Are you thinking about setting up a business in Singapore? However, if your firm is not yet ready to completely commit to Singapore, there is the option of establishing a Representative Office (RO) in the country to do marketing assessments. This enables a company to analyze its potential and the broader business environment, and legal needs, without establishing a new company in Singapore.
What Is A Representative Office
Before committing to any forms of investments that come with establishing a subsidiary or branch office, a foreign firm interested in exploring prospective opportunities in Singapore and the area may consider setting up a representative office.
A representative office (RO) is an interim office that enables international companies to evaluate if setting up a company in Singapore is viable. An office like this is without any legal standing and is unable to do business. As a result, foreign corporations often use this type of office as a way into Singapore before setting up a branch office or subsidiary.
Singapore Representative Office Registration
A company or a legal entity establishes a Representative Office. It conducts marketing and other transactional duties in a foreign country. In this article, we will provide you with some guidelines on registering a Representative office in Singapore. After reading this page, you will understand the setup requirement, methods for registration and the scope of business enterprises, and taxation of Singapore.
A Representative Office provides a pathway for a foreign company interested in establishing services in Singapore to evaluate business opportunities in the Singapore market. The provided avenue is also great for a foreign company interested in promoting its name and operating its work with regional representatives and distributors. However, it is a short-term setup (not more than three years). It is not allowed to enmesh in commercial revenue-generating projects, including the final contracts and opening of Letter of Credit. You can find more information here- https://startupbcs.com/guides/singapore-representative-office-registration/
Why Set Up A Representative Office?
There are no ACRA registration requirements, no minimum capital requirements, and no regulatory requirements such as filing tax reports or keeping accounts.
The office is not required to file any financial or other statutory returns with the Singapore government.
Due to its operating constraints, it has a low maintenance cost from a compliance standpoint.
You are permitted to get a central registration number from the parent firm to import and export sample products and materials.
Taxation of Singapore Representative Office
A Representative Office in Singapore should not be involved in any commercial revenue-generating projects. Hence, there is no need for any file for annual tax revenues. But, the income earned by the staff of the Representative Office and the Chief Representative should be directed to the country’s income tax.
Singapore Representative Office Registration Requirements
The Sales Turnover of the foreign entity should be at least US$250,000. The number of years of establishing the foreign entity should be more than three years. The proposed staff for the Registration Office should not be more than five people.
Things you need to know before setting up a representative office
The name of the Representative office must be the same as the name of the parent company.
The Representative Office should be 100% owned or controlled by the parent company.
A Representative Office of Singapore must have at least one representative. The representative can be a resident of Singapore or a member of the Foreigner staff. You can also take the guide from experts to assist you in the application process for Employment Pass for relocating the Chief Representative in Singapore to fulfill the Representative Office duties.
For every business registered In Singapore, there is a requirement to own a registered office address. The registered address must be a physical address and not a PO Box address. However, private or residential addresses can be acceptable for specific sorts of offices.
Business Activity that an IE Singapore cannot register for representative office:
The following sectors, such as educational institutes, schools, colleges, universities, venture capital, financial institutions, funds management departments, bank, insurance, car leasing or fleet management, travel, workforce or labor agents, etc., do not fall under the purview of IE Singapore.
Other Facts to Know Before Setting Up A Representative Office
As a foreign company seeking to set up a company in Singapore, a representative office registration is crucial. According to Singapore’s corporate regulations, a foreign firm can establish itself in Singapore as a subsidiary company or a branch office. Most corporations choose a subsidiary company; nevertheless, a Representative Office in Singapore provides a third alternative for “assessing the viability” of a foreign company’s presence in Singapore.
Below are vital facts to keep in mind:
A foreign firm can open this type of office in Singapore for three years. Furthermore, the office must be extended every year for the next three years.
There is no legal entity and has no legitimate existence. As a result, the parent firm is liable for the representative office’s liabilities.
Representative offices are prohibited from participating in commercial activity. Instead, they are employed to carry out research and determine whether or not a long-term office in the country is feasible.
A representative office with no legitimate status is not required to file yearly returns with the Accounting and Corporate Regulatory Authority (ACRA). Neither is it allowed to file annual tax returns with the Singapore Inland Revenue Authority (IRAS) (IRAS).
Such an office might become an incorporated firm by setting up a separate office with ACRA.
However, a representative office in Singapore should not perform the following duties:
Participating in any form of trade
Renting its office to third parties
Negotiating business contracts on behalf of its overseas parent
Sourcing or locating raw materials or industrial parts vendors or sources
Providing systems of implementation
Participating in marketing activities
Coordinating efforts between the client and the international parent business
Managing or liaising with regional distributors or agents, as well as affiliated companies or branches
Conducting quality control inspections or performing supervisory duties
Registration of a Singapore Representative Office
Many authorities can help you to register your company in Singapore. These authorities can structure your Representative Office within five working days, provided you have all the essential papers in order.
