Citizenship by Entrepreneurship: Singapore Entrepass

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In a few countries around the world (all to few!) – the governments and politicians that run the land understand the importance of creating legislation that fosters value, innovation and entrepreneurship.

There are even some jurisdictions that have created entrepreneurship programs whereby value creators are granted visas and work permits with a fast lane to residency and citizenship.  Enter the Singapore Entrepass.

Singapore, the unofficial capital of South East Asia, is one such place.

 

singapore entrepass citizenship

 

Why Start a Company in Singapore?

Singapore is a beacon of stability that will be the driving spearhead of ASEAN in the coming years. While the surrounding countries may have larger economies, more people, greater resources, Singapore has established itself as the banking, financial and medical hub for the region. Over half of all foreign direct investment into the region comes to Singapore.

Singapore is an excellent place to plant a flag for gold storage, banking, and more. Singapore private limited companies are also used as holding companies and investment vehicles in other SE Asian countries.

A Singapore (or other common law jurisdiction) holding company, is routinely used for legal structuring throughout South East Asia. Notably, in conjunction with business in Thailand or Indonesia.

Circumvent Ownership Restriction

I predict this will become even more prevalent in the years 2015+ as ASEAN opens up. For instance, 70% of an entity can be owned by ASEAN members. Therefore, since you can own 100% of a foreign entity in Singapore (ASEAN) you can use that as a holding company of a more restrictive country such as Thailand or Indonesia (larger economies, but typically restricted to 49% foreign ownership. [This is still somewhat unclear, but this is what it looks like at an early stage]

Investment

Furthermore, investors will feel much more comfortable if you have a legal entity in thier jurisdiction. Ideally this holding company sits at the “top of the pyramid” and holds the IP, and shares in any subsidiary, operating entities.

TH_SG

Passport With a Singapore Company

Singapore company can also be used to get a passport. If you play your cards right with a Singapore entity, you can get work pass, permanent residency and eventual citizenship by operating a Singapore company.

ENTREPASS

When starting a company and moving to Singapore, you’ll need to get a work pass in order to stay and work. You can receive an employment pass (where your company will employ you), or you can get an EntrePass.

The main advantage of the Singapore entrepass is that it is actually considered a different category altogether from a work permit or employment pass, comes with separate rules and abilities and can provide a fast track to residency or even citizenship. 

An entrepass is a special pass for an entrepreneur, and there have recently been changes (Mid 2013) enacted by the government regarding this pass.

Steps to an entrepass

One would normally apply for the Singapore entrepass before incorporation and capitalization. You are allowed to make an application and see if you are approved. The rule is that you must apply within 6 months of incorporation.

What I did: We incorporated the business and capitalized the company before filing the application.

The MOM site has detailed instructions on how to complete the process. However, these don’t discuss funding options in great detail, or how to fulfill some other steps that are now required.

Steps

  1. Market Research and Business plan

  2. Seek Investment

  3. Incorporate

  4. Secure Investment

  5. Capitalize

  6. Entrepass business plan + Application

  7. Achieve AIP (Application In Principle)

  8. Bankers Guarantee

  9. Pay fee + Fingerprints

  10. Set Appointment and Collect Pass

Include all supporting documents which might be needed. This means diplomas, degrees, certificates, etc. Accolades and educational degrees are important in this process. Since I incorporated before I applied, I also included a recent bank statement which showed the $50,000 capitalization.

  • Business plan – If anything the business plan should focus on the amount of jobs that will be created and potentially created as the company grows. Other points that are of important include standard business plan are also important. Companies that hire people are seen as successful. You will rarely be asked how much do you clear in top line revenue, you will often be asked how many people you have on staff. Make sure that you don’t go over the required amount with respect to the number of pages. Keep the writing succinct, detailed where it needs to be: including financial projections and hiring projections. There are many different places which offer to help with the business plan, I drew ours up myself.
  • $50,000 Capitalisation Requirement – There is a lot of talk that this may increase exponentially in coming years. For now, it is a requirement that the company is capitalised with S$50,000.
  • Under 6 months old – The company should be under 6 months old. You can’t do this if you have been running for several years.
  • $3,000 bankers guarantee OR Company guarantee. There is an option at this step of posting the bond yourself, or having a company guarantee you. Note that you must have it stamped by the company, and a person cannot make this guarantee. The bigger the company, the more favorably your application will be looked upon. I had my initial application returned because a person signed, but did not stamp with a company chop.

