Corporate Establishment, Tax, Accounting & Payroll

roughout Asia

Doing Business in Singapore

An Introduction to

I. Establishing and Running a Business II. Tax and Accounting III. Human Resources and Payroll
An Introduction to Doing Business in Singapore - 1 2012

Preface
In a global economy dominated by huge industrial powers, the city-state of Singapore has carved out its competitive niche as a destination for regional headquarters, branch oices and holding companies for doing business all across Asia. Singapore ofers foreign investors a highly skilled workforce, English-speaking business environment, business-friendly legal and tax systems, immense logistics and transportation capacities, and over sixty double taxation avoidance agreements, among other advantages. Furthermore, the city-state consistently takes measures to align its policies with the international standards emanating from the World Trade Organization, the Organization for Economic Co-operation and Development, and even issue-centric organizations like the International Accounting Standards Board. Singapore has consistently been ranked irst on the World Bank’s Ease of Doing Business Index, with particular strengths in “protecting investors” and “trading across borders.” In fact, the city-state runs in such an eicient, business-friendly manner that it has been said to run like a corporation itself; “Singapore Inc.” This publication, designed to introduce the fundamentals of investing in Singapore, was compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and inancial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the irm has grown into one of Asia’s most versatile full-service consultancies with operational oices across China, Hong Kong, India, Singapore and Vietnam as well as liaison oices in Italy and the United States. Dezan Shira & Associates’ experienced business professionals are committed to improving the understanding and transparency of investing in emerging Asia. Chris Devonshire-Ellis Senior Partner, Dezan Shira & Associates

Alberto Vettoretti Managing Partner

Nathanael Susanto Business Manager, Singapore

Contact Dezan Shira & Associates singapore@dezshira.com www.dezshira.com

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Contents
1. Establishing and Running a Business .....................4
What are my options for investment? ................................................................................................. 5 How do I establish a company? .............................................................................................................. 7

2. Tax and Accounting..............................................10
What are Singapore’s major taxes? ..................................................................................................... 11 What are some of the key compliance requirements? .......................................................... 14

3. Human Resources and Payroll..............................16
How do I hire staf/workers?................................................................................................................... 17 What major legal obligations does a company have for its staf/workers? .............. 20

An Introduction to Doing Business in Singapore - 3

Establishing and Running a Business

What are my options for investment? How do I establish a company?

What are my options for investment?
There are several avenues for foreign investment in Singapore and deciding which route to pursue depends on the intended scope of the investment, business activities, tax implications and legal liability. In this section, we discuss the following business structures: a. Representative Oices b. Branch Oices c. Subsidiary Companies The China Alternative – Singapore July 17, 2012 Asia Brieing News http://bit.ly/OMDa6u

a. Representative Oices
A representative oice can be set up in Singapore to undertake market research or feasibility studies on behalf of its parent company. It cannot engage in commercial revenue-generating activities. This is a short-term option for companies looking to eventually establish greater presence in the country. The foreign company bears liability for the activities of the representative oice.

b. Branch Oices
A foreign company can set up a branch oice to conduct any type of business activity that falls within its own business scope. A branch oice is not eligible for the tax exemptions and incentives available to local companies, because the control of the company is still vested in the overseas parent company. The parent company bears the ultimate responsibility for any liabilities of the branch oice.

c. Subsidiary Companies
Subsidiary companies are the most widely used structure for companies looking to set up a presence in Singapore. These take similar form to local private limited companies, unless they are publicly traded. The parent company’s liability is limited to the share capital it has subscribed in the subsidiary company. The minimum paid up capital for a subsidiary company is S$1 and can be increased anytime. Subsidiary companies must appoint at least one director who is a Singapore resident. This is not limited to Singaporean citizens, and most forms of working visas will allow for “resident” eligibility. Subsidiary companies are entitled to tax beneits available to local companies and eligible for relief under Double Taxation Agreements (DTA), the start-up company tax exemption, and tax exemption on foreign dividends, proits, and service income.
An Introduction to Doing Business in Singapore - 5

