How To Start a Trading Company in Singapore - The Complete 2024 Guide
A trading company is a business entity that operates in importing and exporting goods to and from a country.
Your company may be operating as a trading company if you're:
Importing goods from other countries for local consumption
Exporting goods made in your home country, or goods imported into your home country, to overseas markets
If you are planning to open a trading company in Singapore, this article will guide you through the process and tell you everything there is to know about setting it up.
What Are the Benefits of Starting a Trading Company in Singapore?
Opening up a trading company in Singapore offers up many benefits, such as:
Ideal Location - Singapore is located strategically within the ASEAN region, so much so that it opens you up to various import and export opportunities to other ASEAN countries easily.
Access to World-Class Technology - Singapore's infrastructure is one of the best in the world, so you also get to take advantage of the technological advancements made by the country.
Anti-red Tape Policies - Singapore's government is bureaucracy-free and transparent. The country ranks as one of the least corrupt countries globally, so it comes as no surprise that foreign companies are trying to set up their businesses in the country.
Ease of Company Registration - Singapore makes it easy for you to open and maintain a trading company because of the minimum capital required, and the company registration process is straightforward. Trading companies also enjoy attractive corporate tax rates.
Various Tax Incentives - You can enjoy different tax incentives as a business owner here in Singapore. A local or foreign entrepreneur may even enjoy tax exemption benefits as long as they qualify for them.
How Do You Set Up a Trading Company in Singapore?
Step 1 - Company Registration
Any future Singapore company, regardless of their industry, will go through the exact first step, which is company incorporation (or registering the company). Business structure does not matter as well. It can be a sole proprietorship or private limited company, depending on preference.
In Singapore, these are the business structures suited for opening up a trading company:
Sole Proprietorship - The simplest form of business structure, but also the riskiest. A sole proprietorship does not equate to a separately incorporated business entity, meaning both the business and owner are treated one and the same.
Partnership - This is a business structure made for two or more people who co-own the business. Partnerships don’t have legal existence separate from the partner, so they can be dissolved through retirement, death, or incapacity of a partner. There are three types of partnerships:
General Partnership is formed by two people, up to a maximum of twenty persons. Partners pay their tax as personal income tax based on the shared income from their partnership
Limited Partnership is an alternative form of the general partnership. Limited partners’ liabilities are limited to their investment in the partnership, regardless of its capital or property, or both.
Limited Liability Partnership is an advanced form of partnership that enjoys the benefits of a corporate structure (such as Pte Ltd) but operates with the flexibility of a partnership.
Private Limited Company - Otherwise referred to as Pte Ltd, this is the most preferred business structure for privately incorporated companies in Singapore because of its flexibility, scalability, and robustness.
Company registration is done through the Accounting & Corporate Regulatory Authority of Singapore (ACRA). This is the national government regulatory agency that monitors all business entities and public accountants. The agency mandates that all companies operating within the country of Singapore need to be registered under the Singapore Companies Act and follow its rules and regulations.
Your critical requirements for registering a company in Singapore are:
Must have at least one shareholder (individual or corporate entity)
One local director (can be Singaporean, a Singapore permanent resident, EP holder, or DP holder)
One resident company secretary
Initial paid-up share capital of S$1
Physical Singapore office address
You can learn more about the requirements and business structures in our detailed Singapore Company Registration Guide.
Step 2 - Activate Your Singapore Customs Account
As a Singapore trading company, you need to register with Singapore Customs. Any company that aims to import, export, or carry out trans-shipment activities in Singapore must register as an importer/exporter, common carrier, and others.
You need to register with your company's Unique Entity Number (UEN), which is given to you after registering your company with ACRA. You can activate your customs account for free, and it can be done on the same working day.
Step 3: Apply for Customs Permits
Once your customs account is activated, you can now appoint a declaring agent to apply for a Customs Permit (or permits) via TradeNet on your behalf.
A declaring agent is an entity that files an application for a permit on behalf of the trading company. Declaring agents will charge you a service fee if you do decide to work with them. You can find the list of declaring agents right here.
