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Trade has always been an important driving force behind Singapore’s economic growth. From young, we’ve learned in various textbooks how our naturally deep harbour and strategic location, connecting India, China and the Indonesian Archipelago, has enabled Singapore to succeed.
For aspiring entrepreneurs or those without much experience, the words trading or import-export may seem very daunting. However, if we think about it, almost everything we have in Singapore has been bought from other countries – i.e. imported. These include the sand used to build our homes, the food we eat, the clothes we wear and the gadgets we use, and almost every else in between.
Opportunities For Import-Export Businesses In Singapore
Singapore’s government continues to nurture our trading hub status with business-friendly policies. For a start, Singapore ranks as one of the easiest places in the world to do business, attracting many internationally-leading MNCs, traders, shipping and logistics players.
Using this as a springboard, the Ministry of Trade and Industry (MTI) has also outlined three areas under Trade 2030 strategy – 1) growing trade volumes, 2) widening the types of trading activities in Singapore and 3) expanding trade with other parts of the world. These initiatives will seek to boost Singapore’s export value from $805 billion to at least $1 trillion and double our offshore trade value from US$1 trillion to US$2 trillion.
Complementing a larger re-export and transshipment footprint is our world-class infrastructure, including container ports, storage facilities, airport, roads and more, to handle transshipment and merchandise flowing through the country. Moreover, Singapore’s open economy is one of the most extensive networks of Free Trade Areas, covering 60% of the world’s GDP.
Despite our small population and lack of natural resources, the Port of Singapore – comprising the Tanjong Pagar, Keppel, Brani, Pasir Panjang, Sembawang and Jurong container terminals – is already the world’s busiest transshipment port.
Such a dynamic ecosystem underpins unique opportunities and transparent competition in the space.
For aspiring entrepreneurs or businesses who want to expand your set-up in the import-export field, here are 5 things you need to know.
#1 What Government Support Is Available For An Import-Export Business In Singapore?
For younger trading companies, there are various government grants and platforms you can tap on. These can streamline your work processes to improve productivity and train your employees in new skills such as digital marketing and data analytics.
Singapore enterprises can access financing to develop new capabilities, create new products or expand your business footprint overseas, by applying for Enterprise Singapore’s Enterprise Financing Scheme (EFS),Trade loans include Inventory, stock financing, Structured pre-delivery working capital (revolving working capital), Factoring (with recourse) / bill of invoice / AR discounting, Overseas working capital loan and Bank Guarantee (capped at 2 years tenure)
Given the manpower crunch in Singapore, the Professional Conversion Programme (PCP) – International Trading will equip your new hires with relevant skills, especially if they are switching to a career in the trading industry.
There are also various platforms that seek to smoothen trade flows in the region. For example, the Networked Trade Platform is a one-stop platform connecting businesses, community platforms and government systems online. By using it, you can access a range of more than 100 trade, supply chain and trade financing services. Another platform is the ASEAN Single Window (ASW) – which includes Singapore, Malaysia, Indonesia and Thailand –that facilitates the exchange of electronic certificates of origin to speed up the release of goods in the region, making it more cost-effective.
As trading companies often manage operations in multiple countries, the Inland Revenue Authority of Singapore (IRAS) has also laid the groundwork to alleviate double taxation in different jurisdictions. This will help reduce the same type of taxes twice.
For more established companies playing in the international arena, setting up shop in Singapore can be attractive. Companies that trade a range of products, such as energy and chemicals, metals and minerals, agricultural commodities, consumer goods, industrial products and electronics, can tap on Enterprise Singapore’s Global Trader Programme (GTP). The GTP provides a reduced corporate tax rate of 5% or 10% (from the usual 17%) for qualifying trading income for 3 or 5 years.
#2 How To Start An Import-Export Business In Singapore?
Just like starting any other business in Singapore – whether it’s an import-export outfit or not – the first step is to incorporate a business entity with ACRA. You can be a sole proprietor or choose to incorporate a partnership or company. While being a sole proprietor or partnership are relatively simple business structures, there will be little differentiation between you and the business when accounting for taxes and personal liabilities.
You can also choose to incorporate a private limited company, enabling you to separate your business and personal interest. Company profits are taxed at a flat 17% corporate tax rate, compared to personal income tax which can go as high as 24%.
At this juncture, you should also consider opening a business bank account. Apart from separating your personal and business finances, business bank accounts tend to come with more features that help you run your business better. For example, the OCBC Business Growth Account comes with free e-invoicing and cashflow management tools, as well as seamlessly integrates your payment collections.
