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.
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|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|
|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.
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.
The entity name used must correspond, if not the same, to the name of the foreign parent company.
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.
The branch must adopt the same company’s constitution as the foreign parent entity.
You will require a registered business address at the point of branch registration.
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.
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.
Requirements for setting up a subsidiary company in Singapore
To setup a Singapore subsidiary company, you need to do the following.
You need to appoint a Company Secretary who is resident here in Singapore.
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.
You will require a registered business address at the point of incorporation.
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.
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.
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.
How do you register a Representative Office here in Singapore.
Completed application form for registering a representative office.
A copy of the parent Company’s Certificate of Incorporation or Registration Certificate, as the case may be
The latest annual report and audited accounts of the foreign parent company
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 firstname.lastname@example.org.
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