Registering a Singapore Company Key Risks and Challenges to Watch Out For

Setting Up a Company in Singapore Potential Risks and Challenges You Need to Be Aware Of

In recent years, with the continuous advancement of globalization and the growing of the Southeast Asian market, Singapore has become a top destination for companies looking to expand overseas. Thanks to its strategic location, stable environment, and mature financial system, Singapore has attracted a growing number of enterprises, especially Chinese companies seeking international growth. Establishing a company in Singapore has become a common practice for many. However, despite its many advantages, the registration process involves several potential risks and challenges that, if overlooked, could lead to unnecessary losses.

1. Higher-than-Expected Compliance Costs

Singapore’s legal system is well-developed and regulatory oversight is strict - a double-edged sword that offers protection while also imposing challenges. For companies setting up in Singapore for the first time, compliance costs are often underestimated.

According to requirements from the Accounting and Corporate Regulatory Authority ACRA, companies must submit annual financial reports on time, hold shareholder meetings, and ensure their corporate governance structure complies with the Companies Act. The Inland Revenue Authority of Singapore IRAS also enforces strict deadlines and standards for tax reporting.

Recent media reports have highlighted cases where startups were fined by ACRA for failing to submit financial reports on time, or even, which negatively affected their future financing and partnerships. Before registration, companies should thoroughly understand Singapore’s compliance requirements and consider hiring professional consultants to avoid costly mistakes.

2. Tax Planning Requires Caution

Singapore’s tax system is known for its low corporate tax rate, capped at 17%, and new companies enjoy certain tax exemptions - making it highly attractive to foreign investors. However, at the same time, Singapore has been tightening its requirements for substantial business operations.

In recent years, the OECD’s global minimum tax initiative has influenced Singapore’s regulatory environment. Starting from 2025, the country has gradually strengthened its scrutiny of companies’ actual business activities. According to reports from Lianhe Zaobao, the Monetary Authority of Singapore MAS and IRAS have jointly intensified oversight of shell companies, requiring businesses to maintain a physical office, employ local staff, and demonstrate clear business transactions.

If a company is merely registered without substantial operations, it may face increased tax risks in the future, including back taxes and penalties. Therefore, it is crucial to develop a well-structured tax strategy that aligns with Singapore’s expectations for real economic substance.

3. Increased Difficulty in Opening a Bank Account

Although Singapore is one of the world’s leading financial centers, recent years have seen a tightening of anti-money laundering AML and know-your-customer KYC regulations, making it more challenging for companies to open bank accounts.

For companies established by non-residents, several local banks have raised the bar, requiring more detailed documentation such as business plans, proof of fund sources, and shareholder background checks. According to a mid-2025 report in The Straits Times, some foreign companies failed to meet these requirements and were unable to open accounts, causing delays in capital flow and affecting business operations.

To increase success rates, companies should plan ahead, prepare all necessary documents in advance, and consider working with experienced banking consultants during the registration process.

4. Rising Human Resource and Operational Costs

While Singapore boasts a highly skilled workforce, labor costs are relatively high. According to the Ministry of Manpower’s 2025 salary report, average monthly wages for local employees continue to rise, especially for technical and managerial roles, which are significantly higher than in many other Southeast Asian countries.

Moreover, Singapore has tightened its quotas and work permit approval process for foreign workers. For companies planning to establish a physical presence in Singapore, this increases initial investment costs. Without proper long-term human resource planning, firms may face major challenges in recruitment and management.

It is advisable for companies to assess operational costs thoroughly before registration, carefully balance the ratio of local to foreign employees, and familiarize themselves with the work permit application process to prevent delays caused by staffing shortages.

5. Intense Market Competition and Strategic Branding Needed

Despite its relatively small domestic market, Singapore is a hub for regional headquarters, making competition fierce - especially in sectors like technology, finance, and trade, where many global players are already established.

Newly registered companies that lack a clear market positioning or a differentiated competitive edge may struggle to stand out. Branding and marketing in Singapore require careful planning, as local consumers place high value on brand reputation, product quality, and service experience.

Recently, some Chinese companies faced challenges due to a lack of understanding of local culture, leading to ineffective marketing campaigns or even negative public sentiment. A thoughtful and culturally sensitive brand strategy is essential for successful market entry.

6. Intellectual Property Protection Requires Early Planning

Singapore is one of the strictest countries in the world when it comes to intellectual property IP protection. As part of the company registration process, businesses should also prioritize IP planning.

Whether trademarks, patents, or copyrights, these assets should be registered and recorded at an early stage to prevent third-party infringement or counterfeiting. According to data from the Intellectual Property Office of Singapore IPOS, IP disputes involving foreign companies have been increasing year by year, particularly in e-commerce and tech sectors.

Before entering the Singapore market, companies should conduct comprehensive IP searches and work with professional agencies to ensure full legal protection, avoiding costly legal battles in the future.

Conclusion

Setting up a company in Singapore undoubtedly offers a strong platform for business growth. However, companies must also be fully aware of the potential risks and challenges involved. From compliance costs and tax planning to bank account opening, human resource management, market competition, and intellectual property protection - each step requires careful planning and execution.

Only by fully understanding Singapore’s legal framework and market environment can companies truly leverage its strategic advantages as a regional hub and achieve sustainable development.