You can also leverage on OCBC’s range of digital business partnerships. For starters, you can simply incorporate your business online and open your business banking account – anywhere and anytime. This allows you to skip the paperwork, enjoying same-day incorporation and account opening, and connecting you to a one-stop shop for accounting, bookkeeping services and HR services.
#3 You Need To Activate Your Customs Account
Before importing or exporting in Singapore, you need to activate a Customs Account with a Unique Entity Number (UEN). Only then can you or your appointed agents apply for custom permits to import your goods. This has to be done via TradeNet – a single entry point for import-export businesses to fulfil all regulatory-related requirements and declarations to multiple regulatory agencies.
On the Singapore Customs website, you can check if the goods you intend to import or export are prohibited, controlled or subject to restrictions by various Competent Authorities (CA) in Singapore.
Some examples of prohibited goods include: drugs, chewing gum, pistol, fire crackers, telecommunication equipment, certain tobacco products and shisha, and more. There are also controlled goods under certain authorities including: the Building and Construction Authority (BCA), Central Narcotics Bureau (CNB), Enterprise Singapore (ESG) for rice and rubber, Health Sciences Authority (HSA), Land Transport Authority (LTA), Ministry of Health (MOH), Singapore Food Agency (SFA) for fruits and vegetables, livestock and animal products, meat, processed food and seafood, Singapore Police Force (SPF) for arms and explosives and many more. You may be required to apply for relevant business licences for your line of business. If you are unsure, you can use the TradeNet tool to check if your goods are controlled.
You will also be required to apply for an interbank GIRO with Singapore Customs to pay for duties, taxes, fees, penalties and other charges by Singapore Customs. You may have to furnish a security if you are importing dutiable goods. You can provide a Banker’s Guarantee, Finance Company Guarantee or Insurance Bond for this. This is where having a business banking account will give you ready access.
#4 Paying GST and Excise Duty
Mainly for import businesses, you will have to pay Goods and Service Tax (GST) of 8% and excise duties on dutiable goods (effective 2023).
GST will be collected by the Singapore Customs, unless goods are granted GST exemptions or duty relief. The GST is charged based on the CIF value (i.e. cost, insurance and freight) of all the goods plus all duties payable.
Excise duty will also be collected on dutiable goods, including intoxicating liquors, tobacco products, motor vehicles and petroleum products.
#5 Access To Trade Financing
Those in the import-export business may require more frequent access to trade financing tools. As referenced above, there is a need to furnish a security, which can be done via a Banker’s Guarantee, when importing dutiable goods. The amount of security required depends on the specific goods being imported, as well as the movement type.
Ministry of Finance launched eGuarantee@Gov on 2 November 2022. Under this programme, if you need to furnish a guarantee or security bond in favour of any of the participating government agencies, you can approach any of the participating financial institutions. At OCBC, even if you do not have a facility, you can still apply for a banker’s guarantee on OCBC Velocity against a cash margin and elect for an eGuarantee to delivered electronically to the participating government agencies.
When you import goods, you may offer your suppliers an Import Letter of Credit instead of paying in advance before receipt of goods, reducing risk and enabling better cashflow management. An Import Letter of Credit assures your suppliers that the Bank will pay upon sighting the compliant documents or pay on maturity of the bills of exchange. Offering a Letter of Credit from a reputable bank, such as OCBC, could potentially allow you to negotiate for better payment terms or prices. At the same time, you are reasonably assured that you will receive the goods on time.
Conversely, if you are the seller or exporter, you can also leverage on an Export Letter of Credit. After requesting for an LC from your buyer, you can rely on your bank, to verify its authenticity.
You can even arrange for advance payment from your bank, via Export Letter of Credit Discounting against compliant documents presented, to get upfront payment (subject to approval). As its name suggests you will get a slightly discounted rate from the full payment.
If you are a middleman, in between a buyer and seller for the goods, you can also apply for OCBC’s Transferable Letter of Credit. In simple terms, this effectively allows you to be able to provide your seller with an LC, without you having a credit facility with the bank.
Similar to the Import LC and Export LC, there will also be a fee associated with such a structure.
Take advantage of digital platforms such as OCBC Velocity to apply for your Letters of Credit, Banker’s Guarantee, Standby Letters of Credit to speed up issuance, so that you fulfil your purchase orders and contractual obligations swiftly. These build trust and credibility with your suppliers and customers.
Import-Export: A Lucrative And Competitive Business
As an SME business owner, you can’t only focus on profit either. You need to be aware of your cash flow needs. Using the right financing solutions for your business can make the difference. This is where you can rely on OCBC’s expertise and suite of trade financing solutions to help your import-export business flourish.
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