Singapore is a strategically located country which geographically intersects with both the influential Western and the booming Eastern economies. This unique geographical advantage has seen Singapore evolve into one of the world’s great economic hubs attracting both established and growing businesses who wish to establish or consolidate their presence in Asia. From Singapore’s unique vantage point enterprises have complete visibility and easy access to the Asian markets and all of the lucrative potential contained therein.
There are a number of options for foreign companies who wish to establish a presence in Singapore. Enterprises can choose to undertake registration with a professional firm and become a branch office, as a subsidiary company, or a representative office.
Subsidiary Company (also known as Private Limited Company)
Registering as a subsidiary company means you establish a local company and position your own enterprise as the majority shareholder. Although Singapore allows 100% foreign ownership of a local subsidiary, they may be qualified as a resident company and are eligible for tax exemptions and incentivesif conditions are met.
There are numerous advantages in choosing to register a local subsidiary if you are a small or mid-size foreign business. If properly established, a local subsidiary can become an incredibly tax efficient corporate body as they are considered a separate entity form their foreign counterpart.
A subsidiary company must have a registered office in Singapore where the statutory documents can be stored and official correspondence can be sent. One director must be a Singapore resident who is ordinarily present in the city, this can include citizens, permanent residents, and employment pass holders. These regulations are applicable only to the local subsidiary and do not apply to the foreign company holding the majority share. The foreign company is also not subject to the liabilities of the local subsidiary and each company can operate under a separate name.
This is a registered legal entity which is considered to be an extension of the foreign company. This means that the foreign company is ultimately responsible for any liabilities which arise in the branch office. From a taxation perspective, a branch office is seen as a non-resident entity and therefore not eligible for any incentives or tax exemptions available to local companies.
Unlike with a subsidiary, a branch office must bear the same name as their foreign parent company unless there is a pre-existing Singapore company operating under exactly the same name. To run a branch office, the Companies Act requires there 1 local corporate representative who are generally resident in Singapore as well as a registered office address.
A branch office may conduct the same kind of business activity as it’s parent and both earnings and capital can be sent back to the foreign company. Branch office income which is the result of operations outside of Singapore may be exempt from taxes If conditions are met.
A representative office is ideal for companies who wish to explore the option of establishing a presence in the city or have a base from which to investigate investments, production facilities, and resources within the Asia Pacific region. A representative office is a temporary business setup which does not conduct any kind of business and instead undertakes research on behalf of the foreign company it represents.
The foreign company is implicitly responsible for the representative offices activities. Representative offices need to have a representative of the foreign company on ground and be staffed by no more than 5 local support staff. Registering this type of company comes under the authority of the International Enterprise Singapore (IE Singapore) which is responsible for the manufacturing, business, and commerce industries (excluding banking, finance and insurance)
Choosing the right option
Registering a representative office is an ideal short term arrangement for foreign companies who want to gather market intelligence, explore the viability of establishing a presence in the Asia Pacific region, and coordinate activities without actually carrying out any business. Generally speaking, representative offices are a short term solution which precede foreign companies establishing a more permanent presence by establishing a branch or subsidiary company.
Choosing to register a branch office is suitable for companies who want to maintain the appearance of consistency across their business empire and keep things centralised at their head office. Aside from this, it has many downsides as a branch office is seen as a lesser, short term enterprise in the Singapore business world which may make it more difficult to secure investments and business within the region. From an administrative perspective, the branch office is treated as a foreign entity and is therefore not eligible for any of the tax advantages that a Singapore tax resident company would receive whilst still being beholden to the relative regulations for companies in Singapore. In addition to this, a branch office needs to submit its audited accounts as well as those of the head office which means Adds on to the administrative cost and effort as compared to a subsidiary company.
A subsidiary company is generally considered the best registration option from both an operational and administrative perspective. Because it is registered as a local company, a subsidiary may be eligible for all of the tax exemptions and incentives if conditions are met. As it is considered a separate entity, the subsidiary is solely responsible for all liabilities and the foreign parent company cannot be held responsible for debts or infringements.
For more information on the range of options for registering a foreign company in Singapore, please do not hesitate to get in touch with us.