Permit applications are S$2.88 per application, but you will be required to provide supporting documents relating to your proposed import/export activities for five years after your Permit has been approved.
Important Changes to Trading Companies in 2024
Several changes might affect starting a Trading Company in Singapore in 2024:
GST Rate Change: Starting from 1 January 2024, Singapore's goods and services tax (GST) rate has been raised from 8% to 9%. This change will impact pricing and cost considerations for trading companies.
Resident Director Requirement: As per the standard requirement, at least one company director or authorized representative must be a resident of Singapore.
Taxation of Gains from Foreign Assets: Singapore has proposed a new Section 10L to tax gains from the sale or disposal of foreign assets, which is expected to come into force from 1 January 2024. Trading companies dealing with foreign assets should consider this change.
Increased Regulations: Offshore law firms faced increased regulations and onshore competition from "Cayman-style" funds in 2023. This trend could continue into 2024, affecting trading companies considering offshore operations.
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For Import and Export of All Goods
Importing all goods into Singapore requires an IN Permit, acquired via TradeNet. This Permit covers both non-controlled and controlled items. For the export of all goods, you need to obtain an OUT Permit.
When Do You Need to Obtain IN and OUT Permits?
Before the export of any goods via rail or road, or if goods are classified as controlled goods
Within three days of export, if goods are transported by sea or air or classified as non-controlled goods
Before importing goods previously imported under the Temporary Import Scheme
Before exporting goods classified under the Temporary Export Scheme
There are special cases where import and export can be done without a permit. One example is the import or export of uncontrolled items that don't exceed S$400 in total CIF value (Costs, Insurance, and Freight).
For Import and Export of Controlled Goods
Controlled goods are goods subject to control by various regulating agencies. Examples are tobacco products, drugs, petrochemicals, and animals and food products, to name a few.
For the import and export of controlled goods, you need to acquire an IN and OUT permit, which you can apply for through specific governing agencies or your freight forwarder and cargo agency for approval and processing.
For Import of High-Technology Items
Importing high-technology items into Singapore is heavily regulated, so the importer from Singapore may need to provide an Import Certificate and Delivery Verification (ICDV). You can acquire the ICDV via Singapore Customs. Items covered by the ICDV must not be diverted to any other country but instead only imported directly to Singapore.
For Export, Transit, or Transshipment of Strategic Goods
Strategic Goods Control (SGC) TradeNet Permit is required if you intend to export, transship, or bring in Strategic Goods. These goods are regulated by the Strategic Goods (Control) Act. This act includes all technologies and products that are going to be used for weapons of mass destruction.
For Export of Local Goods
Exporters must show a Certificate of Origin (CO) to buyers to prove that the goods exported are made in Singapore.
There are two COs:
Ordinary Certificates of Origin - Satisfies buyers that the products are obtained, produced, and manufactured locally in Singapore.
Preferential Certificates of Origin - This document helps improve exports' competitive edge by allowing buyers to claim preferential tariff treatment during the importation process (from Singapore to the buyer's country).
You can apply for a Certificate of Origin via TradeNet or via freight forwarding or cargo agencies.
Taxes and Fees
As a trading company, you must understand the various taxes and fees associated with importing and exporting all goods to and from Singapore.
Customs and Excise Duty
If certain goods were manufactured or imported into Singapore, then they are affected by customs and excise duties. These goods are classified as dutiable goods.
Dutiable goods include:
Tobacco products
Intoxicating liquor/alcohol
motor vehicles
Petrochemicals/petroleum products
And more.
Duties are levied on an ad valorem basis or a specified rate. By definition, the ad valorem tax rate is based on the value of the property and imposed during the time of transaction. Property tax levied on real estate properties is a good example of an ad valorem tax.
Imported goods are based on ad valorem rate, which is usually the percentage of the value of imported goods. In contrast, a specific rate is a specific amount per unit of quantity or weight (e.g. S$300 per kg).
