Challenges of Doing Business in Singapore

Contributed by activpayroll, 11 January, 2017

Singapore holds exciting opportunities for businesses from across the globe, but operating in the city is not without challenges...

As a gateway to the wider Asia-Pacific region, Singapore attracts plenty of expat entrepreneurs, seeking to take advantage of the city's capped corporate tax rates and relatively easy-to-navigate bureaucracy. While Singapore presents a favourable environment for a spectrum of commercial organisations, there are plenty of pitfalls lying in wait for anyone unfamiliar with the city's business rules, regulations and culture.

From payroll and taxes, to language and legislation, ensure you are prepared for the challenges of Singapore’s business landscape...

Residency:

Setting up and running a business in Singapore means deciding whether to live and work in the city. For entrepreneurs who can delegate management there may be no need to move, but for those who need to maintain a presence, choosing and obtaining a work and residency permit may be an issue.

Possible options include the EntrePass (a temporary residence and work permit) or a Permanent Residency application. Both permits include complicated eligibility criteria, significant business commitments to invest and spend in Singapore (anything from S$50,000 to a potential S$2.5 million), and requirements to hire local employees.

Incorporation:

Singapore’s business incorporation process involves logging an approved company name, establishing your legal structure, and registering with the Accounting and Corporate Regulatory Authority (ACRA). Your business’ legal entity (sole proprietorship, partnership, etc) and associated liabilities, will affect other factors (such as the cost of work/residency permits).

ACRA registration comes with its own associated cost (from S$50 to S$600), and a measure of administrative legwork. You will need to assemble appropriate documentation before completing the process at a authorised ACRA kiosk, or online via the BizFile portal.

Payroll:

Singapore payroll processing may be confusing to foreign business personnel, especially since employee immigration status is relevant factor in the process.  Beyond getting the basics right (how to pay employees, and when), compliance with regional rules and regulations (including the details of the Singapore Employment Act) is crucial.

Since non-compliance penalties can be costly, expat organisations often administer payroll by fully or partially outsourcing the process to a local Singapore company. Outsourcing may involve more costs, but allows foreigners to take advantage of regional expertise.

Tax:

As an extension of payroll administration, tax compliance in Singapore may be equally challenging. Tax rates involve employees' 'residential ' and 'non-residential' status - a factor dependent on time spent in Singapore per year. Residents (who spend over 183 days per year living or working in Singapore) pay a progressive rate of 2 - 20%, while non-residents are taxed at a flat 22% (as of the 2017 assessment year).

Various tax relief schemes are targeted at expats, including the 'Not Ordinarily Resident' scheme and any relevant double taxation agreements. Employers also need to be aware of social security contributions deductible from employee salaries, such as the Skills Development and Foreign Workers levies, and Central Provident Fund pension payments. There are no monthly withholding obligations for employers in Singapore (employees complete an end of year tax return) - the exception being a tax withholding ‘clearance’ process for departing foreign employees.

Once again, hiring payroll staff with regional expertise may help your business take advantage of tax relief, and ensure compliance.

Language:

While English is the prevailing language of business across APAC, depending on their background, Singapore employees will also use Mandarin, Tamil and Malay (the national language) in large numbers. Expat businesses may have certain obligations to hire Singapore workers to positions within their organisations, but it is worth ensuring English speakers are appointed to roles in important departments, like Payroll and HR, to ensure consistency. Alternatively, you may have to consider hiring translators.

Culture:

Singapore is a melting pot of ethnicities, religions and cultures - your employees' personal details should be carefully recorded since their status may be relevant to the way their payroll and tax affairs are processed. The business culture of Singapore will also factor into the successful operation of your company: professional relationships are built on an understanding of local and regional custom, while the city's statutory holidays also vary by cultural and religious practice.


Author’s bio

Steven is activpayroll’s Regional APAC Director with over 13 years of experience in multiple industries, most recently, the financial service sector. His primary area of specialization is in Multi Country and Expatriate Payrolls and has a track record of managing Payroll & Compliance projects across the globe.

Tags: agreements | compliance | business | payroll | Tax | Asia-Pacific | Work | Employment | Compliance | entrepreneurs | employees | Singapore | regulation | penalties | legislation | services | environment | internet | tax | tax rates | social security |

 

 





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