Common Purpose(s), Pros and Cons by FIE Structure Type
FIE Structure Type
Representative Oice

Common Purpose(s)
• Market research • Liaise with home country companies

Pros
• Easy to establish • Good way to research the market

Cons
• Liability extends to parent company • Restricted to market research • Must be renewed year-by-year with a 3 year maximum • Cannot generate income • Liability extends to parent company • Restricted to business scope of parent company • Taxed as a non-resident entity with no local tax beneits

Branch Oice

• Extension of parent company

• Easy to establish

Subsidiary Company

• Separate legal entity

• No restrictions on the scope of business • Liability limited to subsidiary • Taxed as a resident entity with applicable local tax beneits

Hong Kong and Singapore Holding Companies May issue, 2012 China Brieing magazine http://bit.ly/UGNBzZ

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How do I establish a company?
Singapore is ranked ifth in the world in terms of ease of starting a business, according to the World Bank (2012). Furthermore, in its 2011–2012 Global Competitiveness Report, the World Economic Forum ranks Singapore as the 2nd best country in the world for intellectual property protection. Here, we discuss: a. Set-up Process b. Key Positions in Foreign-invested Entities c. Intellectual Property To discover more about set-up process, key positions or intellectual property, scan this QR code with your smart phone to visit: www.dezshira.com/businessadvisory.html

a. Set-up Process
Singapore’s companies are registered with a statutory board called the Accounting and Corporate Regulatory Authority (ACRA) (http://www.acra.gov.sg/). ACRA is the major governmental body that regulates and registers businesses in Singapore. Before registering your business, determine if any additional licenses and permits will be required and ensure that you will be able to acquire them. Provided that it does not require any additional licenses/approvals from other government agencies, a company may commence business once it has been registered with ACRA. Otherwise, business operations may commence only after all additional licenses/approvals are obtained. The set-up process to establish a business is fairly uniform for the various kinds of business structures. According to Enterprise One (http://www.enterpriseone.gov. sg/), an arm of the Ministry of Trade and Industry, there are seven steps to starting a business: 1) Choose the right business structure 2) Register your business 3) Obtain working capital 4) Set up accounting system 5) Understand your tax obligations 6) Apply for the relevant licenses and permits 7) Look for business premises

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Singapore makes it very easy for a company to be registered with its online application processes and ease of access to information. Once a name is approved, the company can be registered online, where the process of incorporation takes less than 15 minutes. However, if the application needs to be referred to other branches of the government, the incorporation process could take as long as two months. The business of exchange control is overseen by the Monetary Authority of Singapore, however there have been no foreign exchange control obligations in Singapore since 1978. No approval is required for any payment, remittance or capital transfer in any currency or to any country, which means that working capital can be easily transferred to the Singapore entity. To establish a representative office, the foreign parent company must have been established for at least three years and have a sales turnover of more than US$250,000. To establish a branch oice or a subsidiary company, foreign irms are highly recommended to hire a professional services irm to assist with the setup. Both entities must have a local address and, in the case of a subsidiary company, the registered oice must be open and accessible to the public for not less than three hours between 9am and 5pm on weekdays. A branch oice’s name must be the same as the parent company, but this restriction does not apply to a subsidiary company. A subsidiary company, as a separate legal entity, has a number of additional requirements following incorporation. These include: • Appointing an auditor within three months of the date of incorporation, unless the company is exempted from audit requirements under the Companies Act. • Appointing a company secretary within six months of incorporation. • Holding the irst Annual General Meeting (AGM) of the company within 18 months of the date of incorporation. • Registering for goods and service tax, if necessary. It is compulsory to register if revenue is expected to be more than S$1 million. Singapore has various government assistance schemes to attract investments and to assist investors in expanding their businesses. These schemes are administered by SPRING Singapore (http://www.spring.gov.sg/Pages/homepage.aspx), an enterprise development agency under the Ministry of Trade and Industry, and International Enterprise Singapore, or IE Singapore (http://www.iesingapore.gov.sg/ wps/portal), the government agency promoting international trade and overseas growth of Singapore-based companies. Government assistance schemes range from assistance in manpower development, technological/equipment upgrading, to R&D, intellectual property and industry development.

