Business laws every Singapore company should be aware of

This is an introductory article that orients the reader to the general business regulations in Singapore. It provides an overview of the regulatory framework within which every Singapore company must operate and the basic rules that every Singapore company must follow. It covers regulations related to Corporate Tax returns with IRAS, Goods and Services Tax registration, filing annual returns with ACRA, labour laws, personal data protection compliance, Singapore’s contracts laws, and anti-competitive activities.

Introduction

Singapore is well-known around the world for being a business-friendly country. In the World Bank’s Ease of Doing Business List 2019, Singapore was ranked second; it has been one of the top countries on this list for many years. Singapore was ranked first in the World Economic Forum’s Global Competitive Index 2019. With a relatively low tax rate and strong government support for investments, Singapore is an attractive business hub. The country serves as the headquarters for more than 30,000 international companies.

These achievements are undergirded by Singapore’s political stability and its transparent, corruption-free legal framework. The country’s regulations have been developed specifically to welcome foreign investments; and to support a strong and open business environment. This article explains the key principles behind the basic legislative acts that affect all Singapore companies when they conduct business in the country.

Filing Annual Return

The Annual Return is an information document that every Singapore company must lodge annually with the Accounting and Corporate Regulatory Authority (ACRA). It contains important particulars of the company such as the names of the directors, secretary, shareholders, and the date up to which the financial statements of the company have been prepared. The main law governing this area is the Singapore Companies Act.

The Annual Return is submitted by an appointed officer of the company (e.g. a director or company secretary). In most cases, this is done by your registered filing agent on behalf of your company.

Below is a list of the information that companies are required to provide when filing their Annual Return:

  • Company details. These include the company type, Unique Entity Number (UEN), registered office address, the particulars of the company officers, and details of registered charges.
  • Shares. Here you must state the company’s capital structure such as the number of shares held by various shareholders, issued share capital, and amount of paid up share capital.
  • Financial Statements. You must submit the financial Information in XBRL and Financial Highlights, if any. This is not applicable if your company is exempted from this obligation.
  • Date of Annual General Meeting (AGM). Provide the date of your company’s annual general meeting (AGM), if it was held. This is not applicable if your company is exempted from holding AGMs.
  • Date of Financial Year End (FYE). This is the date on which you complete the financial accounting of your company.

The document must be signed either by a director of the company or a company secretary. The deadline for filing the Annual Return is 30 days from the date of the Annual General Meeting.

Filing taxes

Singapore has one of the most efficient and business-oriented tax systems, with low tax rates and a range of various tax incentives. The Income Tax Act of Singapore is the main governing statute for corporate taxation. The law provides for a single-tier corporate tax system. This means that tax paid by a company on its profits is the only tax on such income (i.e., dividends are tax-free to shareholders). A company does not pay taxes on capital gains or on foreign-sourced income that was already subjected to taxation overseas. Thus, the main tax a Singapore company should file is the corporate tax at the rate of 17%, which most often is significantly lower due to numerous tax incentives and tax exemptions available to Singapore-resident companies.

Singapore companies are required to complete their corporate tax returns by submitting annually two filings with IRAS (the Inland Revenue Authority of Singapore, the main government agency that levies and collects taxes in Singapore). These filings are as follows:

Estimated Chargeable Income (ECI)

All Singapore companies must file their Estimated Chargeable Income (ECI) within three months after the end of their financial year, for each financial year. ECI is the company’s estimated income after deducting tax-allowable expenses for the preceding financial year. Companies must submit the ECI  through an ECI Form provided by IRAS.

Besides stating the ECI, a business is required to declare the company's revenue on the ECI Form. Revenue refers to a company's main source of income and excludes items such as gain on disposal of fixed assets. If your company is an investment holding company, your main source of income will be your investment income (e.g., interest and dividend income).

The law exempts companies from reporting their ECI if:

  • The ECI is nil; or
  • Annual revenue does not exceed S$1 million.

Corporate Income Tax Return

Companies are required to file a Corporate Income Tax Return with IRAS after submitting the ECI. The deadline is either November 30 for paper filing or December 15 for e-filing. The Income Tax Return provides a calculation of the actual tax that is to be paid to the tax authority. Companies must file their tax returns in any year based on the profits in the preceding year.

There are two types of Income Tax Return forms: Form C-S and Form C. Both are declaration forms through which a company declares its actual income.

Form C-S is a shorter version (just three pages) for qualifying resident companies that have annual revenue of up to S$5 million. It consists of a declaration statement of the company's eligibility for C-S, information on tax adjustments, and information from the financial accounts.

