Singapore is one of the most sought-after locations for foreign companies to expand their operations due to its easy access to Asian markets, low tax rates, an efficient legal system, and business-friendly policies. Therefore setting up a subsidiary in Singapore can be favorable to foreign businesses. There are different structures for a setting up business in Singapore. A foreign firm can establish a subsidiary, a branch office, or a representative office in Singapore. The following are the main differences between these structures:
- A subsidiary company is a locally incorporated entity in which the parent company owns the shares. It is subject to Singapore corporate tax rates and is eligible for local tax exemptions and incentives. Finally, it has no obligations to the parent corporation.
- A Branch Office is not an independent legal organization, but rather an extension of a foreign corporation. Because a branch office is a non-resident entity, it does not qualify for the tax benefits that a subsidiary business does. A branch office’s liabilities are entirely the responsibility of the parent firm.
- For foreign companies wishing to undertake market research in Singapore, a Representative Office (RO) is available. An RO is prohibited from engaging in any profit-generating activities. Because it is only a temporary administrative structure, it has no legal or tax character. An RO must be renewed every year, and it has a three-year maximum lifespan.
The most prevalent corporate structure utilized by international enterprises in Singapore is a subsidiary company.
Primary Characteristics of Subsidiary
Subsidiary business in Singapore has its own benefits. The characteristics of the subsidiary business in Singapore are as follows:
- A limited liability company is formed as a subsidiary company in Singapore.
- The subsidiary firm is legally distinct from the parent corporation.
- The parent company’s liability is restricted to the amount of money it invests in the subsidiary company’s stock. The parent business is not liable for the subsidiary company’s debts.
- The subsidiary’s business activities can be similar or dissimilar to those of the parent company.
- A foreign parent company can own all of the shares in a Singapore subsidiary company.
- The benefits of a subsidiary in Singapore are low tax rates, tax incentives, and bilateral tax treaties, among other aid initiatives, because it is a local Singapore company.
- If a subsidiary company in Singapore qualifies as a “small company,” it is free from having its accounts audited every year. This exemption lowers the company’s compliance costs and overall regulatory load, making it easier to run and more cost-effective.
Checklist for Incorporation of Foreign Subsidiary in Singapore
The subsidiary company formation in Singapore is straightforward. The following checklist contains the key requirements for the incorporation of a foreign subsidiary in Singapore:
- Company name: Approved company name and registered with ACRA
- Director: At least one director must be a Singaporean, a Singapore Permanent Resident, or a holder of an EntrePass.
- Shareholders: Minimum of 1 and a maximum of 50 shareholders
- Registered Local Address: For your company’s office in Singapore, you’ll need a local registered address.
- Company Secretary: Within six months of the firm’s registration date, appoint at least one company secretary.
- Initial Paid-Up Capital: Minimum of S$1 in initial paid-up capital
During the registration process, the following information and papers are required:
- The parent company’s certificate of incorporation.
- A letter from the parent company authorizing an individual to sign incorporation forms on the parent firm’s behalf.
- The Singapore subsidiary company’s registered office address.
- Each prospective director’s signed consent to serve as a director.
- The directors of the subsidiary company’s passport information and address
Incorporation of Foreign Subsidiary in Singapore:
Name your business:
- First and foremost, you must choose a company name and have it validated in ACRA (the national agency that registers and controls corporations) by your filing agency. In Singapore, no two businesses can have the same name.
- The legal name of your firm may differ from its trading name. Important to ensure the trading name you choose isn’t infringing on anyone’s copyright or trademark.
Choose the business type:
- ACRA will ask you to pick a SSIC code that defines the type of business your company plans to set up.
Assembling your team:
- Shareholders: Individuals and corporations alike can become shareholders. There must be no more than 50 of them who own a private Singaporean corporation. Shares can be held by foreign citizens and businesses as well.
- Directors: A foreigner can only occupy the role of director if there is a second resident director. You could nominate a Nominee Director to solve this situation. The Nominee Director will not be involved in decision-making and will just be present to fulfill the criteria.
- Corporate secretary: This person is required in every firm. The company secretary monitors developments in your organization, compiles paperwork, and submits reports to the government. The law requires you to select a secretary within six months after incorporation, but you may require one sooner.
- Registering a local address: A registered address is required for any Singaporean firm. It must be a valid address where you get mail on a regular basis.
- Setting up $1 paid-up capital: In the vast majority of circumstances, one Singapore dollar per share is sufficient. Other currencies can be used as paid-up capital. After your firm is formed, you can increase the amount and change the currency at any moment.
- Delegate a filing: You cannot form a firm as a foreigner. The law requires you to employ an approved filing agent – a company that will gather your documents, fill out the necessary forms, and send them to ACRA.
Timeline for registration of business:
A new company’s registration process might take anywhere from a few hours to several days. When dealing with a company secretary, the time limit is mostly decided by how quickly each shareholder and director can give the company secretary personal papers for verification, such as confirmation of identity and residence address.
Cost of incorporation
- In Singapore, the company formation process is totally computerized and completed using the Accounting and Corporate Regulatory Authority’s BizFile+ platform (ACRA). ACRA levies a S$15 name application cost and a S$300 registration fee for business establishment, for a total administrative fee of S$315.
- Foreigners without a SingPass ID cannot register a corporation on their own since the BizFile+ portal requires a SingPass ID. Instead, they must hire a corporate secretarial firm to complete the task for them.
- Citizens of Singapore with a SingPass ID who are forming a company for the first time may also benefit from such external firm assistance. Most corporate secretarial firms in Singapore charge between S$500 and S$1,500 for incorporation packages, depending on the breadth of services required, while more complicated services may cost more.
Compliance Regulations for foreign Subsidiary in Singapore:
- The yearly filing requirements that apply to Singapore firms must be met by a Singapore subsidiary company. Among the most important requirements are:
- Annual Returns are filed with the Singapore Registrar of Companies.
- Annual tax returns must be filed with the Singapore Revenue Authority.
- Keeping the Company Registrar up to date on company information (shareholders, directors, registered office address, etc.).
- If appropriate, registration for the Goods and Services Tax (GST).
- Observance of applicable legislation, such as the Employment Law, the Personal Data Protection Law, and so forth.
How Multiplier’s Employer of Record Can Help You Hire & Expand in Singapore?
For international businesses wishing to establish a presence in Singapore, subsidiary firms are the recommended business structure. This type of business structure protects the parent firm from liabilities while also allowing the entity to take advantage of Singapore government tax reductions and other support programmes.
Working with a third-party service provider might assist you in launching your company smoothly. A global employment solution partner like Multiplier, can help you and it could be your best approach to expand your business into a country faster. We know that establishing local entities in numerous countries is a time-consuming process for many companies.
With Multiplier, you can quickly employ, onboard and pay full-time employees while staying inside the confines of local labour rules. You won’t have to bother about forming a local entity or figuring out how to stay up with changing labour laws in your area. To learn more, speak with one of our specialists.