Trading Company in Singapore: Why and How to Set Up One
What is a Trading Company?
A trading company is an entity that engages in the import and export business. You are engaging in the import and export business if you intend to:
- Import goods into Singapore from overseas for local consumption or re-export; or
- Export goods from Singapore to overseas markets.
Trading companies are required to comply with certain regulations issued by the Singapore Customs. This article provides an overview of what you need to do if you wish to establish a trading company in Singapore.
Benefits of Setting Up a Trading Company in Singapore
There are many benefits to setting up a trading company in Singapore. The following are a few:
- Strategic location and excellent infrastructure: Singapore is strategically located and provides a gateway to the regional ASEAN market. Establishing a trading company in Singapore allows you to tap on Singapore’s trade links while benefiting from its excellent infrastructure, which can be used to ferry goods for import and export. Notably, Changi Airport is an award-winning airport and the Port of Singapore is the second-busiest in the world.
- Clear and transparent regulatory framework: Singapore has been ranked as one of the least corrupt countries in the world, and business owners benefit from a clear and transparent regulatory framework.
- Very low barriers to establishing a trading company: The process of registering a company for trading purposes is very straightforward and all procedures can be completed online. Moreover, the minimum capital required for establishing a company is only S$1 in Singapore. Companies in Singapore also enjoy highly attractive corporate tax rates.
How to Set Up a Trading Company in Singapore
Step 1: Register an entity
You will first need to register a business in Singapore. There are various types of business structures to choose from, but setting up a private limited company is the most common option.
Registration of a private limited company is done with the Accounting and Corporate Regulatory Authority (ACRA) through its BizFile+. Upon registration, your company will receive a unique identification number known as the Unique Entity Number (UEN).
If you are considering using an alternative business structure such as a sole proprietorship or partnership for your trading business, you should consider the business structure’s compliance requirements, minimum capital requirements, number of owners permitted, and whether the owner is personally liable for the debts of the business. This will help you decide which business structure is better suited to your needs.
For more information you may wish to refer to our other article on choosing a business structure.
Step 2: Activate the entity’s Customs Account
Prior to conducting any import and export activity, you must activate your entity’s Customs Account. Once your Customs Account is active, you can then transact with the Singapore Customs and submit applications for obtaining import or export permits (see below). The activation of your entity’s Customs Account is free.
To activate the Customs Account, log into the Singapore Customs’ Customs Account portal and submit an application to activate your entity’s Customs Account. This step can only take place after you have successfully registered an entity as you will need a valid UEN. You will also have to provide the particulars of a primary and secondary contact person who will receive all correspondence from the Singapore Customs.
You may be required to provide supporting documents such as copies of the applicant’s NRIC and the company’s certificate of incorporation.
You will be notified of the application outcome within 4 working hours.
Step 3: Check if your goods are controlled
Some goods, such as food products and medicines, are classified as “controlled” goods, and the import and export of these goods are subject to additional restrictions by the relevant agencies in Singapore.
For example, traders who wish to import or export food products are subject to the Singapore Food Agency’s regulations on the types of food that can be imported or exported. They are also restricted from carrying out import/export activities unless they meet certain criteria and have been issued a licence from the agency.
You can find out whether your goods are “controlled” goods by searching for the classification information of your goods on the Singapore Customs HS/CA portal. The portal also provides information on which agency is in charge of your “controlled” goods, so that you can approach it for more information on its requirements.
For more information on how to use this portal, please refer to the Singapore Customs’ website.
Step 4: Apply for a Customs permit to import or export goods
The next step is to apply to the Singapore Customs for a Customs Import Permit or a Customs Export Permit. This permit is required for the import or export of all goods, whether they are “controlled” goods or not.
Permit applications can only be submitted by Declaring Agents. The Singapore Customs defines a Declaring Agent as an entity that is making an application for a permit on behalf of the trading company.
You may wish to appoint a Declaring Agent to apply for a permit on your behalf for a service fee. The list of Declaring Agents can be accessed here.
Alternatively, if you do not wish to appoint a Declaring Agent, you can register yourself as a Declaring Agent and submit your own application for a permit. However, please note that the Declaring Agent Governance Framework (DAGF) imposes a fairly rigorous set of criteria that assesses which entities can become Declaring Agents.
For more information on becoming a Declaring Agent, you can refer to the Singapore Customs website.
The application for the Customs Import or Customs Export Permit is done through the Singapore Customs’ TradeNet system, which can be accessed through TradeNet front-end software from an approved software vendor or from the government’s front-end application. There is an application fee of $2.88.
Once the Singapore Customs approves of your permit application, you can commence your import and export business. However, take note of your permit’s validity period. The duration of this period is decided based on considerations such as the type of goods involved and the place of release and/or receipt.
Maintaining an Inter-Bank GIRO
Inter-bank GIRO with the Singapore Customs is required to make payments for any taxes, fees and customs or excise duty you incur in the course of your trading activity. Excise duty can be levied on goods that are either manufactured in Singapore (e.g. for export purposes) or imported into Singapore. On the other hand, customs duty is a duty levied on goods imported into Singapore (excluding excise duty).
For example, all imported goods for local consumption are subject to 8% Goods & Services Tax (GST), while specific categories of dutiable goods (alcohol, tobacco products, motor vehicles and petroleum products) are also subject to additional customs and/or excise duty.
You can set up the inter-bank GIRO by completing the Application for Inter-Bank GIRO form and mailing it to the Singapore Customs. The application typically takes 3-4 weeks to be processed.
For more information on how to set up inter-bank GIRO, you can refer to this guide.
If you do not set up inter-bank GIRO, the relevant fees and duties will be deducted from your Declaring Agent’s inter-bank GIRO instead. It is compulsory for Declaring Agents to maintain inter-bank GIRO with the Singapore Customs.
Requirement to Retain Trade Documents
The Singapore Customs requires you to keep a proper record of your trade activity for a period of 5 years after your Customs permit has been granted. you This includes relevant documentation concerning the purchase, import, sale or export of the goods. Your records may be in the form of physical hardcopies or softcopy images.
If you are interested in setting up a trading company, you may wish to consult a corporate services firm for a quote. They can assist you with a variety of administrative tasks, such as the registration of a company, the application for a Customs permit and compliance with the necessary legal requirements.
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