How to Set Up an Offshore Company in Singapore (Updated 2024)
An offshore company has a lot of connotations, especially when used in several TV shows or movies. But contrary to popular belief, offshore companies aren’t illegal. Several large corporations are known to expand their reach to other markets by establishing offshore companies. This is mostly because offshore companies can take advantage of certain policies, regulations, and even tax systems in the country they’re expanding to.
But what exactly is an offshore company? And why do large companies favour them so? Why is Singapore a favourite location for offshore companies? How does one even set up an offshore company?
We’ll answer all these questions and more.
What is an Offshore Company?
By definition, an offshore company is incorporated in another jurisdiction from where its principal management (e.g. parent company, shareholders, and directors) are located.
However, it’s worth noting that an offshore company does not need to be an extension of a parent company. Rather, it can operate as an independent entity. For example, if I live in the USA and set up a private limited company in Singapore, then that company is already classified as an offshore company.
If the offshore company does have a parent company, it doesn’t necessarily mean that both parent and offshore companies will share the same management roster. An offshore company may have its local roster of management and shareholders.
Advantages of Setting Up an Offshore Company
Whether in Singapore or not, an offshore company is one of the most practical strategies business owners use to expand their reach to foreign shores. In most cases, an offshore company is formed because of the following reasons:
Tax optimization
Asset protection (i.e. intellectual property protection)
Confidentiality
Ease of doing business (depending on the jurisdiction)
What Kind of Business Activities Can Offshore Companies Engage In?
Offshore companies aren't restricted to any business activity. But offshore companies will still need to comply with various requirements and regulations for certain business activities such as acquiring business licenses and permits.
Foreign companies may also consider setting up a branch office, representative office, or subsidiary office in Singapore if they want to expand their operations in the country.
Can Offshore Companies Operate Under a Different Name?
Offshore companies can operate under a different business name from their parent companies if they choose to do so. But business names need to be approved by the Accounting and Corporate Regulatory Authority of Singapore (ACRA).
Why Should Foreign Companies Set Up An Offshore Company in Singapore?
Situated right in the heart of Southeast Asia, Singapore has become the ideal regional hub for foreign companies and even multinational corporations to expand their business.
On top of the strategic geographic location, Singapore also has other benefits such as:
Favorable Singapore Tax Systems: Low Corporate Income Tax, DTAs, No Capital Gains Tax, and Tax-Free Dividends
Singapore is known for its impressive tax rates. At this time of writing the corporate income tax rate is set at 17%, and income earned from Singapore or foreign sourced income remitted into Singapore are considered taxable.
There's also a single-tier tax policy that allows offshore companies in Singapore to distribute dividends to their shareholders tax-free, so as long as the income has already been taxed at the corporate level. What this means for an offshore company in Singapore is that the company is less liable to taxes compared to if it was registered in another jurisdiction with a different tax system.
An offshore company can also enjoy additional tax benefits if it has had its control and management exercised in Singapore for the preceding Year of Assessment (YA), or the year in which the company’s income is assessed. These benefits include double taxation agreements with other partnered countries and tax exemptions.
Double Taxation Agreement
Taxation is a primary concern for businesses when expanding to other countries. The dilemma of paying taxes twice can be too much, so the issue of double taxation is almost always under heavy scrutiny.
But business owners looking to set up an offshore company in Singapore don’t have to worry about double taxation thanks to Singapore’s Double Tax Agreement or DTA.
The Double Tax Agreement is a bilateral agreement between Singapore and another country that prevents double taxation as a result of domestic tax laws and its applications. DTA’s are meant to provide business owners a sense of certainty about how and when the tax is imposed in the country where income is generated or where payment is made.
To put it simply, DTAs help define each country’s taxing right - the country where it’s originated from and the country it expanded its operation to. DTAs also prevent international tax evasion by allowing the exchange of information between the contracting state and tax authorities.
The following types of income are covered by the Double Taxation Agreement:
Business profits
Shipping and air transport
Associated enterprises
Dividends
Interest
Royalties and fees for technical services
Capital gains
Independent personal services
Dependent personal services
Directors' fees
Artists and sports-persons
Remuneration and pensions in respect of government service
Non-governmental pensions and annuities
Students and trainees
Teachers and researchers
Income of government
Other income
Did we mention that Singapore has an extensive tax treaty network too?
Capital Gains Tax
In Singapore, there is no capital gains tax imposed on individuals. However, if an individual engages in a series of capital transactions, the tax authorities (IRAS) might view the individual as running a business and consider those capital transactions as business activities, leading to the individual being taxed for their income instead.
