Singapore has consistently ranked among the top countries in terms of ease of doing business due to its strong economy. Known to be strict, yet accommodating regulations, advantageous location, and outstanding infrastructure. With various options available for establishing a business, Singapore offers abundant opportunities.
In Singapore, companies can fall under the categories of limited or unlimited company, as well as public or private company. Private company can be further divided into Private Company Limited by shares and Exempt Private Company (EPC).
The focus of this article is on the process of registering Exempt Private Company in Singapore.
Exempt Private Company Limited by Shares Vs Private Company Limited in Singapore
As per Companies Act 1967 Section 4 (1) Exempt Private Company (EPC) is a private company with a maximum of 20 shareholders. None of the shareholders can be corporations. In other words, its shares cannot be held directly or indirectly by any corporation.
An EPC can also be a company which is wholly owned by the government, and which the Minister has gazzette as being an EPC.
In contrast, a non-EPC is a private limited company with more than 20 shareholders. It has a maximum of 50 shareholders including corporate shareholder.
A corporate shareholder refers to an entity, such as another company or corporation, that owns shares or stocks in a different corporation.
Advantages of Setting Up an Exempt Private Company (EPC)
There are several reasons why an EPC is an attractive business structure.
Here are few of the benefits of EPC:
Higher Tax Exemption
To boost the spirit of entrepreneurship and encourage the growth of local companies, newly-setup EPCs are given corporate tax exemption under the Start-Up Tax Exemption Scheme.
For Year of Assessment (YA) 2019 and before, a full exemption on the first $100,000 of normal chargeable income, and a further 50% exemption on the next $200,000 of normal chargeable income was provided for each of the first 3 consecutive years of an EPC’s operation.
From YA 2020 onward, 75% exemption on the first $100,000 of normal chargeable income and a further 50% exemption on the next $100,000 of normal chargeable income.
Tax exemption scheme for new EPC start-up company does not apply to companies incorporated after 25 Feb 2013 that undertake property development for sale, for investment or for both investment and sale (including single project company).
As a shareholder of an EPC, you are only liable up to your investment in the shares of the company.
Therefore, if the company is driven to liquidation, your personal assets cannot be seized to pay off the company’s debts apart from the amount you have invested in the company.
This is unlike other types of business structures, such as a sole proprietorship or a partnership. The owners or partners of these mentioned organisations are at risk of losing their personal assets since they have unlimited liability.
Simplified Compliance Obligation – Audit Exemption in Singapore
EPCs were previously exempted from having their accounts audited if they had an annual revenue of $5 million or lower. However, with effect from 1 July 2015, only “small company” is exempted from audit requirements.
A company is deemed a “small company” if:
- it is a private company; and
- it satisfies any two of the three criteria listed below for each of the two preceding consecutive Financial Years (FYs):
- Annual revenue does not exceed $10 million
- Value of total assets does not exceed $10 million as at the end of the FY
- The company has a maximum of 50 employees at the end of the FY
An EPC that satisfies the above criteria is likely to be exempted from audit, and consequently be able to reduce its operational and compliance costs.
Dormant Company: Dormant company, which has not conducted any accounting transactions during a financial year, may also be exempt from audit requirements.
How to Register Exempt Private Company in Singapore
Below are the requirements to register Singapore Exempt Private Company: –
- At least 1 shareholder – only individual
- At least one resident director (Singapore citizen, Permanent Resident, EP holder or Dependent Pass holder) who is at least 18 years old.
- At least 1 company secretary who must be a licensed individual resident in Singapore.
- Minimum paid-up share capital of at least $1.
- Singapore registered office address.
The total cost of incorporation of a company is $315, which includes a $15 fee for a name application as well as a $300 fee for registration via the Business filing portal of ACRA.
Requirements for Exempt Private Company:
You also need to be mindful of the filing and compliance requirements post-incorporation. Some of these requirements include:
1. Record Keeping and Bookkeeping
Company must retain the accounting records and transactions relating to its income, business expenses and purchases for a period of five (5) years.
Maintaining good bookkeeping records is crucial for several reasons:
- Financial Control: Accurate records help in monitoring the financial health of a business. It allows tracking income, expenses, and overall cash flow, enabling better decision-making.
- Compliance: Proper records ensure compliance with IRAS tax regulations and ACRA requirements. It helps in filing accurate tax returns and provides evidence in case of audits or legal disputes.
- Business Analysis: Detailed records provide insights into business performance. Analysis of financial data helps in identifying trends, areas for improvement, and opportunities for growth.
- Facilitates Planning: Good bookkeeping supports strategic planning by providing a clear picture of the financial status. It aids in setting realistic budgets and goals for the future.
- Credibility and Investor Relations: Well-maintained records enhance credibility with stakeholders, including investors, lenders, and partners. It provides transparency and builds trust.
- Easier Decision-making: Access to up-to-date financial information enables quick and informed decision-making. It helps in evaluating the feasibility of investments or expansions.
- Budgeting and Forecasting: Historical financial data aids in creating accurate budgets and forecasts. It assists in predicting future financial needs and potential challenges.
- Financial Health Assessment: Regularly updated records allow for the assessment of the business’s financial health. This is vital for making adjustments or taking corrective actions when necessary.
All EPCs are required to file annual returns. However, there are differences in the filing requirements for solvent and insolvent EPCs.
A solvent EPC is not required to file its financial statements with its annual returns. However, it may opt to file simplified annual returns if it meets the eligibility criteria as mentioned above.
An insolvent EPC, on the other hand, is neither exempted from filing its financial statements nor eligible for simplified annual returns filing. Instead, it has to file a full set of financial statements in XBRL format. It may also be financial statements highlights in XBRL format together with a PDF copy of the financial statements, when filing its annual returns.
3. Appointment of auditors
Companies are typically required to appoint an auditor within 3 months of incorporation. However, if your EPC fulfils the criteria of a “small company” as explained above, then it is exempted from audits and need not appoint auditors.
Ready to Venture Your Business in Singapore?
The process of registering a new company in Singapore can be an exhilarating experience. We are consistently available to assist in incorporating your company in Singapore, even if you’re overseas. Find out if you’re eligible to register Exempt Private Company. Our consultants are happy to work with you for registration of your company in Singapore.
Should you require further clarification on setting up an EPC, contact us.