Singapore’s economic stability, favorable tax policies, and strategic location have made it a magnet for international business investments. Among the entities that entrepreneurs can establish, non resident companies stan out for their unique characteristics and benefits. This article delves into the essence of non resident companies in Singapore, the process of setting one up, the distinctions between resident and non resident companies, and the tax implications for non resident entities.
What is non resident company?
A non resident company is a business entity that is incorporated or registered in one country or jurisdiction but does not conduct substantial business activities within that jurisdiction. Instead, it operates predominantly in another country or jurisdiction where it may have its main operations, customers, or assets. Non resident companies often face different tax implications and regulatory requirements compared to resident companies in the jurisdictions where they operate.
A non resident company in Singapore is defined primarily by the tax residency of its controlling parties. If the directors and management conduct the company’s operations and make strategic decisions outside of Singapore, the company is considered non resident. This status significantly influences the company’s tax obligations and access to certain tax treaties.
Setting up a Singapore company as a non resident
Non residents can seamlessly establish a company in Singapore, thanks to the country’s business-friendly environment. The process of setting up a Singapore company as a non resident includes:
- Choosing a company name: The name must be unique and not infringe on existing trademarks.
- Appointing a local director: While non residents can own 100% of the company shares, the company must have at least one director who is a local resident.
- Registering the company: This involves submitting the necessary documentation to the accounting and corporate regulatory authority (acra) and paying the requisite fee.
- Opening a corporate bank account: A corporate bank account is essential for financial transactions.
- Obtaining necessary permits: Depending on the business nature, specific permits or licenses may be required.
Setting up a Singapore company as a non resident
Difference between resident and non resident company in Singapore
The primary distinction between resident and non resident companies in Singapore lies in tax residency and the consequent tax benefits. A resident company, actively managed and controlled within Singapore, can leverage the city-state’s extensive network of Double Taxation Avoidance Agreements (DTAAs). These agreements prevent double taxation of the same income in two countries, providing significant tax savings. Conversely, non resident companies may not qualify for these benefits if their management and control are exercised outside Singapore.
Difference between resident and non resident company in Singapore
Here is a detailed difference between resident and non resident company in Singapore:
| Resident company in Singapore | Non resident company in Singapore |
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Corporation tax for non resident companies in Singapore
The corporate tax rate in Singapore is universally applied at 17% on chargeable income for both resident and non resident companies. However, the differentiation in tax treatment arises from access to DTAAs and certain exemptions. Non resident companies are subject to withholding tax on certain types of income (e.g., interest, royalties, rental fees) derived from Singapore. Additionally, they may not be eligible for tax incentives designed for resident companies, such as the Start-Up Tax Exemption scheme.
While non resident companies face certain limitations, especially in tax treaty benefits and exemptions, Singapore remains an attractive jurisdiction for international business due to its robust legal framework, strategic location, and business-friendly ecosystem. Entrepreneurs considering setting up a non resident company in Singapore should conduct thorough research and possibly consult with legal and financial experts to navigate the intricacies of tax laws and leverage the city-state’s vibrant economy.
In summary, understanding the nuances between resident and non resident companies, alongside the specific tax implications, is crucial for global entrepreneurs aiming to expand their operations in Singapore. With the right strategy and compliance with local regulations, non resident companies can thrive in Singapore’s dynamic market.
