This post is also available in: 简体中文 (Chinese (Simplified))

Foreign Company Setup Option in Singapore

Subsidiary Company vs Branch Office vs Representative Office

This chart provides a side-by-side comparison of the three incorporation options for foreign companies intending to set up and operate in Singapore. Tax and compliance to regulatory requirements varies depending on the type of entity you choose to setup. As company set up expertises, we aim to help owners choose the best option for their venture into Singapore and register their company. Please feel free to contact us via email or call us to speak to our company set up expertises. Please click Singapore Company Incorporation Services for more information about Singapore Company Setup.

 

Types of Foreign Companies Structure	Subsidiary Company Set up	Branch Office	Representative Office
Entity Name	Need not be the same as parent company	Must be the same as parent company	Must be the same as parent company
Allowed Activities	Can conduct all business activities	Must be the same as the parent company	Can only conduct market research or coordinating activities
Suitable For	For local or Foreign Companies that wish to expand their operations in Singapore	For Foreign Companies that wish to expand their operations in Singapore	For Foreign Companies that wish to set up temporary vehicle in Singapore to conduct research and act as liaison office
Disadvantages	Continuing Compliance Obligations eg Financial Reports, Audit, AGMS, etc * unless qualifies for certain exemption	Continuing Compliance Obligations eg Financial Reports, Audit etc ** unless qualifies and exemption granted	It is a temporary vehicle and cannot generate revenue
Ownership	Can be 100% foreign or locally owned	Owned 100% by the head office	No Ownership
Separate Legal Entity	Yes	No	No
Cap on Number of Members	Yes, max 50	Not Applicable	Not Applicable
Minimum Setting up Requirement	Min One shareholder, that can be an Individual or corporate (100% local or foreign shareholding allowed. Must have at least one resident director to set up the Company	Must have One Singapore Resident Authorised Representative to set up the Branch	Must appoint a Chief Representative who will relocate from headquarters
Limited Liability	Yes	No, Liabilities extend to parent company	No, Liabilities extend to parent company
Need for Audited Accounts	Yes * unless qualifies for certain exemption	Yes ** unless qualifies and exemption granted	No
Filing of Accounts with ACRA and IRAS	Yes * unless qualifies for certain exemption	Yes	No
Annual Filing	Must file audit report of subsidiary * unless qualifies for certain exemption	Must file branch office’s as well as parent company’s audit reports	Not Applicable
Tax Treatment	Taxed as Singapore resident entity, local tax benefits available, qualifying for group relief, can claim foreign tax credit	Taxed as non-resident entity, local tax benefits not available, not qualify for group relief, cannot claim foreign tax credit	Not Applicable
Tax Benefits	A subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax incentives and rebates	Partial tax exemption	No Corporate tax. Employees have to pay personal tax
Cessation of Business upon Death of a Member/Partner	No. Equity shares go on in perpetuity	No	Not Applicable
Validity Period	Perpetually until struck-off by ACRA or liquidated	Perpetually until deregistered	Temporary and renewable on annual basis for up to 3 years only
Normal Registration Time	1 hour	1 hour	3 – 5 days
Appointment of Officers	Must appoint at least one local resident director to set up the Company	Must appoint one resident authorised representative to set up the Branch	Must appoint a Chief Representative who will relocate from headquarters
Governing Body	ACRA & IRAS	ACRA & IRAS	International Enterprise Singapore
Bank Account	Can open bank account in Singapore	Can open bank account in Singapore	Can open bank account in Singapore to run the cost centre operations. Must be funded by the parent company.
Staff Hiring	No restrictions on hiring local or foreign staff	No restrictions on hiring local or foreign staff	Chief representative must be a staff member from the parent company. Can have only five employees.
Requirement for setup	Not applicable	Not applicable	– Sales Turnover of the foreign entity must be more than US$250,000- No. of years of establishment of the foreign entity must be more than 3 years- Proposed No. of staff should be less than 5 people
Local Person Requirement	1 Nominee director is required for Company set up – $2,000 (W/GST $2,180) per year	1 Local authorised representative is required	1 Chief representative staff member from the head office who will relocate to Singapore.

* All Singapore incorporated companies must appoint an auditor within three months of the date of incorporation- unless it is exempted from audit requirements. To be exempted from audit requirements, a company must satisfy all of the following criteria:

For a company with its financial year beginning prior to 1 July 2015:
– The company does not have any corporate shareholders;
– The total number of individual shareholders must be less than 20; and
– Annual turnover of the company must be less than S$5 million.

For a company with its financial year beginning on or after 1 July 2015, the Company must qualify as a small company for the immediate past two consecutive financial years.

A company qualifies as a small company if (a) it is a private company in the financial year in question; and (b) it meets at least 2 of 3 following criteria for immediate past two consecutive financial years:
(i) total annual revenue is not more than $10m;
(ii) total assets is not more than $10m;
(iii) no. of employees is not more than 50.

For a company which is part of a group, to qualify to the audit exemption:
(a) the company must qualify as a small company; and
(b) the entire group must be a “small group”

For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.

** A Singapore Branch that is dormant, is allowed to lodge with the Registrar, an unaudited profit and loss account with respect to its operations in Singapore and an unaudited statement showing its assets used in and liabilities arising out of its operations in Singapore, without having to seek approval for waiver from filing of the documents of the Singapore Branch.

As a conclusion, A Singapore Branch Office is considered a non-resident company for tax purposes, not qualify for Group Relief and cannot claim foreign tax credit. Non-resident companies are not eligible for tax incentives for new start up or resident companies; Besides, Branch Office is required appoint 1 local authorised representative to run its operations; and therefore most foreign companies prefer to set up a Subsidiary Company rather than a Branch Office. Last but not least, the authority are tightening the assessment criteria for setup of Representative Office in recent years. Therefore, it is not advisable to go with the option of Representative Office always.

Want to understand more how to setup a subsidiary company, Click on Singapore Company Incorporation Services for the detail.