Other points

  • Submit the EntrePass application at any SingPost post office.
  • A $70 admin fee is charged for each application.
  • Approval In-Principle (AIP) letter differs from the In-Principle Approval (IPA) letter
  • The IPA that is issued for approved applications and is required for collection of the EntrePass.
  • EntrePass applications are not only reviewed by MOM but also the Standards, Productivity and Innovation Board Singapore. This increases the time it takes. It is said that it can take 4-6 weeks. It took me 10 weeks, but this did crossover with Chinese New Years, which is a major holiday.
  • You can use your Foreign Identification Number (FIN) to check on your application status online about 21 days after submitting the application.
  • Once you get approved, an In-Principle Approval (IPA) letter, valid for six months from the date of the letter, will be mailed to the applicant’s Singapore address indicated in the application form. This is a very important form.

AIP received 

S$3000 Banking Guarantee

There is a requirement to post a $3000 fixed deposit in a local bank that is certified by MOM and held for insurance purposes. The order is important: you will go and receive this only after you have a AIP (approval in principle) from MOM. The bank cannot set this up before you have AIP. Once you have AIP, you can expect the bankers guarantee within 48 business hours. If you had a company approve your application, there is no need for this step.

If you are under 21 years old – there is only one bank that will accept your deposit – the Islamic bank of Singapore. (sp). If you are under 21 years old, this is the only option and an employment pass cannot be applied for. 

MOM visit, fingerprints, fee for the pass. 

You should do this when you plan to stay in the country for at least 3-7 days, because it will cause you huge headaches and a small fine if you leave the country and receive a new entry card. This step is usually very short and you are close to finished.

Submitting entry card. Card Pickup.

Set a meeting time with MOM. Head down and finish any outstanding requirements. You are done (or just started, depending on how you look at it!)

2014+ Requirements

PDF: NEW REQUIREMENTS For 2014 (current as of august 2013)

The government has slightly lowered the bar for hiring and spending requirements, but there is greater emphasis on companies being innovative, and also additional requirements for approval. It is subsequently harder to initial approval, but easier to keep and reapply for an entrepass.

The person must demonstrate the innovativeness based on at least 1 of 4 factors. 

  1. Funding/investment from a recognized 3rd party Venture Capitalist or business angel
  2. Hold IP that is registered with an IP institution
  3. Research collaboration with a recognized research institution recognized
  4. Incubated company at a Singapore government-supported incubator.

1. Funding

Funding must be strictly monetary and at least $100,000. The applicant should provide Shareholder certificate as supporting document or at

least show documentary proof of commitment (such as a termsheet) from VC/business angel on investment from one of the following:

2. Registered IP 

The IPs must have completed filing with the national IP institution

  • One of the Shareholders must be the original owner of the IP
  • The IP must be related to the proposed business conducted in the EntrePass application

3. Research collaboration

Further, you must meet the following for point 3.

  • Research institution to provide Gov. with a contact point
  • Only applicants with ongoing research collaboration will be allowed
  • Research collaboration must be related to the proposed business.

4.Incubated Company

  • Only existing incubatee is allowed
  • Incubatee’s work must be related to proposed business

Ongoing Requirements

(From September 1st 2013):

No. of yearsNo. of Local Employees Hired *Minimum Business Spending
12$100,000
24$150,000
36$200,000
48$300,000
510$400,000
*Refers to Singaporeans and Permanent Residents being paid a monthly salary and CPF contributions similar to the industry norm.

Total Business Spending (TBS) is the total operation expense as indicated in the audited financial statements except the following:

  • a) Royalties/Franchise fees/Know how fees to overseas companies;
  • b) Work subcontracted to overseas companies; and
  • c) Remuneration to applicant and his/her immediate family.

Applicants should make sure they can abide by these requirements.

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Company Set Up

The company is very easy to set up and for most business types, approval should happen in less than a day. With a private limited company, you can even begin to open up a bank account as soon as your register with ACRA.

ACRA

Everything is done through the Accounting Company Regulatory Authority – and although this is a government agency, most people will refer to the online platform as ACRA – because everything to do with a company is done online. From registering shareholders, to formalizing the Memorandum and articles of incorporation, all of this is done through an online portal. Unfortunately, as a foreigner you aren’t able to access this portal (as you need a singpass). Therefore, the only way you can obtain access is if you have an EntrePass (or other type of work pass).

