By Laetitia Dubois Crochemore, Vario based in Singapore
Singapore has enjoyed a huge boom in prosperity and popularity over the last decade, experiencing huge economic growth when much of the globe has been in recession. So it’s no wonder more and more people are looking to start their own business in Singapore. But is it possible with just a Dependant’s Pass? Our Vario Laetitia Dubois Crochemore explains how.
Many expatriate spouses see expatriation as an opportunity to create their own business. Until Spring 2016, it was very easy to have your own business in Singapore with a Dependant’s Pass, however, the possibilities of establishment are now more restricted.
Before May 2016, setting up your own business as an expatriate spouse under Dependant’s Pass (DP) was possible by creating a Sole Proprietorship and applying for Letter of Consent (LOC) to work as an employee. Since then, the MOM (Ministry of Manpower) has revised the rules and this option is no longer allowed. Indeed, only Singaporean citizens, Permanent Residents or Entrepass holders can now register this structure.
There are now two options to setting up a business entity in Singapore:
Become Permanent Resident or hold an Entrepass:
Become a Permanent Resident (PR)
The application must be made by the spouse who has the work permit. It can be done online at the ICA (Immigration & Checkpoints Authority) website. The application is quite complex but achievable. The PR status is granted for 5 years for all the family (children under 21 years old). Beyond that, if you wish to keep this status, a renewal request must be made.
Officially, the procedure takes between 4 months to 6 months upon receipt of completed application. However, it can actually take up to 12 months.
Relevant skills, diplomas, employment and financial history are all taken into account. It also helps if you:
- belong to a niche sector that requires highly qualified staff
- have skills to bring to the local workforce without competing with them
- are under 50 years old
- have qualifications from reputed institutions
- have family ties in Singapore,
- volunteer and contribute to your neighborhood and local community
- have worked in Singapore for at least 12 months
It should be noted that this status gives the Singaporean Government rights. If you have male children, they will have to do the Singapore 2-year military service (plus 40 additional days in future years).
The conditions and eligibility criteria for the Entrepass are strict, which makes it difficult to obtain. To obtain it, certain criteria listed by the MOM must be fulfilled in one of these 3 categories: “Entrepreneur”, “Innovator” or “Investor”.
The alternative solution: The Private Limited Company
This company may consist of one or more partners, the maximum being 50. It is a separate legal entity, the partners are responsible for their contributions. The minimum capital is 1 SGD however the highly recommended amount is SGD 50,000. Indeed, the practice shows us that for reasons of daily management and salary payment (especially if you want to apply for an Employment Pass: EP), this amount of capital is arguably essential. In addition, some banks request at the opening of the bank account a minimum deposit.
The company must be headed by a board of directors. At least one director is required. One of the directors must be “ordinarily resident in Singapore”. This means for the ACRA (Accounting and Corporate Regulatory Authority) a Singaporean citizen, a Permanent Resident (PR), an Entrepass holder or a holder of an EP under very strict conditions.
A company secretary must be appointed, this must be a person having his principal residence in Singapore. The function of company secretary may be exercised by a sufficiently experienced employee of the company. If the company has only one director, he can not be designated company secretary. They will be responsible for the management of the accounting records, company records, records retention and relations with ACRA. In smaller structures, this is often a lawyer or an accountant.
The company must keep accounts and file its annual accounts with ACRA. Beyond certain thresholds (turnover, assets, number of employees), these accounts must be audited by an auditor (with expenses borne by the company).
In regards to taxes, corporate tax rate is 17%. Exemption schemes exist for the first 3 years up to 300,000 SGD per year (Partial Tax Exemption and Tax Exemption for new start-up companies). Here again, certain thresholds and conditions must be respected.
This structure is quite complex and expensive. It requires the appointment of a director meeting certain criteria, which means that the DP Holder can not be alone in managing his business. However, currently it is the structure directly accessible to DP holders.
It should be noted that for certain activities, regardless of the entity selected, a business license application or special permit will be required.
To date, there is no room for change regarding a possible backtracking for the Dependant’s Pass holders wanting to start their own business with a Sole Proprietorship and a LOC.
The option recommended and mostly retained is the Private Limited Company.
Many people have been forced to give up their projects in the face of these new rules and being a freelancer in Singapore under a Dependant’s Pass is but a dream today.
It’s worth noting that each case is different and has its own exceptions. This article provides general advice. You should seek professional advice for your own circumstances.
This article was contributed by Laetitia Dubois Crochemore, one of our Varios based in Singapore.