5 common mistakes foreign entrepreneurs need to avoid in Singapore
5 minute read
Singapore has been working hard to improve its business environment and attract talented entrepreneurs with high potential from all corners of the world. Its economy is the second-best out of 190 economies in the world when it comes to the ease of doing business. This data was gathered by the World Bank annual reports and ratings.
However, just because this country offers great business conditions, it does not mean that mistakes do not happen. Take a look at the most common mistakes foreign entrepreneurs make when they come to Singapore to set up a business.
Mistake #1: Limited understanding of the legislation and obligations for foreign companies
The first thing foreigners have trouble understanding is the incorporation process in Singapore, which is a bit different compared to the majority of Western countries. That is why, as an entrepreneur, you should first find out what this process looks like and what needs to be done to successfully incorporate a company in Singapore.
The second most problematic issue for foreign businesspeople is filing the annual return. This is a document that every Singapore company has to file annually with the Accounting and Corporate Regulatory Authority (ACRA).
This document has important details of the company, such as the names of the directors, secretary, shareholders, and the date up to which the financial statements of the company have been prepared.
Filing taxes in Singapore is also a bit difficult for some foreign entrepreneurs. But why would you fail to deal with this properly if Singapore has one of the fairest and most business-oriented tax systems in the world, including low taxes and tax incentives?
Another law that is a bit difficult to understand is the law regarding employment agreements. To be precise, the main Singapore legislation that deals with the terms of employment agreements that a company signs with its employees is the Employment Act (EA).
Once the company is set up, and you start hiring your team members, it would be wise to look at the rules and conditions you have to follow when hiring. A company has to comply with the applicable obligations imposed on employers under the Employment Act.
Finally, it is also worth noting that all Singapore companies have to protect the personal data gathered from their clients, employees, and other individuals that deal with the company.
There are two basic regulations that deal with this issue:
- Personal Data Protection Act
- General Data Protection Regulation (GDPR)
Mistake #2: Limited awareness of the tax system
It is often hard for foreign entrepreneurs to gain thorough knowledge regarding the Singapore tax system. Due to this, some fail to understand that low taxes are not equal to no taxes at all. This is a costly mistake that is not easy to fix, so make sure to pay your taxes on time no matter how low they are.
Additionally, Singapore offers various tax incentives that can really make up for a significant boost and relief. As an entrepreneur, you definitely need to be aware of the incentives the government offers for your business type.
For instance, startups that satisfy certain requirements can claim tax relief on the first S$ 100,000 of chargeable income for the first three consecutive years of assessment.
Another good example of how an entrepreneur can benefit is the Not Ordinarily Resident Scheme example. A foreign entrepreneur can benefit from this scheme if they are always on the go and traveling for work.
This scheme means that the NOR taxpayer pays income tax only on that part of their employment income that correlates with the number of days he or she is in Singapore.
Mistake #3: Insufficient funds
Do not forget that even though Singapore ranks among the best places in the world to do business, it is also one of the most expensive places to live and work in. Many foreigners forget this once the money starts coming in. Do not make the same mistake because it can drive both your business and you to the ground.
According to the Economist Intelligence Unit’s Worldwide Cost of Living Survey, the cost of living in Singapore is the second on the list of the world’s most expensive cities for expatriates. Therefore, make sure you include a detailed budget plan in your business strategy.
When it comes to your business, you cannot allow having fewer funds than required, especially in the beginning. Inform yourself about business startup funding plans available for both local and foreign investors to avoid the problem of having insufficient funds.
Mistake #4: Employing the wrong people
Every now and then, foreign entrepreneurs struggle to attract the right talent to work at their companies in Singapore. This is especially difficult for talents that are either top performers or high potential employees. Keep this in mind once you start looking for your workers.
On top of that, Singapore employers also found that keeping the right talent for a long time tends to be difficult. Hence, it is important for a new business to hire but also invest extra efforts in the retention of its employees.
A smart thing to do would be to create a core team to look after the various functions of the company. These workers could be sent from the head office to train the Singapore team and also align them to the company’s vision and mission.
Mistake #5: Thinking you can do everything by yourself and not asking for help
Do not try to do everything by yourself if you don’t have to. Setting up a new business brings many uncertainties. Things sometimes just do not work out well for some reason and when you go at it alone, you are bound to multi-task, which is never a good thing.
The best way to go on about this is to consult or even hire an expert to help you through these difficult starting stages.
Many foreigners reach out to agencies that can incorporate their businesses in Singapore for them. This is a wise move since the paperwork can be a bit complex, and the whole process takes some time to complete.
Setting up a new business in Singapore is, without a doubt, an exciting endeavour. This could bring you a lot of great things in the future.
However, this process can also be a bit difficult. Not every entrepreneur is capable of handling it on their own. The best move one can make in this situation is to consult an experienced agency to lead them through the whole process.
Sleek can help you with incorporation and other administrative tasks that most people find difficult to handle. If you want to avoid mistakes and ensure a smooth passage through this starting phase, feel free to reach out to us.