Click here to refer to types of business entities.

Before a foreign company establishes a place of business or commences to carry on business in Singapore, it needs to register a branch or incorporate a subsidiary.

However, where a foreign company conducts an isolated transaction that is completed within a period of 31 days, but not being one of a number of similar transactions repeated from time to time, it is not regarded as carrying on business in Singapore. [Section 366 (2) (h) of the Companies Act 1967]

Similarities

• Both are taxed at the same corporate income tax rate and generally subject to the same rules for Goods & Services Tax.
  [Click here to go to Publications on the Singapore Budgets for rates of taxation.]

• There is no withholding tax on dividends or repatriation of branch profits.

• The accounts are required to be audited except where a branch has been granted (upon an annual application) a waiver to file audited financial statements. The grounds for application are set out in the Companies Act 1967 and the waiver may be granted on a case-by-case basis.

Differences

• A company is a separate legal entity whereas a branch is an extension of the head office.

• Companies that are managed and controlled in Singapore are considered as tax resident in Singapore and can avail themselves to the network of tax treaties that Singapore has concluded with various countries. A branch is usually tax resident where the head office is resident.

• Upon cessation of business, a branch is only required to file a notice of cessation of business and apply to be de-registered. Thereafter, all tax matters must be settled within one year.

  
  A company that is no longer required must be liquidated or it may apply to be struck off the register of companies if it meets certain conditions required for striking off.

All businesses are required to maintain proper books of accounts for at least 5 years:

• for audit purposes (if applicable); and

• to support their income tax returns,
  

under the provisions of the Companies Act 1967 and the Income Tax Act 1947 respectively.

Directors of companies incorporated in Singapore are required to appoint auditors within 3 months of incorporation, except for companies that are exempt from annual statutory audits.

Companies that are exempt from the audit requirements in Singapore include:

• • Dormant companies; and

• • “Small companies” which are also part of a “small group”.

A company is a “small company” for a financial year if:

• • It is a private company throughout the financial year; and

• • It satisfies any two of the following criteria for each of the two consecutive financial years immediately preceding the financial year:

(i) the revenue for each financial year does not exceed S$10 million;

(ii) the value of the company’s total assets at the end of each financial year does not exceed S$10 million; and / or

(iii) it has at the end of each financial year not more than 50 employees.

A group is a small group for a financial year if the group satisfies any two of the following criteria for each of the two consecutive financial years immediately preceding the financial year:

• • the consolidated revenue of the group for each financial year does not exceed S$10 million;

• • the value of the consolidated total assets of the group at the end of each financial year does not exceed S$10 million; and / or

• • the group has at the end of each financial year an aggregate number of employees of not more than 50.

There is no statutory audit requirement for the financial statements of representative offices, partnerships, sole proprietorships and limited liability partnerships.

A Singapore registered branch of a foreign company is required to have its financial statements audited annually unless it is:

• • dormant during the financial year, or

• • has successfully applied for and obtained from the Accounting and Corporate Regulatory Authority of Singapore a waiver from the need to have its financial statements audited for the relevant financial year by satisfying the conditions stipulated in subsection 12 of Section 373 of the Companies Act 1967.

Company

Every company must keep at its registered office the following:

• • Minute Book

• • Register of directors’ and chief executive officer’s shareholdings

• • Register of mortgages or charges (including debentures)

• • Register of Registrable Controllers

• • Register of Nominee Directors

• • Register of Nominee Shareholders

It has to maintain with the Accounting and Corporate Regulatory Authority (“ACRA”) the following:

• • Register of members (including applications & allotment of shares and transfers); and

• • Register of its directors, chief executive officers, managers, secretaries and auditors.

The directors must hold the annual general meeting (“AGM”) of the company within 6 months from its financial year-end.

All companies (except for exempt private companies) are required to file with the ACRA the audited financial statements and an Annual Return disclosing the date of the AGM, details of the capital structure of the company, a list of secured borrowings and information pertaining to its shareholders and directors.

Branch

All branches must lodge with ACRA annually the Singapore branch’s audited financial statements and the audited financial statements of the foreign company within two months from the date of the AGM of the foreign company. It may be possible to apply for a waiver to file the audited financial statements of the branch under certain limited circumstances.

Limited Liability Partnership (“LLP”)

All LLPs are required to file an Annual Declaration regarding its solvency, within 15 months from the date of registration and thereafter once every calendar year with interval of not more than 15 months.