If your company does not qualify to file Form C-S, you must file Form C. To file Form C, you are required to submit your company's financial statements, tax computation and supporting schedules.

Companies must file Form C-S or C even if they are making losses. An income tax return filing waiver is available for companies that are dormant (zero business activity) and do not have any income for the prior financial year.

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GST Registration

Goods and services tax (GST) is a broad-based consumption tax levied on nearly all supplies of goods and services in Singapore, as well as on the import of goods. In some countries, GST is known as the Value Added Tax (VAT). The Goods and Services Tax Act is the main governing statute regarding GST matters in Singapore.

Your company’s liability for GST registration depends on the value of goods and services supplied by you which are regarded as taxable supplies for GST purposes (also called “taxable turnover”).

Your company must register for GST if its taxable turnover at the end of any calendar year is more than S$1 million. You must monitor at the end of every calendar year (i.e., December 31) and register for GST if your annual taxable turnover exceeds this amount. The GST Registration calculator will assist you in determining your company’s GST registration liability.

Companies with revenues below the above-mentioned threshold are not required to register but they can voluntarily register if they wish.

If you have determined that you are subject to GST or have decided to register voluntarily, you must perform the following steps:

  1. Complete an e-Learning Course. This step is necessary only for voluntary registration. The company director or the preparer of GST returns must complete two e-Learning courses — "Registering for GST" and "Overview of GST". You are not required to do so if the director has prior experience managing other GST-registered businesses or if the preparer of GST is an Accredited Tax Adviser or Accredited Tax Practitioner.
  2. Submit an Application. You may submit the GST application. You will be required to attach supporting documents at the end of the application process. Businesses registering for GST on a voluntary basis are required to be on the GIRO system for GST payments and refunds.
  3. Receive Notification of Effective Date of Registration. If your application is successful, you will receive a letter notifying that you have been GST-registered. The letter will provide the following details:
    • Your GST registration number — the number you have to print on all of your invoices, credit notes and receipts; and
    • Your effective date of GST registration — the date when you have to start charging and collecting GST on your taxable supplies. You must not charge or collect GST before the effective date of your GST registration.

    GST-registered businesses must file a GST F5 tax return to IRAS electronically on a monthly or quarterly basis, even if there are no GST transactions during the relevant accounting period. The GST must be paid to IRAS within 1 month after filing an F5 return.

    Employment Act

    The main Singapore legislation that influences the terms of employment agreements that a company signs with its employees is the Employment Act (EA). It sets out a minimum standard for the terms and conditions that an employer must follow when hiring employees. Your company must comply with the applicable obligations imposed on employers under the EA and provide terms that are no less favourable than those specified by the EA. If a clause in the employment contract is less favourable to the employee than that in the EA, then that clause will be considered null and void and the relevant provision in the EA will be applied instead. Companies that are not familiar with this provision can unwittingly sign contracts that expose them to high risk. For example, the company may negotiate a high salary for an employee in exchange for another restrictive clause in the agreement but that clause would be rendered null and void in case of an actual dispute.

    The EA covers employees working under a contract of service — an agreement in which one person agrees to employ another as an employee and that person agrees to accept such employment. The law covers both local and foreign employees. However, foreign employees holding a work pass are also covered by the Employment of Foreign Manpower Act, which outlines an employer’s additional responsibilities and obligations for employing foreigners.

    Seafarers, domestic workers, statutory board employees and civil servants, and persons employed in a managerial or executive capacity with a monthly salary exceeding $4,500 are not covered by the EA. The terms and conditions of their employment are according to their employment contract.

    For those covered under the EA, your company must abide by the following minimum rights of employees:

    Age

    The legal age to work in Singapore is 17 years and older. A company is permitted to employ children and young persons aged 13 to 16 years, however there are restrictions on the type of work that children and young persons can perform. The retirement age is 62 years.

    Minimum wage

    The law does not provide for any minimum wage for employees. Wages are determined by the agreed terms between the employer and the employee.

    Normal hours of work

    For common work arrangements, the following rules apply. In the case of a work week of up to 5 days, contractual working time must not exceed 9 hours per day or 44 hours a week. Should your employees work more than 5 days a week, their working time may be up to 8 hours a day or 44 hours a week.

    Any work time above the specified work hours must be paid as overtime. For overtime work, the employer must pay at least 1.5 times the hourly basic rate. Such payment must be made within 14 days after the last day of the salary period.

