When starting a business in Singapore, one of the key decisions you will need to make is whether to register your company as an exempt or non-exempt private company. This decision will have significant implications for your company’s legal and financial status, as well as its tax obligations. In this article, we will explore the difference between exempt and non-exempt private companies in Singapore, the requirements for registering an exempt private limited company, and the taxation implications of each type of company.
Difference Between Exempt and Non-Exempt Private Company
The main difference between exempt and non-exempt private companies in Singapore lies in the legal and financial reporting requirements. Exempt private companies are not required to file annual financial statements with the Accounting and Corporate Regulatory Authority (ACRA), and they are also exempt from holding an annual general meeting (AGM). In contrast, non-exempt private companies must file their financial statements with ACRA and hold an AGM every year.
Another key difference between exempt and non-exempt private companies is the number of shareholders they are allowed to have. Exempt private companies are limited to a maximum of 20 shareholders, while non-exempt private companies can have up to 50 shareholders. Additionally, exempt private companies are not allowed to offer their shares to the public or engage in any activities that require a prospectus.
Singapore Exempt Private Company
An exempt private company (EPC) is a type of private limited company in Singapore that meets certain criteria and is exempt from certain legal and financial reporting requirements. To qualify as an EPC, a company must have no more than 20 shareholders, all of whom must be individuals (i.e., not companies) and must not be nominees. The company must also not have any corporate shareholders or be a subsidiary of a corporate entity.
Exempt Private Company Limited by Shares in Singapore
An exempt private company limited by shares is a type of EPC that has a share capital and is owned by its shareholders. This is the most common type of EPC in Singapore and is often used by small and medium-sized enterprises (SMEs). To register an exempt private company limited by shares in Singapore, you will need to follow certain requirements, which we will discuss in the next section.
Requirements for Exempt Private Limited Company in Singapore
To register an exempt private limited company in Singapore, you will need to meet the following requirements:
- At least one director who is a Singaporean resident
- At least one shareholder who is an individual (not a company) and who is not a nominee
- A registered office address in Singapore
- A company secretary who is a Singaporean resident
- A minimum paid-up capital of $1 (this can be increased at any time after registration)
In addition to these requirements, you will also need to provide the following documents:
- Memorandum and Articles of Association
- Identification documents for the director, shareholder, and company secretary
- Proof of registered office address
- Certificate of incorporation (if the company is being incorporated as a subsidiary)
- Once you have gathered all the necessary documents and met the requirements, you can proceed with registering your exempt private limited company with ACRA.
Taxation for Exempt Private Limited Companies in Singapore
Exempt private limited companies in Singapore enjoy certain tax benefits, including a lower corporate tax rate and exemption from certain taxes. Here are some of the tax implications of registering your company as an exempt private limited company:
- Lower corporate tax rate: Exempt private limited companies in Singapore are subject to a lower corporate tax rate than non-exempt private companies. As of 2021, the corporate tax rate for exempt private limited companies is 4.25% on the first $100,000 of taxable income and 17% on taxable income above $100,000. Non-exempt private companies, on the other hand, are subject to a flat corporate tax rate of 17%.
- Exemption from certain taxes: Exempt private limited companies in Singapore are also exempt from certain taxes, including the dividend tax and the capital gains tax. This means that any dividends or capital gains earned by the company are not subject to tax.
- Tax incentives: Exempt private limited companies in certain industries may also be eligible for tax incentives, such as the Productivity and Innovation Credit (PIC) scheme, which provides tax deductions and cash payouts for investments in productivity and innovation.
How to Register an Exempt Private Limited Company in Singapore
To register an exempt private limited company in Singapore, you can either do it yourself or engage the services of a professional firm. Here are the steps you will need to follow:
- Choose a company name: You will need to choose a unique name for your company that is not already taken. You can check the availability of a name on ACRA’s website.
- Prepare the necessary documents: You will need to prepare the necessary documents, including the Memorandum and Articles of Association, identification documents, proof of registered office address, and certificate of incorporation (if applicable).
- Register with ACRA: You can register your exempt private limited company online through ACRA’s website. The registration process typically takes 1-2 days, and you will need to pay a registration fee.
- Open a corporate bank account: Once your company is registered, you will need to open a corporate bank account to manage your finances.
- Obtain any necessary licenses or permits: Depending on the nature of your business, you may need to obtain certain licenses or permits before you can start operating.
Conclusion
In conclusion, the difference between exempt and non-exempt private companies in Singapore lies in the legal and financial reporting requirements, the number of shareholders allowed, and the ability to offer shares to the public. Exempt private companies enjoy certain tax benefits, including a lower corporate tax rate and exemption from certain taxes. To register an exempt private limited company in Singapore, you will need to meet certain requirements and provide the necessary documents. If you are unsure about the process, it is recommended to engage the services of a professional firm to assist you with the registration.
