Singapore, a modern day economic miracle, while known world-wide for its ease of doing business, low-tax policies, and first-world infrastructure, is well on its way to become the regional hub for start-ups. More so in the fields of IT, biotechnology, clean and green technology, media and entertainment; where with the help of a number of incubation schemes initiated by the Singapore Government, the country’s thriving start-up ecosystem has seen a growth of more than 50 percent in the last half-a-decade.

The venture capital funding has increased from S$35 million to S$2.1 billion in the last four years; and as far as M&A goes, the country has contributed to over 40 percent of the total South-east Asian start-ups acquired in the last five years. Singapore Venture Capital and Private Equity Association also noted in its study recently that the country witnessed venture capital deals worth S$578 million compared to S$1.2 billion that took place in the rest of South-east Asia.

Hugh Mason, CEO of JFDI Asia, one of South-east Asia’s most successful seed accelerator companies, too recently showered praise on the Singapore Government adding that it has “gone further than any other in the region to try to clear the way for innovation to happen and to set up structures that enable it”.

Though some analysts have pointed towards Singapore’s tiny local market, costly local work-force, and high rents, as possible hindrances towards incorporating a start-up in the city-state, the advantages are far more. Garena, a five-year-old local start-up, which ensured that Singapore ranked 27th among 29 countries with at least one company over US$1 billion in the World Start-up Report 2014 is a testimony to that.

Also, there has been a proliferation of unconventional working spaces and start-up accelerators firms in Singapore in the last few years such as Joyful Frog Digital Incubator,The Hub Singapore,The Co, and Golden Gate Ventures.

The country also hosts has more than 100 venture capitalists [providing easy availability of funding] with Walden International and Monk’s Hill Ventures being the notable ones.

Other notable advantages include robust Intellectual Property (IP) protection, and geographical proximity to world’s largest emerging markets such as India, China, Vietnam, Thailand, and Indonesia.

Government Schemes for Start-ups

The Singapore government has played its part too in propelling the nation towards a thriving start-up ecosystem. Some measures initiated include the Block 71 program – which incubates local start-ups; whereas money is also being pumped into medtech start-ups, in the Technology Incubation Scheme and in the Early Stage Venture Fund (ESVF).

Other start-up government financing schemes include the Business Angel Scheme (BAS), SPRING Start-up Enterprise Development Scheme (SEEDS), Sector Specific Accelerator (SSA) Programme, and Technology Enterprise Commercialization Scheme (TECS).

While TECS provides funding for R&D efforts for the commercialisation of proprietary technology ideas, SEEDS is aimed at providing start-ups a co-investment financing option from independent investors of up to S$1 million in matching capital. Meanwhile, SSA is for innovative Singapore- based young companies with a co-investment financing option from approved SSA Operators. Finally, BAS provides start-ups in Singapore a co-investment financing option from pre-approved angel groups, of up to S$1.5 million in matching capital.

Aside, there is the ACE, a Singapore entrepreneurial organization, which is assisting local start-ups in expanding overseas. While Garena is one, others such as Reebonz, Redmart, PropertyGuru, Viki, Razer, Hope Techniks and Luxola, have benefited too.

Then there are the IDA Labs, which are physical lab spaces for individuals, companies and government agencies to collaborate, generate new ideas, develop new technologies and test out new concepts.

An important addition few years back was when the government expanded the Productivity and Innovation Credit (PIC) scheme to allow IP in-licensing costs qualify as PIC benefits. These costs to register patents, trademarks, and designs can qualify for 400% tax deduction now. Till 2015, such companies also enjoy a PIC Bonus, which is a dollar-for-dollar matching cash bonus of up to $15,000 given on top of the 400 percent tax deduction.

Start-up Tax Exemption (SUTE)

If a newly-incorporated company in Singapore has no more than 20 individual shareholders; and in case of corporate shareholders, one individual holds at least 10 percent of the issued shares; it is eligible for the SUTE scheme. It must be noted though that property and investment holding companies are not eligible. The exemption is given on normal chargeable income of up to S$300,000 for each of the first three consecutive years of its operation.

• For first S$100,000, after 100% exemption, the exempt amount is S$100,000
• For next S$200,000, after 50% exemption, the exempt amount is S$100,000
• Thus, the total exempt amount for income up to S$300,000 is S$200,000

Equity Fund-raising

As noted above, apart from government assistance, the private equity funding and venture capitalist landscape in Singapore is also getting more vibrant these days. Reason being the tax incentives enjoyed (noted above) by private investors when they invest in the country’s start-ups.

