How to Do Export Business in Singapore
- Posted by Lee Bon
- On 24.03.2017
A tiny island city-state in the Asia-Pacific region is a perfect springboard for starting an export business. Having exported over 270 billion USD in 2014, Singapore was ranked the 20th among world’s largest export economies. There is a bunch of things you can learn from the trade expertise of the country that, being probably one of the most deprived of nature resources nation, has become the world’s leading entrepôt oil trader. Refined oil, fabricated water, chemicals (oxygen amino compounds and ethylene polymers) and integrated circuits are the largest components of Singapore’s export. China, Hong Kong, Malaysia, and Indonesia are Singapore’s traditional export destinations. Singapore has established a robust and trade-driven business ecosystem connecting eastern and western economies with top notch transport infrastructure and advantageous location in-between 2 oceans.
For its openness to trade and business-driven governmental policy, Singapore was hailed as the world’s best trade location in the Enabling Trade Index published by the World Economic Forum in 2014. Among 138 economies, Singapore shows the best result in trading infrastructure development and transportation, access to domestic and foreign markets, openness to foreign participants, affordability of tariffs, and ease of customs procedures. The Doing Business ranking by the World Bank puts Singapore on the top for the easiness of starting and running a business. Import and export procedures here are polished and streamlined, so you can connect the finished trade system that already provides top-notch results.
Except benefits, establishing an export business in Singapore, of course, has its challenges and particularities we would like to cover in this article to help you make a well-informed incorporation decision.
Benefits of Basing Your Export Business in Singapore
Easy business registration
that consists of only 3 procedures which can be handled in less than 3 days. You can start your export business with the minimal investment (you need as little as only 1 SGD for the paid-up capital) and with no nationality restrictions for the share capital.
Easy export procedure.
According to the Doing Business report by the World Bank, for managing the export operation, your trading company would need only 16 hours (for the border compliance and paperwork) and only 4 documents (a customs export declaration, commercial invoice, export permit and a packing list). Trading from other Asian countries would take much more time and efforts.
20 free-trade bilateral agreements
(with over 32 strategic trade partners) that make your product more in-demand on the world market due to certain trade preferences.
World-class transportation system
of Singapore caters for your boldest and widest (geographically) business ambitions through the planet’s 2nd busiest maritime port located in the Singapore Strait where western and eastern ship lanes intersect. Trans-shipping the 5th part of the planet’s containers (and going to double this capacity by 2023), Singapore Port helps your export business access over 600 ports in 123 countries worldwide. The Changi Airport tops the World Airport Awards ranking for the 4th year in a row for its sophisticated design, spectacular green spaces, a wide range of services and entertainment facilities.
- Singapore takes proud in Asia’s
(the least corrupt among Asian countries and the 8th least corrupt in the world according to the Corruption Perceptions rates by Transparency International) and crime rates thanks to the strong rule of law. The public trust in politicians is very high in Singapore (#1 in the world according to the Global Competitiveness Report (2015-2016).
- SG boasts
unsurpassed expertise in IP protection
in Asia being the world’s second most efficient in copyright, patent, and trademark regulations.
- With the GDP per capita of 56k USD, Singapore is the 36th most powerful economy in the world and the planet’s 3rd wealthiest nation after Qatar and Luxembourg (according to the International Monetary Fund’s data, 2015).
Association with the ASEAN
opens the door to a huge market (expected to become the 4th largest by 2016) with a strong middle class. As the dominant player on the ASEAN trade field, Singapore is a perfect launching pad for reaching the region.
Challenges of Running an Export Business in SG
- The cost of doing business in SG can be quite high due to the expensive labour force and high rentals.
- Labour market in SG is tight due to the government’s protectionism of local employment: so long as the Ministry of Manpower imposes high levies and quotas to the lower-skilled foreign labour force, the reliance on foreign expertise is going to decrease. On the other hand, Singapore manpower is intelligent and productive and, therefore, is valued very high.
- SG’s economy is open and, therefore, can be shaken by recurrent economic downturns. For example, an inert trade with China in 2014-2015 slowed down Singapore economic growth.
Steps to Set up Export Business in Singapore
Registration with the ACRA.
The procedure of incorporating a business in Singapore is quite fast and simple due to online technologies. Registration of the chosen legal entity (combined with the tax registration) with the Accounting and Corporate Regulatory Authority is a matter of hours as long as you meet the requirements:
- do the company name check (the name you suggest must be unique in Singapore and not sound improperly);
- provide a real physical office address;
- appoint at least 1 resident director and a secretary (must be adult persons ordinarily living in Singapore);
- provide the Memorandum and Articles of Association.