Singapore taxes income on a preceding year basis i.e., income for financial year-end 2023 will be subject to tax in Year of Assessment (“YA”) 2024. The tax year is referred to as YA.

Singapore taxes income on a preceding year basis i.e., income for financial year-end 2023 will be subject to tax in Year of Assessment (“YA”) 2024. The tax year is referred to as YA.

Estimated Chargeable Income (ECI)

All companies are required to file ECI unless they fall within category (a) or (b) below:

(a) ECI filing waiver

Both criteria must be met:

• • • Annual revenue is S$5 million or below for the financial year; and

• • • ECI is nil for the Year of Assessment (“YA”). The ECI should be the amount before deducting the exempt amount under the partial tax exemption scheme or the tax exemption scheme for new start-up companies.

(b) The following types of companies are not required to file ECI:

• • • Foreign ship owners or charterers whose local shipping agent has submitted / will submit the Shipping Return

• • • Foreign universities

• • • Designated unit trusts and approved CPF unit trusts

• • • Real estate investment trusts that have been granted the tax treatment under Section 43(2) of the Income Tax Act 1947

• • • Cases specifically granted the waiver to furnish ECI by the Inland Revenue Authority of Singapore (“IRAS”)

Form C-S / Form C-S (Lite) / Form C

All Singapore companies must file the Form C-S / C-S (Lite) / C by the filing due date, except for dormant companies that have been granted waiver from the IRAS to file Form C-S / C-S (Lite) / C.

A dormant company may apply for waiver from tax filing if it satisfies all the following conditions:

• • It must be dormant and must have filed its Form C-S / C-S (Lite) / C, financial statements and tax computation(s) up to the date of cessation of business.

• • It must not own any investments (e.g., shares, real properties, fixed deposits). If the company owns investments, it must not derive any income from these investments.

• • It must have been de-registered for Goods and Services Tax (GST) purposes prior to this application if it had previously been a GST-registered company.

• • It must not have the intention to recommence business within the next 2 years.

If Estimated Chargeable Income (ECI) is not filed

If a company is late in filing or fails to file its ECI, an estimated Notice of Assessment may be issued by the Inland Revenue Authority of Singapore (“IRAS”) based on the company’s past years’ income or other information available to the IRAS.

The company must pay the full tax amount within 1 month from the date of the Notice of Assessment.

• • No instalment payment will be granted by the IRAS.

• • Payment must be made based on the estimated Notice of Assessment even if the company files an objection. If the assessment is subsequently revised, any excess payment will be refunded to the company.

• • Late payment penalties will be imposed and enforcement actions may be taken if payment is not received by the due date.

If Form C-S / C-S (Lite) / C is not filed

IRAS may take the following enforcement actions if Form C-S / C-S (Lite) / C is not filed by the due date of 30 November:

• • Issue an estimated Notice of Assessment. The company must pay the estimated tax within 1 month.

• • Offer to compound the offence.

• • Issue a Section 65B(3) notice to the company’s director/s to submit the required information in the corporate income tax returns to the IRAS.

• • Summon the company or persons responsible for running of the company (including the directors) to Court.

The company must file an objection to the IRAS within 2 months from the date of the Notice of Assessment.  If no objection is received within that period, the assessment will be treated as final.

The Inland Revenue Authority of Singapore (IRAS) audits tax returns and imposes penalties when there are errors, omissions and discrepancies.

Under the Income Tax Act 1947, taxpayers may face the following consequences depending on whether there is evidence indicating intention to evade taxes:

Without intention to evade taxes

• A penalty of up to 200% of the amount of tax undercharged and a fine of up to S$5,000; and / or

• Imprisonment of up to three years.
  

With intention to evade taxes

• A penalty of up to 400% of the amount of tax undercharged and a fine of up to S$50,000; and / or

• Imprisonment of up to five years.
  

An entity is required by law to register for GST where the revenue exceeds or is expected to exceed the threshold of S$1 million over a 12-month period. Voluntary registration is also allowed although there may be additional requirements by the Comptroller of GST such as the need for a bankers’ guarantee.

Once registered, the entity is required to charge its customers output GST at the standard-rate, currently at 9% (with effect from 1 January 2024). Certain supplies such as international services or export of goods are zero-rated (i.e., 0% GST). The entity is entitled to claim a credit for input GST paid on its qualifying purchases so that only the net amount is payable to / refundable by the Comptroller of GST. GST returns are due to be submitted on a quarterly basis.