Moreover, the founder has the option of financing his or her business by selling equity in the start-up in the form of shares for a cash investment.

What such equity financing means is this: what you pay to your investors in the form of dividends on shares is typically comparably lower than interest rates you would pay to service a bank loan called debt financing.

Thus, depending on the situation, equity financing may sometimes be more expensive for you if your company turns out to be overwhelmingly successful. This so because if your company earns high profits, you will be paying out a total amount of dividends on these investments that are a greater value than the interest amounts you would pay on a fixed bank loan.

Whereas if the company does not make profits then equity financing becomes less of a financial liability upon the company given that you are not obliged to pay your investors if there are no profits.

However, in order to have a good chance of securing equity capital in Singapore, you need to show your potential investors that you have a watertight and comprehensive business plan, clear exit strategies, reasonable and prudent financial projections, an experienced and go-getting management team, as well as strong growth potential. Otherwise, you will have to seek other sources of funding like from venture capitalists, business angel investors, banks, investment companies/funds or financial institutions.

Angel Investors

Angel investors are private investors who typically not only invest capital but also contribute their business expertise/skills in early-stage businesses in exchange for a significant share in the company. These are typically high net worth individuals (HNWIs) with an appetite for start-up companies with higher risk but promising enough to yield higher returns.

Past experience have shown that business angels in Singapore tend to invest more in the business services, retail and hospitality sectors.

Moreover, there are several local and regional networks for you to seek an angel investor. For example, the Business Angel Network Southeast Asia (BANSEA), which match start-ups in the seed stage of enterprise formation with business angels. BANSEA invests in companies that offer exceptional opportunities for high returns on investment, which usually involves early-stage ventures with a high growth potential, either in a developing market or in an existing market with international expansion capabilities, and that is sustainable in the long-run.

Venture Capitalism

The venture capital industry in Singapore is relatively new and small compared to the US and Europe. But, as mentioned earlier, there are still more than 100 venture capital firms in Singapore ranging from independent limited partnership venture capital firms to corporate-backed venture capital firms. Additionally, it is also common for Singapore government bodies, large corporations and high net worth individuals to set up venture capital funds in Singapore due to the attractive tax incentives and other beneficial government policies.

However, take note that venture capitalists typically are involved in their investments for between 2 to 5 years and seek a higher rate of return from the companies they invest in, at the rate of above 25 percent ostensibly because they will have to account for a higher level of profits to their clients. Popular start-ups for venture capital funds are those in high growth potential sectors such as IT, biotechnology and nanotechnology with a competitive edge in the market and longevity of profiteering. Start-ups whose business involve scientific breakthroughs, IP creation and other similar large-scale impact businesses are often favoured.

Incorporate your Start-up in Singapore!

In summary, if there ever was a good time to incorporate a start-up in Singapore, it is now. So much so that the start-up scene in the country has seen the average annual growth rate of company incorporation crossing eight percent in the last three years. If you are a foreign company or an entrepreneur looking for a stepping board to Asia, Singapore is the ideal destination.

Singapore is unique – a modern miracle in no uncertain terms.

Why?

Because, never before in human history has a society made such a vast jump in improving the quality of life for its citizens in just under half-a-century. Courtesy its business-friendly government, visionary leaders and hard-working pioneer generation, the city-state is now the business epicentre of Asia attracting corporate entities, business leaders, and investors from the region and around the world.

While reasons for this are aplenty, we enumerate just a few.

Ease of doing business and robust IP protection

According to World Bank’s Ease of Doing Business Report 2013, Singapore has topped the list for the seventh year running due to its hassle-free business set-up processes. World Economic Forum’s Global Competitiveness Report 2013–14 also ranks the city-state as the second most competitive economy in the world, offering the best IP protection, infrastructure and incentives in Asia.

Global Information Technology Report as well as the Economist Intelligence Unit’s Country Forecasts Report are all praise for Singapore’s business-friendly ecosystem, which, according to the country’s Ministry of Trade & Industry (MTI), has attracted thousands of multinational corporations to its shores. As a testimony to the country’s success story, many of these MNCs have chosen to incorporate in Singapore and set up their Asia-Pacific headquarters here.

