Advantages Of A Private Limited Company In Singapore

There are various structures for every individual to start a business here in Singapore. The best structure to start a company here in Singapore is a Private Limited Company (Pte Ltd) or the equivalent of a Private Company Limited by Shares. There are obvious reasons why we recommend this company structure. They are as follows:

Limited liability for the company (beneficial) owners

A Private Limited Company (Pte Ltd) is a separate and different entity from its owners. A company has the capacity to form business dealings and bind legal contracts with other individuals and/or companies. It can be liable for all the contracts that it has entered into. Just think of incorporating a company as a mother giving birth to another baby, the mother and the baby are two separate legal persons. As such, the company and its shareholders are two separate entities. The shareholders’ liability is limited to the issued and additional paid-up capital in the company.

This does not mean the same for the directors of the company. Directors can be responsible for their actions if there is any criminal conduct.

Taxation advantages

New companies can take full advantage of the government’s tax exemption scheme introduced in Year of Assessment (YA) 2005. Under this scheme, newly formed companies have a full exemption on the first $100,000 of chargeable income. For the next $200,000, there is a 50% exemption from taxes. It is applicable to the first three years of assessment. Basically, it means that newly formed companies earning less than $100,000 for the first three years of assessment, need not pay any corporate tax totally. But do take note that this tax exemption does not apply to some company structures, such as an investment holding company, or a company with developing properties for sale, investment, or both, as its principal activity.

The company must fulfil these 3 conditions to qualify for tax exemption.

  1. Incorporated in Singapore (but of course!)
  2. It has to be a tax resident in Singapore for that financial year
  3. The company must not have more than 20 shareholders throughout the basis period for that financial year. Whereby all the shareholders are individuals “beneficially and directly” holding the shares in their own names, or at least one shareholder is an individual “beneficially and directly” holding at least 10% of the issued ordinary shares of the company.

Tax-friendly business environment

All companies enjoy the Corporate Income Tax (CIT) rebates to help them deal with rising business costs. The CIT rebate is set at 25%, capped at $15,000 for the year of assessment 2020. The Singapore government has been consistently giving CIT rebates. The sole reason is to remain competitive. The Singapore government has always been adopting a pro-business mindset to remain competitive in this global economy. This is what attracts foreign investments into Singapore, foreign companies starting their bases here will inevitably create more jobs for Singaporeans.

Please take note that only revenue expenses incurred after your business has commenced will be eligible for tax purpose deductions. The Singapore government has given a concession, whereby revenue expenses incurred one year before the first day of the financial year, in which you earn your first dollar of business receipt will be tax-deductible.

Government grants

There are many government grants to help companies grow. A large portion of the government’s budget annually is set aside for the various grants. Available grants such as Enterprise Development Grant (EDG) by Enterprise Singapore, Productivity Solutions Grant (PSG), or the Market Readiness Assistance (MRA) grant are a few popular grants available amongst other types of grants.

Incorporating a Private Limited Company in Singapore is extremely affordable. But the process can be confusing to some, so you should always engage a qualified ACRA filing agent to help you incorporate your company.

If you have any questions, you can contact us here.


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