To establish a branch oice or a subsidiary company, foreign irms are highly recommended to hire a professional services irm to assist with setup.

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b. Key Positions in Foreign-invested Entities
The key positions in foreign-invested enterprises vary by foreign-invested enterprise type. A representative oice must be stafed by at least one representative from the head oice. A representative oice cannot have more than ive employees in Singapore. For branch oices, Singaporean law requires foreign companies to appoint two “local agents” as the oicial representatives of the branch oice. A local agent is anyone (foreigners included) who can prove they are a long-term resident of Singapore. A subsidiary company is required to appoint a company secretary within six months of incorporation. If the company only has one director, he/she cannot be the company secretary.

c. Intellectual Property
Intellectual property rights in Singapore have been standardized with international conventions such as the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property. More speciically, Singaporean law speciies that creators own the intellectual property unless there are legislative provisions or contractual agreements stating otherwise. There are some exceptions to the rule, for instance: employee inventions, commissioned works by contractors or outsourced parties and collaborative joint ownership arrangements with partners. The most commonly registered intellectual property rights in Singapore are: • • • • Patents for inventions Trademarks for business signs Industrial designs Grants for the protection of plant varieties

Intellectual property rights in Singapore have been standardized with international conventions such as the World Trade Organization’s TRIPS Agreement, the Berne Convention, and the Paris Convention.

Other intellectual creations can be protected without having to be registered, for example, copyrighted works and trade secrets. The Intellectual Property Oice of Singapore (IPOS) (http://www.ipos.gov.sg/) is responsible for the legislation and registration of intellectual property (IP) matters in Singapore. It also provides speciic and detailed information, apart from a publicly available register of existing approved intellectual property protections. Additional sources of information and advice can be found at the Singapore Intellectual Property Academy (http://www.ipacademy.com.sg/section/home.html).

An Introduction to Doing Business in Singapore - 9

Tax and Accounting

What are Singapore’s major taxes? What are some of the key compliance requirements?

What are Singapore’s major taxes?
One of the key factors that make Singapore an attractive place for companies to invest is its favorable tax regime. This includes the granting of tax incentives, a comprehensive tax treaty network and tax exemption for certain income – factors that make Singapore’s efective tax rate among the lowest in Asia. Individual income tax is discussed in the next chapter. Here, we discuss: a. b. c. d. e. Corporate income tax Goods and services tax Withholding tax Other taxes Customs duties To discover more about taxes, scan this QR code with your smart phone to visit: www.dezshira.com/turn-keyaccounting-tax-reporting.html

a. Corporate Income Tax
Singapore’s tax system is based on a territorial principle, meaning that only income sourced in Singapore will be taxed. Income sourced in other countries and remitted to Singapore will be taxed only if the country of origin has a tax rate lower than 15 percent. Singapore has a single-tier income tax system that does not tax both corporations and shareholder proits. Under this system, once a company has paid corporate tax on proits, the dividends for shareholders are not subject to further taxes.

Corporate Income Tax Rate over Time
30% 26% 25% 20% 15% 10% 5% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 An Introduction to Doing Business in Singapore - 11 25.5% 24.5% 22% 20% 18% 17%

1997-00 2001 2002 2003-04 2005-06 2007-09 2010-12

26% 25.5% 24.5% 22% 20% 18% 17%

The efective corporate tax rate for Singapore private limited companies for proits up to S$300,000 is 8.5 percent and 17 percent for proits above S$300,000. Additionally, newly incorporated companies can beneit from a series of incentives, deductions, and reduced tax rates. More speciically, a newly incorporated company will be subject to a 0 percent tax rate for the irst three tax iling years if it meets the following requirements: • Incorporated in Singapore (as a structure other than a company limited by guarantee); • Tax resident of Singapore (for the relevant year of taxation); and • No more than 20 shareholders, of which at least one is an individual shareholder holding at least 10 percent of shares.

