Guide to Audit and Compliance for Foreign Investors in Singapore

Audit Compliance Guide

Aside from providing one of the most accessible places to set up a business for start-ups and foreign entrepreneurs, the transparent business and legal system of Singapore further attract multinational companies to set up their regional offices within the island country. To maintain its dynamic business environment; the government requires companies to abide by its audit and compliance laws.

Companies Act, which is the chief enactment regulating the conduct of businesses in Singapore, compel companies to comply with the Inland Revenue of Singapore’s and Accounting and Corporate Regulatory Agency’s annual filing requirements. To ensure compliance, foreign investors should opt for the service of company registration in Singapore.

This article provides a helpful guide for foreign investors to better understand the audit and compliance requirements in Singapore.

 

Determining the Companies’ Financial Year-end (FYE)

After incorporation, every company in the country needs to establish a fiscal year-end, which is the final day of its first fiscal year. Many organisations pick 31st of December as their FYE, whereas other companies prefer the end of any quarter, such as 31st of March, 30th of June and 30th of September.

When it comes to making a decision on an FYE, businesses should consider the effects of their selected date on their eligibility to get tax incentives. From YA 2020 onwards, qualified new companies can get a 75% tax exemption on their initial SGD 100,000 of taxable income during the first three successive years. They are also qualified for a 50% tax exemption on the next SGD 100,000. Hence, for some companies, setting their FYE on the 31st of December can be more advantageous.

 

Companies Obligation for Audit

The Companies Act obliges private limited companies to seek help from eligible public accountants to audit their financial records at least once every year. They are also required to fulfil the following obligations.

Hold an Annual General Meeting

Singapore makes it mandatory for registered companies to hold annual general meetings (AGM). Companies can hold the AGM at any place around the world. It will be held in six months from the FYE day. In this meeting, shareholders will discuss the following issues:

  • Audit reports’ approval
  • Re-election of directors (if necessary)
  • Re-appointment of auditors
  • Declaration of dividends
  • Operation of other businesses

Appointment of Auditors

Within three months of the company incorporation in Singapore, directors of the establishment must appoint an auditor. However, they are exempt from carrying out this duty if they fall under the following conditions:

  • Less than SGD 10 million of annual turnover
  • Less than SGD 10 million of total assets
  • Number of employees of the company does not exceed 50

Public accountants who perform the company audits must be registered with ACRA. The following are some of the roles of an auditor:

  • Report if the financial statements of the company comply with the applicable reporting standards
  • Give an objective analysis of the financial performance of the company

 

Audit Exemptions for Businesses

Back in July 2015, ACRA amended the Companies Act’s audit exemption criteria and introduced the small company concept. This concept applies to both existing and newly incorporated private limited companies in Singapore. Companies qualify as small companies are free from the duty of appointing an auditor and have their accounts audited.

Eligible small companies need to fulfil at least one of the following criteria:

  • Have a total revenue of not exceeding SGD 10 million
  • The full-time employees’ total number by the end of the financial year does not exceed fifty
  • The company’s total assets for the FYE does not exceed SGD 10 million

Aside from private companies, group companies, such as holding and subsidiary companies, are also exempt from audit compliance as long as they qualify as a small group by fulfilling at least two of the criteria mentioned earlier. Still, companies exempt from audits are advised to prepare their financial statements annually.

 

Annual Filing Regulations

Relevant authorities in Singapore require businesses to submit their year-end financial accounting, which includes a comprehensive statement of income, statement of cash flow, balance sheet, and changes in equity statement.

 

Penalties for Non-compliance

Companies that fail to comply with the audit requirements or those who are late in submission of financial statements are at risk of legal penalties such as fines and in worse cases, getting an arrest warrant by the ACRA.

Considering the importance of audit regulations compliance in Singapore, foreign investors should seek help from local company registration service providers to avoid getting penalised.

Posted in Company Incorporation.