Top-notch financial hub with availability of affordable funding

The city-state is home to 123 commercial banks, 154 fund managers and 291 capital markets services license holders, which enables entrepreneurs to raise funds at rates as low as 1% per annum.

The Singapore Exchange (SGX) is also the fourth largest forex trading centre in the world.

The city-state’s personal tax structure is progressive with marginal rates ranging from 0 – 20%. But the framework allows residents to tap various reliefs, thereby lowering their effective payments.

Attractive tax framework

A unique Not Ordinarily Resident (NOR) Scheme is also in place, which grants a favourable five-year tax treatment for qualifying individuals working in Singapore. Such individuals are employees of a Singapore registered company earning at least S$160,000 per annum. If these individuals spend at least 90 days per year outside Singapore for work purposes, IRAS doesn’t tax them on the income of the duration spent outside Singapore for business.

As regards to the corporate taxes, while Singapore’s marginal rate is already the third lowest in the world, the effective tax payable comes out to even lower if one takes advantage of all the government incentives, subsidies and schemes.

For instance, through its enhanced Productivity and Innovation Credit (PIC) Scheme, the Singapore government has made it possible for a firm to not pay any corporate tax even if it earns as much as S$28 million annually by offering tax credits for qualifying activities.

Excellent connectivity, strategic location and comprehensive trade agreements

Singapore is right in the midst of emerging markets such as China, India, Indonesia, Vietnam, Thailand and Myanmar, giving companies based here a strategic advantage over its competitors.

Also, with the world’s best airport – Changi International – serving over 80 international airlines connecting people to more than 190 cities in 160 countries daily, as well as hosting many leading logistics firms such as UPS and FedEx, connectivity is never an issue.

Additionally, Singapore has signed over 20 Free Trade Agreements (FTAs), and 74 comprehensive and 8 limited Avoidance of Double Tax Agreements (DTAs), facilitating trans-border trade and making it cheaper for Singapore-based firms to expand their operations internationally.

Strong legal system and low crime rate

While Transparency International’s Corruption Perceptions Index 2013 has rated Singapore as the least corrupt Asian country, aberrations are given exemplary punishments. Anti-corruption laws are tightly enforced so that entrepreneurs can conduct their businesses without any bureaucratic hassle or red-tapism.

Singapore’s legal system is considered as the most efficient in Asia, with crime rates so low that the government needs to keep reminding its citizens not to lower their guard altogether with signs [with captions such as “low crime doesn’t mean no crime”] posted all over the island.

Overall best quality of life in Asia

As demonstrated by Mercer rankings over the years, Singapore has proven to be the favourite city in Asia among expatriates due to its relative stability, low pollution levels, familiarity with English among the general masses, wealth of public services and recreational provisions. With world-class medical facilities, good public transportation, varied options for housing and education, the multi-cultural city-state is also an excellent choice for raising a family.

So once you have made the right decision to set-up a company in Singapore, what are the next steps?

If you are a Singapore resident, the registration process is fairly simple. But, first you need to determine which business structure, among the ones permitted in Singapore, will meet your requirements.

Seeking company registration and work visa application in Singapore? Read this guide to get started.

Company Structure

While there are five options to choose from, namely sole-proprietorship, partnership, limited partnership, limited liability partnership (LLP) and a private limited (Pte Ltd) company; the last one remains the most popular option as it is the most advanced and flexible business entity.

A Pte Ltd is a separate legal entity with members having limited liability. Among its types, the most preferred type is an Exempt Private Company, which has no more than 20 shareholders (none among whom are corporate entities). Other options include a Private Company (with up to 50 shareholders), or a Public Company limited either by shares or by guarantee. Notably, foreigners who wish to set-up a company in Singapore must have at least one locally resident director.

 
Individuals engaged in professional services such as lawyers, architects and accountants can go for a Limited Liability Partnership (LLP), which is a perfect blend of a partnership with private limited company set-up. This type is suitable for those looking for a company which is quick and easy to set-up, and even easier to administer.

Please note that a business entity registered under the Companies Act of Singapore is an independent legal entity; thus, can own properties, enter contracts, sue and be sued.

Importantly, Singapore tax regime recognizes the importance of easy cash flow for start-up companies in their initial years of operation. Therefore the system extends support in the form of sizable exemptions to resident qualifying companies.

Singapore Company Registration Requirements

While the requirements for registering each type of business entities differ minutely, a private company registration process requires one local resident director, one shareholder (corporate shareholders are permitted), S$1 or more in paid up capital, a local company secretary, and a local registered address.

