How to Open Trading Company in Singapore – Registration, Licenses, Permits
Singapore is very well known as an important ‘port of call’ for businessmen, especially those who are dealing between the eastern and the western time zones. As per World Trade Organization’s latest data, Singapore is the 14th largest exporter of merchandise in the world and has a trade to GDP ratio of 404.9. If you are planning company incorporation in Singapore or setting up a Singapore trading company and start an import and export business, this article will help you begin.
Almost 3000 global and local logistics and supply chain management businesses are operating in Singapore today. Singapore also offers the shippers to opt from 200 shipping lines which connect 600 ports in 120 plus countries. Managing the port services such as transfers of container load and unloading requires highly-trained and skilled staff and state-of-the-art equipment and technology. The Changi Airfreight Centre runs a round-the-clock one-stop service centre for all the airlines, cargo agents, shippers and consignees. With state-of-the-art infrastructure, cargo is managed efficiently and rapidly. As Singapore has proven its market dominance in the import and export trade, it has well-defined guidelines and procedures in place. This article provides an overview of the various things you need to know about trading in Singapore such as how to open a customs account, process to apply for licenses and permits, different types of goods which can be imported or exported, what are the taxes and fees, options of trade financing, and options for goods storage etc.
How to set up a trading business?
- How to establish a trading company
For starting a business of trading in Singapore, the first step is to incorporate a company. For detailed information on this, refer to company incorporation Singapore.
- Registration with Singapore Customs
All importers and exporters have to mandatorily to get their account activated with the Singapore Customs prior to importing or exporting goods in or out of Singapore. After the application is submitted, the account is activated within a couple of working days and then a Customs approval letter is issued, which is valid for the duration for which your business or company exists.
- Apply for relevant licenses and permits
For importing or exporting of all categories of goods
For importing all types of goods (including controlled and non-controlled items) in Singapore, you have to first obtain an IN Permit from TradeNet® before you can import the goods into Singapore.
For exporting all goods (including controlled and non-controlled items) out of the country, you have to first obtain an OUT Permit from TradeNet®:
- before you export the goods out of Singapore in case your goods are controlled or are shipped via road or rail
- within three days of exporting in case your goods are non-controlled or are shipped by air or sea
- before export of goods, which were previously imported under the Temporary Import Scheme
- before export of goods under the Temporary Export Scheme
Some special scenarios like importing or exporting trade samples of uncontrolled items, which are worth not more than S$400/- on the Costs, Insurance and Freight (CIF) value could be imported or exported without any permit.
For importing and exporting controlled goods
The import and export of certain goods depend on the control of the Controlling Agencies and are therefore known as controlled goods. To import or export such controlled goods, you need a special permit, in addition to the regular IN Permit and OUT Permit. The permit applications are to be submitted to the relevant Controlling Agencies through the TradeNet® system or through your freight forwarding agency or cargo agent for processing and the approval. Some examples of controlled goods are cigarettes, tobacco products, petrochemicals, drugs, animals and food products.
For importing high-technology items
Some high-technology items are dependent on the export control by the country that is exporting and the Singapore importer could be requested to furnish an Import Certificate and also a Delivery Verification (ICDV) given by the exporter. Importers have to apply for an ICDV from the Singapore Customs. Items covered under an ICDV have to be imported into Singapore directly, and cannot to be sent via other countries.
For export, trans-shipment, or transfer of Strategic Goods
In case of exporting, transhipping or bring in transit some Strategic Goods, you need to obtain a Strategic Goods Control (SGC) TradeNet Permit. Strategic goods have to be traded as per the Strategic Goods (Control) Act. This Act covers all the goods and technology that are planned or expected to be used for weapons of mass destruction.
For exporting local goods
Some buyers may request exporters for a Certificate of Origin (CO), which is a document proving that the goods are manufactured in Singapore. There are two types of Certificates of Origin:
- Ordinary CO – This document is meant to satisfy the buyers that the goods exported are wholly obtained, manufactured or produced in Singapore.
- Preferential CO – This document helps to improve the value of your exports by enabling the buyers to claim privileged tariff treatment while importing the products under Free Trade Agreements or one of the Schemes of Preferences.
You could apply for a CO through TradeNet® or through your freight forwarding agency or cargo agent.