In Singapore, trade unions must be registered under the Trade Unions Act 1940, which provides for the regulation of trade unions, their rights and liabilities, and the proper use of union funds. Most of the trade unions are affiliated with the federal body, the National Trade Union Congress.

An employee is not obliged to join a union in Singapore, although there is usually union representation in larger companies such as in the transport and manufacturing industries.

Singapore generally has harmonious labour relations and a strike-free environment.

The Employment Act 1968 in Singapore provides for the basic terms and working conditions for all types of employees (under contracts of service with employers), with some exceptions.

A foreigner who wishes to take up employment or engage in business in Singapore must obtain a work pass or work visa issued by the Ministry of Manpower (“MOM”). The prerequisite requirements needed to apply for a work pass or work visa (such as Employment Pass, S Pass, Entrepreneur Pass, etc) are available at the MOM website at www.mom.gov.sg.

An Employment Pass (“EP”), Entrepreneur Pass, or S Pass holder may apply for Dependants’ Passes (“DP”) for his or her spouse and for children below 21 years of age to enable them to stay in Singapore. DP holders must apply for EP / “Consent to Work” or student pass if they wish to work or study in Singapore.

Employers in Singapore are responsible for injury or death arising from work-related accident or occupational diseases under the Work Injury Compensation Act 2019. Compensation is payable regardless of who is at fault so long as the employee suffers an injury or disease arising out of or in the course of employment. Other statutes dealing with workforce matters are the Industrial Relations Act 1960 and the Trade Dispute Act 1941.

No employee in Singapore may be employed without a contract of service, whether in writing or oral, expressed or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee.

A contract of service may be terminated by either party based on the terms stated in the contract. Under the Employment Act 1968, an employee may be terminated provided a minimum period of notice ranging from 1 day to 4 weeks is given. Termination without notice may occur in cases of pay in lieu of notice, or dismissal for wilful breach of contract terms or misconduct.

Singapore has a national social security scheme, the Central Provident Fund (“CPF”) which was established in 1955 to help workers save for their retirement. Since then, it has evolved to meet the changing needs of Singaporeans.

Employers in Singapore are required to pay CPF contributions for all their employees who are:

• • Singapore Citizens; or

• • Singapore Permanent Residents,

and who are earning total wages of more than S$50 per month.

CPF contribution rates vary based on:

• • citizenship status; and

• • age,

of eligible employees.

Employers are required to pay to the CPF Board, the Total Contributions for each month, comprising both the Employer’s contribution and the Employee’s contribution. Employers are entitled to recover the employees’ share of the CPF contributions by deducting them from their wages for the month.

The current CPF contribution rates are available on the CPF website at www.cpf.gov.sg.

Under the Central Provident Fund (“CPF”) Act 1953, CPF must be contributed for employees who are Singapore Citizens or Singapore Permanent Residents including:

• Company directors

• Part time or casual employees

• Operationally Ready NSmen on in-camp training

• Family members of the business owner, if they are receiving wages for work done for the owner; and

• Employees concurrently employed by another employer

CPF contributions are computed based on an employee’s wages. Under the CPF Act 1953, wages are defined as remuneration in money, including any bonus that is due or granted to a person in respect of his / her employment. Examples of wages include, but are not limited to, basic wage, overtime pay, bonus, allowance, commission, and cash incentives.

CPF contribution is not payable on reimbursements of work-related expenses, termination benefits such as compensation for loss of office, or non-cash benefits-in-kind such as gift vouchers that are not legal tender and not convertible to cash.

Under the Skills Development Levy (“SDL”) Act 1979, employers are required to pay a compulsory levy for all employees (including foreign employees) working in Singapore.

SDL is payable at 0.25% of each employee’s monthly total wages; subject to:

• • a minimum payable of S$2 for an employee earning less than S$800 a month; and

• • a maximum of S$11.25 for an employee earning more than S$4,500 a month

The SDL collected is channelled to the Skills Development Fund, which is used to support workforce upgrading programmes and to provide training grants to employers when they send their employees for training under the National Continuing Education Training system.

Employers are also required to pay a monthly levy for each foreign worker who has been issued a Work Permit. The foreign worker levy payable depends on:

• • the worker’s qualifications; and

• • the number of Work Permit or S Pass holders hired.