Dividends Tax
Dividends tax is also a major concern for a lot of foreign business owners who establish offshore companies in different countries. But in Singapore, dividends tax is imposed via a single-tier system where profits tax paid by a company is not charged to the shareholders. Simply put, most types of dividend income are not taxed.
These non-taxable dividends include:
Income distribution from REITs or Real Estate Investment Trusts, except circulations derived by persons during a business or from the continuation of a trade, occupation, or business REITs
Shares paid on or after 1 Jan 2008 by a Singapore resident under the one-tier tax system
Foreign dividends that were established in Singapore on or after 1 Jan 2004 by local individuals.
If a state resident acquires foreign-sourced shares through a partnership in the country, these dividends might be excused by state tax if certain circumstances are met.
Other dividends from unit companies, private resident companies, and dividends from approved CPF investment scheme Agent Banks
Stable Government and Political System
Singapore has been rated as the most politically stable country in Asia by The Political and Economic Risk Consultancy. The country is also the least bureaucratic in Asia.
The country has done an impressive job over the decades in promoting full transparency and streamlining government services. Every government transaction, from incorporating to acquiring a license to paying your corporate income tax, is done online and through one portal (more or less).
Efficient Incorporation Process and Ease of Doing Business
Company registration in Singapore takes a full business day or so, depending on how well business owners have fulfilled the requirements. Goods and services tax benefits both business owners and their customers. Intellectual property protection is rigid in Singapore.
An offshore company in Singapore is as protected as it will ever be, which makes the country one of the prime business destinations for expansions and relocations.
Because the Singapore government is transparent and free from bureaucracy, The World Bank Group has rated Singapore as one of the highest-ranked countries around the world for ease of doing business.
A Global Financial Hub
Singapore is ranked as the third largest international financial centre in the world as of 2022. New York and London are the first and second largest, respectively.
Singapore currently has more than 200 foreign banks and 1,400 foreign financial institutions that have established their headquarters or expanded. For offshore companies, the options for financial services are endless.
Singapore is also one of the top fintech hubs globally, and the government is actively implementing policies and regulations that encourage the development of fintech.
Access To Regional Market
Singapore provides a strategic location for businesses looking to expand their reach into the ASEAN market and other regions in the Asia-Pacific. Singapore is situated right at the crossroads of major trade routes. With its well-developed transportation and communications infrastructure, Singapore gives offshore companies convenient access to the vast regional markets.
How to Set Up an Offshore Company in Singapore
Setting up an offshore company in Singapore isn’t that different from incorporating other businesses. More or less, an offshore company will follow the same process below:
Getting approval of the company name from ACRA
Filing for company incorporation with ACRA
Opening a corporate bank account
Optional: Registering for GST (Goods and Services Tax) depending on revenue earned by the company
Applying for various licenses and permits, if necessary
Ongoing compliance and filing requirements. You may get in touch with corporate service providers such as Piloto Asia to help you with this
Work Visas in case of relocation to Singapore is necessary (e.g. Employment Pass, Permanent Residence, etc.)
Offshore Company Incorporation
The first step in setting up an offshore company is to get incorporated. This is crucial because it lays the foundation for the rest of the process below. There are two aspects of company incorporation that you need to pay attention to,
First, you need to get your business name approved by ACRA, the governing body of businesses in Singapore. Your business name needs to comply with Singapore's Companies Act.
Determine the company structure when registering the business. The type of company structure you choose will impactthe benefits available when setting up your Singapore offshore company.
You can read up on our overview of business structures in Singapore here. You can also work with company incorporation service providers such as Piloto Asia to get started.
What’s Coming in 2024 For Offshore Companies in Singapore?
Setting up an offshore company in Singapore in 2024 comes with a few notable changes:
Stricter Regulations: Offshore law firms faced a challenging 2023 due to stiffer regulations. This trend might continue into 2024, leading to more rigorous compliance requirements for offshore companies in Singapore.
Increased Onshore Competition: There has been increased competition from "Cayman-style" funds and slow M&A. This could impact decision-making for those considering setting up an offshore company in Singapore.
Taxation of Foreign-Sourced Income: Effective 1 January 2024, Singapore has started taxing foreign-sourced disposable gains. This new tax regulation could impact the financial planning of offshore companies.
Proposed Changes to Voluntary Disclosures Program: While the details are not specified, the mention of proposed changes to the Voluntary Disclosures Program could potentially affect offshore companies.