Tax Rate by Taxable Income and Year of Payment Following Establishment
Establish Year 1 Year 2 Year 3
Tax Rate 0% 8.5% 17%

Year 4
Taxable Income (S$) S$0 – S$300,000 S$300,001 – S$2,000,000 Tax Rate 8.5% 17%

Taxable Income (S$) S$0 – S$100,000 $100,001 – S$300,000 S$300,001 – S$2,000,000

b. Goods and Services Tax
Singapore’s goods and services tax (GST) is a tax on consumption charged on the purchase of a good or a service, the equivalent of value-added tax in many other countries. Singapore’s standard GST tax rate of 7 percent is levied on the import of goods, as well as nearly all supplies of goods and services. The only exemptions are for the sales and leases of residential properties and the provision of most inancial services. Export of goods and international services (e.g. air tickets between Singapore and another country) are zero-rated. Businesses with turnover exceeding S$1 million per year must register for GST, while those that do not exceed S$1 million in turnover may register for GST voluntarily. A credit mechanism exists to ensure that only the value added is taxed at each stage of a supply chain, and thus it would be beneicial for irms with high inputs to register for GST even if their revenue does not exceed S$1 million.

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c. Withholding Tax
Royalties, payments for the use of technical information, rentals from movable properties, management and technical fees, director’s fees paid to non-residents, payments made to non-resident individuals and irms in Singapore, and payments made to non-resident public entertainers are subject to withholding tax in Singapore. Singapore does not require withholding tax on dividend payments.

Singapore does not require withholding tax on dividend payments.

d. Other Taxes
Property tax in Singapore is derived from the hypothetical income generated if a property were to be rented out. If the property is actually rented out, then its tax falls under individual income tax. Singapore does not have a capital gains tax. The tax bureau does include stock options as part of the taxable income, and capital losses are not allowed to be deducted from taxes owed. Allowances (i.e. houses, hotels, etc.) form part of taxable income following pre-determined schemes and parameters.

e. Customs Duties
Singapore is a free port, and customs duties are relatively low. Some goods however, such as tobacco and alcohol, have a high tax, and other goods such as automobiles have high taxes due to the government trying to control the number of cars.

An Introduction to Doing Business in Singapore - 13

What are some of the key compliance requirements?
Singapore’s business-friendly environment means accounting and bookkeeping practices and transfer pricing regulations are largely in line with international standards, as well as minimum annual compliance requirements. Here we discuss: a. Accounting and bookkeeping b. Annual compliance c. Transfer pricing To discover more about accounting and bookkeeping, scan this QR code with your smart phone to visit: www.dezshira.com/accountingbookkeeping.html

a. Accounting and Bookkeeping
Singapore’s Accounting Standards Council generally adopts the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board to facilitate ease and transferability of accounting information between international companies and their local counterparts. Singapore’s Financial Reporting Standard (FRS), created with consultation from the Institute of Certiied Public Accountants of Singapore, apply to all general purpose inancial statements and set a general outline of information required by the government, as well as the reporting format. The basic FRS requirements include: a balance sheet, an income statement, a statement showing either all changes in equity or changes in equity other than those arising from capital transactions with owners and distributions to owners, a cash low statement, and accounting policies with explanatory notes.

b. Annual Compliance
Companies in Singapore are required to hold their irst annual general meeting within 18 months of incorporation, and no more than 15 months may elapse between subsequent annual general meetings. At the meetings, directors must present a true and fair view of the company’s proit and loss accounts to their shareholders. Accounts presented at the annual general meeting should be upto-date with a period of six months prior to the meeting.

