Why Establish a Singapore Company as an Intermediary Subsidiary?
Southeast Asia stands out as one of the fastest-growing regions globally, driven by rapid economic development, abundant resources, and a cost-effective, skilled workforce. The ASEAN Free Trade Agreement further enhances cross-border opportunities in sectors such as infrastructure, technology, and agri-business, making the region highly attractive to global investors.
For many international companies, Singapore serves as the ideal gateway to manage and expand operations across Southeast Asia. The country’s low corporate tax rates, absence of capital gains tax, and extensive double taxation treaties make it a leading destination for company registration and regional headquarters setup.
Choosing Singapore company incorporation provides businesses with a stable, transparent, and business-friendly environment backed by a robust legal framework and strong financial infrastructure.
Some of the key considerations are as follows:
Availability of Avoidance of Double Taxation Agreements
The originating country may not have established double taxation agreements (also commonly referred to as tax treaties) with all subsidiary countries. Using a Singapore company as an intermediary holding company will solve this issue. Singapore has concluded over 100 DTAs and tax information exchange agreements as of 2025, particularly with Southeast Asian countries.
Double taxation agreements are essential for promoting international trade and investment by improving the transparency of information and certainty of tax positions. They are also essential for eliminating double taxation that can arise from cross-border transactions, thereby reducing business costs.
A Singapore company can easily qualify as a tax resident to enjoy DTA benefits if the control and management of its business is exercised in Singapore (e.g., by conducting board meetings locally and maintaining key decision-making functions in Singapore)
No capital gains tax
Capital gains are subject to tax in home countries, such as the US and India. In Singapore, there is no tax on capital gains. Having a Singapore company to hold its subsidiaries ensures the avoidance of capital gains tax on the disposal of any subsidiary.
Taxability of dividends
It is common for subsidiaries to distribute profits to the parent company through dividends. Certain countries may impose taxes on the receipt of dividends. In Singapore, foreign dividends can be tax-exempt if they fulfil the following conditions:
- The highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore;
- The foreign income had been subjected to tax in the foreign jurisdiction from which they were received (known as the “subject to tax” condition). The rate at which the foreign income was taxed can be different from the headline tax rate; and
- The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
For this “subject to tax” condition, tax paid or payable on foreign-sourced dividends received in Singapore includes:
- The dividend tax, which is income tax levied on the dividend by the foreign country of source, and
- The underlying tax is income tax paid or payable by the dividend-paying company on the income out of which the dividend is paid.
Dividends can be maintained in a Singapore intermediary company and not be taxed back in the ultimate holding company in the home country.
From YA 2025 onwards, IRAS has simplified administrative requirements by allowing companies to submit a self-declaration with supporting foreign tax credit documentation instead of undergoing lengthy assessments.
Consolidation and group relief
Companies that wish to develop new lines of business or venture into new business sectors may have various business activities. Separate entities can be incorporated for each business activity and be grouped under an intermediary holding company. Financial results are consolidated at the intermediary holding company level. Singapore companies which are part of a group within Singapore can enjoy the benefits of the group relief scheme. Group relief enables Singapore companies to deduct unutilised capital allowances/ trade losses/ donations of a Singapore company from the assessable income of another Singapore company in the same group.
With the ongoing implementation of Pillar Two (Global Minimum Tax of 15%) in 2025, Singapore has aligned its group relief policies to ensure multinational groups continue to benefit from tax efficiency while maintaining compliance with OECD standards.
Mitigating risks
There may be a need to establish a branch in Southeast Asia. Instead of having the company in the home country as the branch’s head office, a Singapore company can serve as its head office. As a branch is an extension of a head office, the risks can be better managed at the Singapore intermediary company level and not affect the ultimate holding company back in the home country.
Fund raising
Fundraising may be required for a specific region, rather than for the entire. A Singapore company can be established to attract investors on a sub-group level. There is also the option of an Initial Public Offering (IPO) in Singapore.
Commercial reasons should back the structuring of companies, and not just for tax benefits, if the group structure is planned well to include an intermediary Singapore company, unnecessary withholding taxes can be saved through reduced tax treaty rates or exemption. Capital gains tax or further tax on dividends can also be avoided.
Singapore has introduced new financing schemes and sustainability-linked bonds to support regional fundraising, making it more attractive for businesses seeking green or ESG-compliant investments.
How to Set Up a Subsidiary Company in Singapore?
Setting up a subsidiary company in Singapore enables foreign businesses to establish a local presence, enjoy full ownership, and operate as a separate legal entity.
- Register with ACRA – Subsidiary companies are incorporated through the Accounting and Corporate Regulatory Authority (ACRA), usually within a few working days if all documents are complete.
- Local Director Requirement – At least one local resident director (Singapore citizen, Permanent Resident, or EntrePass holder) must be appointed.
- Company Secretary – A qualified company secretary must be appointed within six months of incorporation.
- Registered Office Address – A local Singapore office address is mandatory for official correspondence.
- Shareholding Structure – At least one shareholder is required; this can be the foreign parent company itself.
- Paid-Up Capital – No significant capital investment is needed; the minimum requirement is SGD 1, making incorporation cost-effective.
- Foreign Ownership – Subsidiaries can be 100% foreign-owned, allowing complete control by the parent company.
- Certificate of Incorporation – Upon registration, the subsidiary receives a Certificate of Incorporation, establishing it as a separate legal entity.
- Corporate Bank Account – Most subsidiaries open a corporate bank account in Singapore to manage financial transactions and enhance business credibility.
If you require assistance in the Incorporation of a Singapore company or require corporate income tax services in Singapore, feel free to contact us and let our professional team help you.