Workforce Payments Guide Singapore
Last updated: Dec 26, 2023
Papaya Global fully supports workforce payments in Singapore.
Papaya Global supports payments to contractors in Singapore. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. Contractors are advised to reach out to their bank to confirm how foreign currencies are handled.
In Singapore, the Know Your Customer (KYC) process is part of the Enhanced Regulatory Framework implemented by the Accounting and Corporate Regulatory Authority (ACRA) and guidelines set by the Monetary Authority of Singapore (MAS). The KYC process involves verifying the identity of customers, either before or during the time they start doing business, to prevent money laundering, terrorism financing, fraud, and other illicit activities.
The KYC process leverages digital technologies such as Myinfo and Singpass services to streamline the onboarding of new customers, making the process paperless, seamless, and efficient.
The KYC process includes initial requirements, a screening process, and regular monitoring and record-keeping. The initial requirements include providing identification proof, business profile, and a copy of the company’s Memorandum and Articles of Association.
The screening process involves a background check and assessment of recent transactions. Regular monitoring and record-keeping involve evaluating the business history and risk profile if necessary.
Businesses are rated as either high-risk or low-risk based on factors such as ownership structure, nature of trade dealings, and country or territory risk factors. Documentation of all customer information must be kept for at least five years after the termination of the business relationship.
The regulatory guidelines for KYC also include appropriate measures such as independently verified telephone number, confirmation of address, telephone confirmation of employment status (with consent), proof of salary details (recent bank statement), certification of ID documents by lawyers or notary public, initial deposit using a cheque with a bank in Singapore, and other reliable verification checks.
Singapore has a robust digital ID system under the National Digital Identity (NDI) program, with Myinfo providing verified personal and corporate data. Citizens can use the Singpass app to sign up for government and private sector services. Beyond identification, due diligence and ongoing monitoring are required. If a customer is a Politically Exposed Person (PEP) or poses a greater risk of money laundering or terrorist financing, additional due diligence measures are necessary.
Under the Singapore Payment Services Act (PSA), payment service providers need to take a risk-based approach to combat money laundering and other financial crimes. All customers need identity verification. Simple customer due diligence is acceptable for certain low-risk accounts, but enhanced due diligence is necessary if the risk profile suggests a possibility of criminal risk. Watchlist screening, transaction monitoring, and effective recording and reporting of suspicious transactions are all part of the PSA.
Non-compliance with the KYC regulations can lead to penalties such as cancellation or suspension of the company registration with ACRA, denial of access with ACRA’s Bizfile business interface, imposition of financial fines, and disruption of business operations.
Cross-border workforce payments and international payroll in Singapore are influenced by several regulations:
Cross-Border Payments Regulation:
The Monetary Authority of Singapore (MAS) has provided guidance on cross-border payment linkages with countries like Indonesia, Malaysia, Philippines, and Thailand. These payments connectivity initiatives offer greater convenience for cross-border fund transfers and small-value payments.
Payment service providers operating in Singapore are regulated under the Payment Services Act, unless exempted under specific conditions set out in the Act.
International Payroll Regulations:
The Employment Act (EA) applies to employees (irrespective of nationality) who are working under a contract of service. It does not include seamen, domestic workers, and persons employed by statutory boards and government.
Opening a Bank Account
To open a company bank account in Singapore, the following requirements are necessary:
1. Proper documentation and proof of registration of the Singapore company, including:
- Completed Corporate Account Opening Forms (signed by authorized signatories as per the board resolution)
- Board of Directors Resolution sanctioning the opening of the account and the signatories to the account
- Certified True Copy of Resolution sanctioning the opening of the account and the signatories to the account
- Certified True Copy of Certificate of Incorporation
- Certified True Copy of the Company’s Business Profile from Company Registrar
- Certified True Copy of the Company’s Memorandum and Articles of Association (MAA)
2. Proof of identification, such as a passport, or a certified/notarized true copy of the passport for directors, signatories, and ultimate beneficial owners.
3. Proof of residential address for each of the company shareholders, ultimate beneficial owners, and directors.
4. Background information of ultimate beneficial owners, which can include a Curriculum Vitae, a biography write-up, official company website, employment/appointment letters, or any proof of employment and educational certificate from a recognized institution.
5. Detailed information about the company, including sources of funds, the purpose of the entity, the proposed business activities, potential clients and suppliers, anticipated banking transactional activity, and a short-term business plan.
6. Undergoing a detailed “Know Your Client” assessment, providing information about the company’s key personnel, source of funds, legal structure of the company, and nature of the company’s business.
7. An initial deposit and minimum deposit is also required.
The physical presence of directors and authorized signatories at the time of setting up an account may also be necessary to prevent unforeseen delays. The time taken to open a corporate bank account can range from one day to several weeks, largely depending on the time taken for verification by the banks.
However, it may take between a few weeks and three months to open a new company bank account, especially for foreign-owned or complex entities. The processing time can be longer for opening a corporate bank account without physical presence in Singapore.
Here are some of the major foreign banks that operate in Singapore:
- ABN Amro
- BNP Paribas
- Bank of America
- J.P. Morgan Chase Bank
- Bank of New York Mellon
- Standard Chartered Bank
- Deutsche Bank AG
- Barclays Bank
These banks have a significant presence in Singapore and offer a wide range of banking services.
Major Local Banks
The major local banks operating in Singapore are:
- DBS Bank (Development Bank of Singapore)
- OCBC Bank (Overseas Chinese Banking Corporation)
- UOB (United Overseas Bank)
In addition, Trust Bank, GXS Bank, and MariBank are the local digital banks with full bank licenses in Singapore.
The B2C payment tools available in Singapore include:
- QR payments
- Direct debit
- Bank transfers
- Razer Merchant Services
- DBS PayLah
- Opn Payments (formerly Omise)
- Choco Payment
- Singapore QR code payment (SGQR)
- Buy Now Pay Later (BNPL) services like ShopBack and Atome
In Singapore, it is possible to pay employees with cryptocurrencies. Companies considering this option would need to decide on a recurring date each month to set the fiat-crypto conversion rate and this rate would be frozen as the conversion rate for their employees’ payroll.
The market rate of the cryptocurrency could be used as the conversion rate. The employees could then keep the coins in their digital wallets or use different tools to liquidate their cryptocurrency.
However, businesses that wish to engage in cryptocurrency transactions need to apply for a cryptocurrency license under the Singapore Payment Services Act 2020, issued by the Monetary Authority of Singapore (MAS). This license allows businesses to conduct regulated cryptocurrency transactions, including operating as a cryptocurrency exchange operator or depository wallet operator.
As per tax regulations, the Inland Revenue Authority of Singapore (IRAS) states that businesses that accept cryptocurrency for their remuneration or revenue are liable to normal income tax rules. Transactions involving the use of payment tokens as payment for goods or services are viewed as barter trade. The business receiving payment tokens for goods and services rendered will be taxed on the value of the underlying goods and services provided.