Doing Online Business in Singapore – What you need to know
Despite its small landmass, Singapore is reputed for being an extremely conducive place to do business and is famous for being a Smart Nation. Its 5.3-million-population is very tech-savvy and many have experience buying online. As of 2014, some 4.6 million of population has a 3G mobile subscription (87% of population) while wireless broadband subscription hit 10 million. (188% of population. That is more than one account per resident – More data about Singapore infocomm usage available here from iDA Singapore website).
With the recent boom of e-commerce platforms allowing for low-cost operations for traders and effective transactions for consumers, Singaporeans and regional buyers from Malaysia, Indonesia, Philippines and Thailand have bought goods such as computers, mobile phones, electrical appliances, beauty products, health products and office equipment online instead of opting for the traditional ‘brick and mortar’ shops. Many aspiring entrepreneurs, whom have little IT knowledge, have also taken advantage of new platforms and tools to start their online businesses.
This guide provides detail about things you need to pay attention to run an online business.
The basics – Your product, marketing channel and infrastructure
Deciding on your product or service is certainly one of the first considerations for your businesses but there are more to this to run a full fledge online business. After you and your partners have done the appropriate market research, feasibility and decided on what to sell, you will need a master plan in place that typically includes the following:
1. Your product or service
2. Your commercial website appearance
3. Advertising and marketing
4. Financial planning and business support
Product or service
Depending on the size of your business, you may elect to have your goods stored in your home office, a temporary storage, or a larger facility. All products posted on your website shall be available in good quantity to satisfy client orders without delay and you shall make sure your site is up to date with the latest offering of products & services with quantity available.
Apparently your online business would run on a website and therefore it is important to have a reliable e-commerce platform to allow you to post your products and allow for transactions. There is plenty of shopping cart platforms offered by European and United States vendors where you could do research and choose from but if you have some preference or tailored requirements, you could always engage a digital consultant for help.
Marketing and advertising
Online marketing is vital to bringing in customers to your business. Besides advertising where Google and Facebook would be popular options, publishing high-value content on your site with topics relevant to your target clientele is a strategy commonly pursued to bring traffic. Top SEO agencies would always recommend consistency in publishing good content, steadily acquiring backlinks, and adding rich media including images or video to build and maintain a solid Google ranking. Another popular means to promote your business online is the use of social media marketing using Facebook, Twitter & Instagram to engage your customers and provide relevant information about your offerings.
Financial projection and business support
While running an online business itself (particularly the online portion) is supposed to be low-cost in nature, you may wish to work out your cash flow as the owner of a trading business as your may be buying and selling on various payment terms. Miscalculating inventory and also not allowing for enough cash flow to account for storage cost is also a common mistake by first-time online business marketers. It is always advisable to have a proper record of your business’ cash flow (or accounting records), as well as your company assets, such as inventories, for the long-term success of your business. If in doubt about how to keep track of your accounting records of your trading business, you may always seek help from local book-keepers.
Before you start your e-commerce store from your Singapore registered entity, you shall always familiarize yourself with the rules and regulations in the relevant space – such as type of activity allowed, content being published, consumer protection and advertising rules.
In Singapore, internet content is a type of broadcast media and is therefore governed under the Singapore Broadcasting Authority Act. If you provide online services as an Internet Service Provider (ISP) or Internet Content Provider (ICP), then you must be licensed. Fortunately, as an e-commerce website owner, you are regarded as “class licensees” that exempt you from separate license application.
On Published content
While you may publish contents of various sort to promote your business, do ensure that you comply with the Internet code of practice (ICP) statutes of Singapore, which prohibits posting of content that is objectionable in terms of public interest or morality. Content that would also cause public disorder is not allowed. One major point to note for international business operators is that the above regulation about ICP and class licensing are only applicable to local ICPs. i.e. If your servers are located outside Singapore, you would not be covered under the Act.
Type of business activities
Various products or services that you offer are subject to different rules. For instance, there’re several key Acts that you shall pay attention to if you intend to run a related trade in:
Web advertising: Singapore Code of Advertising Practice
E-retailing of second hand goods: Secondhand Dealers Act
Provision of online financial services and product: MAS's guideline on offering securities through internet
Goods and Service Tax (GST or VAT)
The Goods and Services Tax (GST) or VAT in other jurisdictions, is levied if you are selling goods and services consumed in Singapore. You will need to be GST-registered to be eligible to charge this tax (prevailing rate of 7%) but if your annual turnover is less than SGD $1 million, you are exempt from GST registration. If your business turnover exceeds or is expected to exceed a million, you would have to be GST-registered but since GST is a full pass-on to consumers, it is not additional cost to your business. For export of goods or services outside Singapore, GST is not applicable.
When dealing with taxes for e-commerce businesses, which is electronic and borderless by nature, we need to look into a number of factors such as source of tax and tax residence to determine whether the trade is subject to Singapore taxes. Generally, tax will be imposed on the income 1) Accrued in or derived from Singapore, or 2) Received in Singapore from outside Singapore.
For source of tax, one has to take into accounts factors such as place of contract, source of investment capital, place where labor is employed, goods are manufactured, stored, and location from which sales proceeds are received or expenses are paid. You’re advised to check up Singapore tax authority IRAS guidelines on e-commerce before making a decision on your business operations.
As for tax residence, if your business’ control and management is exercised in Singapore, your firm would be considered as a tax resident of Singapore. As for individuals, if you are a Singapore citizen, Singapore Permanent Resident, or a foreigner who has stayed and worked in the country for 183 or more days during the tax year, you would also be classified as a tax resident.
If you are running multiple e-commerce businesses and based outside of Singapore, chances are you are a tax-resident of more than one jurisdiction. In this case, you would be eligible for tax relief through Singapore’s extensive tax treaty network to avoid double taxation.
Funding / grants available
Last but not least, the Government of Singapore does stand behind SMEs and nurture their development and growth with various funding schemes and grants, supporting the city-state’s reputation as a top place to conduct business globally. Do keep an eye on various initiatives from SPRING, which is the government’s official partner, and capitalize on them to support your different stages of growth.