Ten common challenges when starting a business in Singapore.

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Ten common challenges when starting a business in Singapore

Singapore has consistently been recognised among the world’s best places to do business and remains among the top choices for business investors. Compared to other countries considered as business hubs, Singapore offers one of the easiest and quickest processes of business registration, which attracts investors to start a business in Singapore.

However, doing business in Singapore does not come without some challenges and pitfalls. Let’s explore some of them.

1. High costs

Let’s start our list by mentioning how expensive it is to operate a business in Singapore! And the main culprit is… renting costs. In fact, business premises rent is among the highest in the world. High costs for electricity, the Internet, and labour costs contribute to the high costs of maintaining a business in Singapore. A person who is moving a business from another country will quickly realise this upon arrival and will soon adopt cost-saving measures.

2. Long working weeks

While many western countries have started adopting flexible work hours and are moving to a 35-hour week, Singapore remains stuck to the traditional 5 workdays week that runs from 9 to 5 each weekday. In fact, Singaporeans work for an average of 45 hours a week, making it the second hardest-working city in the world preceded only by Tokyo. The work-life balance in the city-state does not score well compared for instance to cities in Northern Europe, so if you are used to a more laid-back lifestyle Singapore will challenge you.

3. Strict business incorporation procedure

Singapore has consistently been recognised among the world’s best places to do business and remains among the top choices for business investors. Compared to other countries considered as business hubs, Singapore offers one of the easiest and quickest processes of business registration, which attracts investors to start a business in Singapore.

However, all Singaporean businesses are registered only if they meet strict eligibility criteria, follow the established registration procedure, and are issued with a certificate of incorporation by the registrar of business. Deviating from these rules is not acceptable and authorities follow them strictly.

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4. Resident company directors

Every registered company in Singapore must at all times have at least one director. Directors or shareholders of a company appoint the director, and his/her primary role and responsibility is to manage the company and provide it with a direction. This means that the Singapore resident director cannot resign until there is a new Singapore resident director to take his/her place.

A director’s resignation is valid only if certain conditions are met:

  • The resignation must comply with the company’s constitution
  • The company must have at least one remaining director who is resident in Singapore

Within 14 days from the resignation of the director, the company must notify ACRA. If the company fails to do so, every officer of the company can be individually fined up to S$5,000 and be liable to a default penalty.

5. Tax compliance

Corporate income tax in Singapore has consistently been falling since 1997, which had a corporate tax rate of 26%. Today the rate for corporate income tax is only 17%, and the tax legislation is relatively straightforward. his low tax rate is an important factor that is attracting investors around the world to start a business in Singapore and has become an investment destination.

Singapore authorities follow strictly businesses’ tax compliance and apply harsh sanctions to non-compliant businesses without exceptions.

6. Paying taxes

The amount of income tax that companies and individuals have to pay depends on their tax residency status in Singapore. Tax residents are taxed at progressive tax rates while non-residents are taxed at 15% and are not entitled to tax reliefs. Corporate income tax is only 17%.

Paying corporate taxes must be done online and Singapore requires companies to register for a CorpPass or SingPass to access the IRAS or the Central Provident Board portals. Companies seeking to get a Singapore tax residency certificate will need also to pass the “management and substance” test imposed by the IRAS.

Individuals however benefit from more flexible payment options. They can sign up for GIRO to benefit from 12 monthly interest-free instalments. Other payment methods include AXS station, AXS e-station/m-station, SAM Kiosk, SAM web/mobile or internet banking.

7. The need for a work pass

No matter how much investment you will be bringing into Singapore, you will still have to apply for a work pass for yourself and your foreign employees. Work passes are issued by Singapore’s immigration department, which reserves the right to deny admission into the city-state.

All work pass holders must only work for their designated employer. They must not take on additional jobs or engage in activities to earn additional income in Singapore.

There are also different work passes depending on the criteria under which a worker falls into: employment pass, entrepass, personalised employment pass, s pass, work permit for foreign workers etc. Things can get confusing and investors are advised to seek professional help from corporate service providers.

8. Opening a corporate bank account

Singapore banks strictly apply the Foreign Account Tax Compliance Act (FATCA) and CRS. If you are planning on opening a corporate bank account in Singapore, you can expect stricter compliance checks and Know Your Customers (KYC) requirements from the banks. They will be required to provide information regarding company shareholders and ultimate beneficial owners, depending on their CRS classifications.

Typically, Singaporean banks would request the following documents before opening a corporate bank account:

  • Completed Corporate Account Opening Forms (signed by the company’s authorised signatories)
  • Board of Directors Resolution sanctioning the opening of the corporate bank account and list of signatories allowed to operate the account (to be prepared by the company secretary)
  • Certified True Copy of Resolution sanctioning the opening of the corporate bank account and list of signatories allowed to operate the account (most of the banks have their own format and you just need to sign it)
  • Certified True Copy of Certificate of Incorporation (must be certified by the company secretary or one of the directors)
  • Certified True Copy of Company’s Business Profile (must be certified by the company secretary or one of the company’s directors)
  • Certified True Copy of Company’s Constitution (must be certified by the company secretary or one of the company’s directors)
  • Certified True Copies of Passport (or Singapore IC) and Residential Address Proof of the Directors, Signatories, and Ultimate Beneficiary Owners.

9. Labour shortage

Singapore has always welcomed foreign workers in sectors ranging from construction to investment banking, and 40 percent of the tiny city-state inhabitants are from overseas.

But in recent years unease has been growing with local residents blaming expats for pushing up living costs. The government responded by making it more difficult to hire in certain sectors and making companies prioritise local recruitment. This, however, resulted in shortages of labour force and employers report that 54% of the jobs remain unfilled, almost double what it was a decade ago.

10. Trading across borders

Singapore is a global trading centre but the government imposes import restrictions on certain goods. For instance, special import licences are required from the Agri-Food and Veterinary Authority. In addition, importers must pay the duty or GST due at the time of importation.

Conclusion

Starting a new business in a foreign country is no easy process and there is a lot of challenges which if known in advance can help you avoid unnecessary complications. We at Acclime can help you navigate the procedures and requirements of starting a business in Singapore and save you time while delivering high level professional services at reasonable cost.

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