 
Engaging a company registration specialist, which can also provide the local director, local company secretary and local registered address, can aid in incorporating the company with Accounting and Corporate Regulatory Authority (ACRA) in less than two working days.

As it’s an internet age, the registration specialist can also assist you in registering your domain address on the web and search engine optimization so as to maximize the traction on your website. Here, you have to take a call whether to choose a .sg, .com or any other domain extension, depending on the market you’re targeting.

Remember to choose the extension keeping in mind your business expansion plans and the long-term vision.

Some registration specialists also provide common seal, minute book and statutory registers, as well as assist in opening the first bank account.

It’s again your choice to go for a local or a foreign bank depending on your business requirements. Overall, Singapore’s OCBC and DBS banks have consistently ranked as among the strongest banks in the world. So going for these is always a very good choice.

Funding Options in Singapore

Apart from the usual fund-raising methods adopted by start-ups world-wide such as equity fund-raising, angel investors, private financing, and venture capitalism, there are various government financing schemes available for companies in Singapore.

These include funding options via SPRING Singapore, various tax exemptions and incentives, investment allowances, the Productivity and Innovation Credit (PIC) Scheme, as well as a range of grants and support programmes.

Few examples are the micro-loan programme, Loan Insurance Scheme and Local Enterprise Finance Scheme (LEFS) offered by SPRING; Development and Expansion Incentive; Pioneer Incentive Scheme; ACE Start-ups Scheme; and iSTART:ACE.

For new start-ups in the social entrepreneurial sector, ComCare Enterprise Fund and New Initiative Grant are the choices.

In most cases, the above-mentioned funding assistance from government agencies is available only for Singaporean entrepreneurs and majority-owned Singapore entities. Though, some exceptions are made to teams with foreign entrepreneurs, or firms jointly-owned by Singaporeans and foreign entrepreneurs.

Work visa Options: Employment Pass vs Entrepreneur Pass

Once you have zeroed in on Singapore as the destination for your next business venture, chosen a business structure, registered your company with ACRA and raised funding, the final step is to get the work visas and set the ball rolling.

In this also, a licensed employment agency with Singapore’s Ministry of Manpower (MOM) can offer a full spectrum of services including reviewing candidacy, acting as a liaison with MOM, applying for the work pass, processing renewals, appealing and tracking the application.

Work visas in Singapore range from work permits for domestic workers and labourers, S Pass for mid-level skilled workers, to Employment Passes (EP) for experienced professionals, managerial personnel, executives or specialists with good credentials.

Note that relevant skills, educational qualifications and professional background matter in securing a Singapore EP. Candidates from tier one countries/region and ones with skill-sets not locally available, generally fare better. It also helps if the candidate’s job scope and job title matches each other, as well as if his or her prospective salary is commensurate with experience and qualifications. Finally, if the foreign talent is being hired by a niche industry such as tect start-ups, or by an established company with successful track-record of more than three years, the EP approval rates are high.

Another type is the Entrepreneur Pass, which is designed for technopreneurs as well as R&D-intensive enterprises that can inject innovation and vibrancy in Singapore. Businesses that are involved in the development or application of innovative technology, or contribute to the flourishing of innovative creations, stand a better chance of having their Pass application approved.

The applicant of this Pass must either hold a nationally-recognised intellectual property (IP), have at least S$100,000 funding from a recognised venture capitalist, supported by a Singapore government agency, is an incubate at a government-approved incubator, or has research collaboration with recognised research institutions.

Please note that draft blue print of the business must include a plan to spend at least S$100,000 [total business spending which doesn’t include royalties, payments made to overseas companies and remuneration to immediate family], and hiring of at least two Singaporeans in the first year of operation.

Now that your Singapore-registered company is up and running, and you’re in the city-state doing business (or making money), what’s next?

We enumerate a few things below that you should pay attention to, or else hire a credible company registration and business specialist to help you out.

Accounting & Bookkeeping

Since all companies registered in Singapore must keep proper books of accounts as stipulated by the Singapore Companies Act, engaging a Singapore company registration and business specialist to help with your taxes, accounting and other corporate services is a good idea. This will help you fulfil the compliance requirements stipulated by ACRA and IRAS and avoid unnecessary penalties.