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Companies in Singapore must ile an annual return with the Accounting and Corporate Regulatory Authority within one month of the company’s annual general meeting. Particulars of the company oicers, registered address, and auditors must be included. A company can engage the services of a professional irm or a service bureau to ile the annual return on its behalf.

c. Transfer Pricing
Transfer pricing refers to the prices that are charged in the transfer of goods and services between two related commercial parties in diferent countries; for example, a subsidiary and a foreign parent company. These parties are subject to the diferent tax legislations associated with each country, and transfer pricing regulations deal with preventing the shift of tax burdens between countries by manipulating the price of goods. The topic of transfer pricing is especially relevant to Singapore since many companies use the country as a base for their operations elsewhere in Asia and should abide by the arm’s length principle, which stipulates that a transaction between related parties must be made under similar conditions to transactions that would occur with an independent party. The Inland Revenue Authority of Singapore (IRAS) has standardized its approach to transfer pricing with the standard of the OECD’s arm’s length principle. The 2006 Singapore Transfer Pricing Guidelines provides, among other things, guidance on: • How to apply the arm’s length principle and relevant documentation requirements; and • Procedures for applying for the Mutual Agreement Procedure (MPA) and Advance Pricing Arrangement (APA) to avoid or eliminate double taxation. In addition, a supplementary tax guide published by the IRAS in 2009 provides transfer pricing guidelines on the application of the arm’s length principle to related party loans and related party services. The Income Tax Act also contains provisions covering general anti-avoidance, related-party business dealings between non-residents and residents, as well as record keeping requirements.

The issue of transfer pricing is especially pertinent to Singapore since many companies use the country as a base for their operations elsewhere in Asia.

An Introduction to Doing Business in Singapore - 15

Human Resources and Payroll

How do I hire staff/workers? What major legal obligations does a company have for its staff/ workers?

How do I hire staff/workers?
Singapore’s “tripartism” approach to labor laws and regulations involves the Ministry of Manpower, the National Trade Union Congress and the Singapore National Employers Federation. In addition, the Workforce Development Agency (WDA) (www.wda.gov.sg) ofers funding schemes that encourage employers to train and upgrade the skills of workers, and provides advice and tools to assist employers in recruiting employees. Here, we discuss: a. Visas for Foreigners b. Contracts c. Compensation

a. Visas for Foreigners
Regulating the immigration low has been, and still is, one of the major concerns of Singapore’s government. The basic rule underlying the release of visas and work passes is to attract high skilled and high talented workers.

Eligible Individuals by Work Pass Type
Work Pass Type
Employment Pass

Eligible Individuals
Foreign professionals working in managerial, executive or specialized jobs who earn a ixed monthly salary of at least S$3,000, and meet other qualiication requirements.

Personalized Employment Pass (PEP) Existing Employment Pass holders and overseas foreign professionals who meet speciic qualiication requirements. Unlike an Employment Pass, which must be cancelled when the pass holder leaves the employer, the PEP is not tied to the employer and is granted on the strength of the applicant’s merit. A PEP holder can remain in Singapore for up to six months between jobs to evaluate new employment opportunities. EntrePass Foreign entrepreneurs who would like to start businesses in Singapore. Applicants need to meet certain qualiications such as holding at least 30 percent of shares in the company, and the company should have at least S$50,000 paid-up capital. Mid-level skilled foreigners who earn a ixed monthly salary of at least S$2,000 to work in Singapore. Foreign basic skilled workers (those who do not meet the criteria for mid-level skilled and professional foreigners) can apply for a work permit.

S Pass Work Permits

Source: Ministry of Manpower, http://www.mom.gov.sg/foreign-manpower/passes-visas/Pages/default.aspx

An Introduction to Doing Business in Singapore - 17

For short trips to Singapore, citizens from most countries are able to get visitors visas upon arrival. These can then be extended or turned into other types of passes. The easiest way for a foreigner to be eligible for a long-term employment pass is to earn a high salary (say above S$3,000). Even in these cases, visas and work permits are subject to prior approval from the Ministry of Manpower, which is bound by employment sector-speciic quotas decided on by the government. Legislation on the release of work passes can be found jointly on the websites of the Ministry of Manpower and the Immigration and Checkpoint Authority. In addition, the government charges a monthly levy on each foreign worker. The amount of monthly levy per worker depends on the business sector, the workers’ skill level and the percentage of foreigner workers in a company’s total workforce (with a higher level correlated to a higher percentage of foreign workers in a company). For example, the service sector has an average monthly levy of S$330 per skilled foreign worker and S$403 per basic skilled foreign worker. The Singaporean government has said that by July 2013, it will increase the levy for the service sector to an average monthly levy of S$433 per skilled foreign worker and S$500 per basic skilled foreign worker.

