How to Run Import-Export Business in Singapore
- Posted by Lee Bon
- On 24.03.2017
A tiny country of Asia-Pacific area has a fantastic potential for trading businesses. Singapore emerged tops in the World Economic Forum’s Enabling Trade Index (2014) rankings for its openness to trade. What does this leadership mean for your import/export business? Outrunning 138 economies of the world, Singapore offers you the planet’s best access to domestic and foreign markets, openness to foreigners, comfortable tariffs, perfect availability of world-class infrastructure and transportation services, and streamlined customs procedures. Another popular business ranking – Doing Business by the World Bank – puts Singapore in the first position for the easiness business is done there. It means that the country has the world’s most balanced conditions for setting up and running businesses, especially an import/export one.
Benefits of Singapore Location for Your Trading Business
- According to the WB’s Doing Business report, Singapore trading companies usually need only 4 import and 4 export documents (a customs export declaration, commercial invoice, import/export permit and a packing list) to orchestrate cross-border trading. In Singapore, you would need only 31 hours for managing an import operation (documentation + border compliance) and only 16 hours for the same export operation. Such indices are worse than those of the OECD’s high-income countries but much better than in other East Asia and Pacific countries.
- Electronic trade documentation system Tradexchange is a simple way to manage your import/export activities with the minimum of papers required.
- Singapore has signed “free-trade” bilateral agreements with over 20 countries of the world (strategic trade partners including the EU countries and the UK).
- As a tiny country with scarce natural resources, Singapore is utterly dependable on export and import. Surprisingly, SG becomes a global leader of the entrepôt trade (purchasing raw materials for subsequent refining and re-exporting them). Today, it is Asia’s flagship for oil refining and water fabrication. So as long as your export/import business is built on innovations, you will have undoubted success.
- Being home to the world’s 2nd busiest maritime port (in terms of shipping tonnage), Singapore is Asia’s powerful transhipment hub. The fifth part of the planet’s shipping containers is trans-shipped by the Singapore Port. It connects your future trading business with over 600 ports worldwide in 123 countries. The Singapore Strait (between Singapore and Indonesia) serves as a perfect connection between the Indian and Pacific oceans easing shipping operations and widening their geography.
Steps to Set up Import-Export Business in Singapore
Registering a company
In Singapore, it is quite a brief process that consists of 3 procedures:
- Company registration with the Accounting and Corporate Regulatory Authority which is combined with the registration for paying local taxes. To succeed on this stage, you should prepare beforehand: do the company name check (your suggested name shouldn’t sound obscene or duplicate any other company name already existing in Singapore), provide a real physical office address, prepare the Memorandum and Articles of Association, appoint a resident director and a secretary (must be adult persons ordinarily residing in Singapore), and do the related paperwork. If you prepared well and no hassles occur during the registration, the procedure takes less than a day.
- Producing the company seal.
- Signing up for the Employee Compensation Insurance.
In total, all of the mentioned procedures take no longer than 3 days.
Setting Up Corporate Bank Account
If you decide to incorporate your import/export business as a private limited company (which is recommended), you will be required to set up a corporate bank account. But be prepared that when you decide to set up a corporate bank account, you will need much more money for making the initial deposit and securing a required minimum balance. These requirements differ from bank to bank, so you should make a research and choose a “winning” bank to go with. Remember that the resolution about opening the above-mentioned account must be made on the board of directors. Some banks require a physical presence during the account setup, so ensure the company is decently represented at the bank.
Activating the Customs Account
All import/export businesses must undergo registration with the Singapore Customs and get the company’s account which later will be used for applying for export/import permits.
Applying for Permits & Licenses
Depending on the type of goods you are going to import/export, you will need to apply for different relevant permits and licenses:
- All Goods: get the IN (for imported goods) and OUT (for exported ones) permits online using the service TradeNet®. You don’t need to obtain such a permit for trade samples of uncontrolled goods worth no more than 400 SGD.
