Notes on operating a startup business in Singapore

Introduction

Notes about operating a startup in Singapore for myself to reference from.

Guides and Resources

Government Schemes and Grants

Budget 2023

Find out which schemes a business may be eligible for at Budget 2023 - Budget Navigator (for Businesses) or visit the Budget 2023 page for businesses.

Business Grant Portal

Business Grants Portal is a government website that brings government grants for businesses into one place, so it’s easier to find and apply for the grants you need.

GoBusiness

A one-stop platform for integrated, personalised and seamless access to Government resources and services, GoBusiness supports businesses across various functions.

Whether you’re a new business owner or an experienced one, GoBusiness is here to support your needs.

Read the GoBusiness guide here.

GoBusiness.gov.sg is a government operated portal providing e-Services for businesses. Benefit from useful content like:

• start-up guides
• licensing overview
• access to over 300 government e-services
• GovAssist schemes

Get recommendations on over 100 government schemes to assist and support your business on GoBusiness.

There is a free online tool called e-Adviser for Government Assistance, which helps to recommend relevant assistance schemes for a business.

Learning and training resources

42 Singapore

42 Singapore offers an unparalleled educational opportunity to anyone in Singapore regardless of socioeconomic status and educational background. The concept created in 42 Paris has received tremendous traction in 47 campuses over 26 countries around the world, from Southeast Asia to North America.

eResources by NLB

Udemy Business

Udemy Business is an online learning platform that offers thousands of courses on key soft skills and technical topics such as Software Development, Leadership, Marketing, Sales, Programming, IT, and more.

Video Learning Portal (VLP)

VLP is a one-stop site with video contents curated by NLB staffs.

Useful services for your registered business entity

See [article by ACRA]https://www.acra.gov.sg/how-to-guides/before-you-start/useful-services-for-your-registered-business-entity)

Before Incorporation

Is the entry barrier of the selected business high enough?

Is there a high entry barrier to the business you have in mind? If not, business risks include the business being cloned by others and waging a price war against you. There is also a risk that your workers quit and set up a competing business after learning the ropes.

Pick a business that is suitable for your personality

From personal experience, if one is soft-hearted and passive, it is difficult to succeed in a rental collection based business. I used to operate a car leasing business serving GrabCar drivers. I thought the business model was pretty straightforward; just pump in the capital to purchase some vehicles, and then collect rent.

It turned out that renters were never timely in their weekly payments, always coming up with sob stories and family difficulties as excuses. They also had no money to pay up the insurance excess after getting into accidents and I had to absorb a lot of bad debts because I didn’t have the heart to push them too hard. I felt like I was running a charity instead of a business.

On hindsight, if the renters were doing ok financially, they needn’t have rented from my company and could have purchased a vehicle by themselves. I ended up winding up the business after a couple of years with substantial losses.

Business partners

what skill sets do the partners bring into the business?

Before agreeing to partner with someone, consider what value the potential business partner brings to the business? For example, is he a trained accountant, lawyer, software engineer etc

I would not partner with a person who only wants to inject capital, does not contribute to the business on a regular basis, and expects returns.

mismatch of business ethics and moral principles

Potential business partners may be willing to compromise on the quality and safety of products and services to maximise profits. Is this acceptable?

They may see nothing wrong in cutting corners, creating fake quotations for tenders, lying to customers, violating copyright and trademarks in order to win business. Is this acceptable?

See case study: Couple sentenced for cheating MHA into awarding them S$165,000 in building contracts with fake quotations [ChannelNewsAsia]

complement your personality

If you are a reserved and introverted person, it would be beneficial to have a business partner who is opposite in personality to front meetings with customers and is a go-getter.

foreign shareholders

• If partnering with non-Singaporeans, note that some government grants require a minimum percentage of Singaporean ownership.
• Foreigners who are not residing in Singapore, e.g. Social Visit Pass holders, don’t need to apply for an EP to be a registered director of a company. Source: www.mom.gov.sg

Profit and revenue projections

When projecting your profits, remember to factor in corporate income taxes on the numbers.

As of 2023, companies are taxed at a flat rate of 17% of its chargeable income. This applies to both local and foreign companies. Source: iras.gov.sg

Setup

Incorporation

Can incorporate by oneself at bizfile.gov.sg or a service provider like Sleek.

Office space

Things to consider:

• traffic options to the office
• peak hour traffic conditions

virtual offices

Do you need a physical office? If not, consider a virtual office to help collect letters

less known options

Apart from the usual real estate portals to look for a commercial/industrial space, other less common options to find units include:

• community centres (under People’s Association)
• HDB office and shopping complexes
  • Portal: HDB Place2Lease
  • if no suitable unit is available currently, can register for alerts using SingPass

reference URA Master Plan

The Master Plan is a statutory land use plan that guides Singapore’s development in the medium term over the next 10 to 15 years. Reviewed every five years, the Master Plan translates the broad long-term strategies of the Concept Plan into detailed plans to guide the development of land and property.

Operating

Courier services

Qdelivery

Sometimes, we need to send documents, or small packages like samples to partners. I typically use Qdelivery from Qoo10.sg.

Services include:

• QX Next Day Delivery
• QX Quick (3 Hours) Delivery from S$6.99
• International Delivery
  • used it to send items to Malaysia

Diversify supply chain

Target to have more than one supplier to avoid having a single point of failure in the supply chain.

Import

Delivered Duty Paid (DDP)

• seller must arrange for all transportation and associated costs including export clearance and customs documentation required to reach the destination port.
• buyer is responsible for unloading, it is important for the seller to make sure that any equipment needed to unload has been arranged for by the buyer.