    Annual leave eligibility

    If your employee has worked for at least 3 months, he or she is entitled to annual leave. The annual leave entitlement depends on how many years of service the employee has with a company. The law provides for the following scheme:

    Year of service

    Days of leave

    1st

    7

    2nd

    8

    3rd

    9

    4th

    10

    5th

    11

    6th

    12

    7th

    13

    8th and thereafter

    14

    Sick leave eligibility

    Your employee is entitled to both — paid outpatient sick leave and paid hospitalisation leave — if he or she has worked for at least 3 months with your company. The right to paid outpatient sick leave and paid hospitalisation leave arises if an employee has informed or tried to inform the employer within 48 hours of the absence. The employer may require a person to be certified unfit for work by a medical practitioner registered under the Medical Registration Act or Dental Registration Act.

    Public holidays

    Your staff has the right to 11 paid gazetted public holidays a year, in accordance with the Employment Act. If you require an employee to work on a public holiday, you should pay an extra day’s salary or offer a different day off in lieu. If one of the gazetted holidays falls on a normal rest day, the next working day will be a paid holiday.

    PDPA & GDPR

    All Singapore companies are obliged to protect the Personal Data (PD) of their clients, employees, or any other individuals’ data the company may process. The two basic regulations that affect Singapore business in this area are the Personal Data Protection Act (PDPA) and the General Data Protection Regulation (GDPR).

    PDPA

    PDPA is Singapore’s law governing the collection, use, and disclosure (collectively called “processing”) of personal data by organisations in Singapore. The main purpose of the act is to ensure that a) all personal data is processed in a manner that respects the privacy and ownership rights of individuals; and b) organisations use such data for legitimate business purposes only.

    The PDPA protects personal data and defines it as any data — whether true or not — about an individual who can be identified from that data, or from that data and other information to which the organisation has or may have access.

    The following PD types are covered:

    • Full name;
    • National Registration Identity Card (NRIC) number or Foreign Identification Number (FIN);
    • Photographs or video images of an individual;
    • Personal mobile telephone number;
    • DNA profile;
    • Passport number;
    • Thumbprint;
    • Iris image;
    • Voice recording of an individual.

    Note that business contact information such as name, business title, business telephone number, business address and email are not considered to be PD.

    You should take the following steps in your company to comply with PDPA:

    • Appoint a Data Protection Officer;
    • Notify clients about the purposes of collecting PD and seek consent to process their PD;
    • Respond when clients ask about their PD;
    • Ensure accuracy and allow correction of clients’ PD;
    • Secure the PD held by your organisation;
    • Dispose of PD that is no longer needed;
    • Ensure protection of personal data when transferring the data overseas;
    • Closely manage service providers that handle PD;
    • Check the Do Not Call Registry before using mobile numbers;
    • Proactively communicate to clients and employees your data protection policies, practices and processes.

    GDPR

    GDPR is a European Union regulation on data protection and privacy. The document has extraterritorial implications, i.e. it also applies to companies that are not residents of any of the EU states. The GDPR applies to companies that are registered outside the EU but collect or process the PD of persons (residents) of the EU. So if your Singapore company collects and processes PD of clients, employees, or other persons who are residents of the EU, you must comply with the GDPR requirements.

    The following personal data is protected by the GDPR:

    • Basic identity information such as name, address and ID numbers;
    • Web data such as location or movements, IP address, cookie data and RFID tags;
    • Health and genetic data;
    • Biometric data;
    • Racial or ethnic data;
    • Political opinions;
    • Sexual orientation;
    • Data on person’s performance at work;
    • Economic information;
    • Personal preferences and interests;
    • Other personal metrics such as reliability, behaviour patterns, etc.

    To become GDPR compliant your company should take the following steps:

    • Implement your data protection policy;
    • Implement security mechanisms;
    • Protect PD when working with other companies;
    • Document processing activities;
    • Conduct data protection impact assessments;
    • Report PD breaches;
    • Appoint a Data Protection Officer;
    • Ensure privacy rights;
    • Have a legal justification for data processing.

    For more details, see our PDPA and GDPR Guide.

    Contract Law

    There’s no single act governing all contractual relations in Singapore. The rules are largely based on the common law of contract in England. Much of the law of contract in Singapore remains in the form of precedents i.e. judge-made rules. However, some aspects of the contract law are affected by specific statutes. These include the Application of English Law Act, the Contracts (Rights of Third Parties) Act, Consumer Protection (Fair Trading) Act, etc. Below is a summary of some of the key principles of Singapore’s contract law.

