Incorporating an Offshore Company in Singapore

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What is an offshore entity in Singapore?

Any entity formed and registered (domiciled) in Singapore, who only participates in business activities in other countries outside of Singapore’s administrative jurisdiction may file for offshore exemption after 1 year of operation.

What is the difference between an entity conducting no business in Singapore and an offshore entity in Singapore?

There’s is no difference in business activities between the two entities. An entity with IRAS offshore exemption has officially filed for exemption with its first annual tax statement to IRAS.

When can an entity conducting no business in Singapore be categorized as an offshore entity in Singapore?

An entity has to operate legally registered to the IRAS for 1 financial year before it is eligible to file for offshore status.

How can an entity conducting no business in Singapore be categorized as an offshore entity in Singapore?

An entity conducting no business in Singapore who has been registered with IRAS for 1 financial year may submit a form C-S along with its first annual tax statement.

What is the difference in ongoing compliances between an entity conducting no business in Singapore and an offshore entity in Singapore?

There is no difference, in both cases the entity must still submit its annual tax statements to the IRAS. Details on such as the entity’s shareholder structure and turnover may however mean in neither case the entity has to have statements professionally audited beforehand.

Can an entity conducting no business in Singapore file for offshore status at the time of when its first tax submission is due?

Yes, upon the entity’s first financial year being registered with the IRAS it may file for offshore exemption together with its first annual tax statement.

Why form and register an offshore entity in Singapore?

Singapore offers both theoretical and practical benefits for setting up an offshore company.

Theoretical

  • Strong Political Stability – Historically, there is a direct relationship between a country’s political stability and their investment climate. Any investment vessel providing security assurance on the underlying financial benefit for investment, will always attract a greater market potential than those without securities. Known as one of the four Asian Tigers, Singapore is the fourth largest foreign exchange trading centre in the world.
  • No Foreign Exchange Controls – No control or restriction over an individual entity’s freedom to move currencies through a country, both physically and financially, provides the greatest flexibility to operating international business.

Practical

  • Advantageous Foreign Ownership Policy – An entity domiciled in Singapore is permitted to allocate 100% of its shares to foreign shareholders, allowing complete ownership of the company from a foreign location.
  • Attractive Tax Obligations – Singapore administers English Common Law, yet unlike Great Britain has no offshore legislation. As such it offers a combination of tax exemptions on income and benefits to foreign entities, providing an attractive business environment.
  • Fast Formation Process – Both the procedure and documentation involved in the formation and registering of a Singapore entity is fast and straightforward. The complete process can be finalized normally within 48 hours.

Who can form and register an offshore entity in Singapore?

Any person(s) of registered company from any nation with the financial means and absent of any political or humanitarian restrictions can form and register an entity for offshore purposes in Singapore.

What entities can be formed and registered for offshore purposes in Singapore?

Under some conditions other entities may be considered for offshore status, however PLLCs are most commonly used as the offshore vehicle for foreign business in Singapore.

  • Private Limited Liability Company – A limited liability vessel regarded as a separate entity to its directors and shareholders. LLCs provide clear separation between assets personally owned by such appointees and any liabilities or debts created by them through operating the entity.

What are the tax benefits from operating an offshore entity in Singapore?

The following tax obligations and exemptions lend significant benefit to operating an offshore entity in Singapore.

  • All income generated or sourced from outside of Singapore by the entity is exempted from income tax.
  • All income generated or sourced from within Singapore by the entity is subject to 22% income tax. Additional tax relief may also apply for startups with low turnover.
  • Entities domiciled in Singapore are not taxed on any capital gains derived from selling assets or property outside of Singapore.
  • Entities domiciled in Singapore are not taxed additional WHT on dividends derived outside of Singapore.
  • Entities domiciled in Singapore are taxed a modest 10-15% WHT on interest or royalties derived outside of Singapore.

Are there any activities an entity for offshore purposes is not permitted to do business in?

Yes, offshore entities are restricted from offering financial and education services, along with other state licensed services.

Can Singaporean shelf companies file for offshore status?

Yes, shelf companies are permitted for offshore purposes. However bank account approval may be limited without physical presence.

Can shelf companies file for offshore status faster than newly formed entities in Singapore?

No, all entities wishing to file for offshore status must have been registered with the IRAS for 1 financial year prior to filing for offshore exemption. Because such entities cannot register with the authorities until a bank account has been opened, there are no time benefits associated with purchasing a standard shelf company over forming a new entity.

What benefits do shelf companies offer in operating for offshore purposes in Singapore?

Shelf companies establish corporate longevity which can provide support to certain business activities and funding scenarios, however they provide no benefit to the registration process for offshore purposes. Shelf companies can be purchased and have all formation documents sent overseas in Singapore.

Are there any additional officer and structure requirements for an entity being registered for offshore purposes in Singapore?

Yes, in Singapore offshore entities must have one resident director and a professionally qualified resident secretary.

What are the officer and structure requirements for an entity being registered for offshore purposes?

Directors

Number of directors – 2 > no maximum limit

Natural person or company (1> must be natural person)

Resident or Nonresident (1> must be resident)

Nominee directors allowed.

Shareholders

Number of shareholders – 1 > 20

Natural persons or companies

Residents or Nonresidents

Nominee shareholders allowed

*100% local or foreign shareholding allowed.

Secretary

Resident only

Professional qualifications required

Sole director/shareholder not eligible

Registered Address – No PO Box address permitted.

AGM Requirements – AGMs can be conducted from anywhere in the world. Electronic media permitted.

What are the auditing requirements for offshore entities in Singapore?

An auditing statement of approval is required annually, however offshore entities can be exempted from this requirement if one of the following applies;

  • The offshore entity has less than 20 shareholders
  • The offshore entity has no corporate shareholders
  • The offshore entity’s annual turnover does not exceed SG $5,000,000
  • The offshore entity is dormant and has not began any form of business activity

What is the possible share distribution for offshore entities in Singapore?

1 share > no limit

Are there any restrictions on shares in entities being registered for offshore purposes in Singapore?

Yes, bearer shares are not permitted.

What are the startup share requirements for an entity being registered for offshore purposes?

The minimum paid up share value for authorized capital is SG $1. There is no maximum limit on capital share value and upon paying the minimum paid up value of SG $1 the remaining value is not required up front.

A total share capital of SG $50,000 is recommended and commonly adapted when forming an offshore entity in Singapore. Authorized capital shares may be paid in any currency.

Are there any additional restrictions on shares for entities being registered in Singapore?

Yes, par value shares are not permitted.

For more Offshore guides and advice, consider becoming a Founders Grid member.

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