Singapore Legislation
Singapore has several very attractive international business opportunities. The dynamic business and international environment of Singapore makes it a great place for business expansions. SME’s make up 99% of Singapore’s enterprise, making it a choice destination for international companies to venture into.
Singapore’s bilingual education system, with English being one of the official languages is another factor that makes this place a more accessible option for business ventures. To help entrepreneurs set up companies in Singapore, Links has created this Singapore company registration guide, including the main employment laws and best practices in Singapore. Please note that all the information listed below are to be used as general guidelines, for more detailed information on laws and regulations, please visit the official governmental websites.
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Company Setup
In Singapore, anyone above the age of 18 can be a director of a company. For a foreigner to set up his own company in Singapore, he or she is required to appoint at least one director who is ordinarily resident in Singapore.
It is compulsory for any entity conducting business in Singapore to register with the Inland Revenue Authority of Singapore (IRAS) when:
a) Your taxable turnover for the past three quarters and at the end of the calendar quarter (3 months ending March, June, September, or December) prior to 2019 exceeds $1 million.
Businesses are accountable for monitoring at the end of every calendar quarter. If their taxable turnover for the past 12 months exceeds $1 million, they have to register for GST.
b) Starting on 1 January 2019, taxable turnover is computed on a calendar year basis. Under the new legislation, if the businesses taxable turnover at the end of any calendar year on or after the 1 January 2019 exceeds $1 million they will have to register for GST.
It is mandatory that employers pay Central Provident Fund (CPF) contributions to employees who are permanent residents in Singapore. For workers overseas, they are required to pay a monthly Foreign Workers Levy (FWL), and in some cases, a Skills Development Levy (SDL).
Benefits of Registering a Company in Singapore
Strategic location
Singapore is a natural trading port linking the East and West. Some of the most important economies of the world are just a short plane ride away from Singapore. The port of Singapore is one of the busiest in the world, and Changi Airport is a world class airport that provides convenient flights to nearly every major city in the world.
Infrastructure
Singapore has notably been number 1 in the world for infrastructure and ranked number 1 in Asia for quality of living, according to global human resources consulting firm Mercer. Singapore is also known for its well-developed transport network.
Economy & Ease of Doing Business
Singapore is the 3rd wealthiest country in the world in terms of per capita GDP and is ranked as the best country for doing business by World Bank. The workforce in Singapore is also generally highly skilled, educated, and proficient. Singapore is the largest corporate banking centre in Asia with over 160 banks as well as deep and liquid capital markets.
Low tax rates
The corporate income tax rate in Singapore is between 0 and 17%. The personal income tax rate is 0-20%. There is also no tax on dividends or capital gains. In addition, there is tax credit pooling, unilateral tax credit, and reduced withholding tax on foreign-sourced income.
Read More: Why Asia is the Place for Startup Success + Recommendations
Considerations when Starting a Company in Singapore
It is mandatory that employers pay Central Provident Fund (CPF) contributions to employees who are permanent residents in Singapore. For workers overseas, they are required to pay a monthly Foreign Workers Levy (FWL), and in some cases, a Skills Development Levy (SDL).
Only Singapore Citizen and Permanent Residents are covered by the Central Provident Fund. To help a new Singapore Permanent Resident employee adjust to the lower take-home pay, both the employer and employee will contribute CPF at graduated rates for the first two years.
CPF contributions reported monthly and necessary deductions made at source.
The monthly CPF contribution payment is mandatory, both employers and employees share needs to be paid. The contributions should be paid based on the employee’s actual wages earned for the month.
For employers, there’s a grace period of 14 days to make payment of CPF contributions after the end of the month for which CPF contributions are due. If the due date falls on Sunday or Public Holiday, CPF contributions must be paid by the next working day. Payments should be paid electronically.
Employment Law in Singapore
Employees’ Compensation
Employers are required to pay their Work Permit holders at least the fixed monthly salary declared in the WP application form or in the subsequent revision. Pay is mandatory even if you do not have work for them. Only if a Work Permit holder is on no-pay leave outside of Singapore may the payment be exempted. See here for more information on requirements.
Work Permits
For foreigners to work in Singapore, they must hold a valid pass (work visa) which has to be obtained before they start working. Various passes are available, it is the employer’s responsibility to ensure that the foreign workers they engage with hold the valid pass.
| Type of Pass | Eligibility |
|---|---|
| E Pass | For foreign professionals, managers and executives. |
| S Pass | For mid-level skilled staff. Candidates need to earn at least $2,200 a month and meet the assessment criteria. |
| Work Permit | For semi-skilled foreign workers in the construction, manufacturing, marine shipyard, process or services sector. Also for foreign domestic workers (FDWs) to work in Singapore. |
Maximum Working Hours
The maximum required work hours per week are 44 hours.
Overtime can be claimed if you are:
- A non-workman earning up to $2,500
- A workman earning up to $4,500
Paid Annual Leave
Under Singapore law, one’s annual leave entitlement is dependent on how many years of service the employee has with their employer. Year 1 begins from the first day or work. See here for more information on eligibility and entitlement.
| Year of Service | Days of Leave |
|---|---|
| 1st | 7 |
| 2nd | 8 |
| 3rd | 9 |
| 4th | 10 |
| 5th | 11 |
| 6th | 12 |
| 7th | 13 |
| 8th & thereafter | 14 |
Rest Day
Employees must be provided 1 rest day per week. Rest days should be 1 whole day, it is not a paid day.
In the case of shift workers, the rest day can be a continuous period of 30 hours. In Singapore, the week is counted from Monday running into Sunday. A 30-hour rest period that starts before 6pm on a Sunday is considered as 1 rest day within the week, even if it extends into the Monday of the following week.
