Foreign Company Registration Options in Singapore

Singapore’s proximity to the booming South East Asian market, its pro-business environment along with open economic policy allowing 100% foreign ownership in almost all sectors, is a very attractive business proposition for foreign companies. As a microcosm of Asia, Singapore is the financial and business hub of the region making it an ideal launch pad for foreign companies interested in venturing into the regional markets. The following is an overview of the options and steps involved in establishing an entity in Singapore.

REPRESENTATIVE OFFICE (RO)

A Representative Office is a temporary setup for the preliminary activities such as market research and market exploratory activities. It is meant for foreign companies that wish to test the waters before taking the big leap. ROs are strictly barred from involving in commercial revenue-generating activities. They are only an administrative arrangement to test the viability of the market.

Features

  • No Separate Legal Identity: A Representative Office is not recognized as a legal entity under the Companies Act of Singapore. It is merely a temporary extension of the foreign company.
  • Name: It must have the same name as that of the Foreign Company. It must explicitly state that it is a ‘Representative Office’ on its name plaque and communication materials such as letterheads, name cards etc.
  • Validity/ Renewal: An RO can operate for a maximum period of three years from the date of registration. The RO must register itself as a Branch Office or Subsidiary before or after the end of the three-year period. The RO’s registration must be renewed annually within this three-year period.
  • Officers: The RO must be deputed with a Representative Officer from the foreign company’s head office to oversee its operations. Such a representative must bear the designation ‘Representative’ and cannot be known by other titles such as ‘manager’
  • Taxation: RO is deemed to be a non-resident for taxation purposes and as it does not engage in revenue-generating activities, it does not have any taxable incomes, therefore, a RO is generally not taxed.
  • Registered Office: RO must have a local registered office
  • Limitations: RO can employ locals as its staff members however the maximum headcount of employees for a RO at all times is limited to five.
  • As it lacks a legal identity of its own, RO cannot enter into a contract, issue invoice/receipts or open/receive Letter of Credit either directly or indirectly.

Registering Authority

  • International Enterprises Singapore (IE Singapore) is the registering authority for foreign companies from manufacturing, trade, business services and most other sectors.
  • Monetary Authority of Singapore (MAS) is the registering authority for foreign companies from banking, finance and insurance sectors
  • IE Singapore is the registering authority for Foreign Trade Promotion bodies
  • Attorney General Chambers under Ministry of Law is the registering authority for foreign law practices

Permitted Activities

The RO can engage in the following activities:

  • Conducting market research to study consumer demands
  • Conduct feasibility studies by studying regulatory landscape, competitive intelligence etc.
  • Supervise the activities of its main head quarter’s local agents and distributors
  • Act as a liaison office to develop trade contacts, negotiating deals or to participate in trade shows and exhibitions
  • Provide customer support by answering product queries

Prohibited Activities

The following activities are prohibited:

  • Providing repair and technical services
  • Shipping or storing goods in Singapore without a designated local distributor or agent
  • Leasing warehousing facilities or lease office(s) to other establishments for a fee

Qualification for Registration

  • The foreign parent company must have a sales turnover in excess of US$250,000
  • The foreign parent company must have been established for three years or more

Essential Documents

The following documents must be submitted along with the completed application form

  • Copy of the parent company’s Certificate of Incorporation or Business Registration Certificate in English or an official English translation
  • Copy of the parent company’s latest audited accounts
  • Non-refundable processing fee of S$200 per year

Post Registration Compliance

  • It is a temporary foreign entity that is not engaged in any profit-making activities, therefore exempted from statutory annual filing requirements.
  • The RO must register with the Central Provident Fund (CPF) Board to honor its CPF obligations for its local employees. The RO must also register with the Singapore Customs if it will be importing samples and exhibits.

Key Considerations

The registration process and time involved is simple and quick for a RO, so it is an ideal way to explore the market. However as a non-revenue generating entity, it will be a cost center for the foreign company. If it gets into any legal troubles or inadvertently falls out of compliance the foreign company will be liable. So the foreign company must effectively use this non-commercial entity to accomplish its objectives and upgrade to a branch office or a private limited entity at the earliest.

BRANCH OFFICE (BO)

A Branch Office is an extension of the foreign company. The foreign company is fully liable for the debts, losses and obligations of the BO. The Memorandum and Articles of Association of the foreign company directs the BO.

