Offshore Company Incorporation
Undoubtedly, one of the most amazing countries in the world, Singapore has also managed to become one of the leading economies over the past decade.
Still, as you may already know, there is a reason for which Singapore is doing so well and that is related to the fact that the entire bureaucratic system and the laws are made in such a way as to make it extremely easy for entrepreneurs to invest in this country. Hence, a Singapore company incorporation is one of the most sought-after options in the world.
Incorporating a Singapore offshore company can also be one of the most beneficial things you could do and if you want to find out more about this, then this is the perfect guide for you.
What is an Offshore Company?
Offshore companies carry out the same type of business as a locally incorporated company and the liability of its shareholders is generally limited to the amount of capital they have invested into the company, and they both will essentially be a private limited company. However, this will be known as an international business
Basically, an offshore shows that the management and control of the company is not in Singapore, means that there is no one running the company in Singapore, yet it still a Singapore company.
However, the difference that an offshore company identify themselves is with the company’s incorporation by jurisdiction.
What we mean is, a locally incorporated company will go through the usual process of a Singapore company incorporation. Whilst an offshore business goes through the same process, the only different is the offshore company will be incorporated by a local nominee director.
For Foreign companies who is setting up an offshore company in Singapore, and do not wish to relocate, will also opt for the offshore company incorporation option.
Basically, you can incorporate an offshore company in Singapore, case in which you will not need any work passes or work visa. However, you will not be able to live inc Singapore for extended periods of time.
Incorporation with Nominee Director
What is a nominee director? It is an individual who is appointed to represent the interests of another group or person or company.
As the name suggests, in this context, a nominee director helps foreign individual or investors for a Singapore Company Incorporation, and they function as the director of a company for meeting the legal requirement to own a local director. Due to the functions, a nominee director acts passively and lacks some power in the company.
Singapore Offshore Company Incorporation
There are many reasons for which offshore companies’ incorporation is something a lot of entrepreneurs are seeking for.
One of the main reasons is related to the fact that it is profitable from the point of view of the taxes you would have to pay.
For starters, there are at least two circumstances when you can be completely exempt of Singaporean taxes: if the foreign-sourced income is remitted in Singapore and certain conditions are met and if the foreign-sourced income is remitted outside of Singapore.
Even if you do have to pay tax in Singapore, they could turn out to be quite low (as low as 8% in certain cases).
Furthermore, once the taxes have been paid at a corporate level, every single shareholder is entitled to his/her share of the profit tax-free. Furthermore, for the first three years of activity in Singapore the first S$100,000 will be completely tax free.
Other reasons for which Singapore is one of the best places on Earth to start an offshore company are related to the fact that the entire environment there is extremely business-friendly and stable (both from an economic point of view and from a political point of view).
Singapore Offshore Company Registration Requirement
If you do decide to incorporate an offshore company in Singapore, you should know certain things prior to the incorporation.
- Company name: The first one is the fact that the name of your company name registration will have to be approved by the Accounting and Corporate Regulatory Authority (ARCA) in Singapore.
- Corporate structure: You are then required to appoint at least one local director and shareholder, and one local company secretary. In this instance, Paul Hype Page & Co can assist you in that.
- Share capital: You will have to have a minimum paid-up capital of S$1.
- Company’s registered legal address: You will need to have a registered address as part of the Singapore Company Registration. This can be a residential address or a commercial one. However, a PO Box is prohibited.
- You will also be required to open a bank account in Singapore. However, according to the policy of the bank, this may mean that you must be there in person (as opposed to all the other steps that can be taken long-distance as well).
- If you plan to carry out business operations in Singapore, you may require a business license depending upon the nature of your business.
- Company constitution: Memorandum & Articles of Association (detailing Directors’ rights, company management, Shareholder Agreement if required etc).
Documents Required for Offshore Incorporation
- Passport copies of proposed shareholders and directors
- Residential address proof of proposed shareholders and directors
- Details of the holding company if the shareholder is a corporate entity
Why incorporate a Singapore offshore company?
- Credible image in incorporating in Singapore
- Liberal foreign ownership policy
- Political stability
- Great corporate banking facilities
Tax Exemption for an Offshore Company
All income received in Singapore from outside Singapore that is not sourced in Singapore by resident individuals is tax exempt. These include overseas income paid into a Singapore bank account.
