Guide to Compliance Laws
For seven consecutive years, Singapore has topped the World Bank’s list of the best countries to do business. Singapore’s business-friendly and easy to follow regulations are one reason for this high ranking. Compliance rules for Singapore based companies are generally straightforward, logical and devoid of unnecessary bureaucracy – especially for small to mid-size companies. Nonetheless, if you do not follow even these simple regulations, your company can be in trouble with the authorities and it can face fines or, in serious cases, even prosecution. Therefore, it is important to understand and follow the requirements related to tax, employees, data protection and licensing that all Singapore companies are expected to comply with.
This article provides information about common laws and compliance requirements that each Singapore company must know about and comply with during its operational lifecycle. Some of these requirements must be followed on an annual basis (such as filing annual tax returns) while others will result in tasks when certain events occur (such as a change in shareholders).
A company can opt not to have annual AGMs by passing a unanimous resolution.ACRA Regulations
ANNUAL RETURN FILING
Singapore companies must hold an Annual General Meeting (AGM) once every calendar year. The first AGM should take place within 18 months from the date of incorporation, and no more than 15 months may elapse between subsequent meetings. The accounts presented at this meeting should be no more than 6 months old. However, companies can opt not to have the AGM by passing a unanimous resolution to dispense with AGMs.
Within one month of the AGM, companies must file an Annual Return with ACRA, that should include up-to-date information about the company officers, auditors (if so required, see below) and its registered address.
In accordance with the Financial Reporting Standards of Singapore, the accounts presented at the AGM shall consist of a Statement of Comprehensive Income, a Statement of Financial Position, a Cash Flow Statement and a Statement of Changes in Equity. If your business has one or more corporate shareholders or annual revenues of more than S$10 million, your accounts must be audited. Such companies must appoint an auditor within three months of incorporation or at such time that the company’s circumstances change so that it becomes eligible for the audit requirement.
UPDATING ACRA RECORDS
Any changes you make to your company structure such as a change in the shareholders, change of directors, company name change, change of address, etc. must be lodged with ACRA on a timely basis (within 14 days in most cases).
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CORPORATE TAX FILING
Singapore companies are required to declare their revenue and file Estimated Chargeable Income (ECI) within three months of the end of their chosen financial year. ECI is the estimated taxable income of the company for the given financial year. Companies with no income are still obliged to file the ECI. Business owners have the flexibility of selecting the date that will be used as the financial year-end date for their company at the time of incorporation.The financial year-end date can be changed subsequently by following the appropriate rules and notifying ACRA.
After filing ECI, companies must prepare and file their annual corporate tax return by November 30th of the following year. The profits for the financial year ending in the preceding year will form the basis for filing the tax return in the year of filing.
Example: Let us assume that your company’s financial year-end date is March 31. This means that you must file Estimated Chargeable Income statement by June 30 of the current year(i.e. within three months of the financial year end) and the final tax return by November 30th of the following year.
NoteFor more, see our article Annual Filing Requirements for Singapore Companies.
GOODS AND SERVICES TAX
Singapore companies should be aware of the compliance requirements related to Singapore’s Goods and Services Tax (GST). Modeled after the VAT in UK, a standard tax rate of 7% is levied on goods imported into Singapore and on the supply of goods and services within the country. A Singapore business must register for GST if your business has a turnover of more than S$1 million in the prior 12 months, or is projected to do so in the course of the next 12 months. Businesses with a smaller turnover are not required to register for GST but can register voluntarily.
GST registered companies are required to file a GST return on a quarterly basis.
All Singapore companies must comply with the Singapore Financial Reporting Standards (SFRS). The SFRS is based on and is substantially similar to the International Financial Reporting Standards (IFRS) that have been defined by the International Accounting Standards Board (IASB). Commonly available commercial accounting software and credentialed accountants can help you comply with the SFRS with ease. There are 39 different standards, each covering a particular topic, such as presentation of financial statements, recognition of revenue and accounting for inventories. One of the main principles of the SFRS is accrual-based accounting, which posits that accounting transactions and events should be recorded when they occur, rather than when payment is made. If you are a small or medium-sized business, you will be able to reduce your compliance requirements by complying with the SFRS for small entities – a simplified set of SFRS based accounting standards set up by the Singapore government to relieve the burden on small business. Eligible companies must have less than S$10 million in revenue, less than S$10 million in assets and fewer than 50 employees.
