As small business owners, keeping up with regulatory compliance obligations is definitely not an easy feat. So much to the point that why do we even choose Singapore as the ideal place to start a business in the first place?
Here’s why.
Singapore is one of the world’s most popular places to incorporate a business—and for good reason! Among those reasons is the fact that The World Bank Group has consistently ranked the country as the easiest country in which to build and do business. Another reason that, thanks to the various Free Trade Agreements Singapore has inked, the country is a gateway for entrepreneurs and corporations that want to tap into the Asian markets.
Beyond its international free trade opportunities, Singapore is also popular because the city-state’s government has taken specific steps to make it as easy as possible to set up a headquarters there. There is an abundance of government grants, easy-to-obtain small business loans and banks that cater to foreign business investors and startups. The tax rates are ideal, too!
Of course, just because it’s easy to set up an incorporated headquarters in Singapore doesn’t mean that it doesn’t have any business regulations. In fact, there are some strict regulatory compliances every business must adhere to if they want to continue operating. Here is a quick overview of the annual statutory compliance regulations every business must follow.
What Is The Required Regulatory Compliance For Private Companies?
1. It is the year 2024 and your Financial Year End has passed. So soon? It’s about that time of year again to manually ensure that all your figures are accurate.
2. Within 3 months – File ECI
Let’s provide an estimate to IRAS on the likely taxable income that your company has!
3. Within 6 months – Hold your AGM
Time to present your company’s financial statements & updates on the company’s financial outlook to its members.
4. Within 7 months – File your Annual Returns within 30 days after holding AGM
Let’s avoid those penalties & file our financial statements on time!
5. By 30 November 2023 – File your Tax Returns (Form C or Form C-S)
6. Monthly employer obligations – Contribute CPF and SDL for employees
AGM Requirements in Singapore
One of the mandatory regulatory compliance for every Singapore company is to meet regularly with the company’s members/shareholders. At a minimum, the company must have one meeting every year at which the company presents its financial statements and updates on the company’s financial outlook to its members. This meeting is called the Annual General Meeting, or AGM.
The first AGM must take place within 18 months of the company’s incorporation. After that, the meetings must happen at least once per year, and within six months of the Financial Year End. The manner in which the AGM is conducted will have been spelt out in a company’s Constitution. Typically, it is presided over by the Chairman of the Board of Directors and is attended by at least two of the company’s members.
For a Singapore-listed company, AGM must be held within 4 months after the company’s financial year end (FYE) whilst for an unlisted company, the grace period for holding AGM is within 6 months after the company’s FYE.
Filing Annual Returns to ACRA
ACRA is Singapore’s Accounting and Corporate Regulatory Authority. Singapore’s Company’s Act requires that every company incorporated within Singapore must submit annual returns to the Authority so that it can make sure that all of its records are up to date.
This filing will include the date of the company’s AGM and, if applicable, financial statements. A listed company must turn in these documents within 5 months from the end of the company’ FYE. A non-listed company on the other hand has a maximum of 7 months from their company’s FYE to comply with the regulation. The company will also need to file AR within 30 days after holding an AGM.
There are penalties (fines) for failing to meet this requirement and ACRA will be instating a two-tiered penalty framework for local companies and IVCCs that fail to comply. After that date, instead of a flat $300 fine no matter how late a company files, the $300 fine will only be applicable during the first three months a company’s filings are late. After three months, the fine doubles to $600.
It is possible, of course, to file returns late, but the company must first apply for permission to do so.
Filing ECI to IRAS
Before talking about the rule itself, it might be helpful to have a quick vocabulary lesson.
ECI = Estimated Chargeable Income
This is a report that estimates how much of a company’s income, after tax-allowable expenses, can be taxed.
IRAS = Inland Revenue Authority of Singapore
This is Singapore’s tax authority.
Revenue = A company’s main source of income
If a company is a chain restaurant, it would report the income you made from serving customers. If it is an e-commerce shop, it would report the money it made via the sales it made.
