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Why incorporate an offshore company in Singapore

What is an offshore company?

The main reason for offshore company incorporation is to enjoy different favorable laws, among other benefits in the country of interest. Therefore, a Singapore offshore company is one that is registered, managed, and operated in a different country other than Singapore.

It means that nobody runs or controls the business from Singapore. The government provides Singapore offshore companies with some financial, tax, and legal benefits.

These companies usually operate the same as a typical private limited company except that the offshore company is recognized as an international business.

The main difference between an offshore and local company is its incorporation process.

A local company gets incorporated generally in the country, demanding the usual documents of company incorporation. An offshore company in Singapore follows the same process, but its incorporation needs to be carried out by a local nominee director.

Opening an offshore company does not require you to relocate to Singapore, and neither are you required to produce a working visa or work pass to open the company or pay a visit to the company.

Since it’s an offshore company, you cannot live in the country for extended periods — it might diminish the definition of an offshore company.

However, if you ever decide to relocate, you will need an entrepreneur pass or employment pass for you to manage your company in Singapore.

Don’t miss my article about, What is an offshore company and where to start your offshore business

What business can your offshore company in Singapore carry out?

For instance, incorporating a restaurant in Singapore requires you to get an exclusive license. You can get such licenses from the official government website for business licensing — GoBusiness.

Some may wonder if they can change their incorporated business name — giving it a different one from its parent company, and the answer is yes.

All you need is to ensure that Accounting and Corporate Regulatory Authority (ACRA) (opens in a new tab) approves the new name.

One of the main reasons they might reject your application is if another business in the country carries the same name.

You must carry out a diligent and thorough name search.

Things to know before offshore company registration in Singapore — requirements

Before the incorporation of an offshore company, here, some of the things to know and fulfill are required.

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You either decide to keep your original company name or change it. However, whichever name you choose, it must be approved by ACRA, which is the company registrar authority in Singapore.

They have rules and regulations that you must fulfill before the approval of your chosen business name.

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He can be a citizen of Singapore, a permanent resident, or an individual holding a valid work pass. If the company wishes to add more resident directors inboard, that is up to them.

This director must be 18 years or above and cannot be an entity. In case the resident director does not satisfy his duties adequately, you can rely on a nominee director. A nominee director is a person appointed to represent the interest of another individual, company, or any other group. here I advise you to read my full article on Nominee director and nominee shareholder – Who are they, and do I need them?

In Singapore, this director can assist overseas investors in incorporating the offshore company in the country. They operate like other directors in a limited company except that they are working for the interest of another person and the overall company. They also help in fulfilling the requirement of a resident director when it comes to the incorporation of Singapore offshore companies.

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Shareholders are literally the owners of a company, which means they enjoy all the rewards from the company. These include losses and profits.

For investors who would like to shield their name from the public as the owners of the Singapore offshore company, they are allowed to appoint a nominee shareholder.

A nominee shareholder is a person or an entity registered as a holder of shares during the incorporation of an offshore company.

They are the people known by the public as the owner of the shares, but in the real sense, they are only holding the shares for the beneficial owner. A nominee shareholder cannot enjoy any benefit or rights of owning shares in a company.

To ensure that this promise is binding, the nominee usually signs a Declaration of Trust and then hand it to the beneficial owner. You can learn more about a nominee director and shareholder from my previous post.

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Limited companies in Singapore must provide a company secretary as one of the requirements of the registration process. An offshore company is not exempt from this requirement. The secretary needs to be a local resident and must be a person and not an entity.

Also, a company secretary cannot be a member of the board of directors or a shareholder. If it becomes challenging to get a resident secretary, you can opt for company secretarial services in Singapore to help you speed up the registration process.

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For the incorporation of an offshore company, you need a minimum of S$1 as paid-up share capital, but no authorized capital required.

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Almost every business activity in Singapore requires a license and permit to start operations, and these documents depend on the type of business.

Singapore offshore companies are not exempt either. Therefore, if your business activity requires you to obtain any license, go for it from the relevant government agency.

