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Singapore Subsidiary versus Branch Office

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There are two main legal structures in which a foreign company may conduct business in Singapore.

  • establishing a branch office by registering the foreign company in Singapore;
  • or establishing a subsidiary.

The type of structure you decide to choose will affect a list of things such as the tax you will pay, liability and more. 

 

Below we have summarised the key differences between the two structures.

 

(Click here to see a table that shows the pros and cons between the two.)

What is a subsidiary?

A subsidiary is a private limited company (PTE LTD) in which the parent company is a corporate shareholder. If the foreign company is a small to moderate business, then a subsidiary is typically the best option to register an entity in Singapore. Singaporean subsidiaries are eligible to be treated as local tax residents, opening access to attractive tax incentives schemes, including Singapore’s 3 year partial tax exemption for new companies (dependent upon your business activity). 

 

With a subsidiary you will be able to conduct your Singaporean business as a separate legal entity, limit your liability to the subsidiary and enjoy asset protection by the subsidiary company.

Business activity 

In terms of business activity, you can run a business completely different from the parent company.

Annual compliance

In terms of annual compliance, you would need to prepare a set of financial statements and submit it in XBRL format when filing your annual return with Accounting and Corporate Regulatory Authority (ACRA).

Key facts about a Subsidiary

To run a subsidiary in Singapore, you need to comply with the following:

  • 1 or more resident directors: You need at least one locally resident director. This is someone who is a Singapore citizen, Permanent Resident, or someone who is on a visa such as an Employment Pass or Dependant's Pass.
  • Paid-up capital: The minimum paid-up/share capital for a company to register in Singapore is S$1. Any time after the company has been incorporated, the share capital can be increased.
  • A registered address in Singapore: The address that is provided for the company must be located in Singapore. In addition, it must be a physical address (residential or commercial). A P.O. Box will not be accepted.
  • Company secretary: within 6 months of incorporation, every company must appoint a company secretary. A company secretary has to be a citizen, permanent resident or an employment pass holder.
  • Auditor: within 3 months of incorporation, every company must appoint an auditor, unless the company has been exempted from audit (which is the case for most start-up companies).

Documents required 

The following documents are required for the registration of a subsidiary: 

  • Parent company’s certificate of incorporation
  • A copy from the Registrar of Companies that shows the current registered address and directors of the parent company
  • A resolution that authorises an individual to sign necessary documents on behalf of the parent company
  • Passport particulars and residential address details of individuals who will act as the directors of the subsidiary company
  • A signed Consent to Act As Director (by each director)
  • Registered address details of the subsidiary company
  • Constitution for the Singapore subsidiary company

What is a Branch office

In Singapore, a branch office is an extension of a foreign parent company that has been registered outside of Singapore. Why register as a branch office? It is to generate revenue and operation in Singapore for the foreign parent company. A branch office is seen as a non-resident company, hence why it will not be eligible for tax incentives and exemptions in Singapore. 

 

As it is not a separate legal entity,  the parent company is liable for all the debts and liabilities of the branch office.

Business activity 

Your business activities have to be aligned with your parent company, meaning it cannot be different. It can also generate commercial revenue aligned to the parent company however, a portion of the profits is subjected to the local corporate tax.

Annual compliance

A branch office is required to submit the audited accounts of Parent Company and audited financial statements of its branch office.

Registration requirements for a branch office

Below are some administrative matters that need to be fulfilled as part of the incorporation process:

  • Name: The name of the Singapore branch has to correspond to the name of the foreign company
  • Officers: A branch has to appoint at least 1 authorised representative who is a Singapore citizen, Permanent Resident, or someone who is on a visa such as an Employment Pass
  • Constitution and Activities: There is no separate constitution for the branch office. The branch’s activities are directed by foreign company’s constitution
  • A registered address in Singapore: The address that is provided for the company must be located in Singapore

Documents required 

The following documents are required for the registration of a branch office: 

  • Foreign company’s Certificate of Incorporation (copy)
  • Foreign company’s Constitution (copy)
  • Particulars of the directors of the foreign company
  • A memorandum of appointment and details of at least 1 person resident in Singapore (who can act as the authorised representative)
  • A memorandum executed by/or behalf of the foreign company that states the powers of the local authorised representative
  • Registered address details in Singapore
  • Latest audited financial statements of the parent company

Overview: Pros and cons between the two

 

Subsidiary

Branch 

Legal nature

  • Parent Company as the shareholder
  • Enjoys separate legal entity, able to own assets and be sued/sue in its own name
  • Enjoys Asset Protection owned by the Subsidiary Company 
  • Not a separate legal entity, mere extension of the Parent Company
  • Liabilities and Assets are from Parent Company, no asset protection 

Business activity 

Can be different from the Parent Company 

Align with the activities of the Parent Company. It cannot be different from the Parent Company. It can generate commercial revenue aligned to the Parent Company however a portion of the profits is subjected to local corporate tax. 

Annual compliance

Need to prepare a set of financial statements and to submit financial statements in XBRL format when filing annual return with ACRA Singapore. 

Branch office is required to submit the audited accounts of Parent Company and audited financial statements of its branch office. 

Tax incentives

A resident entity in Singapore, can enjoy tax incentives such as tax exemption for the first 3 years (note that it depends on the biz activities i.e. investment holding).

Not eligible for tax incentives as it does not create a resident entity in Singapore 

Appointment of officers

at least 1 local resident Director & Company Secretary

at least 1 authorised representative

Company name

Can be different from the Parent Company 

Must be the same as Branch Office 

Registered office address

Mandatory 

Mandatory 

Foreign ownership

Yes – foreign ownership is allowed

Serve as an extension to the Parent Company 

Opening a bank account

Yes 

Yes 

Paid up capital 

Minimum $ 1 (at 1 ordinary share) – this will differ if client intends to apply for a work visa

Not required 

Documents required 

Appointed Officers (Individuals Only)

  • Certified True Copy of Individual Identification Document
  • Certified True Copy of Recent Address Proof
  • Source of Wealth Information 
  • A certified copy of the Certificate of Incorporation of the foreign company
  • A certified copy of the Constitution of the foreign company
  • Particulars of the directors of the foreign company
  • A memorandum of appointment and details of at least 1 person resident in Singapore who will act as the authorized representative for the Singapore branch office
  • A memorandum executed by or on behalf of the foreign company stating the powers of the local authorised representative
  • Details of the registered office address in Singapore
  • Latest audited financial statements of the parent company, if required to be prepared in parent country

**Any documents not in English must be translated in English before submission. The firm you have hired may require additional documents as necessary.

Next steps

This article summarises the key differences between a subsidiary and branch office in Singapore. If you need more help on choosing a business structure that works for you or incorporating in Singapore, contact us to learn more. We are more than happy to help!

 

 

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