Jurisdiction of the month: Singapore

2013 08 20 | Category: News

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Geography, Population, Languages
The Republic of Singapore is situated on the Island of Singapore and a group of small islands. The state is separated from Malacca by the Johore Strait and from Indonesia by Singapore Strait. The total area of the country is over 622 sq. km, and the population is about 5.3 million. 77% of the population are of Chinese descent, the remaining 25% are mainly Malays and Indians. The capital is also called Singapore, it is one of the largest centres in South East Asia. The main official language is English; Mandarin, Malay, and Tamil are also official languages.

History, Political Structure and Law
The Republic of Singapore is a member of the British Commonwealth. Before 1963 Singapore was a British colony. In 1963-1965 Singapore became a member of the Federation of Malaysia. The Singapore government is vigilant in planning, managing and administering the country’s socioeconomic development. This approach has created one of the most politically stable and corruption-free countries in the world. The People’s Action Party, the single dominant ruling party since the country’s independence in 1965, rules Singapore. Because of its close connection to the Crown, Singapore applies the English Common Law system.

Economy and Infrastructure
Strategically located along Asia’s major shipping and air routes, Singapore is a major focus for trade and investment in the region. Singapore boasts an excellent infrastructure, with excellent up-to-date telecommunication and road transport systems. It operates busy and efficient air and sea ports and is a free port with no customs and excise duties on most items. The airport serves as a regional hub for over 100 destinations.

Singapore is a leading international financial centre. Offshore investors are well served by representatives of most major international banks, financial institutions, investment management companies and accounting and legal firms. There is an excellent professional infrastructure with good legal services. Most of the large accountancy firms have offices in Singapore.

The Singapore government actively encourages foreign investors with generous tax and financial incentives. Singapore is an ideal place to base holding companies and headquarters, and a gateway for foreign investment into the emerging economies of Asia, such as China, India, Vietnam, Indonesia and Thailand. The currency is the Singapore Dollar. There are no exchange controls.

Company Incorporation
The Principal Corporate Legislations are:

• The Companies Act;
• The Singapore Income Tax Act;
• The Economics Expansion Incentive Act.

A company incorporated in Singapore has the same powers as a natural person. The language of legislation and corporate documentation is English.

The types of company used for international trading and investment are the Resident Company, the Non-resident Company, the foreign branch operation or representative office.

A Singapore incorporated company may be resident or non-resident depending on its place of central management and control. Thus in simple terms, a Singapore company with a majority of its directors resident in Singapore is deemed resident. Those with a majority of directors resident outside Singapore are normally deemed non-resident.

In general, trading and business activity is not subject to any restrictions except in areas such as financial services, education, mass media or other politically sensitive businesses.

Incorporation procedure involves approval of the company name, submission of the Memorandum and Articles of Association and details of share-holdings, the appointment of directors, company secretary, and statutory auditors.

Off-the-shelf companies are available.

Company names are subject to the following requirements and restrictions:

• A name similar to that of an existing company or that is undesirable or politically sensitive will be rejected.
• Names must be in English.
• Bank, Financial Institution, Insurance, Fund Management, University, Chamber of Commerce and similar names require consent or a licence.
• The suffixes Private Limited or Pte Ltd. are required for privately owned companies to denote limited liability.
• The suffixes Limited, Ltd., Company Limited or Co. Ltd. are required for public companies.

A minimum of one director is required who must be a resident of Singapore. Corporate directors are not permitted. Companies are required to appoint a qualified resident company secretary, who must be natural person. A minimum of one shareholder is required whose details appear on the public register. Corporate shareholders are permitted.

The standard authorised share capital is $100,000. The minimum issued share capital is $2. The following classes of shares are permitted: ordinary shares, preference shares and redeemable preference shares. Bearer shares are not permitted.

Annual Taxation and Fees
Taxation is 18% on income whose source is within Singapore. However, the effective tax rate can be reduced significantly (to 15% or even less) for businesses that qualify for tax incentives. Foreign income is not taxed unless remitted into Singapore. However, with its extensive tax agreements and unilateral tax relief, foreign dividends received in Singapore may generally be redistributed out of Singapore tax-free to foreign investors. In addition Singapore’s agreements are often negotiated very favourably and offer greatly reduced or even nil foreign withholding taxes on royalties, interest and dividends.

Singapore has an extensive investment protection agreement and a network of double tax agreements. This includes most countries in the Asia-Pacific Region and countries in Europe, Africa and the Middle East. These countries include China, Indonesia, Thailand, Malaysia, the Philippines, Vietnam, India, Japan, Korea, Australia, New Zealand, South Africa, the United Kingdom, the Netherlands, Germany, Switzerland, Sweden, France, Belgium, Finland and the United Arab Emirates. Singapore is also one of the very few countries to have a tax agreement with Taiwan. This explains the popularity of Singapore holding companies for Taiwanese investment into China and the region. The minimal annual statutory license fees are approximately S$ 35.

All Singapore companies must prepare audited accounts and must keep a copy of such accounts at the registered office address. All except exempt private companies (a private company with less than 20 members and in whose shares no corporation has a beneficial interest) must file accounts with the Singapore Registrar.

Singapore Banking Law
Pressures from the US and Europe resulted in Singapore negotiating Tax Information Exchange Agreements (TIEAs) to remove the jurisdiction from the OECD’s “grey” list. This was achieved in November 2009, when Singapore signed its twelfth TIEA with France. Singapore also signed an agreement with India which entered into force on September 1, 2011.

The TIEAs do, however, allow Singapore to reject requests for information that are spurious or frivolous, or are mere “fishing expeditions”. Information regarding a customer’s bank account can only be disclosed under a court order. Any disclosure that fails to meet Singapore’s banking secrecy rules can result in a SGD 78,000 fine or three years’ imprisonment.

EditorJurisdiction of the month: Singapore