Singapore has an extremely hospitable climate for business. Sporting a lenient corporate tax system and efficient process for incorporation, many foreign companies are attracted to set up businesses in this country.
If you are considering setting up a business in Singapore, there are several options available to foreign companies. Depending on the management’s focus, growth plans and strategies of the company, each option has its pros and cons.
Overview of types of company entities
- Branch Office
A branch office is recognized as an extension of a headquarters or mother company therefore, all liabilities incurred by operations in Singapore fall on the mother company, wherever it may be stationed. Choosing this option means foregoing corporate and personal tax exemptions because it is not considered a local company. However, any earnings made by the mother company are safe from these taxes. During the audit period, a branch office must submit its accounting as well as that of its mother company to ACRA.
A branch office must meet the standard of having one Singapore resident authorized appointee or company secretary and a registered Singapore office location
- Subsidiary Company
Subsidiary companies are registered companies in Singapore which are owned and controlled by foreign companies. Unlike many countries, wholly foreign owned companies can operate in Singapore.
Subsidiary companies are recognized as a separate legal entity from the mother company – and therefore, enjoys local corporate tax exemptions. At the same time, liability incurred during local business operations is limited to only the subsidiary company, and not the mother company.
By law, a subsidiary company must have the standard one Singapore resident director or representative and a registered Singapore office location.
- Representative office
A representative office is often set up to explore a certain industry or market temporarily by doing industry studies and market research. Since it is not considered a traditional profit-making entity, it is bound by a very different set of limitations
Here are some regulations in place for a representative office in Singapore:
- A representative of the mother company must head the office, with not more than five local staff members
- The office cannot operate for more than three years
- A representative office cannot make any contracts, import or export goods and services, or register for certain business licenses and permits
- Profit-making activities are prohibited
Regardless of the type of business, it should be noted that the incorporation process itself must be done by a Singapore resident or professional firm.
Below is a summary of the features of company entities:
|Legal||Extension of Parent Company||Separate from Parent Company||No legal status, temporary arrangement|
|Company Name identical to parent company||Yes||Can be the same or different||Yes and Compulsory to have “Representative Office”|
|Liabilities extend to Parent company||Yes||No||Yes|
|Activities identical to parent company||Yes||Can be the same or different||No, can only do market research or feasibility studies|
|Validity Period||Perpetual until Company closed||Perpetual until Company closed||Renewed every 3 years minimum|
|Registration Period||1 to 2 days||1 to 2 days||3 to 5 days|
|Tax benefit available||No as non-resident entity||Yes as taxed as resident entity||No; This office cannot generate income|
|Annual Filling||Yes with Parent company account||Yes as account of the singapore subsidiary.||No|
|Able to open bank acc. In Singapore||Yes||Yes||Yes, but with funds from parent company|
|Staff Hiring||No restriction on hiring local or foreign||No restriction on hiring local or foreign||Only able to hire 5 staff. Chief representative must be staff from parent company|
|Appointment of officers||Yes at least 1 local rep||Yes, at least 1 local director||Chief representative from HQ.|