Foreign Company Registration Options in Singapore
Singapore being strategically located at the cross roads of east and west, is the preferred hub for many foreign companies that are keen on establishing or consolidating their business in the region. Singapore is endowed with the essential elements to act as a runway to the regional markets with lucrative potentials. Asia with its in-numerous investment hotspots, growing consumer markets, effective production facilities and affordable resources is increasingly receiving a lot of attention from well-established foreign enterprises, investors or even start-up ventures.
This guide provides an overview for each of the setup options for foreign companies in Singapore. The specific option that best suits the needs of a foreign company will depend on the company’s business plan and strategic goals. You may also find useful our related article why foreign companies relocate to Singapore.
Option 1: Subsidiary CompanyA subsidiary company is a locally incorporated private limited company whose majority shareholder is another local or foreign company. Singapore allows 100% foreign ownership in companies. Therefore a foreign company may incorporate a local limited liability company in Singapore (ie subsidiary company) and own 100% of the shareholding.
A Singapore subsidiary is the most preferred registration option for small to mid-size foreign businesses interested in establishing their presence in Singapore. A properly structured local subsidiary company is an excellent tax efficient corporate body. A Singapore subsidiary company is considered a separate entity from the foreign company even if the foreign company is the only shareholder. The liabilities of the subsidiary company are not extended to the parent company.
The name for the subsidiary can be different from that of the parent company and is subject to approval by the Accounting and Corporate Regulatory Authority (ACRA). The Singapore Companies Act requires the appointment of one or more directors. At least one director must be a Singapore resident (citizen, permanent resident, or employment pass holder). A Singapore subsidiary must maintain a registered office address in Singapore and keep its statutory documents in that office. For taxation purposes, the subsidiary may be treated as a Singapore resident company and as such eligible for tax exemptions and incentives available to local companies.
For a complete guide on setting up a subsidiary in Singapore, refer to Singapore subsidiary registration guide.
Option 2: Branch OfficeA Singapore branch office like a subsidiary is a registered legal entity however unlike a subsidiary, a branch office is treated as an extension of the foreign company. This is an important point since it means that the foreign company’s head office bears the ultimate responsibility for any liabilities arising due to the acts of commission or omission of the Singapore branch office. From a taxation point of view, a branch office is generally considered a non-resident entity and therefore not eligible for the tax exemptions and incentives available to local companies in Singapore. Consequently, setting up a branch office is a less attractive option for small to mid-size businesses.
The name of the Singapore branch office must be the same as that of the head office and must be approved first before branch office registration. The company registrar generally approves the proposed name unless a name is identical to an existing company name.
Singapore Companies Act requires that a branch office appoint at least 1 authorised representative who is ordinarily a resident in Singapore to accept services of process and notices. A branch office must have a registered office address in Singapore.
A Singapore branch office is allowed to conduct any type of business activity that falls within the scope of its parent company and can repatriate its earnings and capital. The portion of the income of the branch office, which is derived from or attributable to the operations carried out outside Singapore, will not be subject to taxes. Only the earnings derived from its operations in Singapore will be subject to the prevailing local corporate tax rates.
For a complete guide on setting up a branch office in Singapore, refer to Singapore branch office registration guide.
Option 3: Representative OfficeForeign companies that are only interested in exploring the market or managing the company affairs without conducting any business activity of profit yielding nature, can setup a representative office in Singapore. A representative office is a temporary setup without any legal persona. Therefore it cannot enter into any contract, engage in trading directly or on behalf of the foreign company, lease warehouse, raise invoices, open letter of credit, etc. Representative office in Singapore can only undertake market research or feasibility studies on behalf of its parent company.
The foreign company bears implicit liability for the activities of the representative office in Singapore. The representative office must be staffed by a representative from the foreign company’s head office and can engage a small number of local support staff not exceeding five employees.
International Enterprise Singapore (IE Singapore) is the registration authority for representative offices for most of the industries including manufacturing, business services, commerce and other sectors but excluding banking, finance, insurance that have to be registered with the Monetary Authority of Singapore (MAS).
For a complete guide on setting up a foreign company’s representative office in Singapore, refer to Singapore representative office registration guide.
Which Option to Choose?A representative office is a short term arrangement that is advisable when a foreign company wants to gather market intelligence or coordinate activities without any profiteering motive. Since this setup does not earn any revenue, a representative office acts as a cost centre to the parent company. Foreign companies that are keen on studying the Singapore business environment before committing investments or those who have considerable non-core activities to be managed should set up a representative office. In general, a representative office cannot continue its operations beyond three years and must upgrade itself to a branch office or subsidiary before or at the end of the three year period.
A branch office affects unlimited liabilities for the parent foreign company. The branch office is required to submit its own audited accounts as well as that of its head office, which many foreign companies may not be comfortable with. The branch office wields a lesser commitment and is deemed to lack any long term vision. Thus securing investment and incentives will be relatively difficult. Tax considerations play a major role in deciding the form of business that is appropriate. A branch office, though registered with ACRA, is still treated as a foreign entity because the control and management is exercised outside Singapore. Therefore a foreign company’s Singapore branch will be deemed a non-resident company for tax purposes. As a non-resident entity, some of the tax exemptions available to resident companies such as subsidiary company will not be available to a branch office.
A subsidiary company is rendered a separate identity and is treated as a local Singapore company. It brings several benefits, the foremost being the limitation of liability of the foreign company in Singapore. The foreign company and its assets cannot be held for the debts and liabilities of the subsidiary. Raising funds locally or availing government incentives are easier. A subsidiary company will generally enjoy a resident status and can avail the benefits of several favorable tax treaties that Singapore has concluded.
Next Topic: Read side-by-side comparison of the three entity types at Singapore Subsidiary vs Branch Office vs Representative Office