Another option is to have a local apply, and serve as your resident director. In any event, you’ll need a local director, as this is a requirement of all companies. The local director is the most expensive aspect of incorporating a company in Singapore. This can be upwards of $3000 with a $10,000 deposit. In my opinion, the requirement for a local director is very much a positive attribute of Singapore companies. This is very much a place where the law rules, and having someone local who is responsible for the company keeps the parties accountable for the actions, assets and liabilities of the company. Yet another benefit of the pass is that you are not required to have a local director – as you are technically the local director.

However, because I incorporated the company before receiving the pass, I had a local director. However, it is necessary for a company service provider to do this, as they have additional permissions to read/write the ACRA database. Something to note is that for a small fee $5 you can buy the report of any company in the country. This information isn’t available publicly, but it can give you some interesting insights into your competitors, from their financial reports, to shareholding.

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Singapore is a great place for raising capital, starting a fund, establishing a business and finding a traditional ‘onshore’ and low-tax jurisdiction with favorable business laws.

Why Set up a Company in Singapore?

Strengths:

  • Government that supports entrepreneurship with different programs
  • Many different types of workers and skill sets
  • No Tax first 3 years >100k profits
  • If no customers or presence in Singapore – possible to establish 0% tax rate
  • Everything just seems to “work” in Singapore
  • Quick and Efficient Transportation
  • Great Networking Opportunities
  • Small, Connected Society
  • Center of SE Asia

Weaknesses:

  • Growing Technological Hub But Not silicon Valley – yet
  • Expensive for Startups
  • Hiring costs for technicians can be a burden
  • Not silicon valley

Cheap Co-Working 

There are plenty of co-working spaces, such as the Hub, ScapeThe Co, and plug & play.

Expensive Office Space

As far as commercial space goes – your options are limited and space is generally expensive.

Its difficult to find tech talent at a reasonable price. 

Skilled locals know they are in high demand, most of the startups are cash rich, and a freelance ruby coder can easily demand 10-20k per month, or more in salary. The coding talent in Indonesia, or further off in HCMC represent more cost efficient pools of talent for hiring. However, there are hiring requirements and rules for bringing in foreign talent. MOM makes it relatively easy to find out if someone can be hired or not. Generally, you would apply on behalf of the foreign employee, and specify which pass he will be hired under.

Even it being said that it is expensive to hire talent, the government introduced new programs that allow SME’s to receive partial training and funding assistance.

A word on innovativeness.  

Innovativeness doesn’t necessarily mean that it attracts investors…

Particularly in Singapore, there is a tendency for “me-too” businesses, such as Doc-Doc for example, which is a clone of western startup Zoc-Doc. There is absolutely nothing innovative at all about this company, but it has attracted funding from the government, it has merged with Dr. Page (another clone, backed by deep German pockets from a Groupon clone exit) and competes with 65 Doctors, similar services at Singaporedoc.com and Doctors.com.sg

Innovation is defined as application of new solutions that meet new requirements, inarticulate needs, or existing market needs. Cloning and ripping an existing business model and pivoting to a new market is not innovative.  Some investors in emerging markets don’t even want a business idea to be innovative – that is for the US market. Instead (for better or worse) emerging market investors would rather fund “fast-follower” type businesses with a large addressable market but proven business model.

Venture capital opportunities

There are a lot of investors deploying capital for pre-seed and seed rounds. There are a few successful exits. What there isn’t, is a culture of successful statups reaching an exit. There is a need for series A rounds. Overall, there is some missing pieces, but it is getting there. Here is a map of the money in Singapore.

Sequoia Capital, one of the most successful VC firms in the world, came to Singapore but they have yet to invest in any Singapore startups. They see Singapore as a safe bridge to Indian or Chinese companies, who they can move to Singapore should they decide to invest, and maintain focus on larger markets, with better corporate governance, and without the burdensome bureaucracy of China or India.

This being said, Singapore is one of the best places in the world to raise venture capital. There is an abundance of capital, and not enough fundable companies. If you have a scalable startup business, are willing to change your HQ, are looking for a place to immigrate, and are seeking venture capital, you should put Singapore on your list.

 

If you are looking to raise capital in Singapore for a Company based in South East Asia, email me or check out Horizon.VC

About Edmund

Edmund is an Emerging Markets Entrepreneur and Investor. He is an Advocate and Provider for Personal Privacy, Freedom, and Wealth.  He writes at Flagtheory.com

2 thoughts on “Citizenship by Entrepreneurship: Singapore Entrepass”

  1. I’m interested in staring an entity in Singapore and would like to correspond with whomever wrote this article and know the ins and outs of start ups, citizenship in Singapore.
    Thansk

    Reply

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