Singapore Subsidiary Company Registration Guide
As economies grow and businesses expand, the subsidiary-parent company structure grows more and more popular. This is so because subsidiaries are distinct legal entities, which limits the liability and legal exposure of the parent company in case the subsidiary fails. Additional advantage is the many tax benefits that subsidiaries enjoy in the jurisdiction of their incorporation.
Even though the parent company owns more than 50 percent of the voting stocks of the subsidiary, it can still own assets, and have its own bank account and operating capital.
Moreover, it’s always advisable to have strong leadership at the management level of subsidiaries that can take independent decisions and undertake separate reporting of annual returns.
Asiabiz, one of Singapore’s leading company registration consultancies, presents the following six-step guide on how to register a Singapore Subsidiary Company.
Fast-track your Singapore Subsidiary Company Incorporation process
A 6-Step Guide for Singapore Subsidiary Registration
1. Why Incorporate a Subsidiary Company
Benefits of a Subsidiary Company
The main reasons for incorporating a subsidiary company can be summarized as below:
- tax benefits
- protection against liabilities
- ease in raising money as registering a subsidiary allows the parent company to offer stocks in a portion of its share in the subsidiary, while the parent company’s stocks are not affected
- prevent public disclosure of identity as the parent company can choose which activities to make public and which to retain private by means of a subsidiary
- protect brand identity as incorporating a subsidiary helps the parent company diversify its business interests
Advantages of a Singapore Subsidiary Company
In the context of Singapore, incorporating a subsidiary is beneficial because it has a distinct legal identity than the parent foreign company and is treated as a local tax-resident here.
Moreover, the parent company can either be local or overseas-based as ACRA, the national regulator of business entities and public accountants, allows 100% foreign shareholding in a subsidiary company and the liability of every shareholder is limited to the value of the shares it subscribes to.
Other advantages for a Singapore subsidiary include:
- the subsidiary can have paid-up capital in the same currency as its parent company making the accounting procedure easier
- the subsidiary can match its fiscal year to the parent to streamline the operations
- subsidiary’s name can be different from that of the parent company
- free repatriation of the entire profits and capital of a subsidiary is permitted in Singapore.
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2. How to Incorporate a Subsidiary Company
Key Requirements for Registering a Subsidiary Company in Singapore
The requirements include:
- at least one shareholder
- one resident director (may be a citizen, permanent resident, EP holder or dependent pass holder)
- as the company requires one shareholder and one resident director, it can be the same person, but it’s always advisable to opt for at least two directors as banks and other financial institutions usually require two signatories
- one company secretary
- initial paid-up share capital of at least S$1
- a physical Singapore office address
Step-by-step Guide for Singapore Subsidiary Registration
The incorporating procedure for a Singapore subsidiary is the same as any private limited company. Please click here to read our nine-step guide for company registration in Singapore.
Set up a Singapore Subsidiary Company Without Relocating
For those who wish to get the benefit of a Singapore subsidiary company but can’t relocate to Singapore for some reason, Asiabiz provides the services of a resident nominee director. This can help you in fulfilling the Singapore companies’ statutory requirement of a resident director.
Asiabiz can provide you with a Singapore nominee director on a long-term basis or just on a temporary basis until you find a suitable local director to represent your company.
3. Work Visas
Applying for Employment Pass in Singapore
Foreign individuals need a work visa in order to relocate and work in Singapore. As such, subsidiary companies will need to apply for an Employment Pass to relocate their key staff. To learn more, please click here to read our nine-step guide for a Singapore Employment Pass application.
4. Compliance
Statutory Compliance Requirements for a Singapore Subsidiary Company
Every company in Singapore, whether exempt private, public or a subsidiary, has several for-incorporation and post-incorporation requirements. Please click here to read more about these mandatory compliance requirements and how we can assist you in fulfilling these.
5. Taxation
Tax Benefits Enjoyed by a Singapore Subsidiary Company
All Singapore subsidiary companies are taxed on profits derived in Singapore, as well as on foreign soil, which are then remitted to Singapore.
The corporate income tax rate fixed at 17 percent is calculated on the basis of the company’s chargeable income i.e. taxable revenues less allowable expenses and other allowances.
But subsidiaries can take advantage of various government incentives, subsidies and schemes such as Productivity and Innovation Credit (PIC) Scheme, Start-up Tax Exemption (SUTE) Scheme, as well as the Corporate Income Tax (CIT) rebate, to make the effective tax payable to be even lower than 17 percent.
Tax Exemptions for a Singapore Subsidiary on foreign sourced income
Generally, foreign sourced dividend, foreign branch profits, and foreign sourced service income is exempted from taxation, but only if the headline corporate tax rate in the foreign country from which the income is received is at least 15 percent, and the income had already been subjected to taxes in that particular country.
Please note that the Inland Revenue Authority of Singapore imposes strict clauses of “subject to tax” and “fixed place of operation” while determining the tax-residency of a subsidiary.
6. Insolvency
What Happens to the Subsidiary if the Parent Company Becomes Insolvent
If a subsidiary becomes insolvent, the effect on the parent company is rather limited. But if the parent company becomes insolvent, the effect on the subsidiary will be determined by the level of insolvency of the parent company.
If the parent company cannot pay obligations as they become due, it can lead to legal insolvency proceedings. The parent company can still seek legal protection under bankruptcy laws and initiate action to pay creditors. If the parent company fails to take action to protect itself from dissolution, under any reasons, it will result in the selling of the stock of a subsidiary to repay debts of the parent. Please note that the above scenario predicated on the subsidiary’s stock being an asset on the balance sheet of the parent company.