Unless there is any exception, employers are not allowed to compel their workers to work on a rest day.
Termination
Both employer and employee have the power to terminate a contract of service. The termination can take place due to:
– employee resignation
– employer dismissal
– contract expiration (such as when a project or contract period has been completed)
Both parties must follow the terms and conditions for termination as stated in the contract of service.
Severance Payment & Long Service Payment
Employees who serve the company for at least 2 years are eligible for retrenchment benefits. Those with less than 2 years’ service could be granted an ex-gratia payment out of goodwill.
The amount of retrenchment benefit will depend on the employment contract or collective agreement (for unionised companies). If there is no provision, it will have to be negotiated between the employees (or their union) and the employer.
The prevailing norm in Singapore is to pay a retrenchment benefit of between 2 weeks to 1 month salary per year of service, depending on the company’s financials.
- If the retrenchment comes shortly after a salary cut, the salary before the cut should be used to determine the amount of compensation.
- Both employee and employer don’t have to pay CPF contributions for retrenchment benefits.
Employees
Benefits In Kind
As of YA 2008, certain benefits-in-kind are no longer taxable. The threshold for some benefits-in-kind have also been revised.
Share Options
Gains and profits arising from Employee Share Options (ESOP) and other forms of Employee Share Ownership (ESOW) are subject to tax.
- Employee Share Option (ESOP)ESOP plans give the employee the rights to purchase shares in the company at a specific predetermined price within a time frame.An employee who is granted share options by an employer will be taxed on any gains or profits arising from the exercise of the share option.
- Other Forms of Employee Share Ownership (ESOW)ESOW plans allow an employee of a company to own or purchase shares in the company or in its parent company. They include share awards and other similar forms of employee share purchase plans (excluding phantom shares and share appreciation rights).An employee who is granted ESOW by the employer is subject to tax on any gains or profits when the ESOW plan vests on the employee.
New Employees
For every new employee, the employer is required to complete the New Employee Contribution Form if submitting the CPF contribution details via hardcopy Payment
Advice. For non-residents, employers are responsible to apply for the Employment Pass. See here for more information on the Employment Act.
Discrimination Laws
The Ministry of Manpower will take legal and punitive measures towards workplace discrimination. MOM refers to the TAFEP in the promotion of fair and responsible workplace practices.
Statutory Benefits
Working mothers in Singapore are entitled to paid maternity leave after child birth. Depending on whether the child born is a Singapore citizen and other criteria, the employee is entitled to either 16 weeks of Government-Paid Maternity Leave or 12 weeks of maternity leave.
As of the 1 January 2017, eligible working fathers, including those who are self-employed, are entitled to 2 weeks of paid paternity leave funded by the Government.
In Singapore, there is the option to share parental leave. Working fathers can apply to share up to 4 weeks of their wife’s Government-Paid Maternity Leave upon their partner’s agreement.
6 days of paid childcare leave per year is made available to eligible working parents of Singapore citizens. For parents of non-citizens, they are eligible to get 2 days of childcare leave a year.
Employees are entitled to both paid sick leave and paid hospitalisation leave after working for their employee for at least 3 months. If the employer has worked for over 6 months, they are entitled to up to 14 days of paid sick leave and 60 days of paid hospitalisation leave. The 60 days of hospitalisation leave includes the 14 days sick leave entitlement.
For new employees, the sick leave is pro-rated according to their length of service. Their pro-rated entitlement is calculated as follows:
| Number of months of service completed | Paid outpatient non-hospitalisation leave (days) | Paid hospitalisation leave (days) |
|---|---|---|
| 3 | 5 | 15 |
| 4 | 8 | 30 |
| 5 | 11 | 45 |
| 6 and thereafter | 14 | 60 |
Read More: New leave benefits and incentives in Singapore
Tax
Financial Filing
The financial filing is counted from January to December.
Tax Payment to Authority
Tax payments should be processed electronically.
Annual Employer Returns
IR8A/IR8E, Appendix 8A and 8B annually (also IR8S if applicable).
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Payment
Bank Accounts and Paying Salaries
Payments can be made electronically via giro through employee bank accounts by producing a file and sending it to the bank. A local in-country bank account is required.
Businesses can pay on a weekly, fortnightly or monthly basis, all salaries must be paid by the 7th day the payment is due.
13th Month and Bonus Payments
Bonuses and commissions are regarded as ‘Additional Wages’. The Government recommends that the Annual Variable Component to be 20% of the annual wages or 1-3 month’s salary.
Timetable
Employers need to complete and provide their employees with the IR8A/IR8E form and Appendix 8A, Appendix 8B or Form IR8S (where applicable) by 1st March each year. Employees are to then file returns by 15th April each year.
Submission Methods
Payroll Forms – IR8A form (IR8S is optional).
Submission Methods – can be submitted electronically or by post.
Read More: How to process payroll in Singapore
Local Information
Singapore Public Holidays 2020
Employees are entitled to public holidays as follows:
| Date | Holiday |
|---|---|
| 1 January | New Year’s Day |
| 25 January | Chinese New Year |
| 26 January* | Chinese New Year |
| 10 April | Good Friday |
| 1 May | Labour Day |
| 7 May | Vesak Day |
| 24 May* | Hari Raya Puasa |
| 31 July | Hari Raya Haji |
| 9 August* | National Day |
*The following Monday will be a public holiday.
Summer / Winter Working
Most businesses are closed for 2 days during Chinese New Year and on Christmas Day.
Local office working hours and Time Zone
Working Hours: 09:00-18:00
Standard time zone: UTC/GMT +8 hours
Interested to explore the idea of payroll outsourcing, EOR, or Visa application services?
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