Features

  • No Separate Legal Identity: A Branch Office is not recognized as a legal entity and it is an extension of the foreign company.
  • Name: It must have the same name as that of the Foreign Company. In special circumstances, the registrar may allow for a name that is different from that of the foreign company.
  • Validity/ Renewal: The registration is perpetual until it is deregistered.
  • Officers: The Branch Office must appoint at least two agents to act on behalf of the company. Such agents must be ‘ordinarily resident’ in Singapore, i.e. they must be either Singapore Citizens, Singapore Permanent Residents or persons holding Employment Pass or Dependent Pass.
  • Taxation: It is deemed to be a non-resident for tax purposes, therefore not entitled to local tax incentives and privileges. The taxable income sourced in Singapore is subjected to Singapore corporate tax rates. However if the control and management of its business are exercised in Singapore it will be deemed to have a business substance in Singapore. Such companies need not pay taxes twice on foreign-sourced income under the Double Taxation Agreements (DTAs).
  • Limitations: The BO must confine to the same activities as that of the head office.
  • Registered Office: The BO must have a Singapore registered office that is open and accessible to the public during normal working hours.

Registering Authority

The Accounting and Corporate Regulatory Authority of Singapore (ACRA) is the registering authority for Branch Office.

Documents Required

  • A certified copy of the foreign company’s Certificate of Incorporation
  • A certified copy of Memorandum and Articles (MAA) of the foreign company
  • A list of directors with their particulars and if the directors are resident in Singapore and members of the local board of directors, a memorandum stating their powers
  • The Memorandum of Appointment or Power of Attorney and details of at least two persons residing in Singapore and acting as the agents of the Singapore branch office
  • A statutory declaration made by the agents confirming particulars of the branch
  • A copy of the latest annual audited financial statement, where applicable.

Post Registration Compliance

  • A Branch Office must appoint an auditor within three months of registration with ACRA.
  • All statutory registrations such as CPF, Customs (if your operations involve import or export) etc, must be completed promptly. If revenue is estimated to exceed S$1 million, the Branch Office must also register for GST with the IRAS.
  • A BO is required to file the audited accounts with ACRA annually. Within two months of the parent company’s Annual General Meeting (AGM), the branch must submit a copy of the audited annual financial accounts of the parent company.
  • Financial Year End of a branch must be same as that of the parent company.
  • Records of financial transactions must be maintained for a period of at least five years and must be open for inspections by its agents and the registrar.
  • All business communication materials such as letterheads, name cards, name plaque, invoices etc. must bear the registration number and name.
  • Any changes in the registered particulars must be promptly notified to the ACRA.

Key Considerations

A BO as an extension of the foreign company is not a tax resident of Singapore, therefore it is exempted from the local tax incentives and benefits. As a non-resident for tax purposes, it will not be entitled to the benefits available under Singapore tax treaties. It may be subjected to tax on its Singapore income also in its home country even if the home country and Singapore are DTA treaty partners. On the other hand, the expenses or losses incurred by the Singapore office may be claimed as deductions in its home country.

The branch office’s activities are limited to the scope of the activities of the parent company. The annual financial statements of the foreign parent company are required to be disclosed in Singapore, this may make the information easily available to the competitors in Singapore.

As BO is an extension of the parent company, its liabilities are extended to the parent foreign company. Claims can be made against the foreign company assets irrespective of its location or its relevance to the BO’s operations. By means of the BO, the foreign company is deemed to be present in Singapore, therefore, potential claimants can file litigation in Singapore courts or in the home country.

SUBSIDIARY COMPANY

It is a Private Limited Company incorporated in Singapore. The foreign company holds the majority of its shares or all of its shares.  The liability of the foreign company is limited to the share capital subscribed by it. It is the most popular route for a foreign company to establish its operations in Singapore.

  • Separate Legal Identity: The subsidiary company is a separate legal entity. Its liabilities do not wholly transfer to the foreign company.
  • Name: The name can be different from that of the foreign company, but prior to registration approval must be obtained from the Singapore company registrar.
  • Validity / Renewal: The registration is perpetual until it is deregistered.
  • Officers: At least one local director must be appointed who may be either a Singapore citizen, a Singapore Permanent Resident (PR) or an Employment Pass (EP) Holder, who should be 18 years old.
  • Taxation: It is deemed to be a resident for tax purposes. Subject to conditions, it is entitled to local tax exemption for startups. The taxable income sourced in Singapore is subjected to Singapore corporate tax rates. Foreign sourced incomes from dividends and service incomes will be exempted from tax. It is entitled to the benefits of the tax treaties of Singapore.
  • Limitations: The number of shareholders is limited to 50. Minimum paid-up capital of S$1 is required.
  • Registered Office: It must have a Singapore registered office that is open and accessible to the public during normal working hours. Statutory records must be maintained at this address.

Registering Authority

The Accounting and Corporate Regulatory Authority of Singapore (ACRA) is the registering authority for a Subsidiary.

Documents Required

  • A certified copy of the foreign company’s Certificate of Incorporation
  • An extract from the Registrar of companies displaying the parent company’s registered address and the directors.
  • Passport details and residential address of the directors.
  • A board resolution approving the incorporation of the Singapore company and the proposed shareholding structure
  • Signed approval from the proposed directors to act as directors for Singapore subsidiary.
  • A board resolution authorizing an individual as a signatory to signing cheques and documents.
  • Registered address of the Company.
  • Memorandum and Articles of Association of the subsidiary company.

Post Registration Compliance

  • A Subsidiary must appoint an auditor within three months of registration with ACRA.
  • Within six months of incorporation, a natural person who is ordinarily resident in Singapore must be appointed as company secretary.
  • All statutory registrations such as CPF, Customs (if you operations involve import or export) must be completed promptly. If revenue is estimated to exceed S$1 million then the subsidiary must also register for GST with the IRAS.
  • The first AGM must be held within 18 months of incorporation and the maximum interval between two AGMs must not be more than 15 months.
  • It is required to file the annual audited accounts to the tax authority (IRAS) and is also required to file returns annually to the ACRA within 30 days of its AGM.
  • Records of financial transactions must be maintained for a period of at least five years and must be open for inspections by its agents and the registrar.
  • All business communication materials such as letterheads, name cards, name plaque, invoices etc. must bear the registration number and name.
  • Any changes in the registered particulars must be promptly notified to the ACRA.

Key Considerations

Unlike a Branch Office or Representative Office, the Subsidiary Company has a distinct legal identity. The assets of the foreign company will remain insulated from any unlimited liabilities incurred by the Subsidiary.

As a resident for tax purposes it will qualify to enjoy the benefits available under the wide network of tax treaties available in Singapore.

Since a corporation is holding the shares of the subsidiary, it is not exempted from annual audit.  The auditing and administrative costs will drive up the compliance cost.

The activities of the subsidiary need not be congruent with that of the parent company. As long as it is disclosed to the registrar in its memorandum, the subsidiary’s activities may be different from the parent company. Therefore the subsidiary can change and diversify its business model based on the ground realities and need not feel stifled by the parent company’s limited scope of activities.

It must be noted that the subsidiary of a foreign company will be eligible for local corporate tax incentives if an individual holds at least 10% of its shares.

Though the subsidiary does not qualify for an audit exemption, it may still be eligible for exemption under the ‘small group’ principle introduced by the latest amendment if it fulfills at least two of the following criteria for the immediate past two consecutive years.

  • The parent and the subsidiary’s aggregate total revenue for the financial year do not exceed S$10 million.
  • The aggregate asset during the financial year does not exceed S$10 million.
  • The total number of employees is not more than 50.

However mid- and large-scale foreign companies establishing subsidiaries in Singapore will typically overshoot the tight threshold, rendering them ineligible for audit exemption.

In conclusion, setting up a subsidiary company is the ideal route for foreign companies if they are confident about their business potential and have a solid plan to operate their business Singapore. If they commence as a RO and realize that their venture will gain better payoffs by continuing as a cost center in Singapore (such as an administrative or liaison office in Singapore), then they have to still incorporate a Subsidiary because it limits the liability of the parent company. More importantly, it is a tax efficient structure than a branch office, which has elaborate disclosure requirements. Irrespective of the structure, the foreign companies must appoint a professional service provider to register their entities in Singapore.

Get an overview of entity options for your foreign company

Compare and contrast the three entity options in a summary table and find out which you should go for when it comes to foreign company registration in Singapore.

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