The government charges a monthly levy on each foreign worker, with amount depending on the business sector, the workers’ skill level and the percentage of foreigner workers in a company’s total workforce.

b. Contracts
The Employment Act regulates employment terms and conditions for all employees in Singapore (regardless of nationality) under a work contract with an employer, except those employed in a managerial or executive position, seamen, domestic workers, or any person employed by a Statutory Board or the Government. The Employment Act provides, among other things, the following: • • • • • Minimum days for giving notice of termination of contract Actions employers are entitled to upon misconduct of employee Salary periods, time of payment, etc. Maternity protection and beneits and childcare leave for parent Holiday and sick leave entitlements

The essential clauses of a contract of service in Singapore are: • • • • Commencement of employment Appointment – job title and job scope Hours of work Probation period, if any

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• • • •

Remuneration Employee’s beneits (e.g. sick leave, annual leave, maternity leave) Termination of contract – notice period Code of conduct

c. Compensation
Singapore does not stipulate a statutory minimum wage. Rather, the National Wages Council promulgates Recommendations for Annual Wage Adjustments. The National Wages Council Guidelines focus on increasing real wages in line with productivity growth. The 2012 guidelines include recommendations for a proportionately higher built-in wage increase for low-wage workers in the form of a dollar quantum and a percentage wage increase. The average weekly working time is almost 50 hours (46 hours normal employment + 4 hours overtime), with a median gross wage around S$3,070 per month for Singaporean citizens. It is common practice in Singapore to provide an annual bonus, generally at least one month’s salary.

Median Gross Monthly Income of Full-time Employed Residents
Including Employer CPF 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Excluding Employer CPF

Note: No data available for 2005 Source: Ministry of Manpower, http://www.mom.gov.sg/Documents/statistics-publications/Statistical-Charts/mrsd_MedianGrossMthlyIncomeFTEmpRes_Ct_310112.pdf

An Introduction to Doing Business in Singapore - 19

What major legal obligations does a company have for its staff/workers?
The legal obligations of a Singapore company to its employees generally include assisting with individual income tax documentation and/or payment and managing contributions to the Central Provident Fund. Here, we discuss: a. Withholding and Paying Individual Income Tax b. Contributing to the Central Provident Fund To discover more about payroll and HR administration, scan this QR code with your smart phone to visit: www.dezshira.com/payroll-services.html

a. Withholding and Paying Individual Income Tax
Most employers choose to participate in the Auto Inclusion Scheme, a mechanism through which the employer iles taxes for employees. In this case, the employee is not asked to ile an income tax return unless they have additional sources of income. If a company does not pay individual income tax on behalf of its employees, then the company must provide its employees with Form IR8A before March 1 each year. Before September each year, the Inland Revenue Authority of Singapore (IRAS) will issue a Notice of Assessment to conirm a tax iling or signal a necessary revision. After receiving a conirmed Notice of Assessment, IIT payments can be made. “MyTaxPortal” (https://mytax.iras.gov.sg/ESVWeb/default.aspx) serves as a portal for taxpayers to transact with IRAS electronically. A foreigner that stays for more than 183 days in Singapore is treated as a tax resident, and will have to pay taxes for all the income received in Singapore. Income received outside of Singapore is exempt from taxation unless the income is received through partnerships, the overseas employment is incidental to Singaporean employment, or an employee is employed outside of Singapore on behalf of the Singaporean government. Non-residents are deined as “individuals exercising any profession of an independent nature (i.e. persons other than employees) in Singapore for less than 183 days in a calendar year under a contract for service” (e.g: foreign speakers, consultants, etc.). Non-resident tax-payers are subject to a 15 percent lat rate, excluding the “highsalary positions” (foreign directors are subject to a 20 percent rate).