New Rules on Taxation of Gains from Disposal of Foreign Assets: Singapore has proposed new rules to tax gains from the disposal of foreign assets received in Singapore by multinational enterprises.
These changes indicate that while Singapore remains an attractive location for establishing an offshore company, potential investors must navigate tighter regulations, increased competition, and new tax laws in 2024.
Do you need help with setting up an offshore company in Singapore?
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Company Incorporation Checklist for Offshore Companies in Singapore
This checklist will help you understand what you need to prepare to get your company incorporated.
Directors
A minimum of one local resident director (needs to be a Singapore Permanent Resident or Citizen or Singapore work pass holder)
There's no maximum number of foreign and local directors that you can appoint
If you can't find a local director for the incorporation process, you can work with nominee director service providers like Piloto Asia.
Shareholders
At least one local or foreign shareholder is named in the incorporation documents
The shareholder and director can be the same person
A shareholder can be an individual or corporate body
You can list up to a maximum of 50 shareholders in the incorporation documents
Company Secretary
You also need to name a local company secretary in the incorporation documents
A sole director or shareholder cannot act as a company secretary
A company secretary needs to be an individual and not a corporate entity
Piloto Asia will gladly provide company secretary services if you can't find a company secretary for the incorporation process.
Paid-up Capital
S$1 minimum paid-up capital is required for the incorporation process
No authorisation capital is needed
Registered Address
The registered address used in the incorporation documents needs to be a local registered address.
This address can either be residential or commercial, so as long as it's not a PO Box.
Piloto Asia will gladly provide you with a registered address service if you can't list a local address for the incorporation process
Shareholder and Directors’ Documents
Copies of passports of proposed shareholders and directors
Residential proof of address of proposed directors and shareholders
Additional details of the parent company if the shareholder is a corporate entity
Once everything is in place, Piloto Asia can incorporate the company with ACRA. The process will take about one business day or so, depending on whether or not ACRA will need to vet your application to other government agencies.
You will be receiving all the necessary documents from ACRA that will allow you to proceed to the other steps of setting up an offshore company in Singapore.
Offshore Company Checklist After Company Incorporation
After incorporating your offshore company in Singapore, it's time to move on to the next steps.
Open A Corporate Bank Account
A corporate bank account may not be a requirement when doing business in Singapore. Still, they do provide convenience and security when transacting with other companies in and out of Singapore and relevant government agencies.
Piloto Asia will be more than happy to assist you with corporate bank account opening here in Singapore.
Corporate Income Tax and Goods and Services Tax Registration
A newly incorporated company in Singapore are automatically registered for corporate income tax upon incorporation.
Goods and Services Tax registration, or GST registration, is necessary for doing business in Singapore. A company is only required to register for GST when they are expected to hit more than S$1,000,000 in annual turnover.
GST is a consumption tax that's added to the price of goods and services in Singapore. In your home country, it might be known as Value Added Tax and other similar terms.
When you buy something from someone in Singapore, the business collects tax from every sale which is paid out to the Inland Revenue Authority of Singapore (IRAS).
Piloto Asia will be more than happy to assist you with GST registration, filing of tax returns, bookkeeping, and other accounting services.
Acquire the Necessary Business Licenses and Permits
Depending on the nature of your offshore company in Singapore, you might be required to obtain business licenses and permits before you can proceed with business operations.
Note that incorporating your company does not mean you can do business immediately. For example, if you're incorporating a trading company in Singapore, you'll be required to get the necessary licenses and permits for importing and exporting items.
You can read more about the different business licenses and permits for businesses in Singapore here.
The Wrap Up
And that’s how you set up an offshore company here in Singapore. With the numerous benefits the country has to offer, it comes as no surprise that a lot of foreign businesses are setting up shop here.
If you have any questions or concerns about setting up your offshore business in Singapore or just setting up any business in general, Piloto Asia is more than happy to assist you.
Frequently Asked Questions
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Setting up an offshore company in Singapore, suitable for a range of business models including investment holding companies, trading companies, and tech startups, involves a streamlined process that Piloto Asia can expertly guide you through. This includes company registration with ACRA, opening a corporate bank account, tax and GST registration, and acquiring necessary business licenses.
Piloto Asia's expertise ensures compliance and efficiency, allowing businesses of all types to leverage Singapore's favorable tax system, political stability, and strategic location. With Piloto Asia's support, your company, regardless of its focus, can effectively navigate the complexities of international business.