Generally, the services provided include maintenance of the general ledger, accounts payable ledger, and fixed assets ledger; maintenance of accounts receivable; bank reconciliation; cash flow /budgeting; financial statements & monthly reports monthly; quarterly and annual reviews; books clean-up; management reporting and financial analysis.

Importantly, with effect from December 2, 2013, Singapore companies which are either unlimited or limited by shares are required to file a full set of financial statements in XBRL format, according to a minimum requirement list within the new ACRA Taxonomy 2013.

XBRL (Extensible Business Reporting Language) is an open-source software that enables the organization and management of financial data for research and analysis. It also facilitates the communication of financial information online and amongst businesses with significant accuracy and reliability.

Payroll Management

An additional headache when your company’s headcount begins to grow is managing the payroll while ensuring the regulatory requirements. This is a cumbersome process because calculating, processing and reporting payroll components such as government remittances, benefits, allowances and deductions must be done with proper care.

As there is no minimum wage rule in Singapore, an employee’s salary is subject to negotiation and mutual agreement between the employer and the employee. However, an employer who intends on hiring foreign employees must consider the minimum salary requirements applicable to qualify for the various employment passes.

Please note that under the Employment Act, companies must pay their employees correct salaries within 7 working days after the end of the salary period. Failure to pay salaries in accordance with provisions of the Act is an offence.

Compulsory Contributions: CPF and SDL

There are also few statutory requirements for employers in Singapore as regards to their contribution per employee.

First is the Central Provident Fund (CPF) contributions, which are payable to Singapore Citizens and Permanent Residents. The employer is required to pay the employer’s and employee’s share of CPF contributions monthly for all applicable employees. The CPF contribution is determined according to the rates set out in the CPF Act and are based on the employee’s actual salary earned for that month. The employer may deduct the employee’s share from his salary.

Second is the Skills Development Levy (SDL), which is used to fund the Skills Development Fund which supports workforce upgrading programmes and provides training grants to employers.

Employers are required to make SDL contributions for all employees — i.e. all local and foreign employees, including casual, part-time and temporary employees. The SDL contribution rate is of 0.25% of an employee’s gross monthly remuneration up to the first $4,500, or $2, whichever is higher. Where the employee’s gross monthly remuneration is more than $4,500, the SDL is fixed at $11.25. The SDL must be paid by the employer and cannot be deducted from the employee’s salary.

Taxation

Another mandatory requirement is tax filing.

In this too, a credible company registration and business specialist can assist in dealing with all the tax aspects of your business including statutory tax filings, identifying tax efficient strategies, and personal and corporate tax compliance.

Goods and services tax (GST) registration, property tax, stamp duty, trust tax and partnership tax is also normally taken care off.

Singapore Customs Registration

If your company is engaged in export, import or trans-shipment activities in Singapore, you are required to register the company with the Singapore Customs as an importer, exporter, common carrier and others.

Earlier, Singapore Customs used to issue a Central Registration Number (CRN) to Singapore companies/organization engaged in trading activities. But since January 1, 2009, Singapore Customs has implemented the use of Unique Entity Number (UEN) in place of CRN.

Now, UEN has become the standard identification number for entities to interact with government agencies. The ACRA registration number, received at the time of company/ business registration is retained as the UEN for local companies and businesses.

Trademark Registration in Singapore

Finally, an important consideration for a Singapore-based company is its trademark registration.

Trademarks are signs used by a business or trade to distinguish their goods or services from those of other players in the market, and are important for a company to protect its ideas and develop a brand.

The benefits of registering your trademark not only includes international legal protection against infringements, but also extends to tax rebates as businesses can use the Productivity and Innovation Credit (PIC) scheme to offset costs incurred in the registration.

Commonly-used symbols to identify a trademark are ® and TM. While ® refers to a registered and protected trade mark pursuant to trade mark laws; ™ merely identifies that the mark is being used as a trademark by the owner but is not necessarily registered or protected under trademark laws.

Office Rental Options in Singapore

Once all the above is taken care off, renting or buying an office space may be your last act.

With property cooling measures implemented by the government over the course of last few years taking their toll, prices of commercial establishments have gone down considerably in Singapore. You may consider shifting out of the central business district (CBD) and to the suburbs, if your business is not so much location-based. The rates in suburbs are considerably lower as compared to the CBD in the city-state. This may affect your bottom-line a great deal.

Remember, relocating your existing business to Singapore or starting a new business there, may prove to be the most beneficial business decision you ever made!