Duties can be suspended temporarily through different Customs schemes up to the point of consumption.
Wines that are consumed in conferences and exhibitions and approved by the Meetings, Incentives, Conventions, and Exhibitions (MICE) Incentive Scheme (“BE In Singapore - BIS") may be exempted from duties as long as they meet qualifying conditions.
Another example of goods exempted from excise duties are motorized bicycles that are not registered as scooters or motorcycles.
Goods and Services Tax
Goods imported into Singapore are also subject to Goods and Services Tax, currently at a rate of 7%. GST is charged by the Inland Revenue Authority of Singapore (IRAS) and collected by Singapore Customs. Like customs and excise duties, GST is also payable on an ad valorem basis for all dutiable and non-dutiable goods.
GST is computed based on CIF (Costs, Insurance, and Freight) value plus other duties and chargeable costs, regardless if it's listed on the invoice or not.
GST may be temporarily suspended under various Customs schemes. Using the same example, wines that are used in exhibitions mentioned above can be exempted from GST.
As an importer, you can also charge your customers GST if you register to collect GST with IRAS. You get a GST refund on the GST paid on the imports if they are exported out of Singapore later.
Singapore Customs Fees
As an importer or exporter of goods, you are subject to various Singapore Customs fees for your transactions.
You can efficiently pay all procedural and administrative fees, and even GST, to Singapore Customs via GIRO. You only need to authorize Singapore Customs to deduct directly from your bank account.
How To Maintain an Inter-Bank GIRO
For any payments for taxes, fees, customs fees, or excise duties you incur in the course of your trading activity, you'll need to maintain an InterBank GIRO. You can set up the company inter-bank GIRO by completing the Inter-Bank GIRO form and mailing it to Singapore customs. You can refer to this guide on how to set up your Inter-Bank GIRO.
If you don't have an Inter-Bank GIRO set up, the fees and duties are deducted from your Declaring Bank's Inter-Bank GIRO instead. Declaring Agents are mandated to maintain Inter-Bank GIRO with Singapore Customs.
Trade Financing and Insurance
As a trading company, you can also apply for various financing and insurance services to help grow and sustain your business.
These are the common sources of funding for trading companies in Singapore.
Letter of Credit
Letter of Credit (LC) is commonly practised in Singapore. The LC allows the buyer's bank to guarantee the payment to an exporter. This is usually the preferred payment method for both exporters and buyers because the former's payment is secured before shipping out the goods. Likewise, the buyer doesn't need to make any payments until goods are received.
You can also go for other financing options that require LC.
Back-To-Back LC - This is preferred when an exporter needs to acquire goods from another third-party provider to help fulfil the buyer's order. In this case, the exporter will secure an LC from his bank based on the original LC of the buyer.
Trust Receipt - Importers can apply for a loan for a bank based on the LC and the goods they will receive.
Packing Credit - This is a loan or overdraft privilege based on LC. Packing Credit comes in pre-shipment financing (payment is made once goods are shipped) or post-shipment (reimbursement is made once the buyer pays for the goods shipped).
Loans
Banks in Singapore are recognizing a trading company's contribution to the growth of the country and its respective industry, so they're more than happy to provide competitive trade financing services to importers and exporters.
As a trading company, you can avail of these financial services from banks:
Revolving Line of Credit - This can be arranged with a bank where you have an agreed amount available of use to you for a fee. You can withdraw and top up the funds regularly.
Term Loans - This is a loan available to you and made against a collateral subject, which is subject to approval by the bank.
Transaction Loans - This is a loan obtained to help finance a confirmed order and is subject to the company's creditworthiness when they place the order.
Inventory Financing - This is a loan that is obtained against unsold inventories.
Overdraft - Overdraw involves withdrawing over your current account based on the maximum amount agreed between the bank and you. You only pay interest on what was overdrawn.
Factoring Loans - If your company has outstanding invoices, you can apply for instant payment for these invoices from banks and other financial institutions. You'll be charged a fee of 15% when these banks or agencies collect payments from your clients.
