Singapore has made a strong position for itself in the global race in terms of business. The country has consistently grown and flourished since its independence in 1965. Not only is it a business hub for leading global companies but it also flaunts one of the most important ports in the world. Thanks to these and so many more reasons, businesses love the idea of investing their money in the island.
One of the best ways to do so is to set up an offshore company in Singapore. In addition to the favorable business environment, the process to set up offshore companies is rather easy.
Interested to learn more about offshore companies, then keep reading. Through this article, you will get an overview of what an offshore company is, the benefits of having an offshore company, and how to register the same in Singapore.
What is an Offshore Company?
An offshore company refers to a company that was incorporated or registered in a jurisdiction away from the region of its offices, operation, and investors. Generally, these businesses operate in a location outside the country where it was founded and their highly-skilled principals such as shareholders, directors, and parent company are located.
Companies often arrange offshore companies with the intention to take advantage of or benefit from specific legal or regulatory differences. For example, businesses might want to leverage benefits that are not available by exploring foreign business opportunities. They may also take advantage of the local law by making the most of favorable taxation systems.
There are no limitations regarding what kind of business activities an offshore company can be involved in. Offshore companies can invest in any business idea, even if the business or industry differs from the parent company. However, it is important to note that some business activities such as operating a restaurant may require industry-specific licenses from relevant local regulatory authorities.
If you wish to set up an offshore company in Singapore, you can simply register it with the Accounting and Corporate Regulatory Authority (ACRA) and apply for the required licenses through the GoBusiness portal by the Singapore government. Singapore is a great location for businesses seeking to establish offshore companies for the following activities:
- Asset Holding
- Investment Holding
- Intellectual Property (IP) Holding
- Professional Services and Consultancy
- Yacht Owning and Ship Management
You may incorporate an offshore company in any sector without even physically visiting the jurisdiction. To do so, all you need is help from some reliable digital corporate service providers.
Who Can Set Up an Offshore Company in Singapore?
Setting up an offshore company may prove beneficial to many businesses. For instance, if you are contemplating expansion with new investors, an offshore company will be great. Institutional investors, especially, prefer to invest in an offshore jurisdiction.
An offshore company holding investment holding entities through real estate, stocks, and bonds are also quite rewarding as there is scope for relief from Capital Gains and Stamp Duty.
An offshore company is great if you incorporate it as Holdco, your main asset holding company. Every Holdco has multiple subsidiaries under it, known as Subco, and each Subco possesses commercial real estate. In circumstances where you want to dispose of any real estate, you may simply sell the shares of the Subco holding that specific real estate. This will save money as stamp duty is higher on real estate than on the sale of shares.
You can also set up a Singapore offshore company if you are trying to develop a substantial Intellectual Property and plan on using it in different jurisdictions. That’s not all. Having an offshore company is best for businesses involved in tax planning and estate planning. It is also recommended if you are seeking enhanced privacy and high-return investments. To summarize, both individual entrepreneurs and corporates looking for these benefits can invest in an offshore company in Singapore.
Note that in some jurisdictions, particularly those with worldwide taxation, you may not obtain a favorable tax planning advantage even with your offshore arrangements. So, it is always best to conduct thorough research and proceed accordingly. Discuss with legal and tax advisors before implementing any structure and initiating heavy investment.
Benefits of Opening an Offshore Company
Are you convinced that setting up an offshore company is great for your business? Not sure what’s a good location to establish an offshore company? Then, you can definitely consider Singapore. Located along the Straits of Malacca, this country-state flaunts a pro-business environment and a highly-skilled workforce.
Surely, this Asian hub will make an ideal regional hub for companies looking to expand to the Southeast Asian region. But, that is not the only reason you should choose Singapore for your offshore company. Below are some benefits of establishing a Singapore offshore company.
Favorable Tax Advantages
If you want to benefit from an attractive corporate tax regime, Singapore is one of the best options in Asia. For profits under S$300,000, the corporate income tax rate in Singapore is around 8.5%. After that, it is a flat 17%. Businesses need to pay tax for only revenues that are derived from or remitted to Singapore.
A newly incorporated firm will enjoy a 0% tax rate on its first S$100,000 taxable income for the first three years of tax filing. To qualify and enjoy a 0% tax rate, an offshore company must have no more than 20 shareholders and at least one of them must be an individual shareholder holding 10% of the shares or more.
Singapore also has a single-tier tax policy. This means offshore companies can give dividends to shareholders tax-free if tax was applied to their income on a corporate level. Therefore, a company incorporated in Singapore might have to pay less tax compared to companies incorporated in countries where the taxation system is less favorable.
What’s more, the offshore company may also be eligible for a plethora of tax benefits if its management and control have been exercised in Singapore for the preceding YA (Year of Assessment). Tax benefits may include tax exemption on some incomes and protection from double taxation.
Business-friendly Regulatory Environment
It is not new information that Singapore flaunts a business-friendly environment. According to the World Bank, Singapore consistently ranks second for ease of doing business among the 190 countries in the world. The country has highly transparent yet efficient financial and corporate regulatory institutions. On top of that, it is very politically stable. These attributes make it easier for offshore companies to access public services and administrative support.
Not only is company incorporation in the country quick and simple, but the government also allows 100% foreign ownership of such companies in most industries. Thanks to this, conducting business in Singapore is easy, making it a popular hub for offshore companies.
Strong Financial Hub
As of March 2021, Singapore ranked fifth-largest international financial hub in the world after New York, London, Shanghai, and Hong Kong. The island hosts over 200 foreign banks. It is also home to branches of 1,400 international financial institutions, many of which view Singapore as a regional hub. Thus, any Singapore-based offshore company will have access to a wide assortment of financial services to back its business operations.
