Singapore’s food culture stands out with a vibrant scene featuring a wide variety of cuisines from around the world. Its eateries cater to all budgets, from hawker centres recognised by UNESCO to Michelin-starred restaurants, earning Singapore its reputation as a foodie destination. This makes it an attractive choice for foreigners looking to start F&B businesses in Singapore.
In this article, we will explain the key legal steps to help you start your F&B business in Singapore.
Business Incorporation in Singapore
One of the first considerations is to determine the business structure of the business. There are various business structures available in Singapore, such as sole proprietorship, partnership, and company. The most commonly adopted business structure in Singapore for profit-seeking businesses is a private company limited by shares. A private company offers limited liability and greater corporate flexibility. The Accounting and Corporate Regulatory Authority (ACRA) of Singapore is the regulator of business registrations.
Generally, F&B businesses are not subject to foreign ownership restrictions. When incorporating a private company limited by shares, most businesses will firstly reserve their intended company name. Names that are similar or identical to the names of existing businesses may be rejected by the ACRA. The below sets out the key incorporation requirements of a private company limited by shares:
- Company Name: Submit a name reservation application to ACRA.
- Financial Year End: Select a date that determines the company’s financial reporting and tax filing timelines.
- Directors: At least one director must be ordinarily resident in Singapore. This requirement can be fulfilled by engaging nominee director services available in Singapore.
- Company Secretary: A qualified company secretary who is a local natural person must be appointed within six months of incorporation.
- Auditor: An auditor must be appointed within three months of incorporation unless the company is exempted under the audit exemption criteria.
- Share Capital: The minimum issued capital is Singapore Dollars (SGD) 1.00. In practice, companies are often incorporated with one ordinary share. The share capital can also be denominated in foreign currencies such as US Dollars.
- Shareholders: The company must have at least one shareholder, who can be an individual or a corporate entity, whether local or foreign.
- Registered Office: A Singapore-based address is required for statutory correspondence.
- Constitution: The company must adopt a constitution. For convenience, the model constitution under the Companies Act of Singapore may be adopted.
- Filing with ACRA: Incorporation applications are submitted online. A straightforward application is typically approved within 1 to 3 days. However, if the application requires referral to another government agency, the approval process may take between 14 and 60 days.
After a company has been successfully incorporated, the company may proceed with opening a bank account. The typical bank account opening process is as follows:
- Prepare required corporate documents, including the company’s business profile from ACRA, constitution, board resolution approving the account opening, proof of ultimate beneficial ownership, and identification and residential address documents of directors, shareholders and beneficial owners.
- Undergo the bank’s Know-Your-Customer process, which may vary between banks and depend on the company’s structure and the completeness of the submitted documents. Additional due diligence may be required for companies with foreign stakeholders.
Tax-related Matters
Goods and Services Tax
All businesses in Singapore with an annual taxable turnover exceeding SGD 1 million must register for Goods and Services Tax with the Inland Revenue Authority of Singapore.
Corporate Income Tax
The corporate income tax rate in Singapore is a flat 17%.
Tax Exemptions for New Start-Up Companies
Newly incorporated companies may qualify for a start-up tax exemption for their first three years of assessment (YA). Key qualifying conditions include:
- The company being incorporated in Singapore;
- The Company being a tax resident of Singapore for the relevant YA; and
- The Company having no more than 20 shareholders throughout the basis period, and either:
- all the shareholders are individuals; or
- at least one shareholder is an individual holding at least 10% of the company’s ordinary shares.
For each of the first three YAs, qualifying companies enjoy the following exemptions:
- 75% exemption on the first S$100,000 of chargeable income; and
- a further 50% exemption on the next S$100,000 of chargeable income.
This start-up tax exemption is not available to companies whose principal activities are (1) investment holding, or (2) property development for sale, investment or both.
Typical licences for F&B Operations
F&B businesses in Singapore are subject to various regulatory and licensing requirements depending on the nature of their operations. Licences which F&B businesses commonly hold include:
- Food Shop Licence – mandatory for all food establishments, including restaurants, cafes, bakeries, takeaway outlets, food courts, canteens, eating houses, coffee shops, private canteens and markets. This licence is issued by the Singapore Food Agency (SFA). The licensing requirements include obtaining approval from the land agency to use the premises as a food establishment, submitting a layout plan that complies with SFA’s Food Shop Design Requirements, signing a tenancy agreement for the premises, and engaging pest control services to maintain hygiene. Additionally, all food workers are required to complete and pass the Basic Food Hygiene Course conducted by SFA.
- Liquor Licence – required if alcohol will be sold or supplied. This licence is issued by the Singapore Police Force. There are different types of liquor licences, which vary based on the type of liquor and the trading hours. Licensed premises are not allowed to supply liquor beyond the permitted trading hours unless an extension has been granted.
- Import Licence – required if the business intends to import any food ingredients for the food establishment. This licence is issued by the SFA. Depending on the type of food ingredients, there may be specific import requirements. For example, any meat or meat products can be imported only from sources approved by the SFA.
Government Support
Several government grants are available to businesses in Singapore including F&B companies that meet the specified criteria. For example, the Energy Efficient Grant provides co-funding support for energy-efficient equipment to manage rising utility costs. The Productivity Solutions Grant provides financial assistance for adopting pre-scoped IT solutions, equipment, and consultancy services aimed at boosting productivity. SkillsFuture Enterprise Credit is provided to support employee training and development by providing subsidies for eligible upskilling initiatives. Government grants will each have specific eligibility criteria and may only be available for companies which have a minimum local shareholding percentage.
Employment Matters
The F&B industry in Singapore typically relies on a mix of local and foreign employees. All employers must comply with employment regulations governed by the Employment Act of Singapore which outlines the minimum standards relating to salary, working hours, rest days, leave entitlements, and retrenchment benefits.
Local Employees
Employers are required to make monthly contributions to the Central Provident Fund, a compulsory savings scheme, for Singapore Citizens and Permanent Residents.
Foreign Employees
All foreign nationals must hold a valid work visa before commencing employment in Singapore. Common work passes include the Work Permit (for lower-skilled workers), S-Pass (for mid-level skilled workers) and Employment Pass (for professionals, managers and executives). Each pass has its own eligibility requirements and may be subject to quota limits, foreign worker levy obligations, and medical insurance requirements. The Ministry of Manpower oversees the issuance and regulation of these passes.
Final Comments
If you intend to launch a F&B business in Singapore with a local partner, it is typical for the parties to enter into legal agreements to set out each party’s rights, obligations and duties relating to the business and the collaboration. The contents of the legal agreement are highly dependent on the commercial intentions and arrangements of the stakeholders. Key discussion points include:
- The duration of the collaboration.
- The rights and obligations of each party in the collaboration.
- The manner in which the collaboration will be undertaken, such as by way of a joint venture company incorporated in Singapore.
- The shareholding structure of the joint venture company, including the types of shares and the rights attached to each class of shares such as voting rights, dividend entitlements and rights on liquidation.
- Funding requirements of the collaboration.
- Matters that require approval from certain stakeholders of the company.
In addition to matters discussed above, businesses in Singapore also need to observe general compliance in relation to matters such as personal data protection and consumer protection.
This alert is for general information only and is not a substitute for legal advice.
A Korean version of the article has been published by Lin Law Firm available on https://www.law-lin.com/news/news_sub01_view.html?idx=1150