How to set up as an independent contractor in Singapore

If you’ve decided to give up the 9-to-5 grind and go it alone, Singapore is an ideal location to set up as an independent contractor. This small Asian city-state consistently ranks highly for ease of doing business. 

But do you know how to become a freelancer in Singapore? Maybe you’ve started doing some research but are struggling to figure out exactly what you need to do. 

As of 2023, 12.2% of the workforce in Singapore is self-employed. Before you can join them, you’ll need to know how to:

• Register your business in Singapore

• Avoid misclassification as an employee

• Create compliant contracts that protect you

• Invoice and collect payments from around the world

In this article, we’ll cover all these things, and help you navigate your tax responsibilities as a self-employed worker. We’ll also discuss some of the other risks and liabilities you should be aware of.

First, it’s important to clarify how Singapore defines independent contractors.

What is an independent contractor, according to Singaporean law? 

Independent contractors provide paid services (or products) to another party. For example, a company might hire an external web developer to design their website. In this scenario, the web developer would be an independent contractor. 

So, how is this different from hiring an employee? 

Independent contractors are classified differently from employees. For instance, they’re usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.

When you work with clients, it’s important to be correctly classified to avoid penalties and fines and to ensure that you pay the right taxes.

See also: Why businesses hire contractors vs. international employees

In Singapore, the Employment Act distinguishes between contracts of service and contracts for service. Based on these definitions, you’re considered a contractor if you:

• Determine your own work schedule and working hours

• Perform work for other companies

• Set your own rates and scope of work

• Provide your own tools or equipment

• Aren’t integrated into one specific company and its operations (i.e., you don’t have an internal email address)

• Delegate or subcontract work

• Work without direction or supervision

Business registration in Singapore

Before you can begin working as an independent contractor in Singapore, you’ll first need to choose a formal structure for your business.

Get sole proprietorship

The most popular model for independent contractors is the sole proprietorship structure, as it’s quick to set up and easy to maintain. You can find out how to register for sole proprietorship on the Accounting and Corporate Regulatory Authority website.

But before you can do this, you need to choose and register a name for your business that is in line with the ACRA’s guidelines. You also need to specify your business activity.

You can complete the registration process online using the BizFile portal. Depending on your business activity, it can take as little as 15 minutes to be approved and receive your Unique Entity Number (UEN).

If your business activity is regulated (i.e., you practice a protected profession such as medicine or law, or you’re handling food), you may also need to acquire the relevant business permits or licenses from your local authority.

Incorporate a company

You may want to incorporate a formal company or enter into a partnership if you:

• Want more legal protection than a sole proprietor

• Are working with other partners

• Anticipate generating a large amount of revenue

If you’re unsure which structure is most suitable for your business, you can speak with a registered solicitor or accountant. However, finding a local expert can be tricky and time-consuming, especially if you’re new to the area.

The good news is that you can use a global HR platform like Remote to take care of this for you. Our local experts can support you throughout the incorporation process, ensuring you do everything in line with local guidelines and regulations.

How do I get paid as an independent contractor in Singapore?

As an independent contractor, it’s up to you to handle your invoices and payment collection.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services like PayPal and Wise

These methods all have their own pros and cons. For instance, international bank transfers can be pretty quick but often come with hefty service fees. And if you have clients in other countries besides Singapore, the payment collection process can be even more complicated.

Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.

Alternatively, you can use a trusted HR solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Singapore dollars — and with no hidden fees. Learn more about how our platform can help.

Independent contractor taxes in Singapore

As an independent contractor, you’re responsible for filing and paying your taxes and social security contributions.

Like most countries, Singapore has a progressive income tax rate system. This means that the tax rate increases as your taxable income increases. For example, income up to $10,000 might be taxed at 10%, while anything between $10,001 and $40,000 is taxed at 15%.

In Singapore, you can expect to pay anywhere between 0% and 22% (24% from 2024) in tax, depending on your level of income.

If your annual profit exceeds S$6,000 (around $4,500 USD), you must also make monthly health insurance contributions of between 6% and 8% (capped at S$5,760). Other social insurance contributions are voluntary. On the plus side, you may be eligible to receive tax relief on these payments.

Even more good news is that as a sole proprietor, you only pay personal income tax on your business profits (using your personal tax number). This means that you don’t have to fill out extra returns or pay additional corporate taxes.

What about tax deductions?

You can also claim tax deductions on multiple business expenses as long as they’re incurred “wholly and exclusively in the production of your business income.”

