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Investors have recognized Singapore as one of the countries that creates a favorable environment for businesses to thrive. For this reason, many foreign companies are launching their expansion in this region to enjoy the low corporate taxes and other incentives.
There are various ways a foreign company can start its operations in Singapore, and one of the strategies is by opening a branch office. The entity is considered an extension of its head office and is not a separate legal entity. This means it cannot enter into any contracts, and the branch office only acts as a representative of the parent company. Further, only the foreign company is liable for losses or debts incurred, and the head office also handles all legal issues.
Before commencing the branch office operations in Singapore, several things must be accomplished, like registration. The procedure might seem easy, but most people get confused about the documents needed and other requirements the foreign company must provide.
To save you from all that trouble, here is all you need to know about setting up a branch office in Singapore.
Registration of entities, including branch offices, is undertaken by the Accounting and Corporate Regulatory Authority (ACRA) through an online portal. But, in the case of foreign companies, it would be best to engage a corporate filing agent to help in the incorporation process.
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One of the essential requirements for branch office registration is the name which must correspond with the parent company. The government agency, ACRA, must approve it before the process commences. It can also reject the name if it’s similar to an existing business in Singapore or the same as an established brand like Coca-Cola. In addition, ACRA has the right to decline a vulgar name or undesirable one.
So, it is vital to do proper research and ensure there is no company with a similar name to that of the parent company in Singapore. This will help the incorporation process be swift, enabling the branch office to start its operations in the shortest time possible.
A branch office must have at least one authorized local representative, who should be a Singapore citizen or a permanent resident of the country. Also, a foreigner with an employment pass can act as an official branch office agent.
Moreover, the officers must have attained 18 years of age to be eligible. And suppose the parent company is planning to endorse one of their employees to Singapore as the branch office agent. In that case, they can apply for an employment pass after the entity has been incorporated.
When it comes to the constitution of the branch office, it must strictly follow the memorandum and article of association of its parent company. This means that the entity should only engage in activities per the foreign constitution. The structure of the company and the rules governing the branch office should be similar to that of a foreign company.
With that said, the company must submit the memorandum and article of association to the government agency, ACRA, for accountability. It will ensure the laid out guidelines are followed to the letter by the entity in Singapore.
Following the Singapore companies act, you must set a registered address in the country for the branch office before commencing operations. ACRA does not allow a PO Box address; instead, they require a physical location where clients can access the management for accessible communication.
To ensure the parent company is a legal existing business, you will be asked to provide several documents for a successful branch office registration in Singapore. They include:
Name and the official address of the foreign company in its initial place of incorporation
Details of the directors of the parent company
Certified copy of the foreign companies certificate of incorporation
Particulars of the registered local representative
Certified copy of the constitution governing the parent company
A certified copy of the latest audited financial statement of the foreign company
A constitution written by or on behalf of the foreign company states the powers of the appointed representative.
A notice includes the parent’s company registration number, entity type, and business description.
In addition to the above document, the appointed filing agent might request other documents to facilitate the branch office registration. Therefore, it is crucial to be cooperative and provide the documentation to start business operations.
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A local authorized representative handles the registration of a branch office after receiving all the necessary documents. The process is done online through a portal and can be done in less than 30 minutes when there is good cooperation between the foreign parent company and the corporate agent.
For a successful branch office incorporation, there are two necessary basic steps that the process must go through;
The proceeding can take an hour or less after submitting the official name. However, remember a branch office name must correspond with the parent’s name, and it cannot be similar to any existing entity in Singapore or be offensive.
After the name has been approved and all the documents have been provided, the entity registration with ACRA can commence. It can take from a day to two days, after which you will receive an email from the company registrar confirming the successful incorporation of a branch office in Singapore.
In addition, it is essential to note that ACRA does not provide a certificate of incorporation in hard copy unless the company requests it in a different process. On the other hand, you can print the specific email certificate if you need a document to display at the branch office premises.
All Singapore-based entities, including branch offices, have several options when choosing the bank to open their corporate account. This happens after successful registration, and now the company is planning to commence its activities. Some of the banks offer multi-currency accounts, which is an attractive feature due to the relation of the branch office with the foreign company.
As a branch entity opening a company bank account is a straightforward process. The procedures may take different durations since different banks have distinctive ways of doing things. Some banks might allow you to open an account with them without physically appearing at the bank. The signatories can sign the needed document at the nearest overseas bank branch near the parent company.
According to the Singapore company act, a branch office is regarded as a non-resident company for taxation purposes. This means such an entity is not eligible for tax incentives, exemptions, and grants that resident companies enjoy. So, the branch office will levy total corporate taxes to the government and register to collect Goods and Services Tax(GST) when necessary.
In terms of legal liabilities, a branch office is not a separate entity according to the Singapore company’s act. It can only act on behalf of the parent company; therefore, it cannot enter into contracts or get sued. The foreign parent company is also responsible for any losses and debts incurred by the branch office in Singapore.
After a branch office starts its operation in Singapore, it must act in accordance with ACRA and IRAS, a tax authority, by complying with all annual filing requirements. If the entity fails to do so, there are certain fines and penalties that the agency has set. The yearly filings include;
Prepare annual Financial Statements following the Financial Reporting Standards (FRS) in Singapore, which are closely related to the International Reporting Standards (IFRS).
Submit a copy of the audited financial statements of the foreign entity’s yearly general meeting within 60 days.
File yearly income taxes before 30th November when paper filing and before 15th December when it comes to electronic filing.
The annual general meeting of a branch office is held by its foreign company since it is not considered a separate entity. The company is only an extension and is governed by following the constitution of the parent business. Therefore, it cannot hold any general meetings since no amendments can be made based on those gatherings.
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When comparing a branch office and a subsidiary company, it depends on your preferences. You can choose to start a branch office in Singapore if you don’t want to create a wholly new company. It will also help you avoid charges that come with opening a new entity.
On the other hand, a subsidiary company is a separate entity that can make decisions independently. It can also engage in different activities from the parent company, giving it a wide range of goods and services.
So, depending on the market research and the parent company’s judgment, it can choose to either register a branch office or a subsidiary company.
Setting up a branch office in Singapore is easy and has attracted many investors worldwide. The entity will enjoy a favorable business environment from the government, which leads to a successful business.
If you have been thinking of starting a small setup or even a branch office in Singapore, this guide will provide you with all the information you need to know to make sure you have a smooth process.
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