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Progressive Individual Income Tax Rates
Income Bracket (S$)
First $20,000 Next $10,000 First $30,000 Next $10,000 First $40,000 Next $40,000 First $80,000 Next $40,000 First $120,000 Next $40,000 First $160,000 Next $40,000 First $200,000 Next $120,000 First $320,000 Above $320,000

Individual Income Tax Rate (%)
0 2 3.5 7 11.5 15 17 18 20

Source: Inland Revenue Authority of Singapore, http://www.iras.gov.sg/irasHome/page04.aspx?id=1190

Selected Reliefs and Deductions for Foreigners with Singapore Tax Residence
Condition-Expense
Relief Earned Income Course fees (related to employment) Life insurance policies with a company that has a branch in Singapore Employment expenses (just those expenses faced to produce income) From S$1,000 to S$6,000 depending on age S$5,500 Max S$5,000; capped at the lower of insurance premiums paid in the preceding year; or 7% of capital sum assured on death Deduction You may claim your employment expenses if you satisfy all conditions below: expenses are incurred when you are carrying out your oicial duties; expenses are not reimbursed by your employer; expenses are not of capital/private in nature; expenses are incurred on public transport Depending on various parameters and conditions (residential, commercial etc.) and capped at S$150,000 Up to 250% of the donations amount till 31 December 2015

Quantum-Rate

Rental and Net Annual Value expenses Donations

Source: Inland Revenue Authority of Singapore, http://iras.gov.sg/irasHome/page.aspx?id=11536

An Introduction to Doing Business in Singapore - 21

b. Contributing to Social Insurance Funds
In order to secure their income during retirement, Singaporean workers are required to contribute to a savings plan called the Central Provident Fund (CPF). The employer makes all payments into this fund, including those required of an employee, by withholding the required percentage from that employee’s salary. The total amount collected is aimed to cover healthcare, housing, education, retirement income, and asset enhancement. Individual CPF funds are further subcategorized into three savings accounts: Ordinary Account, Special Account, and Medisave Account. The Ordinary Account can be used at any time to purchase a home, make investments, and provide for education. The Special Account cannot be touched until retirement unless the money is used to purchase retirement-related investment products. This account will serve as the income a retired person receives. The Medisave Account is used to pay for medical expenses or to pay for health insurance. Required employer contributions range from 6.5 percent to 16 percent depending on the age and wage of the employee. Required employee contributions range from 5 percent to 20 percent. Employers of foreign workers do not have to pay CPF contributions unless the foreign employee becomes a permanent resident. Permanent residents have to contribute to CPF, with the irst two years following the receipt of permanent resident status having lower required contribution rates. Applications to become a Singaporean Permanent Resident are open to certain employment pass holders, as well as entrepreneurs and investors looking to take up residence in Singapore.

Central Provident Fund Contribution Rates and Accounts* (% of wage)
Employee Age (Years)
35 & below Above 35-45 Above 45-50 Above 50-55 Above 55-60 Above 60-65 Above 65

Contribution Rate Employer
16 16 16 14 10.5 7 6.5

Account Credited to Total
36 36 36 32.5 23.5 14.5 11.5

Employee
20 20 20 18.5 13 7.5 5

Ordinary
23 21 19 13.5 12 3.5 1

Special
6 7 8 9.5 2 1.5 1

Medisave
7 8 9 9.5 9.5 9.5 9.5

* For monthly wages ≥ S$1,500 (for this category, there are complex formulas calculating CPF contributions) Source: Central Provident Fund Board, http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/ContriRa.htm

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@ASEANBrieing Discover the latest foreign direct investment news afecting the ASEAN region.