- Controlled Goods: for exporting/importing such items as drugs, tobacco/cigarettes, petroleum products, animals, publications and media production, equipment for TV/radio communication, arms/explosives (including toy weapons) and food, you will need to obtain an additional permit (except the required OUT or IN permits) from the relevant Controlling Agency. You can lodge your application on TradeNet®.
- Foods: if you are going to export, import or transship meat, fish, fruits, vegetables, pasta, cereals, spices, beverages and so on, you must obtain the AVA (Agri-Food and Veterinary Authority) license. Make sure you hold acceptable source documents from the exporter in order to certify your products’ safety.
- Technology Goods: if you import high-technology items from countries where such export is strictly controlled, you must obtain the Import Certificate and Delivery Verification from the exporter. You can apply for this permit with the Singapore Customs. Holding such a Verification, you aren’t allowed to divert these products to any other country but must import them to SG right away.
- Strategic Goods (items or materials that can be used as a weapon of mass destruction): if you export, transit or transship them, you need to apply for the Strategic Goods Control Permit via TradeNet®.
- Local Goods: if you are going to export Singaporean goods, the overseas importers may require you to prove the origin of exported goods using the Certificate of Origin (CO). Using the TradeNet®, you can apply for 2 types of certificates: either the Ordinary one (verifies that goods you export were really produced in SG) or the Preferential one (allows importers to claim tariff preferences under the free-trade agreements or other available preference schemes; this, in turn, increases competitiveness of your exports).
Fees and Taxes Applicable to Trading Business
Goods and Services Tax
The GST (this way, the value-added tax is termed in SG) will be imposed on any product you import to Singapore at the rate of 7%. It is one of the planet’s lowest tax rates. For instance, it is 20% in France and 25% in Scandinavian countries.
The tax is collected at the customs, but registration with IRAS for paying the GST must be completed beforehand (this applies only to companies whose sales turnover is bigger than 1,000,000 SGD). After getting registered, you may start charging your Singaporean buyers with the additional 7% you overpaid as the GST at the customs. Although registering for the GST increases the cost of your goods by 7% (and potentially there will be buyers who would prefer purchasing goods from a non-GST-registered supplier), your image wins seriously as the GST registration proves you are a reliable company.
Export items are exempt from the GST. If you are going to export these imported items in the sequel or they aren’t intended for the consumption inside Singapore, you also avoid paying the GST on them.
Some kinds of goods such as petroleum products, motor vehicles, tobacco, or liquors (either imported to SG or manufactured inside the country) are subject to a customs or/and excise duty. The customs duty is calculated on the basis of either an ad valorem rate (% of the customs value of the import) or a specific rate (a certain amount per 1 kg (or another unit of weight)). Actually, the list of dutiable products is so short because of Singapore’s free port policy. Other goods are duty-free in Singapore.
Singapore customs imposes certain procedural fees, which, along with the customs duties and the GST, can be paid using the electronic transfer system GIRO that deducts the required amount of money from your company’s bank account.
Trading is associated with financial risks, and to cover them, traders often have recourse to insurance, letters of credit, and loans. But to leverage these means, you must have a well-established business reputation.
- The Letter of Credit is usually used by exporters in order to secure a payment from the buyer through a bank of the latter. The Letter of Credit ensures that the seller will be paid as the buyer is required to handle all payments before the goods arrive.
- The Insurance protects you from being unpaid if the buyer defaults on your payment. You should sign up for a trade credit insurance at the IE Singapore because this governmental agency provides very winning rates.
- Bank’s loans and services (term/transaction/factoring loans, overdraft, inventory financing etc.) help you to remain flexible and protect your business while expanding your export-import operations.
Incorporating an import/export business is a complex, uphill, and even venturesome task unless you enlist a professional backup. To lay the reliable foundations for successful export-import operation, lots of details must be circumspectly strategized. Our incorporation consultants will lead you through every stage of your trading business setup and instruct in getting necessary licenses and permits.