Insurance
Trade Credit Insurance (TCI) can protect trading companies against the risk of non-payment by buyers rising from non-commercial and commercial risks. When buyers default payment further than the due date and grace period that was agreed upon, then the insurance company pays once the claim has been made and validated.
Depositing and Storing Goods
Trading companies are also expected to understand the processes of storing and depositing goods in Singapore.
Free Trade Zones
Free Trade Zones are found in Singapore's airports and seaports. These are designated areas where GST and duties are temporarily suspended for imported goods. You only pay taxes and duties once these goods leave the FTZ and enter Singapore territory for local use or consumption. All dutiable goods are stored in the FTZ except cigarettes and liquor.
FTZ can help you manage your cash flow better if you import goods for re-exporting because you don't have to pay for the GST and duties on these imports.
Goods delivered into the country via rail or road are not deposited into FTZ so these goods will be subject to taxes and duties.
Licensed and Zero GST Warehouse
Dutiable goods and non dutiable goods can also be stored in licensed warehouses and Zero GST warehouses. GST and other duties payable for these goods are suspended until these goods are removed from the premises and moved into the local market for use or consumption.
Clearance of Goods
Two agencies are responsible for the clearance of importing and exporting goods - Immigration and Checkpoint Authority (ICA) and Singapore Customs.
ICA officers inspect cargo, vehicles and persons entering Singapore
Any custom and trade matters will be referred to and handled by the Singapore Customs
Clearance procedures will depend on the mode of transport and type of cargo, as listed below:
Export Clearances for Conventional and Containerized Cargo
Dutiable and controlled goods need to obtain a Customs OUT Permit from Customs or the Controlling Agency, as needed, before export. This Customs OUT Permit is presented to the Immigration and Checkpoints Authority (ICA) officers at the exit checkpoint for clearance of goods.
Controlling Agencies, or controlling authorities, are the branches of government offices responsible for the monitoring of importation and possession of prohibited goods. Refer to the ICA’s list of Controlling Authorities here.
The Customs Seal is placed on the cargo if any. These seals are verified by the officers present at the ICA checkpoint before releasing the goods.
To export non-dutiable or non-controlled goods by air or sea, the trading company needs to clear cargo first through the checkpoint and declare the Customs OUT Permit within three days of exporting. A Customs OUT Permit should accompany goods exported via road during clearance.
Import Clearances for Conventional Cargo
For importing conventional cargo, you'll need to present a Customs IN Permit, or import authorization, with supporting documents such as a packing list, bill of lading, and invoice to the ICA officers at the entry checkpoint.
Importing goods for local consumption will require the payment of duties and GST before they can be released.
Import Clearances for Containerised Cargo
There are two types of containerized cargoes
Less Than Full Container Load (LCL) is a container with goods from more than one consignor or goods for more than one consignee.
Full Container Load (FCL) is a container for goods for one consignee or from one consignor.
Before removing these containers from the FTZ or Free Trade Zone, you'll need to obtain the relevant Customs Permits. Refer to Step 3: Apply for Customs Permit.
The clearance procedures for containerized cargo differ from those of the conventional type.
Procedure for FCL Containers
FCL containers usually are not unpacked or unstuffed in the FTZ. Containers that require Customs examination are sealed at their respective FTZ Out-gates. Once the sealed containers are trucked out of the FTZ, the consignee or their transport agent needs to make arrangements with Singapore Customs for the supervision of unstuffing the containers.
Customs seals placed on the containers when they were imported (by the time they arrive in Singapore) should not be broken without Customs supervision or written permission from Customs.
For containers that don't require a Customs examination, these will be given a Sealing Not Required (SNR) facilitation and released by ICA officers without being sealed. The risk here is that unsealed containers may be unpacked at any time by anyone without Customs supervision.
Procedure for LCL Containers
LCL containers are unpacked in the FTZ and cleared through the Out-Gates as conventional cargoes. No sealing is required here, so no Customs Supervision is necessary for unpacking containers in the FTZ.
