• Acc Pro Singapore

What SMEs Need To Know About Singapore Compliance


What SMEs Need To Know About Singapore Compliance

What is compliance service?

Compliance services refer to hiring people or companies to help ensure that the company complies with industry standards, regulations, and laws. These services include maintaining these standards, communicating updates and changes to relevant laws, standards, and regulations, updating internal policies, and communicating internally. If the government enforces this as a non-optional requirement for companies in a specific industry, these services will become an involuntary cost for the company.


If you want to incorporate a company, you need to stay compliant with Singapore’s business laws and regulations, according to Chapter 50 of Singapore Companies Act. Also, this includes compliance with the annual filing requirements to the Accounting and Corporate Regulatory Authority (ACRA) and the obligations imposed by the Inland Revenue Authority of Singapore (IRAS), appointing a Data Protection Officer (DPO) and abiding by Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations.


Why do we need compliance in business?

The main purpose of compliance is simple, that is, to identify and avoid red flags that may appear in your business. Similarly, failure to comply seriously may result in costly fines or penalties in the future.


No business wants to get involved in major legal disputes and face criminal charges for failing to comply with law. When you don’t meet some compliance requirements, it can damage your company’s reputation. In other situations, you might face financial loss. Court hearings and appearances can cause huge problems for your business operations. Hire a compliance expert to ensure you understand all legal obligations and how to comply with them.


Statutory compliance requirements for Singapore companies

Listed below are mandatory business compliance for Singapore companies. We will help you understand all these responsibilities.


Statutory compliance requirements for Singapore companies

1. Registered office address

If you want to legally operate in Singapore, you should have a local registered office address, and it cannot be just a post office box number. Also, the office must be open and accessible to the public for not less than 3 hours during ordinary business hours on each business day.


2. Company secretary

The company secretary is the compliance officer of the company, and responsible for ensuring that the company complies with the relevant legislations and regulations. A company in Singapore must have at least one company secretary, who must be an individual ordinarily resident in Singapore. Furthermore, the office of secretary shall not be left vacant for more than 6 months at any one time.


A company cannot appoint a director as a Company Secretary if he or she is the sole director of the organization.


3. Have a local resident director

Your company must have at least one director who is ordinarily resident in Singapore, which means that the person must be a citizen or permanent resident. In limited circumstances, a foreigner with a valid Employment Pass (EP) can act as the resident director if that EP is for employment with the company for which he/she is a director. Any person above 18 years of age can be appointed as a director, but not be an undischarged bankrupt and not be presently disqualified from acting as a director by the Singapore authorities.


4. Personal data protection and data protection officer

According to Singapore Personal Data Protection Act (PDPA), every company is required to have a data protection policy and to appoint at least one data protection officer (DPO). For more information about DPO, please click here.


5. Display unique entity number (UEN) on certain documents and company name

When your company is registered in Singapore, the Accounting and Corporate Regulatory Authority (ACRA) will provide the company with a unique entity number (UEN). For instance, the UEN would be used when you are transacting with the Inland Revenue Authority of Singapore (IRAS) for GST or annual tax filing purposes. For more information about UEN, please click here.


A Singapore company must display its name and UEN on all company documents such as letters, invoices, statements of account and official company notices and publications.


6. Maintaining company registers and records

If a company wants to function efficiently and adhere to the statutory requirements, it is essential to maintain certain records and registers, as well as ACRA regulations.


With ACRA, the company is required to register and maintain up-to-date details of directors, chief executive officers, secretaries, and auditors. Also, the company must register with ACRA specific resolutions that bind a class of shareholders and any charges incurred on the company’s assets.


There are three types of registers:

  1. Register of substantial shareholders

  2. Register of registrable controllers (basically any person or entity that controls 25% or more of the company)

  3. Register of Nominee Directors – A nominee director is any director who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of any other person.

Private companies (with no more than 50 members) must promptly update the ACRA member (shareholder) register created when the company was established. Public companies must maintain their register of members at their registered office or another office (e.g., that of the company secretary) if ACRA is notified of the location of the register.


7. Business licenses and permits

The license your company requires depends on the nature of your business, as well as the activities and industries your company will engage in. Examples of business activities that would require special licenses include, but are not limited to private schools, travel agencies, liquor distributors, moneylenders, banks, childcare centres, importers/exporters, wholesalers, and retailers of liquors.


While incorporating the company, ACRA’s automated system will indicate whether another approval agency’s permission is required before starting the above-mentioned business.


8. Annual general meeting (AGM)

Every company should hold an Annual General Meeting (AGM) once every calendar year. Under Section 175 of the Companies Act, unless the company is exempted from holding an AGM or has dispensed with the holding of an AGM (see below for more details):

  1. 4 months in the case of a public company that is listed after financial year end (FYE)

  2. 6 months in the case of any other company after FYE

Under Section 201 of the Companies Act, for Private Limited Companies it also states that accounts presented at the AGM shall be made up to a date not more than 6 months before the AGM.


