The city-state of Singapore is a natural launch-pad for starting your business in Asia, with setting up a trading company an obvious choice. Below are few of the reasons for doing so:
- Singapore is home to most (60-80%) of the world’s largest commodity trading companies, generating more than US$1 trillion in annual turnover. Notably, of the 400 trading firms based in Singapore, more than 30 percent place one or more C-level positions in the country.
- As a global financial hub with over 500 financial institutions, Singapore provides for 25-35% of trade finance for commodities trading in Asia.
- Also, the Singapore Exchange is Asia’s most internationalised exchange, the country is the third largest global foreign exchange market, and the largest offshore RMB hub (outside of Greater China).
- There is also TradeNet, which is the world’s first national single window for trade bringing together more than 35 border agencies. The World Economic Forum’s Enabling Trade Index ranks the city-state tops for its nation-wide Electronic Data Interchange (EDI).
- Notably, 30 percent of all Asian trading is conducted through Singapore and the Strait of Malacca is the second largest trade route globally for crude/petroleum transportation.
- Singapore is fifth in the world and first in Asia in the World Bank’s Logistics Performance Index.
- It also has Asia’s best seaport, which along with being the world’s largest bunkering port, has the highest concentration of oil storage in Asia. Singapore’s container ports are the busiest in the world and Changi International Airport is linked to 300 cities in 70 countries, with more than 6,500 weekly flights.
- The country employs 14,000 people in the commodities sector and has the 4th largest pool of trading talent in the world after London, New York City and Houston.
- 47% of the Singapore workforce has a tertiary education.
- The nation has been ranked first in Asia and seventh globally in Transparency International’s anti-corruption index.
- Singapore is also Asia’s top arbitration centre, with the Singapore International Arbitration Centre handling more than 200 new cases annually.
- Singapore has been named as the world’s easiest place to do business for eight consecutive years by the World Bank.
- Income tax rates are competitive for both companies (17%) and individuals (maximum tax rate of 22%).
- Singapore has a network of over 70 comprehensive avoidance of double taxation agreements.
So once you have decided to open a trading company in Singapore and take advantage of all the above, the procedure is as below:
1) Incorporate the company
This procedure is similar to incorporating any company in Singapore. While there are five different types to choose from, the most common and flexible business entity that can be set up in Singapore is the private limited company.
ACRA – the Accounting & Corporate Regulatory Authority of Singapore, which is the national regulator of business entities and public accountants, mandates that all companies operating in the country must be registered under the Singapore Companies Act and abide by its rules and regulations.
Use the Singapore Standard Industrial Classification Code (SSIC) 2015 to select the trading business activities your company will be engaging in. The primary and secondary business activities must all be clearly stated at the time of company incorporation. While you can refer to our detailed company incorporation guide, in summary, the key requirements to register a company in Singapore are:
- at least one shareholder (individual or corporate entity)
- one resident director (may be a citizen, permanent resident, EP holder or Dependent Pass holder)
- one resident company secretary
- initial paid-up share capital of at least S$1
- a physical Singapore office address
If the number of shareholders is 20 or less, with no corporation holding any beneficial interest in the company’s shares, it is known as an Exempt Private Company (EPC). If the shareholders are more than 20 but less than 50, it’s called a private company. If the number of shareholders exceeds 50, it becomes a public company.
When the company incorporation is successful, ACRA issues an email confirming the incorporation of the company. It includes the company’s Unique Entity Number (UEM), which is the standard identification number, issued by the Singapore Government to any business entity registered in Singapore.
2) Activate a Singapore Customs Account
Being a trading company, the next step will be to register with Singapore Customs.
Any entity that has its business activities in export, import or trans-shipment activities in Singapore, is required to register the company with the Singapore Customs as an importer, exporter, common carrier and others.
You must mention the company’s UEN in every application made by it for a permit, license, certificate or other document under the Regulation of Imports and Exports Act (Chapter 272A)
All entities with a valid Unique Entity Number (UEN) can activate their Customs Account for free and is normally done within the same working day.