The Singapore government is continually implementing new policies to promote the finance sector, which helped the country develop into one of the leading fintech hubs internationally. Offshore companies in Singapore can access a range of fintech products to serve their unique financial needs.
In Singapore, the registration of an offshore company is rather straightforward. It involves only two steps:
- Registration of company name with ACRA
- Company registration with ACRA
Aspiring entrepreneurs often choose to hire a locally registered filing agent. Such professional assistance can help you complete registration and all the processes before and after as required by ACRA, the Singaporean Company Registrar.
Regardless of whether you seek professional guidance or attempt your offshore company register by yourself, knowing the requirements is important. Continue reading to get an overview of the processes before, during, and after registration.
The first step is to collect a list of all the documents, steps, and processes involved in Singapore offshore company registration. Your company incorporation agent will be able to help you with this. Most business owners choose to set up their offshore companies as private limited companies.
Here is a list of all the requirements for incorporating a Singapore-based private limited company:
- The company must have one or more shareholders,
- The company must have a minimum of one ordinarily resident director,
- The company should have one or more company secretaries,
- The company should have an initial paid-up share of a minimum of $1,
- The company must have a registered office address where notices and other communications will be addressed. P.O. box addresses will not be considered valid. Company incorporation agents may provide registered address services for offshore companies incorporated by them.
The documents required will vary for foreign individuals. If you are a foreigner, prepare the following documents:
- Descriptive summary of the company’s business activities,
- Memorandum and Articles of Association (M&AA),
- Passport copy,
- KYC documents that include residential address proof abroad, reference letter from the bank, business and personal profile, and details of the company secretary, shareholders, and directors.
If you are an individual entrepreneur of Singaporean nationality you will need to provide a copy of your local Identity Card. You can register the business using a legal entity from the below list:
Likewise, corporations must submit a copy of their Company Constitution and Certificate of Incorporation. If you are a corporate hoping to set up an offshore business in Singapore, you can register using legal entities such as:
- Subsidiary Company
- Branch Office
- Representative Office
Note that directors must be 18 years old or more. They must not have been convicted of any dishonesty or fraud offenses or an undischarged bankrupt. An offshore company is obligated to appoint a Singapore resident as a company secretary within the first six months of incorporation.
After you learn all the basic document requirements, it is time to brainstorm company names. Getting an ACRA-approved name for your company is essential. For this, shortlist a list of five to six names first. Your company incorporation agent will search the name and assess availability and originality on the ACRA website. Then will then reserve one of the available names on behalf of you for 60 days. This cost around S$15.
When selecting names, you must keep ACRA’s rules regarding company name selection. They are:
- The company name should be decent, meaningful, and unique
- The names that resemble names from the black-list will be rejected
- The name cannot be identical to any existing company names
- The name should not infringe any trademark or copyright laws
Registration of Singapore Offshore Companies
If you have all the documents ready, incorporation of an offshore company is not very difficult. You can simply initiate the process online through the ACRA’s BizFile+ portal. It is to be noted that you will require a SingPass ID to log into the BizFile+ portal. For this reason, foreign companies commonly employ a reputed filing agent such as an accounting firm, law firm, or corporate secretarial firm.
The incorporation process is fully computerized. It only takes about one to two days to complete the registration application. As the process is split into two parts, the fees for name registration and company registration must be paid separately to ACRA. The name application fee is S$15 while the company registration fee is S$300. There will be additional fees if you choose to hire a filing agent.
After your company registration is complete, you will receive an email from ACRA stating the company registration number. This number can be used as the Singapore certificate of incorporation.
Creating an offshore company in Singapore is not too difficult, especially if you hire an offshore company incorporation agent. The registration process is the same for both Singaporeans and foreigners. Best of all, the registration process comes without any kind of bureaucratic hurdles.
You might require help from the agents even after registration is completed. They may advise you regarding opening a corporate bank account, obtaining permits, getting Goods and Services Tax (GST) registrations, opening a CPF account, or obtaining business licenses.
Now that your company is a separate legal entity and not linked to the shareholders or parent company, you need to evaluate regulation and compliance. The offshore company must follow all regulatory requirements and be responsible for its compliance. It must also record all transactions and maintain proper financial accounts.
Within three months of company incorporation, the offshore company must also appoint an auditor. This rule will apply unless the company is considered a small company according to Singapore law.
As a part of maintaining proper financial accounts, you need to set up a separate corporate bank account for the Singapore offshore company. Even though some banks will allow you to open a corporate bank account online, most banks will require authorized signatories and company directors to be present at the bank during account opening.
You may consider opening a corporate bank account offered by neobanks. These banks allow companies to set up accounts online without any hassle. On top of that, neobanks offer some attractive perks. The Aspire Business Account, for example, is free. It does not require any minimum deposit or monthly fees. It also does not have any fall-below fees. Such offers provide simple, fast, and remote financial services to business owners.
Finally, you need to register the offshore company for GST. When an offshore company is incorporated in Singapore, it is automatically registered with the Inland Revenue Authority of Singapore (IRAS) for corporate income tax. However, it is required to register for GST separately. GST registration with IRAS is mandatory with offshore companies that have an expected yearly turnover of S$1 million or over.
The development and growth of offshore businesses have left clear footprints in the global arena. Investors have noticed how beneficial these offshore entities can be for the overall business. When the time comes to choose a jurisdiction to establish your offshore company, Singapore ought to be one of your top choices. Why not?
The beautiful culture-rich island is among the fastest-growing economies. You can enjoy numerous tax advantages for incorporating your offshore company in Singapore. Moreover, the business environment and financial sector are very positive. Not just that, when the registration process is hassle-free. All you need are the required documents, application fees, and two days.