Top 5 Potential Risks of Setting Up a Company in Singapore Revealed

Analysis of Risks Involved in Setting Up a Company in Singapore Five Truths You Must Know

In recent years, with the continuous strengthening of globalization trends and the increasing frequency of cross-border business activities, more and more enterprises and individuals have chosen to register companies in Singapore. As one of the globally recognized international financial centers, Singapore has attracted a large number of investors due to its advantageous geographical location, complete legal system, and efficient business environment. However, while enjoying these advantages, it is also necessary to recognize the hidden risks involved. Here are five key facts you need to know when considering registering a company in Singapore.

One, the compliance pressure brought by tax transparency.

Singapore is renowned for its low tax rates, with corporate income tax at only 17%, and foreign income exempt from taxation, making it an ideal choice for many multinational corporations as a tax haven. However, at the same time, as Singapore is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters MLI and has signed agreements with many countries to avoid double taxation, its tax transparency continues to increase. For example, according to the latest Global Tax Report released in 2025, the Singapore Tax Authority requires all foreign entities to provide more detailed financial information, including the identity of ultimate beneficiaries. This means that if the relevant reporting obligations are not fulfilled in a timely manner, there may be risks of heavy fines or even the cancellation of the company.

Two, strict anti-money laundering regulations.

To prevent illegal capital flows, Singapore implements extremely stringent anti-money laundering measures. According to the latest Anti-Terrorist Financing Law, any suspicious transaction activity will be subject to strict scrutiny. Especially for businesses operating through anonymous accounts or offshore companies, once violations are discovered, they will not only face huge fines but also may face criminal liability. Before setting up a company, ensure that all documents are genuine and valid, and cooperate in completing necessary due diligence procedures.

Three, intensifying market competition leading to reduced profit margins.

Despite the numerous preferential policies supporting the development of small and medium-sized enterprises in Singapore, with the acceleration of global economic recovery, competition from other Asian countries is becoming increasingly fierce. In particular, in the e-commerce sector, a large number of emerging platforms are emerging to seize market share, forcing traditional retailers to lower prices to attract consumers. High living costs are also a major factor constraining the development of local enterprises-whether rent or labor costs are much higher than in surrounding areas. Even if a company is successfully registered, careful assessment of market prospects and the formulation of a reasonable profit model are still required during actual operations.

Four, increased intellectual property protection but still some loopholes.

As a country highly respecting intellectual property rights, Singapore has recently strengthened its efforts to protect rights such as patents and trademarks. However, in certain specific industries, such as software development and cultural creativity, there are still recurring instances of infringement. Especially in the context of the internet era, online piracy problems are particularly prominent. Once faced with such disputes, it can affect brand image and lead to substantial compensation liabilities. Before starting business operations, conduct patent searches in advance and establish a comprehensive copyright management system.

Five, the issue of labor shortages is becoming increasingly severe.

Although Singapore has a high-quality talent reserve pool, due to factors such as population aging and tightening immigration policies, the current supply of labor has become significantly insufficient. According to statistical data, by the end of 2025, industries such as manufacturing and construction are experiencing a shortage of workers. For Singaporean enterprises that rely on local employees to support daily operations, this is undoubtedly a major challenge. In this situation, how to balance cost control with human resource allocation has become an important issue facing every entrepreneur.

In summary, although Singapore remains an extremely attractive investment destination, before deciding whether to set up a branch office in the country, please carefully weigh the pros and cons and take corresponding preventive measures for the potential risks mentioned above. Only then can long-term stable development goals truly be achieved!