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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 NameNeed not be the same as parent companyMust be the same as parent companyMust be the same as parent company
Allowed ActivitiesCan conduct all business activitiesMust be the same as the parent companyCan only conduct market research or coordinating activities
Suitable ForFor local or Foreign Companies that wish to expand their operations in SingaporeFor Foreign Companies that wish to expand their operations in SingaporeFor Foreign Companies that wish to set up temporary vehicle in Singapore to conduct research and act as liaison office
DisadvantagesContinuing 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
OwnershipCan be 100% foreign or locally ownedOwned 100% by the head officeNo Ownership
Separate Legal EntityYesNoNo
Cap on Number of MembersYes, max 50Not ApplicableNot Applicable
Minimum Setting up RequirementMin 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 CompanyMust have One Singapore Resident Authorised Representative to set up the BranchMust appoint a Chief Representative who will relocate from headquarters
Limited LiabilityYesNo, Liabilities extend to parent companyNo, Liabilities extend to parent company
Need for Audited AccountsYes
* unless qualifies for certain exemption
Yes
** unless qualifies and exemption granted
No
Filing of Accounts with ACRA and IRASYes
* unless qualifies for certain exemption
YesNo
Annual FilingMust file audit report of subsidiary
* unless qualifies for certain exemption
Must file branch office’s as well as parent company’s audit reportsNot Applicable
Tax TreatmentTaxed as Singapore resident entity, local tax benefits available, qualifying for group relief, can claim foreign tax creditTaxed as non-resident entity, local tax benefits not available, not qualify for group relief, cannot claim foreign tax creditNot Applicable
Tax BenefitsA subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax incentives and rebatesPartial tax exemptionNo Corporate tax. Employees have to pay personal tax
Cessation of Business upon Death of a Member/PartnerNo. Equity shares go on in perpetuityNoNot Applicable
Validity PeriodPerpetually until struck-off by ACRA or liquidatedPerpetually until deregisteredTemporary and renewable on annual basis for up to 3 years only
Normal Registration Time1 hour1 hour3 – 5 days
Appointment of OfficersMust appoint at least one local resident director to set up the CompanyMust appoint one resident authorised representative to set up the BranchMust appoint a Chief Representative who will relocate from headquarters
Governing BodyACRA & IRASACRA & IRASInternational Enterprise Singapore
Bank AccountCan open bank account in SingaporeCan open bank account in SingaporeCan open bank account in Singapore to run the cost centre operations. Must be funded by the parent company.
Staff HiringNo restrictions on hiring local or foreign staffNo restrictions on hiring local or foreign staffChief representative must be a staff member from the parent company. Can have only five employees.
Requirement for setupNot applicableNot 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 Requirement1 Nominee director is required for Company set up – $2,000 (W/GST $2,140) per year1 Local authorised representative is required1 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.

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