Foreign Company Registration Options in Singapore
Over the years, Singapore has positioned itself as one of the most attractive countries for companies to build their business. From creating a business-friendly environment with supportive government policies to harbouring a diverse pool of talent, there are several reasons as to why one might choose to set up their company on this island country. Foreign company registrations in Singapore can be done using several methods as mentioned below:
- Incorporating a Subsidiary Company
Foreign entities may choose to incorporate a company/subsidiary in Singapore. Subsidiary companies act as a separate legal entity from its parent company and is solely responsible for all its legal liabilities.
Such entities adhere to the Singapore taxation system and are required to have one local resident director. The shareholder(s) of the company may all be foreign individual(s) or foreign corporation(s).
The application for registration of a subsidiary must be submitted to the ACRA for review and approval.
Pros: Subsidiaries are taxed at the local rates of 17%, which is relatively lower than many other countries. Should the subsidiary face any legal settlements, the parent company is not liable for its subsidiary. Furthermore, the subsidiary can have a different principle activity and name from their parent company.
Cons: As they act as a separate legal entity from the parent company, subsidiary companies often have to bear the weight of operational or other costs that may be incurred.
- Registering a Branch of a Foreign Company
Companies looking to venture into the Singapore market as a foreign entity may register a branch office in the country. Such entities are not granted any tax exemptions under the Singapore taxation system and the parent entity is held responsible for any legal actions taken against the branch office(s). Having a foreign status would also mean that the branch office will not qualify for any audit exemption. The branch office is thus required to file its own (unless dormant) as well as its head office’s audited financial statements annually. The branch offices is also not allowed to conduct any business activities outside the scope of its parent company.
Pros: Branch office are able to carry out profit-making activities and own properties in Singapore.
Cons: They do no enjoy any Singapore tax benefits and the parent company is responsible for any liabilities of the branch office. It is to carry out the same activities as the parent company, with the same company name.
- Setting up a Representative Office
Foreign companies looking to test new business opportunities in Singapore can set up a representative office (RO) to further explore Singapore’s market. However, this option does not serve as a long term solution as such offices are not allowed to conduct any profitable business activities nor be involved in any transactions that may have legal implications of any sort, whether for the RO itself or on behalf of the foreign parent entity. The RO is a temporary facility to allow a foreign entity to assess the viability of setting up a permanent establishment in Singapore. An approved RO may operate in Singapore for a period of one year only from the date of commencement. Extensions are granted on a case-by-case basis, up to a maximum period of three (3) years. Should the entity wish to continue its operations in Singapore, it should register a branch or incorporate a company in the country.
Pros: Foreign entities are able to explore the Singapore market without much obligations.
Cons: Companies set up as Representative Offices are for a limited period of time and as such are not allowed to carry out profitable transactions or engage in activities that may have legal implications.
- Transfer of Registration (re-domiciliation)
A foreign corporate entity can choose to transfer its registration to Singapore, also known as, re-domiciliation. Once this is done, the foreign entity will effectively be recognized as a Singapore company and be required to comply with the Companies Act.
Re-domiciliation allows foreign corporate entities to take advantage of Singapore’s stable political, economic and legal environment, pro-business regulatory framework, competitive tax regime, highly skilled workforce, and access financial and capital markets, among many other benefits that the country provides.
The benefits of re-domiciling a foreign entity are aplenty, however, it is crucial that businesses carefully examine others forms of registration to see which suits their needs the most.
Pros: Entities registered in Singapore can make full use of the benefits available as a local business.
Cons: Re-domiciliation is a permanent move and cannot be reversed. Currently, Singapore does not have options on re-domiciliation overseas. Hence, entities considering to re-domicile to Singapore should consult the relevant professionals thoroughly before finalising their decision.
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