3) Apply for Customs Permits
After activating your Customs Account, you may appoint a declaring agent to apply for Customs permits (either export, import or both) via TradeNet on your behalf. Thus, permit applications can be made via TradeNet front-end solution purchased from approved solution providers, or Government Front-End Application. Each permit application typically costs S$2.88. Generally, you are required to retain the relevant supporting documents relating to the purchase, import, sale or export of the goods for a period of 5 years from the date of approval of the Customs permit.
TradeFIRST stands for Trade Facilitation & Integrated Risk-based System. It is an integrated assessment framework that provides a holistic assessment of a company and determines the level of facilitation accorded. The assessment is free and it is mandatory for all companies who wish to apply for a Singapore Customs scheme or licence.
Especially for Importers
Duties and GST for importing goods
If you intend to import goods into Singapore, you are required to make a declaration to Singapore Customs. Also, while Goods and Services Tax (GST) is payable on non-dutiable goods, both GST and duty are payable for dutiable goods if these goods are imported for local consumption.
Do note that in Singapore, “an import refers to goods brought into customs territory from an entry point or a free trade zone (FTZ), or overseas goods brought into a free trade zone for storage and pending re-export”.
Also, check if the goods you intend to import are controlled goods or goods subject to restrictions by Competent Authorities (CAs) in Singapore. You may search using the description of the goods, Harmonized System (HS) code or CA product code. If the item is subject to control, the name of the CA will be indicated next to its HS code. You may check directly with the respective CAs on their licensing requirements. If you require advice on the full 8-digit HS code of the product, you may apply for an official classification ruling at a fee of S$75 per product.
Thus in summary, duty and/or GST payment should be made when your goods enter Singapore unless goods remain inside a FTZ. Also, note that when goods are moved from a FTZ or entry point into a Customs licensed premises (such as zero-GST warehouses or licensed warehouses), duty and/or GST will be suspended as long as the goods are stored in the licensed premises.
Additionally, duty and/or GST are not payable for goods granted duty exemption or GST relief or those imported under the Temporary Import Scheme under Singapore Customs or the relevant Inland Revenue Authority of Singapore (IRAS) schemes including:
- Major Exporter Scheme (MES)
- Approved Import GST Suspension Scheme (AISS)
- Import GST Deferment Scheme (IGDS)
Especially for Exporters
To export goods from Singapore, you are required to declare the goods to Singapore Customs. Do note that GST and duty are not levied on goods exported from Singapore.
Moreover, goods exported from Singapore are regulated under the Customs Act, the Regulation of Imports and Exports Act, the Strategic Goods (Control) Act, and other legislation by the relevant Competent Authorities (CAs).
Similar to the procedure for importing, do check if the goods you intend to export are controlled goods subject to restrictions by Competent Authorities (CAs) in Singapore.
An exporter in Singapore is required to declare the Free on Board (FOB) value of the goods in the export permit application. In summary, a customs export permit is required for:
- export of locally manufactured goods or local GST-paid goods
- export of goods from the Free Trade Zone (FTZ)
- export of dutiable goods from a licensed warehouse
- export of non-dutiable goods from a zero-GST warehouse, and goods under the Major Exporter Scheme
- re-export of goods imported under the Temporary Import Scheme
- temporary export of goods intended to be re-imported
Do note that a strategic goods export permit is required for the export of goods controlled under the Strategic Goods (Control) Act.
Certificates of Origin
Another aspect to take note of if you are an exporter is the Certificates of Origin clause. A Certificate of Origin (CO) helps to attest the origin of goods. There are two types of COs, namely ordinary COs (also known as a non-preferential CO) and preferential COs.
Ordinary COs are issued by Singapore Customs or any of the authorised organisations including Singapore Chinese Chamber of Commerce and Industry, and Singapore Manufacturing Federation. These authorised organisations issue ordinary COs for locally manufactured or processed goods, and goods from other countries which are re-exported from Singapore. However, they do not issue ordinary COs for the export of Singapore-origin textiles and textile goods to the United States of America.
A preferential CO allows your buyer to pay lower or no customs duty when you export your goods under a Free Trade Agreement or Scheme of Preferences. These are issued only By Singapore Customs. Additionally, the back-to-back preferential CO is issued by Singapore Customs for the re-export of goods based on the preferential CO issued by the first exporting party. The goods must be imported into Singapore and meet the conditions for it to be issued.
