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Singapore: competing globally for talent and essential workers

28 April 2022 | Applicable law: Singapore

For several decades, companies have been competing globally to hire the most talented workers. As a result of COVID-19 and lockdowns, this global competition has now extended to skilled and trade workers. How can immigration practitioners help their clients gain an edge and manage staffing shortages?

Leon Kwong Wing examines the key points for Singapore. The following is based on his Singapore paper for the 2022 AILA/GMS Annual Global Migration Forum.

Global Investor Programme (GIP)

The GIP offers Singapore permanent resident status for ultra-high net-worth people and owners of large businesses.

The GIP is administered by the Economic Development Board, which is the government agency for promoting foreign direct investment in Singapore. The EDB division administering the GIP is Contact Singapore, whose mission is to draw entrepreneurs and busines owners to relocate to and invest in Singapore.

The GIP is open to four categories of people:

a) ‘Established business owners’ of three or more years’ entrepreneurial and business standing, running businesses with revenues of SGD200 million (about USD150 million) a year in the last three years, in any one of a (wide) list of specified industries. The applicant should be owner of at least 30 per cent of the business if it is privately-held; or among the largest individual shareholders if publicly-listed.

b) ‘Next-generation business owners’ who are board directors or C-suite executives of businesses with revenues of SGD500 million (about USD370 million) a year in the last three years, in any one of the same (wide) list of specified industries. The applicant’s immediate family must own at least 30 per cent of the business or be its largest shareholder.

c) ‘Founders of fast-growth companies’ in the specified industries. The applicant must still be a major individual shareholder in business. The business has to have a valuation of SGD500 million, and reputable venture capital or private equity investors.

d) ‘Family office principals’ who have five years’ entrepreneurial, investment or management experience, and who have net assets (excluding real estate) of SGD200 million.

The investment is SGD2.5 million:

a) as share capital in a new business or as additional share capital to expand an existing business in Singapore (‘Option A’);

b) in a (small) number of third-party investment funds approved by the EDB for the GIP (‘Option B’); or

c) as share capital in a single-family office which will manage SGD200 million in assets (‘Option C’).

Contact Singapore takes nine to 12 months to process a GIP application. The application fee payable to the agency is SGD10,000.

a) Before that can happen, it takes a fair amount of time and effort on the part of the client and the law firm to prepare an application for submission In the case of Option A, a GIP application requires, among other things, the applicant to draw up a five-year business plan with their projections for:

(i) the number of jobs to be created for Singapore citizens, Singapore permanent residents and foreigners at every level of the organisation and business;

(ii) fixed investments in building, equipment and machinery;

(iii) revenues; and

(iv) business expenditure within and outside Singapore.

The applicant is expected to be involved in the business as a board director and/or a C-suite executive, and his/her role in executing the business plan has also to be elaborated in the application.

b) An Option C application will likewise require a five-year plan describing the intended investment strategy, asset allocation, functions and in-house capabilities of the single-family office. The GIP applicant would be expected personally to figure in a major investment role in the family office’s business plan.

c) Option B may be in the nature of a passive investment in a third-party fund. Even so, Contact Singapore will solicit the applicant’s intentions (if any) in relation to carrying on a business in Singapore and the possible size of the business investment and number of jobs that might be created. Even with Option B applicants, being established entrepreneurs, business owners and/or ultra-high net-worth people, are assessed on the basis of any business or investment plans that they would be minded to pursue when they have obtained permanent resident status; and not on their purely passive monetary investment in the fund.

Singapore permanent resident status can be obtained for the GIP applicant’s spouse and unmarried children under 21 years in the one application. The applicant may also sponsor ‘long-term visit passes’ for his/her parents and unmarried children over 21 years to reside in Singapore.