    Capacity to enter into contracts

    A contract is legally binding only if the parties entering into such an agreement have the capacity to do so. A contract entered into with a minor, a person of unsound mind or an inebriated person may not be an enforceable one. Those individuals are deemed not to have the capacity to undertake obligations if they did not understand what they were agreeing to.

    A contract with a company is almost always enforceable, as legally companies are defined as “persons” with the legal capacity to enter into contracts.

    Offer, Consideration, Acceptance

    Singapore law, like systems in other common-law countries, provides that a contract is formed only if it includes these three elements:

    1. Offer. One of the parties has made a promise to do or refrain from doing some specified action in the future. An offer can be withdrawn at any time before it is accepted by the other party.
    1. Consideration. This means that something of value must be promised in exchange for the specified action or nonaction in the offer. This can take the form of a significant expenditure of money or effort, a promise to perform some service, an agreement not to do something, or reliance on the promise. Consideration is the value that induces the parties to enter into the contract. The existence of consideration distinguishes a contract from a gift. A gift is a voluntary and gratuitous transfer of property from one person to another, without something of value promised in return. Failure to follow through on a promise to make a gift is not enforceable as a breach of contract because there is no consideration for the promise.
    1. Acceptance. The offer must be accepted unambiguously. Acceptance may be expressed through words, deeds or performance as called for in the contract. In recent years, electronic offers and acceptances between parties have also been considered legitimate. Generally, the acceptance must mirror the terms of the offer. If not, the acceptance is viewed as a rejection of the offer and a counteroffer.

    Terms of the contract

    A contract must resemble the rights and obligations that each party has. Some of the essential and obligatory terms include: the price being paid for a good or service, the description of the good or service being sold or provided, and the details of parties in the contract. Only the written contract can be used in determining the terms of the agreement, not prior negotiations or other oral or written evidence.

    For terms that were not explicitly stated in the contract, the court may imply a term where necessary for public policy reasons or because it is necessary to fulfill the intentions of the parties and to ensure that it does not contradict any express term in the existing contract.

    If there is no written contract, the courts will look at the parties’ statements and actions to determine if there was an intention to be legally bound. To make that determination, the courts look at when the representation was made, the importance the party attached to it and the sophistication of the party.

    For more details, see An Essential Guide to Singapore's Contract Law.

    Competition Act

    All Singapore companies in the course of their activity must follow market-based competition regulations. This branch of law promotes and seeks to maintain market competition by regulating anti-competitive conduct by any business. A competitive market results in open, dynamic markets, featuring increased productivity, innovation, and better value for consumers. Competition law is known also as “antitrust law” or "anti-monopoly law". The basic statute that regulates this field in Singapore is the Competition Act.

    In order to achieve fair competition between market participants, the act prohibits companies from the following three basic activities:

    1. Agreements that have as their object (or result) the prevention, restriction or distortion of competition in Singapore.

    Companies’ agreements, decisions or concerted practices which involve the following are considered as having a detrimental effect on competition and are therefore deemed illegal:

    • The fixing of purchase or selling prices or any other trading conditions;
    • Limitation on or control of production, markets, technical development or investment;
    • The sharing of markets or sources of supply; or
    • Bid rigging or collusive tendering.

    2. Conduct that amounts to the abuse of a dominant position in any market in the country.

    Typical examples of conduct that may be considered an “abuse of a dominant position” are as follows:

    • Predatory behavior toward competitors;
    • Limiting production, markets or technical development to the prejudice of consumers;
    • Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
    • Making the other party conclude the contract with additional obligations having no connection with the subject of the contract.

    3. Mergers or acquisitions that may result in a substantial lessening of competition within any market in Singapore for goods and services.

    The law prohibits mergers or acquisitions that result in a substantial lessening of competition within any of the goods or services markets. However, certain mergers are excluded from these restrictions. These include transactions that are approved by regulatory authorities, are under the jurisdiction of any regulatory authority, belong to specified activities set out in the law (such as services of general economic interest which result in economic efficiencies that outweigh their adverse effects), etc.

    The state body responsible for the administration of the Competition Act is the Competition Commission of Singapore (the Commission). The Commission has wide powers to conduct investigations if there are “reasonable grounds” for suspecting an infringement of competition rules. It may recommend block exemption orders by the Minister for Trade and Industry. Such exemption orders may be given in respect of a particular category of agreements that are likely to contribute to improving production or promoting technical or economic progress.

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    Summary

    We hope that this introductory article to key Singapore business regulations will assist you in running your Singapore-incorporated venture so that it remains in compliance with all Singapore laws.

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