Private Company with Exemption Status (PCES)
Summary: A company owned by the government, or a private firm with less than 20 individual (not corporate) shareholders.
A Private Company with Exemption Status (PCES) is a private firm with fewer than 20 shareholders. No corporation holds its shares, either directly or indirectly.
Additionally, a private company entirely owned by the Government is also deemed a PCES, provided its status is publicly declared in the Gazette by the Minister.
As per Section 4(1) of the companies act, if a company fits the above parameters, it automatically takes on PCES status without the need for additional documentation or applications to the Registrar.
Advantages of a Private Company with Exemption Status
In Singapore, the PCES is a prevalent business structure due to the numerous benefits it provides:
Significant Tax Breaks
Under the Start-Up Tax Exemption Scheme, new PCESs receive corporate tax exemptions for the initial three Assessment Years (YA) in a row. Beginning from YA 2020, a PCES gets a 75% exemption on the first $100,000 of typical taxable income and a further 50% exemption on the next $100,000.
Beyond the first three years, companies with exemption status qualify for partial tax discounts just like other eligible companies. However, new companies primarily involved in property development for sale, investment or both, as well as investment holding companies, cannot enjoy the advantages of this tax exemption scheme.
Reduced Compliance Obligations
PCESs with an annual turnover of less than $10 million are freed from the need to submit accounts or perform annual audits. However, a solvency statement must be signed by the company’s director(s) and company secretary, then submitted to Singapore’s Registrar of Companies and ACRA to avail these benefits.
They can also provide their unaudited accounts to ACRA and the Registrar. PCESs with a turnover of $10 million or more must audit their accounts and submit their returns like any other company.
According to the Companies Act in Singapore, firms are not generally allowed to grant loans to their directors or affiliated companies. Similarly, they can’t provide security or guarantee for a credit transaction made with another person for the benefit of a particular director(s). However, a PCES is exempt from this clause, resulting in greater flexibility concerning financial loans.
In Singapore, foreign individuals receive the right to own 100% of a PCES’s shares. As the company operates as a separate legal entity, foreigners are only liable up to the extent of their shares in the company.