Foreign Companies Setting up in Singapore
Foreign companies are finding it increasingly attractive to set up branches in Singapore. The reasons for their relocation include Singapore’s attractive corporate tax arrangements, stable political climate and strategic geographical location. There are 4 entry options for foreign companies:
- Singapore Branch Office
- Singapore Subsidiary
- Representative Office
1. Singapore Branch Office
The first entry option for foreign companies would be to set up a branch office in Singapore. A branch office is considered an extension of the parent company, and not as a separate legal entity. This means that the parent company will be legally responsible for the act or omissions of the branch office.
Another important point to note would be that branch offices are not regarded as resident entities in Singapore, and hence would not be entitled to the various tax exemptions available to resident companies. Branch offices conduct their business activity within the scope of their parent companies, and must file their own audited accounts as well as that of their head offices.
The registration of a branch office can be done online on BizFile+, either from the parent company’s country, or the parent company can engage a registered filing agent, such as corporate services firm or a law firm, to submit an online application on their behalf.
The branch office must also appoint at least one authorised representative who is ordinarily resident in Singapore. A Singapore citizen, Permanent Resident or EntrePass holder are all regarded as ‘ordinarily resident.’ The name of the branch office must also be the same as that of the parent company.
Setting up a branch office in Singapore is viewed as a short-term commitment as it is unlikely to attract investment opportunities due to its non-resident status. The extended liability imposed on the parent companies is also one which deters them from opening branch offices. Hence, a Singapore branch office is most suitable for businesses looking to capture market share in the short-term.
Read our other article for more information on how to set up a branch office in Singapore.
2. Singapore Subsidiary
The second entry option for foreign companies would be to set up a subsidiary in Singapore. A subsidiary is a locally incorporated private limited company, with the majority of shareholders either a local or foreign corporate entity. Subsidiaries can even be 100% owned by foreign companies. The name of the subsidiary may be the same or different from that of the parent company.
Unlike branch offices, subsidiaries are considered separate legal entities from their parent companies. This means that the foreign companies have limited liability and are not liable for the acts or omissions of their subsidiaries.
Subsidiaries must have at least one locally resident director in Singapore. In addition, subsidiaries are treated as local tax-residents, and hence are entitled to the same tax exemptions and incentives as local companies. Subsidiaries may also engage in activities that are of a different scope than that of their parent companies.
Registration can be done online on BizFile+, either from the parent company’s country or through engaging a registered filing agent such as a law firm to fill the application process on the parent company’s behalf. The latter option is highly encouraged. The registration process for the incorporation of a subsidiary is also similar to that of a local company.
Most foreign companies prefer setting up a subsidiary rather than a branch office due to the limited liability protection and added tax benefits a subsidiary enjoys. For foreign companies looking to establish themselves in Singapore in the long-term, setting up a subsidiary would be the most ideal option.
Read our other article for more information on how to set up a subsidiary in Singapore.
3. Representative Office
The third entry option available for foreign companies would be to set up a representative office. Unlike branch offices and subsidiaries, representative offices have no legal persona and are merely an extension of their parent companies. Hence, they are unable to enter into contracts, engage in trading or any other profit-making activities. The parent company is also legally responsible for the acts and omissions of the representative office.
Representative offices have no tax-residence status as they are not involved in profit-making and do not generate revenue. The scope of activities of representative offices are primarily market research and feasibility studies. As they are non-incorporated bodies, representative offices do not need to adhere to filing requirements as branch offices and subsidiaries do.
Registration for a representative office is done online on the Enterprise Singapore website and not BizFile+. Companies are highly encouraged to appoint a registered filing agent to fill the application process on their behalf and act as a point of contact with local authorities. The application criteria and necessary documents are also stated on the Enterprise Singapore website.
There is no need for an authorised representative who is ordinarily resident in Singapore, unlike branch offices. However, a chief representative staff from the parent company must relocate to Singapore to oversee the activities of the representative office.
Representative offices are only valid for a maximum of three years and must be renewed every year before their expiry date. As a result, they are only seen as temporary arrangements. For companies that want to first gather market intelligence before settling on full-fledged, profit-making activities, a representative is the most ideal option.
Read our other article for more information on setting up a representative office in Singapore.
Redomiciliation is a process where a company transfers its registration from one jurisdiction (country) to another. If you redomicile your company to Singapore, it ceases to have its place of incorporation in the foreign country and becomes a Singapore-registered company instead.
Read our other article for more information on redomiciliation to Singapore.
Setting Up in Singapore
Each entry option has their different benefits and drawbacks. For companies to decide on what is best for them, they have to take into consideration their business objectives and duration of establishment in Singapore. Certain factors such as the tax considerations, different types of liability and scope of activities of each entry option should be carefully weighed before a foreign company decides to set up in Singapore.
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