Before diving into the differences, it may be useful to briefly clarify that incorporating a company means creating a separate legal entity where businesses can be conducted through.
An incorporated company can be owned by at least one individual, or it can be owned by another company or another legal entity. A company is legally separate from the individual(s) holding it in terms of its taxes, accountability, and responsibilities.
Now, onto the comparison.
1. Overview of Government System
Singapore is a city-state, which means the whole city is the whole country. If this concept is unfamiliar to you, think of the city or the closest city that you live in, draw an imaginary line along its borders, and now you need a passport every time you enter or leave the city. That’s essentially what a city-state is, where there are no such thing as “provinces” or “states”, like in Canada and the United States respectively. This also means that individuals and companies in Singapore are subject to only one set of laws from the government.
Canada, on the other hand, is a federal state. Put simply, it is a country with one federal government, ten provincial governments, and three territorial governments. A list of Canada’s provinces are as follows: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec, and Saskatchewan. The three Canadian territories are Northwest Territories, Nunavut, and Yukon. This means that individuals and companies in Canada are often subject to two sets of laws, one from the provincial government and another from the federal government.
2. Types of Incorporation
In Canada, companies can be registered at either a provincial or a federal level.
A company that is incorporated provincially does not have to be registered at the federal level, but a company that is incorporated federally have to be registered at the provincial level as well.
A company that incorporates provincially can still incorporate federally later, although there are some legal, trademark, and cost considerations as well. Read more: Federal vs. Provincial Incorporation in Canada
During an incorporation application, a company in Canada can choose one of three legal endings:
- Inc. (Incorporated),
- Ltd. (Limited),
and/or their French equivalents:
- Inc. (Incorporée),
- Ltée. (Limitée),
- Corp. (Corporation).
Legally, entities with all of the above endings are the treated the same way, so it all comes down to a matter of preference.
In Singapore, there is only one legal ending available for privately-held companies: Pte Ltd, which stands for “Private Limited”.
3. Company Registration Authorities
In Canada, the governmental organization responsible for federal incorporation is Corporations Canada, and you would need a My ISED Account to submit your incorporation application online. ISED stands for Innovation, Science, and Economic Development Canada. Provincial incorporation can also be done online through the registrars of each province.
The organization responsible for company incorporation in Singapore is called ACRA (Accounting and Corporate Regulatory Authority). Submitting your incorporation application online can be completed using BizFile+.
4. Corporate Income Taxes and Authorities
When it comes to taxes, the governmental organization responsible for taxation in Canada is the CRA (Canada Revenue Agency), and you would need a CRA My Business Account to file your corporation income taxes. In Singapore, the organization responsible for taxation is IRAS (Inland Revenue Authority of Singapore).
The fact that Canada is a federal state means that companies are taxed at both the provincial level and at the federal level. For example, if a company is based in the province of British Columbia in Canada, it will be taxed based on both the corporate income tax rates in the province of British Columbia and federally in Canada.
Different provinces across Canada impose different corporate income tax rates, although federal tax rates remain the same regardless of the province the company is conducted in.
Although the following is an oversimplification, for the sake of giving out the big picture, there are two corporate income tax categories for Canadian companies:
- Small businesses with an annual taxable income of less than CAD $500,000–600,000 and/or taxable capital of less than CAD $10–15 million will be taxed between 0–4% provincially and up to 9% federally
- Businesses with an annual taxable income of more than CAD $500,000–600,000 and/or a taxable capital of more than CAD $10–15 million will be taxed between 8–16% provincially and up to 38% federally
In contrast, the city-state status of Singapore means that there is only one flat corporate income tax rate to pay: 17%. However, there are tax exemptions for new businesses, where for the first SGD $300,000 income earned by the business, only around SGD 150,000 will be taxed at the 17% rate.
5. Goods and Services Tax (GST)
Upon hitting a certain sales threshold, companies in Canada and Singapore will be required to register for GST, and collect sales taxes to be remitted to the government.
