Foreign companies that wish to conduct business in Singapore typically set up a Singapore subsidiary company or open a branch office. Most small to medium-sized companies choose to register a subsidiary company in Singapore in order to take advantage of the greater flexibility and liability protection that such a structure provides over a branch office. Therefore, before you decide to set up a branch office, you should carefully consider if it is the right structure for your needs. This guide provides information about the following topics related to a Singapore branch office:
- Key Facts
- Registration Requirements
- Branch Office vs Subsidiary Company
- Required Documents
- Registration Procedure
- Taxation of Branch Office
- Filing Requirements
- Foreign companies must engage the services of a registered filing agent such as a corporate service provider in order to register a branch office with the Accounting and Corporate Regulatory Authority (ACRA).
- A branch office is considered an extension of the parent company. Therefore, all debts and liabilities accrued by the branch office are passed on to the parent company. Furthermore, if a Singapore branch office is sued, the case will be heard in Singapore and the parent company will be liable for any judgements against the branch office.
- A branch office has the same company constitution as the parent company i.e. the branch office is required to undertake the same activities as the parent company.
- For tax purposes, a branch office is considered a non-resident and is ineligible for tax incentives, grants or tax exemptions. Furthermore, a branch office does not qualify for tax exemptions on foreign-sourced income or double taxation relief under Singapore’s network of Avoidance of Double Taxation Agreements (DTAs).
- A Singapore branch must have at least 1 local representative who is a Singapore citizen, permanent resident, or Employment Pass holder.
To register a branch office in Singapore, foreign companies must engage the services of a registered filing agent, typically a corporate services provider. The following provides the minimum requirements to register a Singapore branch office:
- 1 local representative: Branch offices are required to have at least one local representative present in Singapore. The local representative must be at least 18 years old and can be either a Singapore citizen, a permanent resident of Singapore or an Employment Pass holder.
- Registered address in Singapore: A branch office must have a local registered address in Singapore. Note that the address cannot be a PO box.
Branch Office vs Subsidiary Company
To incorporate in Singapore, foreign companies generally choose to set up either a branch office or a subsidiary company.
With a branch office, a foreign company is not required to have a local director or a company secretary. However, a branch office has several drawbacks that must be considered:
- A branch office is not a separate legal entity, but rather an extension of the parent company. Therefore, the debts and liabilities of the branch office pass directly to the parent company.
- As a non-resident for tax purposes, branch offices cannot take advantage of Singapore’s generous tax incentives, grants and exemptions.
- A branch office has the same company constitution of the parent company and therefore must conduct the same activities of the parent company.
Conversely, a Singapore subsidiary provides more flexibility and liability protection for foreign companies that wish to establish a presence in Singapore:
- As a separate legal entity, a Singapore subsidiary’s debts and liability do not extend to the foreign parent company
- Singapore subsidiaries are tax-residence of Singapore and qualify for tax incentives, exemptions and grants available in Singapore.
- A Singapore subsidiary has its own company constitution and therefore it has the freedom to conduct different business activities than those of the parent company.
The following documents are required to register a branch office in Singapore:
- The name of the parent company
- The address of the parent company outside of Singapore
- A certified copy of the parent company’s certificate of incorporation
- A certified copy of the parent company’s company constitution
- A register of the directors of the parent company
- The particulars of the authorised local representative
- A statement of consent from the local Singapore resident who will serve as the local representative for the branch office
- A notice that includes the following information:
- the foreign company’s registration number;
- the kind of business carried out by the foreign company; and
- the legal structure of the foreign company
- A copy of the parent company’s audited financial statements
The registration procedure consists of 2 steps–name approval and entity registration:
- Name approval: The branch office must have the same name as the parent company. Typically, the name will be approved within an hour. Note that the name cannot be identical to an existing company in Singapore or be vulgar in nature.
- Entity registration: Once all the documents have been provided to the filing agent, the the branch office can be registered with ACRA. If the filing agent has all of the documents completed in time, the registration process can take as little as 20 minutes.
Taxation of Branch Office
Singapore levies taxes on the profits earned by a branch office. When necessary, a branch office must also register to collect goods and services tax (GST).
For tax purposes, branch offices are considered non-residents.
As a non-resident, a Singapore branch office cannot take advantage of Singapore’s tax incentive programs, grants and tax exemptions. Furthermore, branch offices do not qualify for the tax exemption on certain foreign-sourced income and cannot seek double taxation relief under Singapore’s extensive network of Avoidance of Double Taxation Agreements (DTAs).
A branch office is required to comply with all annual filing requirements dictated by ACRA and the tax authority of Singapore known as IRAS. Any failure to comply may result in penalties or fines. The annual filing requirements for a Singapore branch office are as follows:
- Prepare Financial Statements: According to Singapore Company law, branch offices are required to prepare financial statements using Singapore Financial Reporting Standards (FRS). FRS closely aligns with International Financial Reporting Standards (IFRS).
- File with ACRA: Singapore branch offices are required to submit their audited financial statements to ACRA within 60 days of the parent company’s annual general meeting.
- File estimated chargeable income (ECI) with IRAS: Within 3 months of its financial year end, a Singapore branch office is required to declare its revenue and ECI with IRAS. ECI refers to the revenue generated by the branch minus items such as capital gains or disposal of fixed assets.
- File annual income taxes with IRAS: A Singapore branch office is required to file annual income tax returns with IRAS. Singapore uses a preceding year basis for taxation. This means taxes are calculated using the income from the previous year. Branch offices are required to file income taxes with IRAS by November 30 for paper filing or by December 15 for electronic filing.