Call Us: +6565232574

Comparison between Branch, Subsidiary and Representative Office

Comparison between Branch, Subsidiary and Representative Office
Comparison between Branch, Subsidiary and Representative Office

In this article, you will learn about the distinctive features of a Branch Office, Subsidiary Office, and Representative Office. The following table will compare these three incorporation options for the foreign business entities that want to run their businesses in Singapore. All these business forms vary depending on the tax and compliance. You can select the best entity that suits your business from the table below.

Job postings will now be extended to 28 days.

TYPES OF BUSINESS ENTITY SUBSIDIARY COMPANY REPRESENTATIVE OFFICE BRANCH OFFICE
Name of the Entity It doesn’t  require the same name as of the parent company The name of the company must be the same as the parent company The name of the company must be the same as the parent company
Allowed Activities The company can conduct all the business activities It can only conduct market research or coordinating activities Its activities must be the same as the parent company
Suitable For It is suitable for local and foreign companies, who wants to expand their business in Singapore It is suitable for foreign companies that want to set up a temporary business entity in Singapore for research and it acts as a liaison office It is suitable for the foreign companies that want to expand their business in Singapore
Disadvantages It continues a compliance obligation. For examples, Financial Reports, Audit, AGMS, etc It is a temporary business entity and cannot provide business expansion or revenue It continues a compliance obligation. For examples, Financial Reports, Audit, etc
Ownership It can be owned 100% by foreign owners or by locals There is no ownership in a Representative Office It is owned 100% by the head office
Separate Legal Entity The Subsidiary Company has a separate legal entity A representative office doesn’t have a separate legal entity A branch office doesn’t have a separate legal entity
Cap on member numbers Maximum 50 members Not applicable to this entity Not applicable to this entity
Minimum set-up requirement The company must have minimum one shareholder, who can be an individual or a corporate and must have one resident director The company must appoint a Chief Representative who can relocate from the headquarters The office must have minimum one Singapore Resident Agent
Limited Liability Yes No No
Audited accounts The company needs an audited account The company doesn’t need an audited account The company needs an audited account
Filing of accounts The company needs to file accounts with ACRA and IRAS The company doesn’t need to file accounts The company needs to file accounts with ACRA and IRAS
Annual Filing The company must file an audit report of subsidiary Not applicable The company must file audit reports of branch office and parent company
Tax treatment The company is taxed as a Singapore resident entity. Local tax benefits are also available. Not applicable The company is taxed as a non-resident entity. Local tax benefits are not available.
Tax Benefits The company that has at least one shareholder with the minimum 10% shareholding is eligible for local tax incentives and rebates It doesn’t have a corporate tax. Employees have to pay for personal tax Partial tax exemption
Validity Period It is valid until deregistration It is a short-term setup and cannot last for more than three years. The company is valid until deregistration
Registration time 3 hours 3 to 5 days 3 hours
Business termination upon the death of a member or partner No equity share go on in perpetuity Not applicable Not applicable
Officer’s appointment The company must appoint at least one resident director The company must appoint a Chief Representative who will relocate from headquarters The company must appoint at least one resident agent
Governing Bodies for company ACRA and IRAS International Enterprise Singapore ACRA and IRAS

Comparison between branch office, subsidiary office, and representative office

For a foreign firm to establish its office in Singapore, it can adapt one of these three structures based on the one that has favorable terms. One of the essential aspects to consider is the legal liability that affects each method. Therefore as an investor, this article provides all the information to help you make an informed decision. 

Free White Sitting Behind Counter Under Television Stock Photo

https://www.pexels.com/photo/white-sitting-behind-counter-under-television-518244/

Branch Office

A branch office is an extension of a foreign parent company and is considered a non resident entity. For this reason, this type of office is not eligible for Singapore tax incentives and other exemptions received by a resident entity from the government.

When it comes to the legal liability of a branch office, it is not a separate legal entity and it shares the same as parent company liabilities. It will have the same name and enter into contracts on behalf of the foreign company, which is advantageous if the brand has a good reputation.  

So, in case of any court cases or debts, the parent company is held liable for such circumstances. But, having a limited liability comes with its advantages, such as saving on legal costs of registering a new company.

Also, if the foreign company has already created a good name for itself, Singapore residents will quickly embrace the branch office, increasing sales within the shortest time. Therefore, if investors want to spend less and their product is globally recognized, they should consider opening a branch office. 