Family offices are fund management companies. And fund management companies in principle constitute taxable permanent establishments for the fund entities whose capital and investments they manage.

a) With that said, any offshore fund entity managed by a fund management company in Singapore is explicitly exempt from tax in Singapore on most kinds of investment.

b) The point of making offshore fund entities tax-exempt is precisely to encourage these funds to be managed in and from Singapore rather than someplace else.

c) Of course, fund management is a regulated activity. Which means that the fund management company has either to be licensed or exempt from licensing. Family offices will usually be exempt from licensing on the ground that they only manage funds for related corporations.

d) A family office can also manage onshore (meaning Singapore-resident) fund entities. Onshore fund entities can also be exempt from tax in Singapore on same investments as offshore funds, merely that the exemption is not automatic (as with offshore funds) and has to be applied for.

e) The exemption for onshore funds is relevant to Option C under the Global Investor Programme. As I mentioned above, Option C involves setting up a family office that will manage investments SGD200 million (about USD150 million) or more. There is further requirement that SGD50 million (about USD37.5 million) of the investments be held onshore (meaning in or through Singapore).

The investment period is five years. That is to say, the investor under Option A or C has to provide the EDB with the audited financial statements and payroll of the business or family office at the end of five years as evidence that the business plan was carried through. Option B investors will be free to withdraw their fund investments, should they choose to, after five years.

Tech.Pass

The Tech.Pass is a two-year work pass for entrepreneurs, leaders and experts in ‘tech’.

The pass is administered by the Economic Development Board and intended by the agency to attract tech talent and develop the tech ‘ecosystem’ in Singapore. For the EDB, ‘tech’ encompasses digital, medtech, biotech, cleantech, agritech and fintech.

A person has to meet two out of the following three criteria to apply for a Tech.Pass:

a) have an income of SGD240,000 (about USD180,000) a year, or a fixed salary of SGD20,000 (about USD15,000) a month;

b) at least five years’ experience in leading roles in tech companies with USD30 million in funding, or a USD500 million valuation or market capitalisation; and

c) at least five years’ experience in leading roles developing tech products having USD100 million annual revenues, or 100,000 monthly active users.

The Tech.Pass holder is expected to engage in some combination of the following:

Tech.Pass holders can be accompanied by their spouse and unmarried children under 21 years on ‘dependant’s passes’; and by their parents or partner on ‘long-term visit passes’.

The Tech.Pass can be renewed once for another two years. One of the conditions for renewing the pass is that the person is engaged in two or more of the activities in the table above, at least one of which must be in first column, ‘A’.

EntrePass

The EntrePass is for individuals wanting to start tech companies in Singapore.

The pass is administered by Enterprise Singapore, the government agency whose remit is to develop small and medium enterprises in Singapore, and the Ministry of Manpower. SMEs are defined as businesses with revenues up to SGD100 million (about USD75 million) a year, or employ up to 200 people.

The EntrePass is open to three categories of people:

a) ‘Entrepreneurs’ who have

(i) raised SGD100,000 (about USD75,000) funding from a Singapore government-linked investment vehicle, or a venture capital fund or business angel recognised by the government;

(ii) been incubatees at an incubator or accelerator recognised by the government;

(iii) founded and sold a tech company;

(iv) previously raised significant funding from investors; or

(v) a track record in business which is relevant to the proposed new Singapore company.

b) ‘Innovators’ who:

(i) possess intellectual property (registered with an approved national IP institution) which will give the proposed Singapore company a competitive advantage which cannot be easily replicated;

(ii) are collaborating with a Singapore research institute or institution of higher learning in research relevant to the proposed business; or

(iii) possess exceptional technical or domain expertise (evidenced by achievements and/or international recognition) relevant to the proposed business.

c) ‘Investors’ investing a ‘substantial amount of money’ in the proposed company and who have:

(i) a track record of investing in and driving the growth of highly-scaleable business;

(ii) eight years’ professional or executive experience in senior management in a large corporation which would be relevant to growing the proposed business; or

(iii) definite plans (in terms of the amounts of money, timetable and pipeline) to invest in other innovative or tech start-ups in Singapore.

An EntrePass application requires, among other things, putting together the documentary evidence of the applicant’s eligibility as an entrepreneur, innovator and/or investor. Also, a business plan for the new company will need to be prepared. Enterprise Singapore and the Ministry of Manpower take about eight weeks to process an EntrePass application.