This means that the expenses must be related to your business. You must be able to show why the expense is necessary for you to earn your income. For example, you might need to pay for gas to get to a client meeting.

However, purchasing fixed assets (such as machinery) isn’t an allowable expense. Depreciation of fixed assets may be claimed as capital allowances.

Your expenses must be supported by full documentation. This means you should keep any transaction history, invoices, and details that show how these expenses relate to your business for at least five years.

Side note: An expense is “incurred” when the legal liability to pay arises, regardless of the date you actually pay.

When should you file your tax return in Singapore?

You must file your tax return by April 15 (or April 18 if you file online). Once your return is assessed, you have one month to settle your tax bill.

According to PwC, the tax returns of self-employed people are under increased scrutiny in Singapore. In particular, the Inland Revenue Authority of Singapore (IRAS) is focusing on:

• Returns being filed on time

• Wrongful claims of business purchases and expenses

• Potential instances of tax avoidance

With this in mind, it’s advisable to consult with a qualified accountant or tax specialist when filing your return.

VAT information for independent contractors in Singapore

In Singapore, VAT is known as goods and services tax (GST). The standard GST rate in Singapore is 9%.

As a sole proprietor, you must register for — and charge your clients — GST if your annual taxable income exceeds S$1 million (around $740,000 USD). You can do this online through the IRAS website.

Liability considerations for independent contractors in Singapore

Sole proprietors are personally liable for their finance and tax debts. This means your private assets, including your personal assets (like your home) and professional assets (like your business equipment), can be forcibly used to settle your business debts.

Many independent contractors purchase liability insurance to mitigate this risk.

It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Singaporean and international clients.

Accounting requirements for independent contractors in Singapore

Unlike most countries, sole proprietors in Singapore must prepare annual financial statements (namely a Profit & Loss Account, and a Balance Sheet). The IRAS provides a thorough guide on how to do this.

With this in mind, it’s mandatory to keep organized, accurate records of all your income and expenditures. This includes client invoices, purchase orders, bank statements, and receipts).

It’s highly recommended to consult with a qualified accountant when preparing financial statements. Or work with a platform like Remote, which helps you store, track, and manage all your financial documents in a central location.

The dangers of contractor misclassification in Singapore

As we’ve mentioned, independent contractors are classified differently from employees in Singapore. Many of the protections and benefits employees enjoy don’t typically apply to contractors.

As a result, companies may deliberately or accidentally misclassify you to circumvent their legal obligations. Whether intentional or not, misclassification can result in penalties and fines for both you and your client.

As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly to ensure you comply with classification regulations.

It’s important to keep up to date with classification requirements so that you know exactly what you can and can’t do when working with a new client. You should also create a contract that protects yourself from misclassification, clearly outlining your role and responsibilities with the company.

Use Remote’s Freelance Hub to create airtight independent contractor agreements. You can even create contracts in multiple languages to reduce the risk of miscommunication.

Use our Contractor Compliance Checklist to avoid misclassification

Work through this checklist to help determine if a new hire should have a contractor or employee relationship.

Download

How do I ask the company I’m working with to convert me to an employee in Singapore?

If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.

You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Singaporean law.

5 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:

1. International payments in countries around the world

Navigating all of your clients’ different invoicing, approvals, and payment systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote’s Freelancer Hub gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Singapore dollars (or other currencies) without any hidden fees.

2. Localized in-app contracts and advice

When you draft agreements and contracts for your clients, you risk non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Singaporean laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments. We remove many of the inaccuracies and delays caused by archaic processes and manual management.

Automatically create invoices, submit them for approval, and get paid in your local currency without needing to switch to any other tool or software.

4. Tax management

Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.

Plus, we help you deal with taxes for the country you’re operating in. We can remit all your taxes to the relevant local tax authorities, help you manage your tax liabilities, and support you when you’re applying for relevant tax breaks.

5. Compliance with local regulations

Remote’s local experts ensure that you’re working in line with local regulations and government requirements — either as an independent contractor or when hiring global contractors for your business.

Whether you’re in Singapore, France, or the US, our experts can make sure that you operate on the right side of the law.

Setting up as an independent contractor in Singapore

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract you from what you really want to be doing — helping your clients, delivering great work, and getting paid.

Use a stable, trusted platform like Remote to manage these obligations quickly and efficiently, allowing you to focus on your business goals. We can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for Singaporean and foreign clients

• Enhance your invoice management and avoid manual processes

• Follow local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.