Subsidiary vs. Branch Office in Singapore - 2024 Guide
Subsidiary vs. Branch Office in SingaporeUpdated on Tuesday 20th February 2024
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Foreign investors interested in opening a company in Singapore should know that they can choose from 3 legal options, according to the investor’s business plans and interests in this country.
The foreign entrepreneur can choose to establish: 1) a branch office, 2) a subsidiary company or 3) a representative office.
As a general rule, most of investors decide to set up either a subsidiary, or a branch office; our law firm in Singapore can provide you with assistance in the registration process for any of the business types mentioned above.
Subsidiary in Singapore in 2024
A subsidiary in Singapore is usually chosen by foreign investors who wish to open a small or medium company. A subsidiary is incorporated as a private limited company, in which foreign ownership is allowed 100%.
Although the subsidiary can have 100% foreign ownership, at the appointment of the board of directors, it is required to name at least 1 director who is a Singaporean citizen (or a permanent citizen or the holder of a working permit).
The main aspect of setting up a subsidiary is that the company in Singapore is considered a different legal entity than the parent company. The subsidiary is liable for its debts and they cannot be extended to the parent company.
In terms of taxation, a subsidiary is considered to be a tax resident in Singapore and the taxes due from business activities in the city-state are to be paid here.
The company can also benefit from tax incentives or deductions offered by the Singaporean government; our lawyers in Singapore can offer you further information on the subject.
Branch office in Singapore in 2024
If you choose to register your company as a branch office, you should know that the office set up in Singapore will be considered as an extension of the parent company. Therefore, the parent company will be liable for the debts of the branch office in Singapore.
The ownership of the branch office belongs to the parent company and, because this entity is not a Singapore tax resident, it will not benefit of the local tax exemptions.
The Singaporean Companies Act states that the branch office should appoint 1 agent, who is required to be a resident in Singapore; also, the local legislation states that a branch office must have as a trade name the name of the parent company.
You should know that a branch office can repatriate the profits resulted from the business activity in Singapore.
How can investors start a branch in Singapore?
The branch office is set up for the purpose of developing activities that will generate profits for the parent company. Because of this, it must be registered with the Accounting and Corporate Regulatory Authority (ACRA).
This company type has to be registered with the local authorities following the same incorporation rules that are applied to other legal entities operating in Singapore.
Furthermore, the branch office has the same tax obligations as other corporate structures. In the list below, investors can discover few of the characteristics of this entity:
- investors who want to start a branch in Singapore will need to pay the corporate income tax, currently imposed at a rate of 17%;
- the branch has to complete various accounting obligations, as per the rules of the Section 373 of the Companies Act;
- the branch can be incorporated in a period of 1-2 business days, after the trading name procedures were completed;
- the registration with ACRA is made out of 2 basic procedures – 1) the issuance of a trading name, and 2) the submission of the incorporation documents;
- when applying for a trading name, the investors are required to pay a fee of $15, and for the incorporation procedure, a fee of $300 must be paid.
According to ACRA, the registration fees have been maintained for 2024 as well. If you want to register a foreign company in Singapore, please know that the overall registration process can take minimum 14 days.
Overall, you can expect to spend approximately 2 months with all the registration formalities necessary for your company.
Investors must also know that they can re-domicile their company in 2024, and this procedure involves following all the steps required under the Companies Act in Singapore.
What documents are necessary for branch registration in Singapore?
Regardless if foreign investors will opt to register a branch office or a subsidiary in Singapore, it will be necessary to prepare a large set of documents, required for the incorporation procedure.
Our team of lawyers in Singapore has prepared the list of documents that one has to submit for the registration of a branch:
- certified copy of the Certification of Incorporation of the parent company applying for branch registration;
- certified copy of the Constitution/Articles of Association of the parent company;
- information on the parent company’s directors;
- the memorandum of appointment through which a Singaporean resident is appointed as the branch representative;
- a memorandum stating the rights granted to the branch representative by the parent company;
- information on the registered office where the branch will develop its operations;
- the latest financial statements of the parent company.
Are investors required to arrive in Singapore for the registration procedure?
No, foreign investors do not have to physically be present during the registration formalities. This is applicable regardless of the company type selected (branch office or subsidiary).
The procedure can be completed with the help of our law firm in Singapore, who can act as an intermediate between the foreign investors overseas and the Singaporean institutions.
However, short arrivals in Singapore can be necessary during the process of opening a corporate bank account. Please mind that all companies must set up a corporate bank account at a local bank in Singapore.
The procedures can vary according to the internal rules of each bank. You can find out more on this subject from our team of lawyers in Singapore.
What are the tax requirements for companies in Singapore?
Generally speaking, all companies are liable to taxation in Singapore, as they are set up for the purpose of obtaining a profit from the sale of products or supply of services.
Branches and subsidiaries are liable to the payment of the taxes regulated by the tax law in Singapore. If you want to start a branch in Singapore, you will need to pay the corporate income tax, but also the GST tax. GST has been increased in the last years (7% by the end of 2022, 8% by the end of 2023 and 9% since January 2024).
However, it must be noted that certain business activities are exempt from the payment of the GST. Some of such activities are financial services, the lease of residential properties, the sale of residential properties, the import of precious metals, etc.
This is necessary when the company reaches an annual turnover of S$1 million. When this applies, it is mandatory to register with the Inland Revenue Authority of Singapore.
If you want to register either a branch or a subsidiary in Singapore in 2024, you are advised to study the rules applicable for each entity.
For instance, you should know that the branch office must have as a trading name the same name under which the parent company was incorporated, regardless if the parent company is a Singaporean based company or a foreign one.
Our team of lawyers can represent you in the process of registering any of these entities and can help you grow your business in Singapore in 2024.
Please mind that if you want to register a branch office in Singapore in 2024 you will need to appoint a local representative, who must be a resident and who must have an age of at least 18 years old.
We also mention that local representatives, directors and other company officers can register an alternate address with ACRA, outside the residential address, where any official documentation is sent. This procedure can be completed by paying a fee, which, in 2024, is of $40. The 2nd address will be evidenced on the ACRA's website, along with other mandatory details imposed by the law for company representatives.
Please watch the video below for more information on branches and subsidiaries in Singapore:
If you need further information on subsidiary or branch office in Singapore, please contact our Singaporean law firm for assistance. Our lawyers can present more details on how to start a branch in Singapore.