You are required to keep your business records and accounts for a period of at least five years. Failure to do so may result in expenses claimed being disallowed, or other financial penalties. Examples of records that you need to keep include:Copies of receipts
- Copies of receipts
- Sales and purchases records
- Bank statements
- Rental documents
- Import documents such as bills of landing, airway bills and import permits
- General ledgers to record assets, liabilities, revenue and expenses
- Statements of accounts, including balance sheets and profit & loss statements
The Employment Act is Singapore’s main labour law and covers the basic terms and conditions of employment. As you hire employees, you must ensure that your hiring, ongoing employment and termination practices follow the regulations prescribed by the Singapore Employment Act.
The laws in Singapore including the Employment Act are straightforward and designed to promote entrepreneurship and ease of doing business. Singapore government gives significant freedom to businesses and employees to negotiate mutually beneficial employment contracts.
Employees earning less than S$2,000 per month are provided with extra protection under the Act but the rest of the staff are primarily governed by an Employment Agreement between the employee and the employer. The Employment Agreement will typically cover the following:
- Job title
- Employment duration
- Date of commencement
- Hours of work
- Employee benefits
- Code of conduct
Common employment terms consist of 40-hour 5-day work week, 2 weeks notice period, 2 weeks annual paid leave, 10-12 days of sick leave, and optional health insurance. Before you are ready to hire employees, we recommend that you work with an HR specialist and put together a standardized Employment Agreement and HR policies document for your company.
For employees that are Singapore citizens or permanent residents, companies are required to make monthly contributions to a set of statutory funds that include the Central Provident Fund (CPF), and the MediSave fund. To learn more about statutory contributions, please review these contribution and allocation rate requirements specified on the Central Provident Fund website.
Foreign employees are covered under the Employment of Foreign Manpower Act, which outlines an employer’s responsibilities and obligations for employing foreigners. A number of different types of work passes are available for foreign employees. The employer must apply and secure a valid work pass for a foreign employee before the employee can commence work for the company.
For more, see our article Guide to Singapore’s Employment Act.
Personal Data Protection Act
In 2012, following the footsteps of other developed countries, Singapore passed the Personal Data Protection Act (PDPA) that regulates the collection, use, disclosure and care of customer data by Singapore businesses. PDPA recognizes the rights of individuals to protect their personal data and balances these rights against those of businesses to use customer’s personal data for legitimate purposes.
In summary, the PDPA establishes two separate mechanisms for the protection of personal data in Singapore: the Do Not Call (DNC) Registry and data protection provisions for a business. Businesses are required to nominate a person in the role of data protection officer (DPO) to ensure that their company complies with the PDPA.
For more about data protection in Singapore, check out our guide to Personal Data Protection Act.
All Singapore companies are required to ensure that their business practices are not anti-competitive under the Competition Act. The Competition Act applies to all commercial and economic activities conducted by private sector entities. The Act prohibits anti-competitive activities that distort or inhibit the free-market competition to occur between firms. These include collusion agreements between competing firms to fix prices, reduce the quantity of goods and services sold, or divide markets. Predatory behavior by market leaders is also prohibited, as are mergers and acquisitions that may create monopoly or monopsony or that do not bring about economic benefit to consumers.
Any business decisions that infringe this law can be rendered void and companies can be forced to pay fines of up to 10% of revenue for each year of anti-competitive practices for up to three years.
For more, see our article Guide to Singapore Competition Act.
Business Permits and Licenses
A business license may be required to operate certain types of businesses in Singapore. Industries for which a license is required include retail, construction, trading & shipping, hotels & restaurants, spas, medical clinics, employment agencies, travel agencies, financial services, event management, real estate, publishing, telecommunications and education. Most of these industries have an industry-specific regulator that sets up requirements for obtaining the relevant license. The application process is efficient and straightforward and businesses do not face any difficulty in securing a license as long as they are able to meet the necessary requirements for the license.
The information provided in this article may appear daunting to a reader and compliance with all these regulations might seem like a lot of work, but in reality compliance burden in Singapore is lower than that in nearly all other countries. The Singapore government has established simple rules for business operations and streamlined procedures for complying with them. It is this efficient and bureaucracy free business environment that has earned Singapore its many accolades as one of the most business friendly countries of the world.