After the approval of the application of your Singapore Representative Office, they will also support you in the application process for Employment Pass for the Chief Representative, the one who proposes the intention to relocate to Singapore to manage services of the Representative Office. The method of approval by Singapore’s Ministry of Manpower can take about three to five weeks.
Foreign enterprises register with International Enterprise (IE) Singapore to open a representative office. You can carry out the registration procedure entirely online. After applying, the foreign corporation is to pay S$200 for registration. More often than not, the application is processed within five business days by Internet Explorer. IE will provide an acceptance letter verifying the registration after it is approved.
A foreign company may frequently use the help of a professional service provider. A service provider like this can assist with everything from the early document creation to final approval and the representative office’s continuing compliance requirements.
An RO must follow the following rules to remain compliant:
The representative office’s name must be the same as the parent company’s. Within one month of the parent company’s name change, the office should prompt IE and give a name change certificate.
A representative office must put “Representative Office Registered in Singapore” on all communication materials.
Any replacement in the representative office’s address, phone number, or fax number must be reported to IE within one month.
The RO should inform IE in less than one month after discontinuing operations or changing to a separate office.
It’s worth mentioning that an RO is not allowed to file yearly financial documents with ACRA or yearly tax returns with IRAS because it has no legal status.
Approval and Renewal Information
The international Singapore enterprises can take approximately five working days to approve every application. Once assessed, the company will send a Letter of Approval through email. The registration can be made for a maximum of a year and then directed to annual renewal.
International Enterprises Singapore will transfer a renewal notice two months before the expiratory duration of the registration. The renewable must be made within seven days before the expiration time. After three years, the representative office must be promoted into a Branch Office or a Subsidiary Company.
Opening of a Corporate Bank Account
After incorporating the representative office, there is the need to open a corporate bank account. You can choose any local or international banks in Singapore or elsewhere.
However, if you can’t come to Singapore, you have to select a particular bank that does not demand your presence to open a corporate bank account. There are various banks from which you can choose. Standard character Bank and HSBC are two international banks that enable you to initiate an account without your existence in Singapore.
Registration of Singapore Central Provident (CPF):
The Singapore Central Provident Fund or CPF is a mandatory pension fund system in which the employer and the employee share a portion of their monthly salary in these funds. The contribution of CPF by the employers is mandatory for all the local employees who are citizens or are permanent residents of Singapore. Therefore, their monthly earnings should be more than S$50.
The maximum ratio fixed for the contribution of CPF for the employers or employees is about 14.5% to 20% individually. This rate can be lower on specific constituents such as the age of the employee, permanent residual status, etc. This CPF contribution is not essential for foreign employees.
Registered Office Hours:
You must have a registered office address in Singapore. The certified office must also stay open for the public for at least three hours every day through the regular business period on weekdays.
The business registration number must be specified on the letterheads, invoices, billings, or other documents utilized for official business communications.
Suppose your Representative Office plans to import and export samples of goods in and out of Singapore. In that case, you will have to register with Singapore Customs and get a CR Number known as Custom Registration.
This type of office is sustainable for one year after approval, and you can renew it annually. IE typically sends a continuation notice two months before a representative office’s renewal date. In addition, you can continue the office within seven days after the expiration date.
The office must continue their registration by applying to IE’s website, just as they did when they first registered. Renewals usually do not require probed financial documents. Nevertheless, IE may request the parent firm to produce the most recent financial accounts to continue the office. An RO in Singapore can only be open for three years. After that, the office must change into a separate office to continue operations after three years.
Converting The Representative Office To A Local Company
By registering a branch or subsidiary office with Singapore’s Accounting and Corporate Regulatory Authority, you can conduct commercial activities legally and enter into contracts and make revenue for the company. The license for the Singapore representative office can be cancel anytime or automatically discontinued when it expires.
Singapore expects international corporations to hire an advisor, such as a professional service provider, for the registration of branches or subsidiaries. A professional provider will assist you in gathering and preparing all relevant paperwork and completing the ACRA filing process.
A Singapore representative office is a unique entity with no legal status and generates no money for the parent corporation but serves as a cost center. A representative office is ideal for international enterprises interested in exploring opportunities in and around Singapore. Once the foreign company is satisfied with the market research, it may decide to open a subsidiary or branch office to conduct business operations.
If you are still unsure how all this works out, feel free to connect with us for a no obligation discussion by emailing us @ email@example.com. Take that first step and make that appointment with us today.