Singapore is one of the world’s best places to start a business. This is also true of small businesses, or SMEs. Read on to find out why this is the case, how one can start an SME in Singapore, and any other information on SMEs you would like to know about.
Singapore is recognized as the best place in Asia for business. It is not difficult to start a legitimate, successful business there. This has naturally drawn many people from all over the world to take advantage of the country’s business environment and opportunities. The laws governing business activity in Singapore are simple to understand. Businesses can even be registered online, meaning that one doesn’t have to be physically present to file the required papers.
In Singapore, the vast majority of companies are small and medium-sized enterprises (SMEs). Individual skills, ideas, and innovation thrive in this atmosphere. There are also several government agencies that can assist with entry into this arena of small and medium-sized businesses. As is the case with the environment for large businesses, the world of SMEs in Singapore is very competitive, so those with the best ideas will reap the most rewards.
Definition of an SME
Before the methods of how an SME in Singapore can be started, the definition of an SME according to the Singaporean government must be put forward. In Singapore, an SME is defined as a business which has been registered and is operating in Singapore, has a minimum of 30% of its shares being held by locals, and has either a group annual sales turnover which does not exceed S$100 million or a number of employees which does not exceed 200. A business’s status as an SME is relevant to its eligibility for certain incentives and other forms of government assistance.
Starting an SME in Singapore is done in the same way as starting any other business. In fact, most major companies, whether in Singapore or elsewhere, began their existence as SMEs. There are certain requirements which must be fulfilled before one can start an SME in Singapore. One of these is that the business must have a registered address which is not a post office box. This even applies to the small business owners who intend to work from home. The proposed company must also have an amount of paid-up capital of at least S$1. It must also have an approved name and a number of shareholders between one and 50. Two positions regarding the small business’s administration must also be filled. They are the positions of resident director and company secretary. The company secretary has to be appointed within six months of the date of the company’s incorporation.
Foreigners who intend to start an SME or any other business in Singapore must also receive an Employment Pass (EP) or Entrepreneur Pass (EntrePass) from the country’s Ministry of Manpower. These visas allow a foreigner to live and work in Singapore. They can only be obtained by foreigners who fulfill all the necessary criteria. After receiving the pass, the foreigner may choose to remain in Singapore to oversee the running of the newly-created SME.
If you are a foreigner who needs an Employment Pass or Entrepreneur Pass, we at Paul Hype Page & Co are able to help you navigate this issue. We will guide you through every step of the application process until you receive your pass from the Ministry of Manpower.
In Singapore, there are certain tax incentives of which SMEs can make use. The Singaporean government has a tax exemption scheme for startups known as the Startup Tax Exemption Scheme. Almost all startups are classified as SMEs. This scheme allows startups in Singapore to have a complete tax exemption on the first S$100,000 of taxable income which has been earned, as well as a 50% exemption on the subsequent S$200,000 of taxable income earned by the startup.
Another tax incentive scheme from which SMEs can benefit is the Partial Tax Exemption Scheme. This scheme allows SMEs, as well as other eligible companies, to receive a tax exemption of 75% on the first S$10,000 of normal chargeable income which has been earned. The next S$290,000 of normal chargeable income earned will receive an exemption of 50%. Both of these schemes are intended to increase the level of entrepreneurship in Singapore and encourage the people living there to set up more businesses, including SMEs.
Other Forms of Government Assistance for SMEs
The government of Singapore has also provided grants and other forms of government assistance from which SMEs across the country may benefit. One of these forms of assistance is the SME Working Capital Loan. This loan was launched in June 2016. It acts as a financing option for Singapore’s SMEs. Companies which are eligible for this loan may use it to finance their working capital and make the company’s cash flow needs easier to handle. The eligibility criteria for this loan are the same as those stated in the Singaporean government’s definition of an SME. The loan quantum is S$300,000, the repayment period lasts for five years, and the interest rate is determined by participating financial institutions’ decisions regarding the risk involving the loan. Should the company become insolvent, 50% of the loan default risks will be borne by Enterprise Singapore, with the other 50% by participating financial institutions.
The government has also provided SMEs in Singapore with the Enterprise Development Grant (EDG). This grant is intended to boost the growth and evolution of Singapore companies, including SMEs. It supports projects which are classified under one of the following categories: innovation and productivity, market access, and core capabilities. Innovation and productivity projects are those which try to discover new areas for growth or possible ways to increase efficiency. Market access projects are those which support Singapore companies which are able and willing to expand abroad. Core capabilities projects strengthen companies’ business foundations, thus making them more able to grow and evolve. The EDG funds up to 70% of all costs of eligible projects. Eligible projects are those related to software and equipment, internal manpower, and third-party consultancy. Companies, including SMEs, eligible for the EDG must have been registered and currently be in operation in Singapore, be financially able to carry out the project from beginning to end, and have at least 30% of their shares held by locals. Enterprise Singapore makes the final decision on whether a company receives the EDG.
Although there is no single statistic which states which industries in Singapore have the highest proportion of SMEs, information on this can be inferred via Enterprise Singapore’s website for SMEs known as SME Portal. On that website, there are links catering to SMEs in the following industries: infocommunications, food and beverage, retail, and manufacturing. A look at the statistics for each of these industries in Singapore shows that each is in a prime position for upcoming business growth. Therefore, the number of SMEs entering these industries should only continue to rise.
The infocommunications industry in Singapore is expected to grow by 6% every year. This rate is approximately double that of the Singaporean economy as a whole. Meanwhile, according to the latest Singapore Business Federation–DP Info (SBF-DP) SME Index, the business outlook for retail SMEs as well as food and beverage SMEs saw a marked improvement. This was especially true with regard to hiring expectations, business operations, and possible future expansion of operations. Manufacturing SMEs may be in the most enviable position of all four industries mentioned. This is because they have been presented with a unique opportunity. SMEs in the manufacturing industry may soon be able to find new sources of revenue by transforming their business models, enhance productivity to overcome manpower shortages, and expand the size of the industry’s job market to suit the current digital age.
There are many excellent reasons for one to start an SME in Singapore. Those who have a sound plan for a small business in Singapore can expect much interest from Singaporeans who are keen and willing to join startups and new ventures. Most of these people are not only enterprising, but also well-educated and IT-savvy. Therefore, new SME owners in Singapore will be able to connect with other people equally as passionate as them.
Furthermore, those who are willing to generate good business ideas and put in the work will experience tremendous success, whether financial or otherwise. SMEs are a truly indispensable part of the Singaporean corporate landscape. They are expected to become even more influential in the future because of the large portion of Singapore companies they comprise.
If you would like to start an SME of your own, contact Paul Hype Page & Co via social media, email, or telephone. We can provide expert advice on a host of issues related to SMEs such as business plan, company secretarial activities, auditing of accounts and balance sheet, and many others.