The current foreign worker levy rates are available on the Ministry of Manpower website at www.mom.gov.sg.

Under the Employment Act 1968 in Singapore, salary must be paid at least once a month:

• • within 7 days after the end of the salary period; or

• • within 14 days after the end of the salary period for overtime work.

For resigned or terminated employees, the final salary payment must be paid:

• • on the last day of employment if the required notice period has been served;

• • within 7 days of the last day of employment if the required notice period has not been served; or

• • within 3 working days from the date of dismissal or termination.

Salary should be paid on a working day, during working hours. If paid by cheque, the cheque needs to clear before salary is considered paid.

Employers are required to issue itemised payslips to all employees:

• • together with the salary payments; or

• • within 3 working days of the salary payments if the employer is unable to issue the itemised payslips together with the salary payments.

For terminated or dismissed employees, the final payslip must be issued together with the final salary payment.

Itemised payslips must include the following details, where applicable:

• • Full name of employer

• • Full name of employee

• • Date/s of payment/s

• • Basic salary (or hourly base rate and hours worked for hourly-rated employees)

• • Start and end date of salary period

• • Allowances

• • Any other additional payment

• • Deductions made

• • Overtime hours worked

• • Overtime pay

• • Start and end date of overtime payment period, if different from start and end date of salary period

• • Total net salary paid

Employers may deduct from salary payments only for specific reasons, such as:

• • For employee’s CPF contributions in respect of the current month’s salary;

• • For recovering advances, loans, overpaid salary or unearned employment benefits;

• • For absence from work;

• • For damage or loss of money or goods that employees are responsible for; and

• • For supplying accommodation / amenities and services accepted by employee.

Employers cannot deduct more than 50% of the total salary payable in any one salary period, excluding deductions for:

• • Absence from work.

• • Recovery of advances, loans, overpaid salary or unearned employment benefits.

• • Payments, with employee’s consent, to registered co-operative societies for subscriptions, entrance fees, loan instalments, interest and other dues payable.

However, for an employee whose contract of service is terminated, the total deduction may exceed 50% of the final salary payment.

Under the Income Tax Act 1947 in Singapore, employers are required to prepare an annual return (i.e., Form IR8E¹/ IR8A²) of remuneration and taxable benefits-in-kind provided to their employees working in Singapore by 1 March of the following year for each calendar year (i.e., if an employee started work in Singapore in 2023, he / she should receive a Form IR8A by 1 March 2024 for employment income earned in Calendar Year 2023).

¹ Employers who have 5 or more employees for the entire calendar year (including employees who had left the organisation during the year) or who have received the “Notice to File Employment Income of Employees Electronically” must submit their employees’ income information to the Inland Revenue Authority of Singapore (IRAS) electronically by 1 March of each following year (i.e., Form IR8E).

² Employers who are not in the Auto-Inclusion Scheme for Employment Income must provide all existing employees, and employees who ceased employment during the calendar year (other than those for whom tax clearance had been obtained), with their respective Forms IR8A by 1 March of each following year, to file their income tax returns.

Under the Income Tax Act 1947 (“ITA”), the employer is required to:

• • Withhold all monies due to the foreigner as soon as the employer is aware of the foreigner’s impending cessation of employment or departure from Singapore;

• • File the Form IR21 at least 1 month before the earlier of: (a) the last day of employment, or (b) the date of departure from Singapore; and

• • Ensure that tax clearance is obtained from the Inland Revenue Authority of Singapore (“IRAS”) and all outstanding amounts due to the IRAS have been paid, before issuing the final salary payment.

If tax clearance is not obtained from the IRAS when the foreigner leaves Singapore, he / she may be held up at immigration at the airport. If he / she manages to leave Singapore without paying his / her personal taxes due to the IRAS, IRAS will seek to recover the unpaid taxes from his / her employer if the employer had failed to withhold the monies as required under the ITA.

Under Section 94 of the Income Tax Act 1947, employers who fail to comply with the deadline shall be liable on conviction to a fine not exceeding S$5,000 and in default of payment to imprisonment for a term not exceeding 6 months.

Under Section 95 of the Income Tax Act 1947, any person who gives any incorrect information in relation to any matter affecting the tax liability of any other person shall be guilty of an offence, and may be liable to:

• A penalty of up to two times the amount of tax undercharged and also to a fine not exceeding S$5,000; or

• Imprisonment for a term not exceeding 3 years; or

• Both