However, private companies can be exempted from holding AGMs if they send their financial statements to its members within 5 months from the company’s FYE. Dormant private companies that are exempted from having to prepare financial statements are also exempted from holding AGMs.


9. Annual returns with ACRA

In compliance with Singapore Companies Act, every company must lodge a return with the Registrar after its annual general meeting:

  1. In the case of a listed company, within 5 months after the end of its financial year; and

  2. In any other case, within 7 months after the end of its financial year

A company having a share capital and keeping a branch register in any place outside Singapore must lodge a return with the Registrar after its annual general meeting:

  1. In the case of a listed company, within 6 months after the end of its financial year; and

  2. In any other case, within 8 months after the end of its financial year

An Exempt private company (EPC) is a private company that has no more than 20 shareholders, none of which are a corporation. An EPC does not have their annual financial statements audited can complete a simplified annual return that does not require the submission of financial statements.


Also, a Singapore company must file an annual return with ACRA via the BizFile+ portal, unless exempted.


One of the most important elements of annual filing in Singapore is a financial statement of your company, and it need to be lodged in XBRL (eXtensible Business Reporting Language) format. Usually, the company’s financial accountants or auditors will convert the financial statements to XBRL.


A financial statement is written records that convey the business activities and the financial performance of a company. It should consist of:

  1. Statement of Comprehensive Income (i.e., Profit and Loss Account)

  2. Statement of Financial Position (i.e., Balance Sheet)

  3. Cash Flow Statement

  4. Statement of Changes in Equity

This must be prepared in accordance with Singapore’s financial reporting standards. The statement must be prepared based on the recorded transaction history.


Unless exempted, audited financial statements must be attached during the AGM.


Companies are required to file their ARs under s197 of the Companies Act (CA). Those who file AR late must pay a late filing penalty such as paying a composition sum of $300 per breach instead of facing prosecution.


In addition, a late lodgement fee will be imposed at the time of lodgement, for each return that is lodged late.


ACRA may prosecute the companies and/or directors that breach statutory obligation in court if:

  1. Companies and/or directors do not accept the offer of composition; or

  2. When ACRA decides not to offer composition for the breaches

For more information about the Annual General Meeting and Annual Return Filing Breaches, please visit here.


10. Accounting and bookkeeping

In Singapore, every company must implement the following accounting and bookkeeping compliance requirements:

  1. General bookkeeping

  2. Maintenance of the general ledger, accounts payable ledger, and fixed assets ledger

  3. Maintenance of accounts receivable

  4. Bank reconciliation

  5. Cash flow/budgeting

  6. Financial statements and monthly reports monthly

  7. Quarterly and annual reviews

  8. Books clean-up

  9. Management reporting and financial analysis


11. Designating of financial year end

All companies should determine a financial year end. The standard year-end in Singapore is 31 December, many companies will choose that date. However, this refers to the end of a company’s annual accounting period, which does not necessarily need to fall on 31 December every year.


A company’s first financial year must not be longer than 18 months unless the Registrar on the application of the company otherwise approves.


If your organization is a subsidiary of a holding company, your financial year end must correspond to the company’s financial year end.


12. Appointment of auditors

The directors of a company must appoint an auditor within three months from the date of incorporation, unless it fulfils all the following requirements:

  1. Annual turnover is less than S$5 million

  2. The total number of shareholders is less than 20

  3. All shareholders are individuals and not corporations

The company and anyone who fails to comply with any of the above, will be fined up to S$5,000 or imprisoned for up to 12 months, in addition to a default penalty.


13. Audit exemptions

Back in July 2015, ACRA amended the Companies Act through the Small Company Concept. Private companies are not subject to audit requirements; however, they can qualify for audit exemptions. Small companies, dormant companies, and small companies in a group can obtain audit exemptions in Singapore.


Eligible small companies need to fulfil two of the three following criteria:

  1. Have a total revenue of not exceeding S$10 million

  2. Total number of full-time employees must not exceed 50; or

  3. Total assets of the company should not exceed S$10 million

In addition to private companies, group companies, such as holding companies and their subsidiaries can also be exempt from audit compliance if they qualify as a small group. Still, companies that are exempt from audits need to prepare their financial statement annually.


14. Keeping of proper accounts and records

All Singapore companies must keep proper financial accounts and transaction records and maintain such accounts for at least 5 financial years.


15. Notification of changes

You must promptly notify ACRA of any changes within the company, such as any transfer of shares, increase or decrease in share capital, or the nomination or resignation of the officers of the company, which would include directors and the company secretary.