You need to get this done after incorporating the company, but before you start your operations.

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Why incorporate a Singapore offshore company? – 9 Reasons

You may wonder why most entrepreneurs and multinational companies are settling on expanding their businesses in South Asia. Well, the main reason is the fast emerging markets and numerous business incentives provided by local governments in these countries.

Singapore is explicitly known for lucrative business opportunities, among other benefits, as stated below.

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Every private limited company in Singapore, including offshore companies, pays a corporate tax of 7.5% for revenues up to S$300,000. For revenues surpassing S$300,000, the corporate tax is 17%.

This is by far below average corporate tax rate in most companies across the globe.

A newly incorporated company pays a 0% tax for every S$100,000 taxable income for the first three years of operations.

However, for a company to enjoy this benefit, shareholders must be 20 or less, and at least one of them must hold a minimum of 10% share capital. Since Singapore has a one-tire tax policy, shareholders get to enjoy their dividends tax-free.

Also, every company incorporated in Singapore is not liable to pay withholding tax, capital gain tax, accumulated revenue tax, or sales tax.

Previously, corporate companies were never required to pay Value Added Tax (VAT) (opens in a new tab), which is referred to as Goods and Services Tax (GST) (opens in a new tab) in Singapore. The government introduced GST in the year 1994, and today it stands at 7%. This too low as compared to the global VAT average.

It is also below the Asian Pacific region (opens in a new tab) average, which stands at 10.5%.

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This means that you will not attract negative energy from stakeholders, employees, bankers, or any other professional in the market.

You are all operating on a leveled ground and, therefore, can compete naturally and healthily with other companies in the country.

It builds trust and credibility in the market from all stakeholders.

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They have been ranked among the most comfortable nations to start any business in the world. As shown earlier, their registration process and requirements are quite straightforward.

Also, it only takes a maximum of three days to incorporate any company in Singapore.

As long as you have all the documents required, be sure not to encounter any bureaucratic red-tape when incorporating Singapore offshore company.

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The foreign ownership policies are quite open for any business that you may think of setting up in the country. You are not required to get any prior approval to register a company in this country as well.

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The country’s government is known for its integrity being described as pragmatic, rational, and corrupt-free.

Very few countries get to enjoy such political stability, yet it is crucial for the growth and success of every business.

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The good thing is that you can get access to a multi-currency bank account and also transfer your money with ease to and from your domestic bank.

The process of opening an offshore bank account is also straightforward.

Sectors such as electronic components, chemical products, mineral fuels, and general manufacturing hold excellent prospects.

One can indulge in any — they are actually remarkable for import and export trading.

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Singapore offshore companies get to enjoy the open immigration policies implemented by the government to acquire working visas and permits for their foreign employees.

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This is possible because the country is a significant signatory in most intellectual property treaties, including the patent cooperation treaty, Berne Convention, and Paris Convention.

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Compliance and regulations in Singapore

Have you managed to incorporate your offshore company in Singapore?

If yes, congratulations!

They will provide you with a registration number, which can act as a formal certificate of incorporation for your offshore company.

This company will start operating as a separate entity from its parent company in a foreign country.

That said, here main compliance requirement that the offshore company must fulfill.

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Like other companies in Singapore, your offshore company needs to identify its designated financial year-end.

This happens during the time of incorporation of the offshore company.

All Singapore offshore companies need to maintain proper books of accounts. This is a requirement for all companies in the country.

The financial statements and records of all transactions need to be maintained for a minimum of five years.

The offshore company is also required to appoint an auditor within the first three months after its incorporation.

However, those companies that are considered by the law, Company Act as a “small company” are not required to fulfill this requirement.

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In Singapore, every public-listed company is required to hold an annual general meeting (AGM) (opens in a new tab) within four months after the closure of its financial year.

Other limited companies are given a time limit of six months after the end of the fiscal year.

However, there are a few exemptions from this requirement.

For instance, dormant companies that are exempted from maintaining financial records are also exempted from holding AGMs.