Again, this is an oversimplification, but to give the big picture:
- Singaporean companies will have to register for GST when their taxable turnover exceeds SGD $1 million at the end of a calendar year, or expected to exceed SGD $1 million in the next 12 months.
- Canadian companies will have to register for GST when its sales revenue hits CAD $30,000 in the last 3 or 12 months.
Another difference is that Canadian companies will have to collect and remit sales taxes for both the provincial and the federal governments. Registration for provincial sales tax collection will have to be done separately from the registration of GST with the federal government.
Here is a list of sales taxes in Canada:
- GST (Goods and Services Tax) at 5%, applicable federally in addition to any provincial sales taxes
- PST (Provincial Sales Tax), ranging between 6–7%, applicable in the provinces of British Columbia, Manitoba, and Saskatchewan in addition to GST
- QST (Québec Sales Tax) at 9.975%, applicable in the province of Québec in addition to GST
- HST (Harmonized Sales Tax), ranging between 13–15%, applicable in the provinces of New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. HST is a combination of both provincial and federal tax (GST), so wherever HST applies, GST no longer does.
The only province that does not collect provincial sales taxes is Alberta, meaning only GST (5%) applies. The same goes for the three territories of the Northwest Territories, Nunavut, and Yukon.
It’s also good to note that in both Singapore and Canada, there are some business transactions where sales taxes will be zero-rated, meaning that no sales tax will be collected from the transaction. Some transactions in Canada may qualify for a zero-rated sales tax provincially and/or federally, so you should verify how your business activities are classified by referring to the provincial government and the CRA websites, or by consulting a tax professional.
There’s no quick and simple way to explain what shares are, but if you are already familiar with the concept, here is the main difference regarding shares when incorporating a Canadian vs. a Singaporean company.
To incorporate a Singaporean company, a paid-up capital is required and the amount has to be defined upfront during the incorporation process, as this is an information that goes into the incorporation document. This paid-up capital can be as low as SGD $1, paid by the shareholder(s) to the company in exchange for ordinary, preference, or other classes of shares. Of course, the amount of shares issued can be changed later after incorporation.
Federal incorporation in Canada has a slightly different process, in that it typically follows the concept of what is called the authorized share capital. Essentially, you would only need to know whether or not there is a limit on the number of shares that can be issued, and if yes, what that limit would be. Unlike Singapore, there is no need to explicitly define the amount of shares issued to shareholder(s) at the incorporation process.
7. Corporate Secretary
A corporate secretary is responsible for the administration of a company. Generally, this includes taking minutes, updating important company records, and reminding directors of deadlines in any required filings.
It is a requirement for a Singaporean company to appoint a corporate secretary within 6 months after incorporation, where the corporate secretary cannot be the same individual as the sole director of the company.
On the other hand, Canada does not require the appointment of a corporate secretary in a company. A Canadian company is allowed to consist of one sole director only.
8. Foreign Ownership
Canada does not allow 100% of a federally-incorporated company to be owned by non-resident Canadians (non-citizens and non-permanent residents of Canada), since at least 25% of the company must be owned by resident Canadians. However, a provincially-incorporated company can be fully owned by non-residents, depending on the province:
- The provinces of Alberta, Manitoba, Ontario, Saskatchewan, Newfoundland and Labrador requires that at least 25% of the company be owned by resident Canadians.
- The provinces of British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, Québec, and the three territories (Northwest Territories, Nunavut, and Yukon) do not require that its directors to be resident Canadians.
Singapore allows 100% foreign ownership of privately-held companies, which means a foreign director can hold 100% of shares in the company. However, if the foreign director of the company is not a resident of Singapore, the company will have to hire a nominee director who is a resident of Singapore. It is permissible for a nominee director to hold no shares at all in the company, and they do not have to be involved in day-to-day business operations at all.
I work with a Singapore firm and a registered CPA who can help you to incorporate a company in Singapore, provide nominee director services and corporate secretarial services, open corporate bank accounts, obtain a registered Singapore office address, as well as file annual return + taxes in standards that meet local regulations. If you would like a free quote on these services, please fill up the following form: