Foreign Company & Representative Office

In South East Asia, Singapore boasts a reputation as a strategic gateway and an attractive hub for foreign companies with the desire to consolidate or establish their business operations in the region.

Some of the reasons for this establishment include:

• Low corporate tax rates (attractive tax regime)
• Business-friendly policies
• Strategic location
• Availability of multilingual and skilled workforce
• Smart immigration policies
• Highly-developed infrastructure and conducive environment
• Efficient legal system
• Excellent IP protection regime

Are you a foreign company that is looking to expand or incorporate your business to Singapore?

Timcole can help you with the set-up process. Compliance, regulatory and tax requirements vary depending on the incorporation option you choose.

Based on your business objectives, the following are the three incorporation options (company setup options) that foreign companies intending to operate and set up in Singapore can consider:

• Subsidiary company
• Branch office
• Representative office

A subsidiary company refers to a private limited company that is locally incorporated. The major shareholder is another foreign or local company. In Singapore, it’s possible for companies to be fully foreign-owned, thus allowing foreign companies to own 100% of shares or incorporate a subsidiary company.

Under the Singaporean law, subsidiary companies are considered a separate entity from their foreign parent company. As such, it is treated as a local company in Singapore. Therefore, foreign companies and their assets can not be held for the liabilities and debts of the subsidiary.

Properly structured local subsidiary companies are excellent tax-efficient corporate bodies. The resident status of such companies make them entitled to effortless access to local funds, government incentives, and favorable tax treaties.

Generally, individuals or companies are advised to set up subsidiary companies if they run small to medium-sized businesses.

When setting up a subsidiary company in Singapore, take note that:

• Subsidiary companies must have a registered office address within the country as well as maintain their legal documents in that office.
• The Singapore Companies Act demands the appointment of at least one director. Among the directors, one of them must be an Employment Pass holder, permanent resident or a Singapore citizen.
• Although the name of a subsidiary company might be different from that of a parent company. Nevertheless, this condition is subject to approval by the country’s ACRA (Accounting and Corporate Regulatory Authority).

 

Disadvantages	Branch offices have continuous compliance obligations (for example, audit, financial reports etc) unless the government grants them an exemption.
Minimum Setting up Requirements	The Singaporean law requires subsidiary offices to have at least one shareholder, who can be a corporate or an individual. Both foreign shareholding and 100% local shareholding is allowed. The other requirement is that the office must have one resident director to be involved in setting up the Company.
Annual Filing	Subsidiary offices are required to file their audit reports unless they qualify for certain exemptions.
Tax Benefits	Subsidiary companies with not less than one shareholder and a minimum of 10% shareholding are entitled to local rebates and tax incentives.
Bank Account	The law allows subsidiary offices to open a bank account in Singapore.
Tax Treatment	In Singapore, Subsidiary offices are taxed as a resident entity. Local tax benefits are available. The office not only qualifies for group relief, but it can also claim a foreign tax credit.
Local Person Requirement	For the set up of this office, the law requires a nominee director.
Limited Liability	The limited liability of a representative office extends to the parent company.
Filing of Accounts with IRAS and ACRA	Yes, the office qualifies for certain exemptions.
Cessation of the Business Demise of a partner/member	No. The office’s equity shares extend in perpetuity.
Normal Registration Time	It takes 1 hour.
Requirement for Setup	When it comes to a representative office, no requirements for set up exist.
Staff Hiring	There are no restrictions on hiring foreign or local staff.

In Singapore, a branch office refers to a registered legal entity that acts as an extension of an overseas parent company. These kinds of offices can conduct any kind of business operation that is within the realm of the parent company. They can repatriate their capital and earnings. Branch offices are taxed strictly for the earnings that emanate from their operations in Singapore.

Of great importance to note is that in Singapore, the law considers these offices a non-resident entity. It means that the head office of the respective foreign company is held liable for any acts of omission or commission that their branch office in Singapore commits. Branch offices’ non-resident status excludes them from part of the tax exemptions that subsidiary and local companies enjoy.

Individuals or companies are advised to set up a branch office if they run a medium to large-sized business with specialized operations overseas and intends to conduct an array of business activities in the country.

When setting up a branch office, take note that:

• The law requires branch offices to have a registered office address in the country.
• According to the Singapore Companies Act, branch offices should appoint not less than one authorized representative who is a resident in Singapore to accept services of notices and process.
• The branch office name in Singapore needs to resemble that of its head office. It must first be pre-approved before registration.

 

Disadvantages	Branch offices have continuous compliance obligations (for example, audit, financial reports etc) unless the government grants them an exemption.
Minimum Setting up Requirements	According to the law, these offices must have at least one Singapore resident authorized representative.
Annual Filing	The law requires branch offices to file their office and parent company’s audit reports.
Tax Benefits	These offices enjoy partial tax exemption.
Bank Account	The law allows branch offices to open a bank account in Singapore.
Tax Treatment	The office is taxed as a non-resident entity. Local tax benefits are not available. The office is not qualify for group relief. The office also cannot claim foreign tax credit.
Local Person Requirement	A branch office must have one local authorized representative.
Limited Liability	The limited liability of a branch office extends to its parent company.
Filing of Accounts with IRAS and ACRA	Yes.
Cessation of the Business Demise of a partner/member	No.
Normal Registration Time	It takes 1 hour.
Requirement for Setup	In terms of set up, the law doesn’t require anything of a branch office.
Staff Hiring	There are no restrictions on hiring foreign or local staff.

A representative office, under Singapore law, is a temporary entity that enables foreign companies to manage company affairs or explore the market in Singapore without any handling of profitable business activity.

An important highlight of representative offices is the fact that they do not have legal personas. Consequently, these offices can’t sign contracts, open letters of credit, raise invoices, lease warehouses, handle trades directly or for their parent companies overseas.

Foreign companies usually bear implicit liability for all the operations of their representative offices within the country.

Individuals or companies are generally advised to form a representative office if their main objective is to analyze the business environment in the country prior to committing their investment. The same is true if the company has considerable non-core activities to be handled within the country.

When setting up a representative office, take note that:

• The maximum number of local support staffs that a representative office can hire is five.
• The office must have a representative staff from its head office overseas.
• Representative offices can’t continue with their operations beyond 3 years. Beyond this period, the office needs to upgrade itself to a subsidiary company or a branch office.
• If the representative office operates in the insurance, finance, or banking sectors, it is mandatory to register the office with MAS (Monetary Authority of Singapore). For offices in other fields or industries, they need to register with IE (International Enterprise) Singapore.

 

Disadvantages	Representative offices are more of a temporary vehicle. They can’t guarantee revenue.
Minimum Setting up Requirements	The office must hire a Chief Representative who’ll relocate from the headquarters.
Annual Filing	Annual filing isn’t applicable for subsidiary offices.
Tax Benefits	There’s no corporate tax for subsidiary offices. Employees must pay personal tax.
Bank Account	A representative office can open bank accounts in the country in order to run their cost center operations. The parent company must provide funding.
Tax Treatment	It’s not applicable.
Local Person Requirement	A representative office must have one chief representative staff from the main head office who will relocate to Singapore.
Limited Liability	Yes.
Filing of Accounts with IRAS and ACRA	No.
Cessation of the Business Demise of a partner/member	Not applicable.
Normal Registration Time	The normal registration time for a representative office is 3 – 5 days.
Requirement for Setup	The foreign entity must have a sales turnover of over $250,000. Additionally, the foreign company must have been in establishment for over 3 years.
Staff Hiring	A chief representative from the parent company must be a staff member at the representative office. The office can hire only five workers.

In spite of the challenging global economic environment, Singapore continues to attract a high number of investment commitments. The country’s political and economic stability coupled with the other reasons mentioned earlier in this primer is what makes Singapore a preeminent business hub of the contemporary global economy.

Timcole can assist you in the incorporation of foreign company or representative office, or aid you in any administrative load the business carries.

Timcole is one of the leading company incorporation and accounting firm based in Singapore. Our wide range of professional services serve as a one-stop solution for your business, offering you the most affordable price for services conducted with the highest level of excellency.

Contact us to find out more on how we can help you with your company today.