A corporation that operates in importing and exporting goods to and from Singapore is defined as a trading company. A Singapore trading company can import goods from outside of Singapore into the country for local consumption or export goods made in Singapore or goods imported into Singapore to overseas markets.
Our guide below explains the basics and process of setting up a trading company. Relin Consultant is a Singapore company secretary specializing in Singapore company incorporation.
Our team can guide you through the process and advise you on everything you need to understand before setting up a company.
WHY SET UP A TRADING COMPANY IN SINGAPORE?
There are many benefits to setting up a trading company in Singapore. The country is deemed the leading global business hub in the world. Singapore’s well-developed infrastructure, stable political environment, and low tax rate are reasons investors choose to incorporate a company in Singapore.
Five Advantages For Starting Up A Trading Company In Singapore
Tax Incentives
One of the most attractive features of Singapore is the single-tier income tax and tax incentives available to Singapore-incorporated companies.
- The corporate tax rate for your Singapore company’s chargeable income is capped at the rate of 17%.
- Good and Services Tax (GST) is applicable in the case of a trading company. However, the GST rate in Singapore is fairly low, with a rate of 8% effective 2023. This is very low compared to other global average GST rates of 16.4% and 10.5% in Asia Pacific countries.
- Tax exemptions are available for qualifying new start-up companies for 3 consecutive Years of Assessment (YA).
Strategic location
Singapore is strategically located in Asia and provides companies with a gateway to the regional market. Setting up a trading company in Singapore allows you to tap into Singapore’s multiple free trade agreements while benefiting from its modern, efficient infrastructure. Singapore’s free trade zone also exempts duties and GST for goods stored within the free trade zone.
Strong economic fundamentals
Singapore is one of the few countries with a triple-A sovereign credit rating. The government has implemented a strong current account surplus and positive foreign currency reserves. The Singapore dollar is considered one of the world’s most stable and strongest currencies. Companies incorporated in Singapore can further enjoy economic stability.
Business-friendly technological infrastructure
Singapore has one of the most business-friendly environments. The government prioritizes technological advancement, evidenced by the nation leading in the Fintech industry.
Singapore government also offers various business grants, especially to the qualifying business industry involving research and development and innovation for IT. For example, the Research and Innovation Scheme for Companies (RISC) and Training Grant for Company (TGC) are given to promote the development of new technologies and industrial skills.
Comprehensive and fair Corporate Law
Singapore promotes a healthy competitive nature in the business economy through its comprehensive and fair corporate law. The stable political situation in Singapore also contributes to the cause. This can be seen from the fact that Singapore has a lesser corruption percentage compared to other Asian countries.
Based on the current Corruption Perception Index (CPI) from the official Transparency International, Singapore ranked fourth among 180 world countries with a high score of clean at 85% over 100%. As a result, Singapore is an ideal jurisdiction to venture into a trading company that involves a lot of governmental and customs matters.
STEPS TO START A TRADING COMPANY IN SINGAPORE
You can set up a trading company and commence operations in these 6 steps.
Step 1 – Register a Singapore Pte Ltd
Foreign investors wishing to set up a trading company must engage a professional firm such as Relin Consultants to assist with the incorporation application. The company registration can be done online without the investors traveling to Singapore. A Private Limited Company (Pte Ltd) is the most preferred business structure for trading companies in Singapore because of its flexibility and scalability.
Step 2 – Create a Singapore customs account
Once your trading company is officially registered in the Singapore company registry, you can create a Singapore customs account using the newly incorporated company credentials. Relin Consultants can assist you to create a Singapore customs account. If the company imports and exports goods in and out of Singapore, then a customs account is mandatory.
A Customs account can be opened within 1 to 2 business days after applying and the required documents.
Step 3 – Obtain the necessary licenses and permit
To import and export all goods (including controlled and non-controlled items) into Singapore, you must obtain an IN Permit through TradeNet® before goods are imported or exported from Singapore.
Licenses
- Obtain a license from the Competent Authority (CA) for controlled goods
- Classification certificate to identify restricted trading goods
- Warehouse license to store goods
Permits
- Import Permit called as IN Permit from TradeNet®
- Export Permit called as OUT Permit from TradeNet®
- Special Permit for export, re-export, and transporting goods called Strategic Goods Control (SGC) TradeNet Permit. This permit is regulated by Strategic Goods Act. This act also covers all movement for technological goods and weapons.
To operate the trading business activity in Singapore, you must apply for and secure the necessary license after the custom registration. These licenses and permits are conditional depending on your trade business operations.