Also, if a private company sends its financial statements to all the members within five months after the closure of the financial year, they are also exempted.

These exemptions come with some conditions, and it is essential to ensure that you fulfill them all.

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Once you complete registration for your offshore company, you automatically get registered with IRAS (Inland Revenue Authority of Singapore) (opens in a new tab).

Every company in Singapore, including offshore companies, must remit their tax payments every year and file returns.

That said, Singapore offshore companies are required to declare their revenues, including approximated taxable income through the Estimated Chargeable Income (ECI) form (opens in a new tab).

This revenue includes the primary source of income for the offshore company excluding items such as capital gain and withholding incomes.

Even if the company’s taxable income is zero, they must still file a return, ‘NIL’ under ECI.

Filing returns for on offshore company ought to be done within 60 days after the AGM of the parent company.

Even if it is not a must for the parent company to prepare accounts of hold an AGM, they must maintain accurate financial records and get them audited.

Singapore offshore companies are required to file their annual returns with ACRA through their online portal on the website.

They must file these returns for corporate tax either by December 15 (online filing) or November 30 (physical filing).

The good thing is that your incorporation agent is responsible for fulfilling all these compliance requirements.

Remember, if you do not comply with any of these statutory requirements, it is considered an offense that may lead to hefty fines or imprisonment.

Also, if your company qualifies for GST registration, you need to register it and pay the tax liabilities there-in.

Qualification for GST comes when a company’s revenue surpasses S$1 million and this demands for compulsory registration with IRAS within 30 days.

Some entities may also register voluntarily even if they are not liable to do so based on the business they intend to carry out.

However, some conditions come with voluntary registration.

Setting up an offshore bank account

Since you are required to maintain financial accounts for the offshore company, it is advisable to open a bank account separate from that of the parent company. Opening an offshore bank account is very easy since the requirements for the same are straightforward.

You either open the account online by remitting the necessary documents or visit the bank in person. The decision depends on the policies of the bank you choose or your own preferences.

You can read more about offshore banking from my previous blog post, How to open an offshore bank account.

Most banks in Singapore will allow you to save in diverse currencies and, at the same time, expand your investments for maximum returns.

Offshore bank accounts are no longer a thing for the wealthy only, nor are they illegal.

After incorporation of your foreign company in Singapore, start shopping for a reliable offshore bank account.

However, your choice should not be limited to these — do your research homework until you get satisfied with the services you need.

Now, can you close an offshore company, and how?

The procedure for closing an offshore company in the country depends on whether you still have outstanding liabilities or not. In this case, if your foreign company does not have any liability, you can apply for the deregistration of the company through ACRA.

The process is referred to as a struck off of the register. Creditors can still claim and enforce their unpaid dues. In case the company has liabilities to settle, the company gets closed through a process known as full winding up.

A liquidator may be required to help in proper realization of the offshore company’s assets and distribution of the same to its members and creditors.

Winding off an offshore company can be a complicated process based on the type and quantity of assets and liabilities associated with the company.

Therefore, before you decide to close your foreign company in Singapore, consider working closely with reliable legal and accounting professionals.

They will advise you on the best way forward.

FAQs for offshore company incorporation

How many licenses do you need to start operating in Singapore?

The number and type of business license required by any limited company in Singapore depend on the activities of the business.
The same rule applies to Singapore offshore companies.
Therefore, you can’t say that you need a specific number of licenses to incorporate an offshore company.

How come a local company in Singapore does not need a nominee director?

Since this is a locally registered and owned company in Singapore, the directors are citizens or local residents.
The law only requires a director who is a local resident for offshore companies only.
Therefore, no need for a local nominee director.

Is a dormant Singapore offshore account required to audit its accounts?

The answer is no. However, you can still file returns based on unaudited accounts.

Are details of directors and shareholders public in Singapore?

The answer is yes. Once the incorporation of the foreign company is complete, details of directors and shareholders of the company become public.
This is the main reason why most people appoint a nominee director or shareholder to shield their privacy as the company owners or from public association with it.

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