Closing
Singapore continues to be one of the best places in the world to start a company. The government's anti-red tape stance, combined with competitive access to the ASEAN market and the country's technological advancements, have made it enticing for local and foreign entrepreneurs to start their companies here.
Starting a trading company here in Singapore will be pretty easy if you have the correct paperwork and capital.
Piloto Asia will also be more than happy to help you with the company incorporation part of starting your company here in Singapore and work with you together with our local network of partners.
Frequently Asked Questions
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Trading companies in Singapore are required to follow the Singapore Financial Reporting Standards (SFRS). The SFRS are based on the International Financial Reporting Standards (IFRS), but there are some differences between the two sets of standards.
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Trading companies in Singapore are required to maintain accurate financial records and adhere to the Singapore Financial Reporting Standards (SFRS). They must also file annual tax returns. Piloto Asia offers accounting and bookkeeping services in Singapore to assist with these requirements.
Our services include setting up accounting systems, regular bookkeeping, financial reporting, and tax compliance, ensuring your trading company meets all regulatory standards while you focus on your business operations.
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To start a trading company in Singapore, you need to follow a few essential steps. First, you need to begin by registering your business with the Accounting and Corporate Regulatory Authority (ACRA) in Singapore. Next, it's crucial to open a corporate bank account, secure the necessary licenses or permits, and set up proper accounting and invoice systems. You also need to hire employees, set up an office space, and ensure compliance with Singaporean laws and regulations.
An integral part of the trading business is understanding the intermediate holding company meaning. Essentially, an intermediate holding company serves as a subsidiary of the parent company but it also has its own subsidiaries. This organisational structure is commonly used by multinational corporations to manage their operating companies in various countries effectively while controlling and consolidating their global operations. Operating under an intermediate holding company can provide your trading company with financial and strategic benefits, such as risk management, financial flexibility, and operational efficiency.
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Several corporate tax services are available in Singapore, including Tax filing and compliance, Tax planning, and Tax advisory. Accounting, law, and other professional services firms typically offer corporate tax services in Singapore. The cost of these services will vary depending on the complexity of the business's operations and the level of advice required.
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Estimated Chargeable Income in Singapore estimates a company's taxable profits (after deducting tax-allowable expenses) for a Year of Assessment (YA). The ECI is used to determine the amount of corporate income tax that the company needs to pay.
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To start a trading company in Singapore, you need to follow a few essential steps.
First, you need to begin by registering your business with the Accounting and Corporate Regulatory Authority (ACRA) in Singapore.
Next, it's crucial to open a corporate bank account, secure the necessary licenses or permits, and set up proper accounting and invoice systems. You also need to hire employees, set up an office space, and ensure compliance with Singaporean laws and regulations.
An integral part of the trading business is understanding the intermediate holding company meaning.
Essentially, an intermediate holding company serves as a subsidiary of the parent company but it also has its own subsidiaries. This organisational structure is commonly used by multinational corporations to manage their operating companies in various countries effectively while controlling and consolidating their global operations.
Operating under an intermediate holding company can provide your trading company with financial and strategic benefits, such as risk management, financial flexibility, and operational efficiency.
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When it comes to the formation of a company in Singapore, what sets Piloto Asia apart is our comprehensive and client-focused approach. Our deep understanding of the local business landscape allows us to deliver personalized services that make your company setup seamless and efficient. Our services include:
Company Registration: Guiding you through the entire registration process with the Accounting and Corporate Regulatory Authority (ACRA).
Securing Relevant Licenses: Assisting in obtaining any necessary permits and licenses for your business operations.
Opening Corporate Bank Accounts: Facilitating the setup of your corporate bank account with reputable banks in Singapore.
Providing a Registered Address: Offering a physical address for your company, which is a requirement for all businesses in Singapore.
Nominee Director Services: Providing nominee director services if needed, to meet local regulatory requirements.
We are dedicated to ensuring the success of your enterprise, making Piloto Asia the trusted partner for your business formation needs in Singapore.