However, this does not include income received in Singapore from outside Singapore obtained through partnerships in Singapore or overseas employment that is incidental to your Singapore employment.
Along with the corporate tax rate of 17%, Singapore has a territorial principle, which implies that only the income earned in Singapore or gained from trade operations outside the country are subject to taxation.
These include offshore income paid into a Singapore bank account. However, income received in Singapore from outside Singapore obtained through partnerships in Singapore or overseas employment is not included.
Foreign-sourced income received in Singapore that meets certain qualifying conditions is exempted from Singapore tax, while foreign-sourced income that is not remitted into Singapore is exempted from Singapore taxation.
Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level; dividends can be distributed to shareholders tax free.
The corporate income tax rate is approximately 8.5% for profits up to S$300,000 and a flat 17% above S$300,000.
Furthermore, a newly incorporated company enjoys 0% tax rate on the first S$100,000 taxable income for each of the first three tax filing years, provided the company has a maximum of 20 shareholders of which at least one is an individual shareholder holding at least 10% of the shares.
Common Reporting Standard for Tax
With Singapore igniting the Multilateral Competent Authority Agreements (MCAAs) this year, they will facilitate the Automatic Exchange of Information (AEOI), which Singapore has agreed to implement next year under the internationally agreed framework known as the common reporting standard (CRS).
The MCAAs cover:
- AEOI under the CRS; and
- theExchange of Country-by-Country (CbC) Reports.
What is this you ask?
The Organisation for Economic Cooperation and Development (OECD) and the Global Forum for Transparency and Exchange of Information for Tax Purposes have mounted global efforts to bring about transparency and exchange of information for tax purposes, in order to address risks to tax compliance such as tax evasion.
This means with AEOI under the CRS, authorities will be able to obtain information through financial institutions of account holders who are tax residents of their jurisdictions and regulations with which Singapore has agreed to exchange tax information.
Accounts held by individuals and entities can be reported. This includes trusts and foundations, and the CRS includes a requirement that financial institutions “look through” passive entities to report on the relevant controlling persons.
Downside of Incorporating an Offshore Company
OECD set out several factors for identifying tax havens and in many countries especially USA and Europe region; they have already introduced many legislations such as FATAC to counter Tax evasion by offshore companies.
Although Singapore is not in their ‘blacklist’, we still believe that it is our duty to educate you the factors to take note if you fall under the OECD Offshore Company Blacklist:
- No or nominal tax on the relevant income;
- Lack of exchange of information;
- Lack of transparency;
- No substantial activities.
The use of an offshore company has concerned governments around the world to the extent that they have jointly enacted the Base Erosion and Profit Shifting (BEPS) Initiative. The BEPS initiative is an OECD initiative, approved by the G20, to identify over a period to December 2015, ways of providing more standardized tax rules globally.
If you fall understand under the blacklist, it does not automatically mean that you have done any wrong doing.
Although, the use of an offshore company as a tax haven has concerned global governments to the extent that they have jointly enacted the Base Erosion and Profit Shifting (BEPS) Initiative, there still many factors to consider before saying that you are breaking the tax law.
Why Chose Paul Hype Page & Co
Lastly, do keep in mind the fact that although it is quite easy to obtain the permit to incorporate an offshore company in Singapore, and according to the Singapore Company Law, a foreigner is forbidden to do it without the assistance of a professional agency.
Make sure you work with the best – Paul Hype Page & Co – and that you deliver all the necessary incorporation documents for them to make this process fast and easy.
Paul Hype Page & Co – Acra service provider and Asean Chartered Accountant.
Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia
Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
How we can help you:
Step 1- Listen to your Business plan and Relocation needs.
Step 2- Analysis your Singapore Tax Planning
Step 3- Recommend the most suited type of Company Incorporation , Open Bank account and
Step 4- Arrange for your Spouse and Children Visa
Step 5- Assist as your company to hire staffs and handle all HR matters
Step 6- Every financial year end, we assist you with your yearly Acra Financial and Tax Compliance
Step 7- Assist you to expand business to Malaysia, Indonesia , Vietnam and Thailand.
Get in Touch with Us Today.
Paul Hype Page