Before implementing any changes, be sure to consult a professional corporate service firm, because professionals would be able to advise you of the stipulated timeline as set out by the Companies Act. For certain changes, such as allotment of shares, companies are required to lodge the change with ACRA within 14 days.


Every company must also prepare and implement the necessary documentation to keep proper records in its minute book. In the case of share transfer, ACRA and IRAS need to be notified.


16. Payroll management

Managing your payroll can become a rather onerous process, especially when your number of employees starts to grow along with your business. To ensure compliance with the regulatory requirements, calculating, processing, and reporting payroll components such as government remittances, benefits, allowances, and deductions must be done with proper care.


Please also note that according to the Employment Act, companies must pay their employee’s correct wages within seven working days after the end of the wage period. Failure to pay wages in accordance with the provisions of the Act is illegal.


17. Comply with Employment Regulations

A Singapore company must comply with the Employment Act when hiring, maintaining, or laying off employees.


For employees that are Singapore Citizens or Permanent Residents, the employer is required to make contributions to the Central Provident Fund (CPF) fund. CPF is a mandatory retirement savings scheme for Singapore Citizens and Permanent Residents.


18. Comply with Disclosure Requirements

Under the terms of the Singapore Companies Act, every director of a company must disclose, whether directly or indirectly, if he/she’s interested in a transaction or proposed transaction with the company.


He/she must also declare whether he/she holds any office or property that might result in a conflict of interest with their duties as a director (for example, if he/she holds directorships or shares in a competitor company).


This is because a director has a right to influence the company’s decision-making and must not abuse his/she powers for personal gain.


19. Pay corporate tax every year

All companies must pay corporate tax on any taxable income from Singapore or foreign income remitted into Singapore.


Corporate tax must be filed annually by:

  1. 15 December if filing online; or

  2. 30 November if the company physically files the Income Tax Return


20. GST registration

The Goods and Services Tax (GST) is a consumption tax levied on most goods and services supplied in Singapore.


If a company’s annual taxable turnover exceeds S$1 million, it must register with the Inland Revenue Authority of Singapore (IRAS) for GST. In some cases, companies not reaching the turnover threshold may still register.


Once registered with IRAS, the company must charge GST on applicable goods and services at the prevailing rate.


Tax evasion penalties in Singapore

Acc Pro (Singapore) - Tax evasion penalties in Singapore

IRAS takes a serious view of non-compliance and tax evasion. Tax evasion involves unlawful ways to avoid paying taxes and is a criminal offence. According to the Income Tax Act, tax evasion may occur when a person deliberately:

  1. Failing to declare all assessable income

  2. Claiming deductions for expenses that were not incurred or are not legally deductible

  3. Claiming personal relief on fictitious dependents

According to the Goods and Services Tax (GST) Act, tax evasion may occur when a person:

  1. Claiming input tax on fictitious purchases

  2. Omitting output tax charged on local taxable supplies

  3. Claiming tourist refunds when not entitled to


What are the penalties for evading tax?

Under the Income Tax Act, taxpayers may face the following consequences depending on whether there is evidence of intent to evade taxes:


1. Without intention to evade taxes

  • Penalty up to 200% of the amount of tax undercharged

  • Fine up to $5,000; and/or

  • Imprisonment up to three years

2. With intention to evade taxes

  • Penalty up to 400% of the amount of tax undercharged

  • Fine up to $50,000; and/or

  • Imprisonment up to five years


Under the Goods and Service Tax Act, if you are found guilty of GST evasion and shall on conviction:

  1. Pay a penalty equal to 3 times the amount which the person collected or attempted to collect; and

  2. Be liable to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both


Reach Out to Acc Pro (Singapore)

Led by professionals in the field of regulatory compliance, we cover all compliance requirements of your company - bookkeeping and payroll, financial review, financial statements, taxation, corporate secretary, and Goods and Services Tax (GST).


Acc Pro (Singapore) is constantly kept abreast of Singapore’s regulatory compliance requirements. Contact us today to fulfil your compliance requirements.



References:

  1. https://www.aseanbriefing.com/news/audit-compliance-singapore-guide-foreign-investors/

  2. https://singaporelegaladvice.com/law-articles/filing-annual-returns-for-your-business/

  3. https://www.acra.gov.sg/how-to-guides/offences-prosecutions-and-penalties-for-companies/annual-general-meeting-and-annual-return-filing-breaches

  4. https://www.iras.gov.sg/contact-us/report-tax-evasion

  5. https://www.iras.gov.sg/taxes/individual-income-tax/tax-bill-and-payment/making-changes-after-filing-receiving-tax-bill/errors-in-tax-returns

  6. https://sso.agc.gov.sg/Act/GSTA1993?ProvIds=P1IX-