploadedfiles/pdf/examples-on-computing-the-amount-of-tax-exemption-for-companies.pdf?sfvrsn=891caf26_5

• Corporate tax refund conditions for start: https://www.iras.gov.sg/taxes/corporate-income-tax/basics-of-corporate-income-tax/corporate-income-tax-rate-rebates-and-tax-exemption-schemes#:~:text=Qualifying%20Conditions%20for%20Tax%20Exemption%20Scheme%20for%20New%20Start%2DUp%20Companies branch

Establishment Requirements

At least one authorized representative and a minimum capital of $1 are required to establish a branch office.
The representative must be a Singaporean citizen, permanent resident or employment visa holder residing in Singapore.

Establishment procedures

• Mutual application: Before registration of a branch office, a mutual application is made to examine whether there is the same name.
  Since the registered company name is preserved for 120 days at the time of approval, it must enter the company registration process within this period, and if it is not approved, it must be reapplied to another company name.

  • Online Application: www.bizfile.gov.sg

  • Cost: S$15

• Branch Registration: After mutual registration, you can use CorpPass on BizFile+ to register branches of foreign companies online.

  • Online Application: www.bizfile.gov.sg

  • Cost: S$300

  • Period: 15 minutes after payment of the mutual application fee (However, it may take 14 days to 2 months if permission and review by other agencies are required)

  • Required documents:

    • Copy of the Foreign Company's (i.e., Headquarters) Certificate of Incorporation (Copy of the Certificate of Incorporation of the foreign company certified by the authority which issued the certificates)

    • Copy of the Company's Articles of Incorporation and Bylaws (Copy of its Memorandum & Articles of Association certified by the authority which incorporated the foreign company)

    • Personal Information of All Directors (Return providing particulars of all directors of the foreign company-Form79)

      • Memorandum statting powers of local directors

      • Agreement Regarding the Appointment and Authority of Local Agent (Memorandum of appointment or power of attorney stating the names and addresses of two more Singaporeans, Permanent Residents or EP holders authorized to act as agents in Singapore)

    • Pledge of local representatives (Statutory Declaration by the Agents of the Foreign Company-Form 80)

A representative office is a temporary administrative unit operated for a limited period of time with the purpose of establishing local business relationships and conducting market research on behalf of foreign companies.
Consequently, no financial business activities or involvement in transactions are permitted. Liaison offices in Singapore can operate for up to three years, subject to yearly evaluation and renewal.
If you wish to continue operations beyond this period, registration with the Office of Corporate Accounting Supervision (ACRA) is required.
Information on establishing liaison offices can be obtained from the Monetary Authority of Singapore (MAS) for the banking, finance, and insurance industries, and from the Ministry of Justice (MinLaw) for the legal profession.

Establishment Requirements

• Parent Company's Total Revenue Exceeds $250K

• More than 3 years of parent company establishment

• Number of Contact Office staff less than 5 people

Establishment Procedures

• Online application: https://roms.enterprisesg.gov.sg/

• Registration fee: S$200 per year

• List of required equipment

• Copy of the certificate of establishment of a foreign company (i.e., headquarters) (Softcopy attachment (in English or an official English translation) of the foreign entity’s Certificate of Incorporation or Registration Certificate (as applicable))

  • Softcopy attachments of the foreign entity's latest audited accounts

In general, when foreign companies enter Singapore, it is usually conducted in the form of a limited liability company (foreign company: parent company / Singapore company: subsidiary) or a branch (foreign company: headquarters / Singapore company: Singapore branch).
This is challenging for private companies to proceed with Employment Pass (EP) or foreign status.
In the event of a business failure, individuals have unlimited responsibility.
However, in a limited liability company (i.e., PTE. LTD), individuals can establish themselves as 100% shareholders and obtain EPs (work visas), allowing foreigners to operate their business with one local director.

