Forming an Offshore Company in Singapore
An offshore company is one that is incorporated in a jurisdiction other than the jurisdiction that constitutes its main place of operations or where the company’s principal investors reside. In a broader sense, offshore simply means a jurisdiction other than your own.
Some of the principal advantages of incorporating an offshore company include tax benefits, simpler reporting requirements, ease of company set up and ongoing administration, etc. The choice of a particular jurisdiction for offshore company incorporation is an important decision as it can have a significant impact on your business. In this regard, a Singapore offshore company represents a tax efficient corporate entity that is simple and easy to operate in a politically and economically stable environment.
This guide describes the benefits of incorporating a Singapore offshore company and also provides an incorporation checklist for offshore companies in Singapore.
Why incorporate a Singapore offshore company?
There are several benefits of incorporating a Singapore offshore company. Some of the main advantages include:
Reduced tax liability
Taxes are one of the key considerations for setting up an offshore company. One of Singapore’s unique advantages is its simple and low tax system. Singapore’s tax system is characterized by low corporate and personal income tax rates; tax incentives and tax relief measures; absence of capital gains tax; absence of dividend tax; territorial one-tier tax system and an extensive tax treaty network.
As Singapore follows a territorial basis of taxation, taxes apply to income that is accrued to or derived by the company from Singapore or foreign-sourced income received in Singapore. Foreign-sourced income received in Singapore that meets certain qualifying conditions is exempted from Singapore tax, while foreign-sourced income that is not remitted into Singapore is exempted from Singapore taxation. Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax free.The corporate income tax rate is approximately 8.5% for profits up to S$300,000 and a flat 17% above S$300,000. Furthermore, a newly incorporated company enjoys 0% tax rate on the first S$100,000 taxable income for each of the first three tax filing years, provided the company has a maximum of 20 shareholders of which at least one is an individual shareholder holding at least 10% of the shares.
Since Singapore is not a tax haven, an offshore company that is incorporated in Singapore communicates credibility and stature as a legal entity. By incorporating a Singapore offshore company, your business will be taken seriously by stakeholders such as employees, bankers or other professionals you will be dealing with.
Ease of offshore company incorporation
Singapore was ranked #2 as the world’s easiest place to do business in 2018 by the World Bank Group. The company registration process is quick and efficient and free of bureaucratic red-tape. The registration procedure is fully computerised and involves only two distinct steps – company name approval and submitting incorporation documents. Both these procedures can be executed online and under normal circumstances a Singapore offshore company can be incorporated in 1-2 days.
Liberal foreign ownership policy
Singapore’s foreign ownership policy is open and liberal. There are no restrictions on permitted fields of business activity if you want to set up an offshore company in Singapore. 100% foreign shareholding is allowed in all sectors. Shareholders can be individuals or corporate bodies. Additionally, foreigners looking to register an offshore company in Singapore do not require prior approval from Singapore authorities.
The Political and Economic Risk Consultancy has rated Singapore as the most politically stable country in Asia and Asia’s least bureaucratic country. The Singapore government is noted for its high integrity and pro-business approach. It is often described as rational, pragmatic, transparent and corrupt-free. Singapore is also characterised by a transparent, sound and efficient legal system. There are clear-cut rules and regulations pertaining to commerce, intellectual property protection, manpower and other business related areas. As a result, the level of risk involved in setting up and operating a Singapore offshore company is minimal and almost non-existent.
Sophisticated banking facilities
Singapore has emerged as the leading financial center in the Asia Pacific region. Singapore offshore companies are offered a broad choice of reputable local and foreign banks for opening an account. Banks in Singapore offer a wide-array of attractive features such as multi-currency accounts, internet banking, credit cards, trade financing, freedom to move funds across countries and more. Although most of the banks require physical presence at the time of opening the account, some banks are also willing to make an exception on a case-by-case basis. The account opening process may take anywhere from 2-15 days depending on the amount of due-diligence undertaken by the bank.