Setting up a recruitment business in Singapore This factsheet looks more closely at some of the key considerations for new businesses on entering the Singapore recruitment market. Trading structure options Recruiters setting up in Singapore typically have a choice of trading structures, including sole trader, joint ventures, branch, various types of partnerships, and companies. The choice of trading vehicle will normally be driven by a mix of factors, such as ease and cost of set-up, ongoing compliance burden, commercial factors, asset protection issues, local tax planning, group-wide tax planning, profit extraction issues and succession planning. Many recruiters choose a company, which requires, amongst other things, registration with the Accounting & Corporate Regulatory Authority (ACRA), a local registered office, and at least one local director and one shareholder.

Local entity and UK taxation Singapore has a simple and low tax regime, which adopts the territorialbased approach. The prevailing corporate tax rate is 17% of chargeable income after allowing for full or partial tax exemption (where applicable). Qualifying new start-up companies are entitled to tax exemption on the first S$100,000 and a further 50% exemption on the next S$200,000 of the normal chargeable income (excluding Singapore franked dividends). These exemptions are available to Singapore tax resident start-ups for each of the first three consecutive years

of assessment upon incorporation, subject to conditions. Companies which do not qualify for the full tax exemption scheme can claim for partial tax exemption on their normal chargeable income (excluding Singapore franked dividends) of up to S$300,000 – 75% of the first S$10,000 and 50% of the next S$290,000 (so the maximum partial tax exemption claimable is S$152,500). Unlike the full tax exemption scheme, there are no conditions attached for partial tax exemption. Singapore also offers a various range of other tax incentives, rebates and grants dependent on the size and the industry of companies. Singapore currently adopts a one-tier corporate tax system. Under the onetier corporate tax system, tax paid by a company on its chargeable income is the final tax. All dividends paid by a Singapore company are exempt from tax in the hands of the shareholders.

There is no capital gains tax in Singapore, and the Goods & Services Tax (GST) is rated at 7%. For overseas owned or controlled companies there will be a number of tax planning considerations, including initial funding, use of local losses, repatriation of profits and withholding taxes and transfer pricing. Recent changes in UK tax legislation have reduced the exposure to UK corporation tax for profits derived by a UK company from a subsidiary or branch located overseas. Dividends received by a UK company are generally exempt from corporation tax and this exemption applies to most foreign dividends, including those received from a company resident in Singapore, although there are certain anti-avoidance provisions designed to prevent, for example, the conversion of taxable trading income into exempt dividend income.

There is also an exemption from UK tax for the profits or losses of foreign permanent establishments, such as a branch located in Singapore. The exemption is by way of an irrevocable election. Other transactions between a UK company and its subsidiary in Singapore, such as the provision of goods and services and loan finance, will remain liable to UK tax and will be subject to UK transfer pricing rules, which require that they are on arm’s length terms.

Payroll taxes and compliance For resident individuals, personal taxation rates are progressive; from 0% on the first S$20,000, to a maximum of 20% on amounts over S$320,000. For non-resident individuals, employment income is taxed at 15% or resident rate, whichever gives rise to a higher tax amount. All other income will be taxed at 20%. Social security for Singapore citizens and Singapore Permanent Residents is paid to the Central Provident Fund (CPF). For individuals with ordinary wages over $1,500 per month to a ceiling of $5,000, the rates vary dependent on age from 5% to 20% for employees and 6.5% to 16% for employers. UK nationals do not need a visa for stays of up to a month, based on certain criteria. It is relatively easy for UK

nationals wanting to work in Singapore, however there is a need to register with the Ministry of Manpower (MOM) for an Employment Pass (EP). There are various forms of employment passes dependent on profession, qualification and monthly salary.

Local labour legislation The labour market in Singapore is less regulated than most. The labour regulation in Singapore is governed by the Employment Act and managed by the MOM, and provides minimum conditions of employment for businesses and employees. With low unemployment, currently averaging between 2% and 3% (well below UK and Europe rates), and limited population, the labour market is very competitive and very dependent on international talent.

Practical issues All entities and individuals that are engaged in employment agency activities in Singapore are governed under the Employment Agencies Act (cap 92) and require an Employment Agency Licence (EAL). Only Singapore citizens or permanent residents can apply directly for an EAL. Foreigners applying for an EAL must first obtain an Employment

Pass. Applicants must also be registered with the ACRA as owner/director of the employment business. There are two types of EALs for companies; a select licence and a comprehensive licence, dependent on the monthly base salaries of the candidates. Each requires a security deposit ranging between S$20,000 and S$60,000. The employees of comprehensive licence agencies need to attain a Certificate of Employment Intermediaries (CEI) by attending a course and passing a test. However, this requirement does not apply to the personnel of select licence agencies.

About Nexia International Saffery Champness and Nexia TS are members of Nexia International, a worldwide network of independent accounting and consulting firms that operates from over 100 countries. Nexia is ranked amongst the top 10 networks of its type worldwide by fee income. Our membership of the network significantly enhances our worldwide reach and the cross-border capacity available to our clients. The information in this factsheet is correct as of January 2014.

Richard Collis

Kristin Kim

Saffery Champness, UK

Nexia TS PAC, Singapore

T: +44 (0)20 7841 4000 E: [email protected]

T: +65 (0)65345700 E: [email protected]

Richard is a partner at Saffery Champness, based in London. He advises a range of recruitment clients, providing both taxation advice and planning to companies and individuals. Richard has considerable experience of both domestic and international financial reporting standards and is familiar working with international groups of companies and other professional advisers overseas.

Kristin Kim is a Director at Nexia TS. Kristin has been involved in providing audit and tax advisory services for public listed companies, multinational corporations, and small and mediumsized enterprises for many years, across various industries.

T: +44 (0)20 7841 4000 E: [email protected] www.saffery.com The firm is regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Saffery Champness is a member of Nexia International, a worldwide network of independent accounting and consulting firms. No responsibility for loss occasioned to any person acting on or refraining from action as a result of the material in this leaflet can be accepted by Saffery Champness. J5257