An exporter can use the FTA Cost Statement Calculator for a preliminary assessment of the qualifying value content and/or Change in Tariff Classification status of the manufactured good under a specific Free Trade Agreement, after the applicable origin criterion(a) for the good under the Agreement has been identified.
So in summary, the procedure for obtaining COs is:
- register your manufacturing premises
- submit the manufacturing cost statement
- apply for CO via TradeNet
- collect the CO
4) Applying for Inter-Bank GIRO
Another important thing to note is that you must maintain an Inter-Bank GIRO (IBG) account with Singapore Customs to facilitate the payment of duties, Goods and Services Tax (GST) and other fees to Customs directly. The application usually takes 3 to 4 weeks for the bank’s approval. Once it is approved, you will receive a notification by fax or email depending on the contact details provided in your Customs Account.
5) Security Lodgement requirement by Singapore Customs
Do note that a trading company in Singapore, is required to furnish security for if it engages in – transactions involving dutiable goods, temporary import of goods for approved purposes, or operation of licensed premises such as licensed warehouses and excise factories. Singapore Customs may vary the security lodgement amount on a case-by-case assessment which may be also for regulatory compliance requirements and revenue protection purposes.
6) Procedure for clearance of goods
Approved permits are issued with a validity period. You should ensure the validity of the permit presented for goods clearance. For imports/exports of containerised cargo, the container number and shipper seal number are required when applying for a permit.
For imports of containerised cargo by sea, you are not required to present the printed copy of the customs permit and supporting documents to the checkpoint officers at the entry points. But for import of containerised cargo by air or land, you are required to produce the permit and supporting documents such as invoice, packing list and Bill of Lading/Air Waybill, to the checkpoint officers for verification.
For exports of containerised cargo, please produce the cargo with the approved Customs export permit and supporting documents such as invoice, packing list, Bill of Lading/Airway Bill, to the checkpoint officers if it is specified in the permit conditions or if the cargo is dutiable or controlled. Please have the permit number at the point of cargo lodgement for verification purposes.
Please note that partial clearance is not allowed for goods departing Singapore via Woodlands and Tuas checkpoints. You should submit one permit application for each container or vehicle of cargo.
7) Letter of Credit
In Singapore almost all traders resort to Letter of Credit (LC) which eliminates the risk of non –payment against delivery for the seller and risk of non-delivery against payment for the buyer. It is a letter of undertaking from the buyer’s bank to pay an exporter, through the exporter’s bank, for goods on behalf of the buyer.
8) Global Trader Programme
Another scheme is the Gloal Trader Programme which offers reduced corporate tax rate of 5% or 10% on qualifying trading income for three or five years to well-established international trading companies committed to expanding their operations in Singapore. The GTP is only available to companies which conduct substantial international physical trading activity, invest significant directly attributable local business spending and employ experienced trading professionals in Singapore.
9) Trade Facilitation Scheme
Under this scheme, IE Singapore enters into risk sharing arrangement with the Asian Development Bank (ADB) and Swiss Re Corporate Solutions, to increase the capacity for credit guarantees to Singapore-based banks for protection against the non-payment risks of overseas issuing banks. Thus, the scheme is aimed to help address market gaps in trade financing for Singapore-based companies in emerging markets.
10) Trade Credit Insurance Scheme (TCIS)
TCIS is a financial assistance programme under IE Singapore’s Global Company Partnership (GCP) programme. It’s a tool for companies to protect their cashflow against non-payment by their buyers, thus allowing them to acquire new customers with greater confidence. Moreover, companies can also use TCI as additional comfort for their lenders in order to enhance their access to trade finance and working capital loan. The scheme enables qualifying Singapore companies to receive premium support for TCI policies. International Enterprise (IE) Singapore will support up to 50% of the minimum premium for TCI policies held with Singapore-registered credit insurers. This is subject to a maximum amount of S$100,000 per qualifying Singapore-based company. To qualify, the company must:
- have its Global HQ in Singapore
- turnover of applicant company and subsidiaries must not exceed S$100million
- the minimum paid-up capital is S$50,000
- must have at least three managerial staff who are Singaporeans and PRs