Corporate Bank Account Setup
You will need a bank account for handling the cross-border operations. For a successful setup, you will need to provide the resolution (made on the board of directors) about opening the corporate account and make an initial deposit (the amount varies from bank to bank similarly to other requirements). In some cases, the physical presence of the company representatives during the account setup is required.
Application for Employment Visa
Starting a business in SG is tightly connected with relocation of directors and other PME staff. For the director, such relocation isn’t mandatory as long as the newly incorporated company is run by the resident director. But if the foreign executive decides to shift to Singapore to take the helm in their export company, they will need a visa. There are 2 migration options available:
- Employment Pass (can be granted after company incorporation for 1-2 years, imply professional requirements, processed in 7-10 days, renewable);
- EntrePass (can be granted before or 6 months after the incorporation for one year, imply entrepreneurial requirements, processed in 6 weeks, renewable).
Activation of Customs Account
Export businesses based in Singapore are required to get registered with the Singapore Customs for setting up the company’s account that will later be used for claiming export permits.
Application for Permits & Licenses
All goods you are going to export must be declared at the customs. Depending on the kind of exports you handle, you will be required to get the respective permits/licenses:
- All Goods: regardless of what you are going to export, you are required to obtain the OUT permit (unless you export trade samples of uncontrolled goods worth no more than 400 SGD). This can be done online using the service TradeNet®. A single application costs less than 3 SGD.
- Foods: for exporting foods (fish, meat, fruits, vegetables, pasta, spices, cereals, beverages etc.), you need to get the license from the AVA (Agri-Food and Veterinary Authority). Ensure you hold acceptable source documents (may be requested by the buyer) certifying the goods’ safety.
- Controlled Goods: if your business specializes in exporting such stuff as tobacco/cigarettes, drugs, animals, petroleum products, equipment for TV/radio communication, publications and media production, food and arms/explosives (including toy weapons), you are required to obtain an additional permit from the respective controlling agency (for example, Heath Sciences Authorityfor cosmetics and medicines or AVA for food). The application can be lodged via TradeNet® as well. All controlled goods must be registered with the SPRING Singapore (the Board that controls the safety of goods) before exporting them.
- Strategic Goods: exporting, transiting or trans-shipping items/materials that can be used as a weapon of mass destruction require the Strategic Goods Control Permit which can be obtained via TradeNet®.
- Local Goods: you will need the Certificate of Origin (CO) for all kinds of Singaporean goods you are going to export; this certificate can be requested by your buyer as a proof of the origin of goods. 2 types of certificates are available for application via TradeNet®: the Ordinary CO that proves your exports were really produced in SG and the Preferential CO that provides importers with certain tariff preferences under the free-trade agreements (and boosts your goods’ competitiveness at the same time).
Paperwork for Cargo Clearance
To pass the cargo clearance, ensure you hold the export permit (apply separately for each container/vehicle of cargo) and the required package of documents (invoice, packing list, and Airway Bill/Bill of Lading). Be ready to provide the OUT permit number at the clearance with the checkpoint officer.
Taxes Applicable to Export Business
Export business is exempt from the Goods and Services Tax and Customs Duties. You avoid paying the GST even if you import items that are going to be exported in the sequel or that aren’t intended to be consumed inside Singapore.
Singapore’s company tax is among the lowest in Asia and the world – 17%. New companies can get it reduced even more thanks to lavish government incentives:
- Startup Tax Incentive: get the discount of 100% for the first 100k SGD of revenue and then get the next 200k SGD taxed at the halved rate of 8.5% (works during 3 consecutive years);
- Partial Tax Exemption: pay tax only for the 25% of the first 10k SGD and for the 50% of the next 290k SGD of chargeable profit (300k SGD exempted in total);
- Corporate Income Tax Rebate: get a one-time rebate worth up to 20k SGD (for 2016/17 years of assessment);
- Productivity and Innovation Credit: win back up to 400% of allowances/deductions if you invest in IP protection, staff training, research, buying new equipment, and so on.
To manage export, you will have to pay certain procedural fees at the SG Customs. Payments can be handled using the electronic transfer system GIRO that withdraws the required fee from your export company bank account.
Personal Income Tax
Individual income taxation starts from 0% and gradually reaches 20% for incomes higher than 320k SGD (22% from 2017).
To ensure your export business is incorporated in the most efficient way and you have a head start in further statutory compliance, please involve professionals that will suggest the most winning scheme of your Singapore export company incorporation and lead you through all setup milestones.