Singapore Economy Overview

Currency

Singapore Dollar (SGD)

Working hours

40 – 44 hours/week

Public/bank holidays

11 public holidays

Capital

Singapore

Languages

Malay, English, Mandarin & Tamil

Population

5.92 million

Minimum hourly salary

No minimum wage

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Fines of up to SGD 60,000 and 6-12 months of prison time, plus back payment of employee’s entitlements

Fun fact

Singapore is the least corrupt city in Asia, and the fifth least corrupt in the world.

Sitting in the heart of Southeast Asia, Singapore is the most advanced country in the region and one of the wealthiest countries in the world. The country offers foreign investors world-class infrastructure, a highly educated English-speaking workforce, a transparent legal and regulatory environment, and political stability. 

Overview of Singapore's Economy

Singapore has long been a key regional and global entrepôt and a crossroads of trade between the East and the West. Today, higher value-added activities in the manufacturing and services sectors dominate Singapore’s economy as the country is:

Key Elements Description
MNC Hub A regional, continental, and global hub for the HQs and operations of various MNCs.
Tourism and Business Destination One of the most visited cities in the world for both tourism and business purposes.
Wealth Management and Financial Services The regional hub for wealth management and financial services.
Oil and Gas Industry One of the top three oil export refining centers in the world and a major center for oil and gas equipment manufacturing.
Shipping and Maritime Industry One of the busiest ports in the world and a major ship repair center.
Biotechnology and Pharmaceuticals A global biotechnology and pharmaceuticals R&D and manufacturing hub.

Taxes

Employer Tax: 17%

Central Provident Fund (CPF)

17%

Employee Tax: 20%

Central Provident Fund (CPF)

20%

Income Tax

Singapore operates a progressive income tax system, where residents are taxed between 0% and 24% depending on their income level. Non-residents are generally taxed at a flat rate of 15% or the resident rate, whichever is higher.

Gross Income (SGD)

Below 20,000

20,001 – 30,000

30,001 – 40,000

40,001 – 80,000

80,001 – 120,000

120,001 – 160,000

160,001 – 200,000

200,001 – 240,000

240,001 – 280,000

280,001 – 320,000

320,000 – 500,000

500,000 – 1,000,000 

1,000,000 

Tax on Gross

–

–

200

550

3,350

7,950

13,950

21,150

28,750

36,750

44,550

84,150

199,150

Tax on Excess

0%

2%

3.5%

7%

11.5%

15%

18%

19%

19.5%

20%

22%

23%

24%

Business Regulation in Singapore

As a former British colony, the Singaporean legal system is based on the common law legal system. Administrative, contract, equity and trust, property, and tort law are mostly decided by judges who can use English case law (and increasingly decisions from important Commonwealth jurisdictions) to decide cases. Other areas of the law (criminal, company, and family law) are almost completely statutory in nature.

For businesses, the Singapore Companies Act 1967 regulates and governs company compliance in Singapore and gets periodically updated with new amendments. Companies need to stay informed of any changes.

In addition, after a new business is registered with the Accounting and Corporate Regulatory Authority (ACRA), the following types of business licenses or permits may be needed before commencing business activities:

  • Compulsory licenses in sectors such as retail, trading, shipping, construction, education, telecommunications, recruitment, travel, real estate, financial services, and publishing.
  • Occupational licenses for professional services.
  • Business activity licenses and permits.

More than one license may be required, and applications with multiple agencies or professional associations may be necessary. Foreigners must also apply for appropriate entry permits before they enter, reside, or do business in Singapore.

Benefits of Doing Business in Singapore

Singapore is consistently ranked among the top countries in the world for the ease of doing business and imposes a flat 17% corporate income tax rate – among the lowest rates in Southeast Asia.

The tax system operates on a territorial basis with signed Double Taxation Agreements (DTAs) with around 100 jurisdictions. Companies do not get taxed on most foreign-sourced incomes (such as from dividends or branch profits) remitted into the country, provided they pay tax in the source country with a rate of at least 15%. There is also no capital gains tax.

Compared to other Southeast Asian countries, Singapore has relatively minimal foreign direct investment (FDI) controls except in a few specific sectors (namely public infrastructure assets and sensitive national security areas). The country also offers numerous tax and other incentives to encourage the growth of particular sectors.

Business Expansion Options in Singapore

The following options are available for setting up a Singapore business entity – a Private Limited Company (ending in Private Limited or Pte Ltd), a Public Limited Company, various types of partnerships (including Limited Liability Partnerships or LLPs), a subsidiary, a branch, and a representative office.

However, the last entity is usually restricted from conducting revenue-generating activities. In addition, individuals representing foreign companies can have their own Private Limited Company (including a subsidiary), a branch office, or a representative office.

The most common setups for new foreign businesses in Singapore are subsidiaries and branches.

Singapore Employer of Record (EOR)

The Singapore EOR becomes the official legal employer of your Singapore team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Singapore talent acquisition and visa support. 

Please note, as of 2024 there is an EOR ban in place in Singapore, meaning that Singapore EORs can no longer sponsor visas/employment passes. For businesses looking to sponsor expat employees a nearby Malaysia EOR solution may be more appropriate. 