If you have further inquiries regarding the license and permit requirements and setting up a trading business in Singapore, do not hesitate to reach out to us at enquiry@relinconsultants.com
OTHER REQUIREMENTS OF A SINGAPORE TRADING COMPANY
Create inter-bank GIRO account for tax and custom purposes
Companies undertaking import and export must maintain an inter-bank GIRO account. This arrangement will aid in the payment of duties, taxes, and other fees to the customs directly.
Thus, there will be no third party involved in the payment procedure, this is mainly to prevent corruption and legal goods movement in the trading business. A company can apply for the inter-Bank Giro to Singapore customs directly using the company’s corporate bank account if your bank is listed under the participating IBG banks in the Association of Banks in Singapore. The bank will take around 3 to 4 weeks to provide approval.
Secure a security lodgement for the imported goods
According to Singapore Customs, moving goods will require security deposits, especially if the trade involves dutiable goods, licensed warehouses or factories, and others. For example, liquor and tobacco products are required to have a security lodgement.
Hence, you must apply for a banker’s guarantee (BGG), finance company guarantee, or insurance bond using the security application form. This process can take up to three to four weeks.
For further information, you can visit the Singapore Customs webpage to guide you through the application process.
Apply for trade financing and insurance
Trading operations involve a lot of risks. Therefore, we strongly suggest you apply for trade financing and insurance coverage to reduce the risk in the future. In Singapore, the government is very attentive to these risks. You can minimize the risk in a trading business by applying.
- Trading companies can easily obtain funding through loans from most banks for the import/export industry. You can apply for an overdraft, line of credit, term loan, transactions loan, and many more, as Singapore also recognizes and appraises businesses involving trading.
- Your trading company can also apply for a letter of credit as a guarantor for ensuring the export and import activities. This letter of credit can reduce the risk by having the payment for the exporter guaranteed by the buyer’s bank. Thus, the payment for the exporter is secured before the goods are shipped, avoiding fraudulence.
- Apply for protection against non-payment using insurance called trade credit insurance. Trade credit insurance work as insurance to pay the seller if the buyer fails to pay for the trading payment after the due date and grace period. Singapore is conscious and proactive on this issue by initiating its TCI Program, International Enterprise Singapore, which can provide trade credit insurance at a highly appealing price rate.
Singapore trading company undertaking imports
- GST and duty are only payable for dutiable goods if these goods are imported for local consumption. GST and duties must be paid when the goods enter Singapore unless it remains in a free trade zone for reshipment.
- If the goods you intend to import are controlled goods or goods subject to restrictions by competent authorities (CAs) in Singapore, additional licensing is mandatory.
- GST and duties 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)
Singapore trading company undertaking exports
GST and duties are not levied on goods exported from Singapore.
If the goods you intend to export are controlled goods, they will be subjected to restrictions by competent authorities (CAs) in Singapore.
A Customs export permit is required for the 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, and temporary export of goods intended to be re-imported.
TAX OF A TRADING COMPANY IN SINGAPORE
Below is the taxation system for a trading company in Singapore
GST for imported goods
Trading goods that are imported into Singapore are subjected to a Good and Services Tax (GST). The GST rate in Singapore is capped at 8%. However, GST is exempted for goods that are listed under the qualification below:
- The goods are in Zero-GST Warehouses
- The goods are in Licensed Warehouses
- The imported goods are within the 9 Free Trade Zones (FTZs) in Singapore
- The goods are under the Major Exporter Scheme (MES)
Dutiable goods
Dutiable goods are goods that are subjected to custom and excise duties. Examples of dutiable goods are intoxicating liquors, tobacco products, petroleum products, and motor vehicles. These dutiable goods imported or manufactured in Singapore are imposed with customs and excise duties. For further information on the fees for each dutiable good, visit the Singapore Custom webpage to understand the calculation fees and rates. Same as the GST, dutiable goods can also be exempted under the qualifying criteria as below:
- The dutiable goods are in the Licensed Warehouses
- The dutiable goods originate within the 9 Free Trade Zones (FTZs) in Singapore
- The dutiable goods are under the Industrial Factory Exemption Scheme (a tax break scheme for manufacturers using dutiable raw materials in the manufacturing of non-dutiable goods)
Global Trader Programme
Global trader program offers a reduced corporate tax rate of 5% or 10% to qualifying trading companies for a period of three to five years. The companies must be established international trading companies committed to expanding their operations in Singapore.
CONCLUSION
Starting a trading business in Singapore is relatively straightforward, but a trading company in Singapore has various benefits. If you require further assistance in setting up a trading company, do reach out to our team.