An EntrePass is issued for one year in the first instance. It is then renewable for another year after the first year. And subsequent renewals are given for two years each time. In order to renew:

a) The EntrePass holder’s shareholding must be at least 30 per cent of the company.

b) The company must furnish documentary evidence of its business operations in the form of letters of reference from customers, invoices, contracts, business partnership agreements, tenancy agreements, etc.

c) It must have:

(i) raised funding from Singapore government-linked investment vehicle, venture capital funds, other companies, family offices or business angels;

(ii) developed, produced or commercialised tech products, services or platforms;

(iii) registered patents with an approved national IP institution; or

(iv) an ongoing research collaboration with a research institution.

d) Both the EntrePass holder and the company must join the Startup SG Network, a platform to promote tech entrepreneurship, innovation and investment in Singapore. EntrePass holders are expected to contribute by hosting or speaking at workshops and webinars, organising deal-making and networking sessions, providing mentorship for other start-ups, etc.

e) The company must meet annual business spending thresholds which increase every two years. For this purpose, ‘annual business spending’ excludes:

(i) royalties to non-residents;

(ii) franchise, technical know-how and service fees to non-residents; and

(iii) the EntrePass holder’s remuneration.

f) And it must create jobs for Singapore citizens or permanent residents.

(i) In this regard, the new company must create employment for at least one citizen/PR in a professional, managerial or executive (PME) position by about the middle of the 2nd year.

(ii) After that, the payroll requirement in terms of citizen/PR PMEs increases by one every two years to a ceiling of 10 PMEs in the 20th year.

(iii) For this purpose, three non-PME employees on the payroll are counted as equivalent to one PME, except that there cannot be more than 12 non-PMEs.

g) The business spending and payroll requirements to renew an EntrePass are as follows:

h) These are the conditions for renewal for the time being. Conditions can change over time.

A company has to satisfy job creation and business spending thresholds before an EntrePass holder can obtain dependant’s or long-term visit passes for family members as follows:

Personalised Employment Pass

The GIP, Tech.Pass and EntrePass are aimed at quite narrow categories of people; nobody else may apply. Participants in those programmes also sign up to substantial obligations; the EDB or Enterprise Singapore require proof that these obligations are performed. In contrast, the Personalised Employment Pass (PEP) is a simple work pass allowing high-earners to engage in employment in Singapore.

PEP applications are the purview of the Work Pass Division in the Ministry of Manpower.

Individuals who can prove that they earn a fixed salary (that is to say, non-variable employment income in cash, excluding benefits-in-kind, variable incentives and such) of not less than SGD18,000 (about USD13,500) a month may apply for a PEP to work in Singapore.

The Work Pass Division takes about eight weeks to process an application.

PEP holders must take up employment in Singapore with third parties; that is to say, the pass does not permit its holders:

a) to work as independent contractors or self-employed freelancers; or

b) to go into business for themselves (for example, as a sole proprietor, as a partner in a partnership, or as a director in a company of which the pass holder is a shareholder).

The pass holder must also be employed by a Singapore entity; meaning that the Work Pass Division does not recognise employment with a foreign entity that is not registered with the business/company registry in Singapore.

A pass holder’s fixed salary in a full calendar year must add up to at least SGD144,000 (about USD110,000), regardless of whether or not they have been employed continuously during the year. Otherwise, the pass will be cancelled.

A PEP is also cancelled if the pass holder is out of work for more than six months at a stretch.

A PEP is issued for three years; there is no renewal. PEP holders, therefore, must either apply for a normal Employment Pass (see next section) or become a permanent resident if they want carry on working in Singapore for more than three years.

Employment Pass

The Employment Pass (EP) is the regular category of pass under which foreign PMEs are employed in Singapore.

a) Where a PEP application is made by the individual, an EP application, in contrast, is made by the employer.

b) Where a PEP holder has a personal right to work in Singapore and, as such, a PEP holder can change jobs, an EP, in contrast, is specific to the employer and is cancelled when and if the employment ceases. In order for an EP holder to change jobs, the prospective new employer has to make its own EP application to hire the individual.

As with PEPs, EP applications are the purview of the Work Pass Division in the Ministry of Manpower.

For an employer to hire a foreign PME on an EP, it must pay a minimum fixed salary of SGD5,000 (about USD3,750) a month for newly-qualified candidates to SGD10,500 (about USD8,000) a month for candidates in their mid-40s.

An employer may only apply for an EP to hire a foreign PME only after it has advertised the position on the national job bank, MyCareersFuture, for 28 days and attempted to fill the position locally. With that said, the ‘fair consideration’ process is not obligatory where:

a) the employer has fewer than 10 people on its payroll;
b) the fixed salary for the position is SGD20,000 a month or more:
c) the EP will not be for more than one month;
d) the candidate is being transferred from a related entity in Singapore; or
e) the candidate is an intra-corporate transferee under the terms of a free trade agreement or WTO GATS.