ECI Rules
Companies need to produce an ECI to provide an estimate to IRAS on the likely taxable income that the company has. Unless it qualifies for administrative concession (which makes them exempt from filing in a specific year), every company must submit its ECI within three months of the end of the previous financial year for the upcoming tax assessment.
Typically, the financial year end dates in Singapore are the last day of the month. However, to maximize the coverage of the tax exemption for new start-up companies for its first three consecutive years of assessments, most companies fix their first financial period to end on the last day of the 11th month from the date of incorporation.
If a company does not know which financial year it operates within, the company can enquire with its company secretary.
Filing Tax Returns to IRAS
This is where tracking the details can get a little tricky.
Companies are to file Corporate Income Tax Returns commonly known as Form C-S or Form C by 30 Nov every year, except for dormant companies which have applied to IRAS to waive the requirement to file.
In tax terms, YA (year of assessment) is the year in which your income is assessed to tax. To assess the amount of tax for the current YA, IRAS looks at the income, expenses, etc. during the financial year. This financial year is known as the "basis period".
The basis period is generally a 12-month financial period preceding the YA. In corporate tax filing, this refers to the financial year that ended in the year that precedes the current YA, e.g., YA 2024 for income earned in the financial year that ended in 2023.
You can also check out one of our previous blog, Every Taxes Business Owners Should Know in Singapore for a more detailed explanation on taxes.
An Example
If Company ABC was incorporated on 01 November 2022 and chooses its financial year-end date to be 31 October 2023, then ABC’s basis period for the YA will be from 1 November 2022 to 31 October 2023. As the basis period is the period of income that is relevant for the YA, the YA will be in the preceding year. Meaning that, Company ABC’s YA is to take place in 2024.
In Singapore, annual tax reports filed by a corporation report on the income earned, the amount the company paid in allowable expenditures (these are called business expenses), and tax reliefs and tax rebates that are applicable in the most recently finished year. This significantly reduces the corporate tax payable for companies.
Because tax payments can be paid in instalments (if the company’s application is approved by the IRAS) the Company divides $170 by the number of instalments they have been granted by the IRAS. These amounts will be used to offset the amount they will think they owe when they file their annual taxes via Form C/ C-S/ C-S(Lite). The final tax expenses being assessed by IRAS will be electronically communicated via the Notice of Assessment (NOA).
Regulatory Compliance as an Employer
The Singapore Employment Act requires company to contribute CPF and SDL for each employee that meet certain criterias.
CPF, also known as Central Provident Fund. The Central Provident Fund (CPF) is a mandatory savings plan for Singaporean citizens and permanent residents earning more than SGD 50 per month. Companies are responsible for making CPF contributions on behalf of their Singaporean employees, and those earning more than SGD 750 may have the employee's share recovered from their wage.
The maximum contribution rate for employees and employers aged 55 and below are 20% and 17% respectively. Variations may occur based on factors such as age and permanent residency status. You may check here for the latest updates. Similarly, SDL, also known as Skills Development Levy is also one of the regulatory compliance for a company. This levy is distinct from other payments such as the Central Provident Fund (CPF) contribution or Foreign Worker Levy (FWL).
All SDL contributions are directed to the Skills Development Fund (SDF), which is used to finance workforce improvement programmes and to offer training grants to employers when their employees participate in training administered by SkillsFuture Singapore Agency (SSG).
In accordance with legal requirements, companies must pay SDL at a rate of 0.25% of the initial $4,500 of their employees’ monthly salary. This is subject to:
- a minimum payment of $2 for employee earning $800 or less per month
- a maximum payment of $11.25 for employee earning $4500 or more per month
Conclusion
For companies that want to take advantage of stable growth markets and expand their offerings into Asia with minimal hassle or fuss, Singapore is the ideal nation in which to incorporate. That said, there is still mandatory regulatory compliance to meet annually. This was just a quick overview of how the process works.
Even if you are sure you can navigate Singapore’s system on your own, it is absolutely in your best interest to hire an expert to help you properly avoid compliance deadlines and pay your taxes. A qualified Corporate Secretary and Accountant can help make sure that no details are missed. Plus, having professional help allows you to focus your attention where it is most needed: on the business itself!