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Recruitment Agencies

A Singapore recruitment agency can help you source employees in Singapore quickly and cost-effectively. Singaporean recruiters often work in tandem with Professional Employer Organizations or Employers of Record to ensure that your Singaporean team is hired and paid in full compliance with local laws. 

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Singapore Professional Employer Organization (PEO)

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Singapore without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Singapore market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Singapore regulations, reducing the complexity and risk associated with hiring local employees.

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PEO/EOR

Singapore labor law allows employers to utilize PEOs and EORs to manage their human resource needs with the Employment Act (EA) being the primary labor law for both foreign and Singaporean employees. The EA covers: 

  • Employment contracts;
  • Minimum days for giving notice of termination of contract;
  •  Actions to deal with employee misconduct;
  • Salary periods and time of payment;
  • Maternity benefits and childcare leave for parents and
  • Public Holiday, leave, and sick leave entitlements.

Note that there is no universal minimum wage in Singapore, but employees in some industries are required to receive one. In addition, Part IV of the Act (which provides for rest days, hours of work, and other conditions of service) does not cover managers, executives, and certain types of specialized professionals (lawyers, accountants, doctors, dentists, etc.).

Non-compliance risks can also be significant. For example, The Ministry of Manpower keeps a public record of employers convicted for offenses under the Employment Act – penalties for violations can range from fines to jail time. Common offenses or mistakes include failing to pay salaries on time or misclassifying employees as contractors

For these reasons, the risk of committing violations can significantly outweigh the costs of using an EOR/PEO for small or newly established Singapore subsidiaries.

Singapore’s central location, low tax rates, open economy, and well-developed legal and regulatory system make the country an ideal location to set up a new business in Asia.

Subsidiary Incorporation

A Singapore subsidiary is an entity in which the parent company has a majority ownership stake of 50% or more with a minimum paid-up capital of S$1. If the parent’s ownership stake is less than 50%, the entity is considered an affiliate, with the parent company acting as a minority shareholder. Note that a subsidiary is not required to have the same name as its parent company, can conduct any business activity, is taxed as a Singapore resident entity, and can receive local tax benefits.

A Singapore subsidiary must have a Singapore resident director who is either a Singaporean Citizen, a Permanent Resident, or an Employment Pass holder. After a subsidiary is registered, employment passes for foreign staff may be applied for.

The Companies Act also requires the appointment of a company secretary who is a natural person and resident of Singapore within six months of incorporation.

Branch Registration

A Singapore branch office is not a separate legal entity as it is an extension of its parent company – meaning the foreign parent is liable and responsible for all debts, and the entities must share the same name. In addition, the branch office’s and the parent company’s audit reports will need to be filed in Singapore. 

Singapore branches are also considered non-resident for tax purposes. Thus, they are not eligible for tax incentives and exemptions available to private limited companies. 

Requirements for setting up a Singapore branch include: 

  •  The use of a professional corporate services firm (as the Singapore Companies Act does not permit foreign companies to self-register a Branch Office).
  • One corporate shareholder as the foreign parent must be a 100% owner.
  • One Singapore resident agent who can be a Singapore citizen, permanent resident, or a holder of an Employment Pass or Dependant’s Pass. The agent must be at least 18 years of age and not be bankrupt or convicted for any criminal offense in the past.
  •  A registered office address in Singapore that cannot be a PO Box, but a residential address is allowed for certain types of businesses.

Business Opportunities in Singapore

With its prosperous and business-friendly economy, and strategic location in South-East Asia, Singapore is the ideal spot for international businesses looking to grow or hire employees in the region. 

The government’s pro-business policies, coupled with a transparent and efficient regulatory framework, further enhance the appeal of setting up operations in Singapore. Some of the most promising business opportunities in Singapore are:

Opportunity Rationale
Fintech Singapore is a leading financial hub with a supportive regulatory environment for fintech innovation. The country’s focus on digital transformation and its position as a gateway to Southeast Asia make it an ideal location for fintech startups and established players.
E-commerce With a high internet penetration rate and a tech-savvy population, Singapore is a thriving market for e-commerce. The country’s well-developed logistics infrastructure and its role as a regional distribution hub further support the growth of online retail.
Biomedical Sciences Singapore has invested heavily in its biomedical sciences sector, establishing itself as a global leader in research and development. The presence of world-class research institutions, a skilled talent pool, and strong intellectual property protection make Singapore an attractive location for biomedical companies.
Smart City Solutions As Singapore continues to develop its smart city initiatives, there is a growing demand for innovative solutions in areas such as urban mobility, energy management, and digital infrastructure. Companies with expertise in these fields can find ample opportunities to collaborate with the government and private sector players.

These are just a few examples of the many business opportunities available in Singapore. With its conducive business environment, strong economic fundamentals, and commitment to innovation, Singapore is well-positioned to support the growth and success of businesses across a wide range of industries.

With the recent restrictions on Singapore Employer of Record, it is crucial that you get in touch with Singapore hiring experts to ensure full local compliance.