The Companies Act (Cap 50) governs the majority of companies in Singapore, and all companies are required to register with the Accounting and Corporate Regulatory Authority (ACRA).
At the time of establishment, there must be at least one local director, and it can be established with a minimum capital of S$.
Since the company itself is the subject of economic and legal rights and obligations, all contracts, transactions, etc., are carried out in the company's name.
In addition, all actions are taken by the board of directors appointed separately from shareholders, following the procedures and laws specified in the articles of association and the general shareholders' meeting.

There are three types of stock companies: Stock Company, Guarantee Company, and Unlimited Company.

• Private/Public Companies Limited by Shares: These companies are limited to the payment of the stock value allocated to shareholders.
  Most of them are limited by shares as Pte Ltd. Pte Ltd is divided into two types, and companies with fewer than 50 shareholders cannot offer stocks and bonds to the public, and public offering of deposits is prohibited.
  Additionally, the transfer of shares may be restricted in accordance with the provisions of the articles of association.
  Therefore, this type of company has a strong personal character and fewer requirements for general notarization.
  Various governance and reporting obligations under company law are eased compared to public parent companies, and the process of appointing and dismissing executives, auditors, and liquidators is simple.
  If the number of shareholders exceeds 50, the company must become a Public Company allowing public offerings of stocks and bonds.
  Shares and debentures in public offerings can be freely transferred without restrictions.
  All companies listed on the Singapore stock market are public limited.
  Since public offering companies have more public interests, they must comply with various compliance and reporting obligations under company law, such as the preparation and disclosure of semi-annual financial statements.
  Additionally, the procedures for appointing and dismissing executives, such as directors and clerks, auditors, and liquidators, as well as the convocation procedures for general shareholders' meetings and board of directors, are more complex.

• Company Limited by Guarantee: This type of company is mainly used by non-profit organizations and is established by agreeing to pay any excess company debt to the extent that shareholders do not pay capital at the time of establishment and will pay when the company liquidates.

• Unlimited Company: This is a very rare type of establishment where shareholders bear unlimited responsibility to the creditors of the company, regardless of whether shareholders pay capital at the time of establishment.

Limited Liability Partnerships (LLP): Singapore's LLP has a separate legal identity, similar to a private limited company.
Consequently, a lawsuit may be filed or incurred in the name of the LLP, and assets may be owned by it.
In the case of a partner, the individual partner is responsible for the loss caused by his or her negligence but is not responsible for losses incurred by the LLP due to the actions of other partners.

To establish an LLP, there must be at least two partners aged 18 or older, who can be individuals, local companies, foreign companies, or another LLP.
Additionally, at least one manager aged 18 or older is required, primarily residing in Singapore.
If a foreigner who does not reside in Singapore establishes an LLP in Singapore, a local resident manager must be appointed.
For foreigners residing in Singapore, it is strongly recommended to obtain approval from the Singapore Ministry of Manpower (MOM).

A single business owner or a single company has all the rights and obligations of the business alone, making it the simplest form of business organization.
Since a sole proprietorship is not a legal entity, it does not have a separate legal personality distinct from the owner.
Therefore, legal disputes, transactions, or assets cannot be owned by a sole proprietorship.
All transactions and legal activities must be conducted in the name of the employer or the owning company, and business profits are considered personal income and must be taxed accordingly.
Foreign corporations temporarily operating in Singapore can reduce various regulations or costs under company law by registering as a joint venture or their own private business.
Registration costs are low, but private companies must be maintained by renewing them annually.

To register a sole proprietorship, you must be a Singapore citizen, permanent resident, or hold an EntrePass visa, and be at least 18 years of age.
Overseas residents must appoint at least one authorized local resident representative and also employ a registered filing agent (such as a law firm, accounting firm, or corporate secretarial firm) to submit an application through BizFile+.

Foreigners residing in Singapore must obtain approval from the Singapore Ministry of Manpower (MOM) before registering as a private diesel business.
If the proposed partner does not have a SingPass account, the applicant must use the services of a registered filing agent (such as a law firm, accounting firm, or corporate secretary) to submit an application on their behalf.
Only individuals with SingPass or CorpPass accounts can submit applications on BizFile+.