Look for business opportunities

Subscribe to GeBIZ Alerts service via BizFile+. GeBIZ Alerts is an e-service offered by Enterprise Singapore which updates subscribers on the latest Government procurement opportunities posted on the Government Electronic (GeBIZ) portal, based on their preferences.

Marketing

AI generated content

• Adobe Firefly
  • generate images
• ChatGPT
  • generate marketing text, blogs
• DALL·E 2 (OpenAI)
  • generate images
• Image Creator from Microsoft Bing
  • powered by DALL·E
• Midjourney
  • generate images
• Microsoft Designer
  • generate images
  • design posters
  • design social media posts

Free stock photos

• Pixabay
• Unsplash

Salary matters

pay founders a salary too

Even if you own the company, you should pay yourself an employee salary.

Why it matters?

• during the COVID pandemic, there was a Job Support Scheme (JSS) that provided wage support for employers to retain their local employees. The government extended the JSS to include wages of employees who are also shareholders and directors of a company.
• even as a shareholder, one should be paid for the time invested and work done for the company. It makes it easier to figure out whether the company is doing well.

payroll calculation

If you don’t use a payroll system, it is very easy to make mistakes when calculating CPF, SHG and SDL contributions manually.

Useful tools to calculate CPF contributions when generating payroll manually:

• https://quickhr.co/cpf-calculator
• https://www.talenox.com/sg/cpf-calculator/

what payments attract CPF contributions?

Employers need to pay CPF contributions on wages payable to employees. Find out the definition of wages and how to classify them into Ordinary Wages and Additional Wages here.

Resources

• CPF 101 for Employers Chatbot
  • I initially thought this was a chatbot to ask questions but it is actually some Telegram bot providing bite-sized information about making CPF contributions.

Work Pass Exempt (WPE) activities

For partners/suppliers visiting Singapore for work pass exempted activities, we need to notify Ministry of Manpower (MOM).

Notes:

• notification can be done only after person is physically in Singapore
• it is a notification, and can be completed in one sitting. No need to wait for any reply from MOM
• notify MOM here
• list of eligible activities for a work pass exemption here. Examples include:
  • Installing, dismantling, transfer, repair, or maintenance of any machine or equipment.
  • Transfer of knowledge on process of new operations in Singapore.

Regulatory Compliance

Singapore Financial Reporting Standards (SFRS)

In Singapore, accounting standards are known as Singapore Financial Reporting Standards (SFRS) and are based on the International Financial Reporting Standards (IFRS)

Visit the Accounting Standards section on ACRA website to learn more.

The “Singapore Financial Reporting Standard for Small Entities” should be more relevant to startups.

Auto-Inclusion Scheme (AIS)

Submit your employees’ employment income information so that they can view their information when e-Filing their Income Tax Returns.

Late or inaccurate AIS submission may incur a fine of up to $5,000 for late AIS submission and a penalty of two times the amount of tax undercharged for an incorrect AIS return.

ECI (Estimated Chargeable Income)

Estimated Chargeable Income (ECI) is an estimate of your company’s taxable profits (after deducting tax-allowable expenses) for a Year of Assessment (YA). In order for you and your company to stay compliant with Inland Revenue Authority of Singapore (IRAS), every company is required to submit an ECI for the Year of Assessment within three months after the financial year ends.

More details on ECI on Sleek.com

Tax Matters

IRAS Accounting Software Register Plus (ASR+)

IRAS strives to meet the evolving needs of taxpayers by encouraging seamless tax filing.

To this end, IRAS has enhanced its partnership with the software developer community to provide a list of software that enables taxpayers to fulfill their tax obligations seamlessly.

Learn more about IRAS ASR+ on the IRAS website. You can also find a list of ASR+ certified accounting software.

They can help to make the filing of financial and GST reports easier.

Capital allowances

Capital allowances are deductions claimable for the wear and tear of qualifying fixed assets. They are generally granted in place of depreciation, which is not deductible.

Resource: www.iras.gov.sg

Tax treatment of capital gains

There is no tax on capital gains in Singapore.

Examples of capitals gains include:

• gains on sale of fixed assets
• gains on foreign exchange on capital transactions

Tax treatment of dividends to shareholders

Singapore has a single-tier corporate income tax system, which means there is no double-taxation for stakeholders. Tax paid by a company on its chargeable income is the final tax and all dividends paid by a company to its shareholders are exempted from further taxation.

Tax treatment of gifts given to employees for festive occasions

The gifts (e.g. red packets during Chinese New Year) are not taxable if they are not substantial in value and are generally available to all staff.

As a guide, a gift not exceeding $200 is considered to be not substantial in value. If the gift exceeds the exemption threshold, the full value is taxable.

How about CPF? Do we need to contribute CPF for red packets?

Yes. Such cash benefits will be considered as Additional Wages (AW), as it is not wages paid based on employee’s employment during that month.

References:

• iras.gov.sg
• CPF Board

Other tax related resources

• www.startupdecisions.com.sg
  • Singapore Corporate Tax Guide
• www.guidemesingapore.com
  • Singapore Corporate Tax Guide

Others

Business continuity in the case of unfortunate events (e.g. owner pass away)

Is the business able to continue and thrive if I am suddenly not around? What measures are there to ensure that my family members or other shareholders can take over the business without hiccups? E.g. store important information on a shared storage like OneDrive. Put passwords in a secure vault like ‘My Legacy vault’ on mylegacy.life.gov.sg.