On 10 March 2017, the Companies (Amendment) Bill 2017 was passed in Parliament which, among others, introduced an inward re-domiciliation regime in Singapore. Under this new re-domiciliation regime, which came into force on 11 October 2017, a foreign corporate entity will be allowed to transfer its registration to Singapore, without having to set up a subsidiary. This is akin to that of a company changing its corporate citizenship, while retaining its corporate history, identity and branding.
Re-domiciliation will allow a foreign corporate entity to take advantage of Singapore’s stable political, economic and legal environment, pro-business regulatory framework, competitive tax regime, highly skilled workforce, and access to financial and capital markets.
Through re-domiciliation, the foreign corporate entity will be able to relocate its regional and global headquarters to Singapore and still preserve its corporate history, identity and branding. It also allows the foreign corporate entity to retain its proven track record and this is especially important for those operating in highly regulated industries that require licensing.
While there are several reasons why the new regime is advantageous to a foreign corporate entity, one must consider carefully whether it would be more beneficial to re-domicile or simply set up a new subsidiary. A foreign corporate entity may consider the following factors to determine whether to re-domicile:
- Whether existing contracts can be easily re-negotiated
- Whether there are assets held by the foreign corporate entity in its current jurisdiction that may be expensive and time-consuming to sell and buy back, or re-register
- The importance of retaining the foreign corporate entity’s branding and corporate history
- The costs and time/resources involved to re-domicile as opposed to setting up a new Singapore company or branch
- Whether the country where the foreign corporate entity wishes to transfer its registration from has a re-domiciliation regime or allows for outward re-domiciliation to another jurisdiction
- Tax and stamp duty implications when re-domiciling
- How the transfer will be treated for tax and stamp duty purposes in the home country
- Singapore tax considerations when a foreign corporate entity is re-domiciled to Singapore
It is worth noting that Singapore only allows for inward re-domiciliation. Any bearer shares and share warrants issued prior to re-domiciliation will be void.
Effects of re-domiciliation
A foreign corporate entity that re-domiciles to Singapore will become a Singapore company (limited by shares) and be required to comply with the Companies Act, Cap. 50 (the “Act”).
As no new legal entity is created following the re-domiciliation, this corporate action would not:
- Affect the obligations, liabilities, properties or rights of the foreign corporate entity
- Affect legal proceedings by or against the foreign corporate entity
- Prejudice or affect the identity of the body corporate that the foreign entity constitutes or its continuity as a body corporate
The re-domiciled company must de-register in its place of incorporation and register all pre-existing charges in accordance with the registration regime under Division 8 of Part IV of the Act.
Shareholders and directors of the re-domiciled company should also be aware of recent amendments to the Act that now require all companies to disclose their beneficial owners and controllers, and nominators of nominee directors except those exempt from such requirements.
Tax treatment for re-domiciled companies
In conjunction with changes in the Act concerning re-domiciliation, the Income Tax Act was amended to introduce new provisions to address the tax treatment of re-domiciled companies.
Section 34G of the Income Tax Act specifically prescribes the tax treatment of certain items of expenses incurred or assets acquired by a re-domiciled company that has never carried out any trade or business in Singapore before the transfer.
Section 34H of the Income Tax Act provides for tax credits that can be awarded to companies successful in their re-domiciliation to Singapore.
Requirements for inward re-domiciliation
First and foremost, the foreign entity must be a body corporate that can adapt its legal structure to that of a company limited by shares under the Act. In addition, it must meet certain prescribed requirements as described below:
a) The foreign corporate entity must meet any 2 of the following:
- Total assets exceeds S$10 million
- Annual revenue exceeds S$10 million
- Has more than 50 employees
b) The foreign corporate entity must be solvent:
- There are no grounds on which the foreign corporate entity could be found to be unable to pay its debts;
- The foreign corporate entity is able to pay its debts as and when they fall due within 12 months after the date of application for transfer;
- The foreign corporate entity is able to pay its debts in full within 12 months after the date of winding up (if it intends to wind up within 12 months after applying for transfer); and
- Value of its assets is not less than the value of its liabilities (including contingent liabilities)
c) The foreign corporate entity is authorised to transfer its incorporation under the law of its place of incorporation
d) The foreign corporate entity has complied with the requirements of the law of its place of incorporation in relation to the transfer of its incorporation
e) Application for transfer is:
- Not intended to defraud existing creditors of the foreign corporate entity; and
- Made in good faith
f) The foreign corporate entity is not under judicial management, liquidation or winding up.
Application process and time frame
The application for transfer by the foreign corporate entity must be submitted to the Accounting and Corporate Regulatory Authority for review and approval. It may take up to two months from the date of submission of all required documentation to process the application for transfer of registration. This includes the time required for referral to another government agency for approval or review.
If you need assistance or would like to find out more about inward re-domiciliation in Singapore, please contact:
Maureen Low, Director
T +65 6594 7817
Catherine Lim, Director
T +65 6594 7814
Sally Yap, Director
T +65 6594 7815