Introducing ASEAN Brieing
Asia Brieing Ltd. is proud to announce the launch of its latest regional publishing title, “ASEAN Brieing,” covering foreign direct investment news, commentary and advice relating to doing business both with and within the economic organization known as the Association of Southeast Asian Nations (ASEAN). Particular focus is placed on issues involving business, politics, tax, accounting, inance, trade, investment legalities and the regulatory environment within ASEAN’s 10 member nations, namely: • • • • • • • • • • Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Related reading on Singapore from ASEAN Brieing
The China Alternative – Singapore
The China Alternative is our series on other foreign investment destinations in emerging Asia that may soon be competing with China in terms of labor costs, infrastructure and operational capacity. In this issue we look at Singapore.

Why ASEAN Matters For Your China Business
The term “ASEAN” is cropping up more often these days, yet still many businesses in China are unaware of what it is and why it is gaining in importance. The basic answer is fairly simple – free trade across Asia. That means reduced or zero customs duties across a space that includes the 10 ASEAN nations in Southeast Asia, and includes China, India, Australia, New Zealand, Japan and South Korea.

Scan this QR code with your smartphone to visit the ASEAN Brieing website: http://bit.ly/KSNUyL?=qr

Singapore and United Kingdom Ink DTA Protocol
The UK and Singapore have signed a second protocol to their existing Double Taxation Agreement (DTA) on February 15, 2012, amending withholding tax rates.

An Introduction to Doing Business in Singapore - 23

About Dezan Shira & Associates
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and inancial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the irm has grown into one of Asia’s most versatile full-service consultancies with operational oices across China, Hong Kong, India, Singapore and Vietnam as well as liaison oices in Italy and the United States. Dezan Shira & Associates’ experienced business professionals are committed to improving the understanding and transparency of investing in emerging Asia. @DSA_Singapore Inquiries? Technical questions? Stay connected with our Singapore oice.

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Hanoi, Ho Chi Minh City

Singapore

About Dezan Shira & Associates: Scan this QR code with your smart phone to visit: www.dezshira.com/oices.html

24 - An Introduction to Doing Business in Singapore

Corporate Establishment, Tax, Accounting & Payroll

roughout Asia

Contact
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and inancial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the irm has grown into one of Asia’s most versatile full-service consultancies with operational oices across China, Hong Kong, India, Singapore and Vietnam as well as liaison oices in Italy and the United States. Dezan Shira & Associates’ experienced business professionals are committed to improving the understanding and transparency of investing in emerging Asia.

Singapore
Singapore: +65 65212933 singapore@dezshira.com

China
Beijing: +86 10 6566 0088 beijing@dezshira.com Dalian: +86 411 8459 5011 dalian@dezshira.com Qingdao: +86 532 6677 5461 qingdao@dezshira.com Tianjin: +86 22 8787 7998 tianjin@dezshira.com Shanghai: +86 21 6358 8686 shanghai@dezshira.com Hangzhou: +86 571 5685 9956 hangzhou@dezshira.com Ningbo: +86 574 8733 8682 ningbo@dezshira.com Suzhou: +86 512 8686 8717 suzhou@dezshira.com Guangzhou: +86 20 3825 1725 guangzhou@dezshira.com Zhongshan: +86 760 8826 9592 zhongshan@dezshira.com Shenzhen: +86 755 8366 4120 shenzhen@dezshira.com Hong Kong: +852 2376 0334 hongkong@dezshira.com

India
Delhi: +91 12 4401 1219 delhi@dezshira.com Mumbai: +91 22 3953 7100 mumbai@dezshira.com

Vietnam
Ho Chi Minh City: +84 8 6288 8988 hcmc@dezshira.com Hanoi: +84 4 3946 1046 Hanoi@dezshira.com

@DezanShira Stay up to date with regulatory and legal updates.

Scan this QR code with your smartphone to visit us at: www.dezshira.com

Disclaimer
The contents of this brochure are for general information only. For advice on your business, please contact a qualiied professional advisor. Copyright 2012, Asia Brieing Media. No reproduction, copying or translation of materials without prior permission of the publisher.

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