Taxes and Fees
Customs and Excise Duty
Certain goods which are made in Singapore or imported into the country and are also subject to customs and/or excise duty are called as dutiable goods. Dutiable goods in Singapore include: tobacco products, liquors, vehicles, and petroleum products. Duty is levied on an ad valorem or specific rate basis. An ad valorem rate is basically a percentage of the total Customs value of the imported goods. A specific rate is a precise and specific amount per unit of weight or some other quantity like $300.00 per kg. Duty may be briefly suspended (up to the point of consumption) under the different Customs schemes.
Depending on the qualifying conditions, exemption of duty is granted for certain wine used at wine exhibitions and conferences approved under the Meetings, Incentives, Conventions & Exhibitions (MICE) Incentive Scheme “BE In Singapore – BEIS” which is administered by the Singapore Tourism Board. In addition, motorized bicycles that cannot be registered as motorcycles/scooters are also exempt from the excise duties.
Goods and Services Tax
Goods that are imported into Singapore are subject to the existing GST which is currently at 7% if those goods are to be used for local consumption. GST is regulated by the Inland Revenue Authority of Singapore (IRAS) and is collected by Singapore Customs. GST applicable on all dutiable and non-dutiable goods is to be paid on an ad valorem basis, that is, 7% on the total value of goods. The taxable GST is calculated depending on the CIF value plus all the duties and any other chargeable costs, which may or may not be reflected on the invoice. GST might be briefly suspended (up to the point of consumption) under the different Customs schemes. Please note that depending on some specific criteria, GST relief is given for the wine, which is used at wine exhibitions and conferences approved under the Meetings, Incentives, Conventions & Exhibitions (MICE) Incentive Scheme “BE In Singapore – BEIS”, which is administered by the Singapore Tourism Board.
GST can be charged from customers if you have registered with IRAS to collect GST. You could also get back GST through a refund on GST paid on the imports if the goods are eventually exported out of Singapore. You need to be GST-registered with IRAS to also apply for the refund.
Note: There are special schemes, for example, the ‘Major Exporter Scheme’ and ‘Import GST Deferment which decrease the burden of GST.
Singapore Customs Fees
Singapore Customs charges some administrative fees. The best way is to make all payments for all fees, duties and also GST to Singapore Customs by GIRO, which authorizes Singapore Customs to directly make deductions from one’s bank account.
Trade Financing and Insurance
Singapore companies and businesses often depend on loans, LCs or letters of credit and insurance to take care of the financial risks that are involved in trading.
Letter of Credit
Letter of Credit (LC) is very commonly used in Singapore; in this, the buyer’s bank guarantees the payment to the exporter. This is the preferred option of payment both among exporters and buyers because the exporter’s payment is safeguarded before the goods are shipped and in the same manner, the buyer doesn’t need to make any payments till he/she receives the goods. Depending on the LC, other financing options available are Back To Back LC, Trust Receipt and Packing Credit.
Most Singapore banks work with the large import and export industry and give competitive trade finance services such as import and export products and bank guarantees. Some financing options offered by banks are overdraft, revolving line of credit, term loans, transaction loan, inventory financing, and factoring loans.
Trade Credit insurance provides businesses with protection against any risk of non-payment by the buying agencies which might arise due to commercial and non-commercial risks. If the buyers fail to pay on the pre-determined due date and even in the grace period, the insurer would pay after verifying the validity of that claim. International Enterprise Singapore, which is a Government initiative, gives trade credit insurance at appealing and competitive premium rates through its TCI Programme.
Depositing and Storing Goods
Free Trade Zones
- Free Trade Zones (FTZs) are special areas that are selected in Singapore’s air and seaports where all the duties and Goods and Services Tax (GST) are suspended temporarily for the imported goods.
- You would need to only pay the duties and taxes at the time when goods leave the FTZs and come into customs territory for utilization. All dutiable goods are allowed to be stored in the FTZs barring liquors and cigarettes.
- If you are importing certain goods for exporting (re-exporting), then FTZs could help your cash flow in a big way as you would not have to pay duties and GST on the imports.
- Please note that the goods that come by rail and road cannot be deposited into FTZs and duties and taxes are payable on them.
Licensed and Zero-GST Warehouses
- You are permitted to store dutiable goods in designated Licensed Warehouses. In this case, GST and duties would be suspended till such time that the goods are taken away from the premises and sent to the local market for selling or consumption.
- You could store non-dutiable goods in designated Zero-GST Warehouses so that GST is suspended till such time that the goods are taken away from the premises and sent into the local market for selling or consumption.