How do register a Singapore branch office.

  1. The entity name used must correspond, if not the same, to the name of the foreign parent company.

  2. The branch must appoint at least one authorized representative who is a resident in Singapore with a citizenship, permanent resident, or an employment pass holder.

  3. The branch must adopt the same company’s constitution as the foreign parent entity.

  4. You will require a registered business address at the point of branch registration.

  5. An operating corporate bank account is required for the branch to function.

A branch office in Singapore is not restricted in terms of any local vs foreign shareholding structure and its directly connected to the shareholding structure of parent company in this case. The branch should however, conduct the same business activities as the parent company.

A major international brand will always consider setting-up a branch office to increase the business presence of its brand while they conduct business in a different jurisdiction.

Free Man With Headphones Facing Computer Monitor Stock Photo

https://www.pexels.com/photo/man-with-headphones-facing-computer-monitor-845451/

Subsidiary Office

A subsidiary office is a local private limited company that a foreign parent company can wholly own. It is fully eligible for local tax incentives, which allows the entity to grow without the burden of high taxes expenses.

This kind of company is expected to prepare annual financial reports per the set accounting guidelines. 

With that said, a subsidiary company is a separate legal entity from its parent company. It is liable for its losses, debts, and contracts and any legal action only affects the subsidiary office.

Most people prefer this structure because it can independently run its operations without involving the parent company. It can also engage in different business activities unrelated to the other entity, thus giving them a wide range of services and products to offer depending on the market. 

Free Man Having a Phone Call In-front of a Laptop Stock Photo

https://www.pexels.com/photo/man-having-a-phone-call-in-front-of-a-laptop-859264/

Requirements for setting up a subsidiary company in Singapore

To setup a Singapore subsidiary company, you need to do the following.

  1. You need to appoint a Company Secretary who is resident here in Singapore.

  2. You will need to appoint at least one Resident Director who is a citizen, permanent resident, or an employment pass holder working for the company.

  3. You will require a registered business address at the point of incorporation.

  4. A paid up capital of at least $1 Singapore dollar is required but a much higher amount will be helpful in presenting the financial status the company is in.

  5. An operating corporate bank account will be required for the legal operation of the subsidiary company.

The corporate regulatory authority didn’t make things easy and these five steps can be deem unachievable for many if they are not connected to the right service provider. Working with the right provider not only will you have these requirements taken care of, it will also greatly improve the speed compared to the normal registration time required to get the entity up and running.

A Singapore subsidiary company will need to submit its annual filing just like a private limited company every year.

Representative Office

A representative office is a temporary entity that is viable for three years from the date of commencement in Singapore. It only allows the parent company to measure the viability of setting up a business in the country. 

A representative facility is not a separate legal entity from its parent company in terms of legal liability. In fact, it must have a similar name to the foreign entity, which has the liability for all losses and debts. Furthermore, a representative office, vs subsidiary company, cannot undertake profit-making activities, enter into contracts with any local or foreign companies , and its sole responsibility is to conduct market research for its parent company.

In general, a representative office is suitable when a foreign company wants to measure the demand for its products. Afterward, it can set up a subsidiary or branch office, depending on the research results.  

Free Photo Of People Having Discussion Stock Photo

https://www.pexels.com/photo/photo-of-people-having-discussion-3184632/

How do you register a Representative Office here in Singapore.

  1. Completed application form for registering a representative office.

  2. A copy of the parent Company’s Certificate of Incorporation or Registration Certificate, as the case may be

  3. The latest annual report and audited accounts of the foreign parent company

  4. Duly endorsed undertaking to abide by the Terms and Conditions governing representative offices in Singapore

Seems straight forward but it is actually quite labor intensive if you don’t do this right the first time round. The representative office can be up and running within days if the required documents from the parent company is readily available and in English language.

If you are still unsure, please feel free to reach out to our experts for a quick no obligation chat by emailing to info@startupbcs.com.

6660b877-74aa-4bbd-a89e-876b89bb2901
Blog

Singapore Tax Rates and Tax System

Singapore Tax Rates and Tax System Singapore is known internationally for its practical and fair taxation system that lets individual entrepreneurs and large companies enjoy

Read More »

Our team of experts can deliver all corporate services on a world-class platform at very affordable prices — the best of all worlds.

scroll top