The Work Pass Division takes about three weeks to process an application.

EPs are issued for one to three years at a time. The initial period is commonly one or two years, then two or three years on renewal. Renewals are subject to the person satisfying the requirements for their EP as may be in force at the time. (Principally, the salary requirements for EPs have been raised several times in recent memory.)

EP holders on fixed salaries of SGD6,000 a month or more can are eligible for dependant’s or long-term visit passes for their spouse/partner and unmarried children under 21 years. EP holders on fixed salaries of SGD12,000 a month or more may also sponsor their parents.

a) EP holders whose fixed monthly salaries are less than SGD6,000 are not eligible for dependant’s/long-term visit passes for their family.

b) Also, persons whose EP applications were made on the basis that they are Intra-corporate transferees are not eligible for dependant’s/long-term visit passes for their family, regardless of their remuneration.

Tech@SG Programme

Enterprise Singapore and the EDB will endorse and support EP applications that qualifying tech companies make to the Ministry of Manpower.

Backing for EP applications by companies with 30 per cent or more Singapore shareholding is provided by Enterprise Singapore (whose remit is to promote Singaporean SMEs), and applications from companies with more than 70 per cent foreign shareholding will be backed by the EDB (which is responsible for encouraging foreign direct investment).

The three criteria for a company to qualify for agency support for their EP applications are:

a) The company’s core business product or service is a digital or technology offering built on proprietary hardware or software. Examples given by the agencies are big data and analytics, artificial intelligence, cybersecurity, software-as-a-service, e-commerce, digital media, digital gaming, medtech, biotech, cleantech and fintech.

b) The company has raised more than USD10 million funding in the past 36 months.

c) And some of that funding (no minimum amount) has come from a specified investment firm. At the time of this writing, there are 50 ‘programme-recognised’ investment firms:

Tech companies that have been accepted into the Tech@SG Programme will have Enterprise Singapore’s or the EDB’s endorsement on up to 10 EP applications that they make to the Ministry of Manpower over a two-year period. This agency backing means smooth processing and approval of the EPs by the Work Pass Division.

a) The candidates have to belong to what the agencies refer to as the company’s ‘core team’ in Singapore for their EP applications to receive this support.

b) Enterprise Singapore’s and EDB’s support extends to the first renewal of the EPs, so their EPs should be renewed by the Work Pass Division as a matter of course.

c) All other things being equal, the company and the candidate are essentially assured that the candidate will have an EP in Singapore for up to five years.

Labour market

28.1 per cent of the people in employment in Singapore are non-residents, and 71.9 per cent are residents — if we exclude those work permit holders employed as domestic workers. (These are December 2021 figures in the Ministry of Manpower’s Labour Market Report 2021.)

If all the people in employment are counted, then 32.9 per cent of the people in employment are non-residents and 66.1 per cent residents.

‘Residents’ in this context means citizens and permanent residents. Between these two categories, Singapore citizens are 84.6 per cent of the labour force and permanent residents 15.4 per cent. (These are the June 2019 figures from the Ministry of Manpower’s Singapore Citizens in the Labour Force.)

By definition, a permanent resident is not a Singapore citizen. If we may assume that the proportion of citizens to permanent residents in the labour force carries across to the ‘residents’ in employment, then fully 43.1 per cent of the people working in Singapore are foreign citizens.

The point is that the number of foreign citizens working and carrying on business in Singapore is about as high as is politically sustainable.

This has been the situation for a number of years already. At one time, as I recall, we had an level playing field policy, which was to say that a job created was regarded as a job created and it did not matter all that much whether it was filled by a Singaporean or a foreign citizen. The labour market was quite open. There was little protection for citizens in the labour market. Employers had considerable liberty. And that meant a very simple immigration system. Back then, an account of the Employment Pass would have fulfilled the remit of this practice advisory, and it was a simpler EP system at that.

The system is now much more complex, as you can see. It has been made more discriminating in order to get in the kinds of people we do want to see come here while at the same time avoiding any increase in the numbers as a whole.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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