Subsidiary Vs Branch Office Vs Representative Office
Singapore has been consistently ranked as one of the most business-friendly economies year after year by World Bank. Many factors have contributed to Singapore’s competitive edge: easy access to capital, strategic location, excellent infrastructure, ease of doing business etc.
Foreign companies keen on establishing a presence in Singapore may choose to set up a subsidiary company, branch office or a representative office in Singapore. The best option will depend on the company’s business plan and strategic goals. The sections below will delve into the different setup options available for foreign companies.
Subsidiary Company
A subsidiary company is a locally incorporated private limited company and its shareholding may be owned 100% by a foreign company or individual. A subsidiary company is treated as a local resident company if the control and management is exercised in Singapore. As a resident company, it enjoys various tax exemptions and incentives that are available to local companies. In addition, a subsidiary company is considered as a separate entity from the foreign company. As such the parent company’s liability is limited to the share capital invested in the subsidiary company and its own assets cannot be held liable for the debts and liabilities of the subsidiary company. It is also easier to raise funds locally or obtain government incentives.
Due to the above mentioned benefits, registration of a subsidiary company is often preferred by small to mid-sized foreign businesses who are keen on setting up an office in Singapore.
The name for the subsidiary office can be different from the parent company and is subjected to approval by the Accounting and Corporate Regulatory Authority ("ACRA"). Singapore Companies Act requires that one of the directors must be a local resident, e.g., Singapore Citizen, Singapore Permanent Resident or Employment Pass Holder. A subsidiary company also needs to have a registered office address in Singapore and ensure all statutory documents are kept in that office.
Branch Office
A Singapore branch office is a registered legal entity but it is considered an extension of the foreign company. As it is not a separate legal entity from its parent company, its debts and liabilities will have to be borne by the head office of the foreign company. A branch office is generally considered as a non-resident company for tax purposes, as a result it is not eligible for tax exemptions and incentives which may otherwise be available to tax-resident local companies.
Due to its non-resident status for tax purposes, this option is less attractive for small to mid-sized foreign businesses. Generally, setting up a branch office is for foreign companies which do not want to incorporate a company in Singapore, but would like to register an entity in order to carry out business activities in Singapore under the corporate title of the foreign company.
The name of the Singapore branch office must be the same as that of the parent company and must be approved first before branch office registration. The company registrar generally approves the proposed name unless it is identical to an existing company name or is offensive in nature. Singapore Companies Act requires the appointment of at least one authorised representative who is ordinarily a Singapore resident. A branch office also needs to have a registered office address in Singapore
Representative Office
Setting up a representative office is for foreign companies who are interested in conducting market research or administering company affairs without conducting any profit-generating business activities. A representative office is a short-term setup without any legal status and cannot engage in any direct trading or on behalf of the foreign company. As it is not generating revenue, it is not required to submit tax returns in Singapore. It is also not a separate legal entity from its parent company, thus the foreign company will bear all the liability for its activities.
The cost for registering a representative office is considerably lower, making it an ideal avenue for foreign companies to explore potential opportunities in Singapore and the region before making commitments. However, a representative office cannot operate beyond three years. It will have to be converted to a branch office or subsidiary before or at the end of the three years.
Similar to branch office, the name of the Singapore representative office must be the same as that of the parent company. The authorities will decide on a case by case basis for situations where the name is identical to an existing company name. The representative office is required to be staffed by a representative from the foreign company’s head office and may engage up to five employees.
Below is a table summarizing the differences between the three entity types:
| Singapore Subsidiary | Singapore Branch | Singapore Representative Office | |
|---|---|---|---|
| Entity Name | Need not be the same with that of its parent company but should not be identical or similar to any registered company or business in Singapore. | Need to be the same as that of its parent company. | The name of the RO must correspond to that of its parent entity. IE Singapore must be notified within one month of any change in its name and accompanied by a copy of the parent entity’s certificate of change in name (in English or official English translation). The RO must clearly state that it is a “Representative Office Registered in Singapore” on its name plaque, letterheads, name cards of its staff and other communication materials. |
| Legal Status | Separate legal entity distinct from its members (parent company) and directors. | Not a separate legal entity but an extension of the parent company registered outside of Singapore. | Has no legal status but just a temporary facility with no statutory obligations to file financial accounts and tax returns with ACRA and the Inland Revenue Authority of Singapore ("IRAS"). |
| Liabilities | Parent company not liable for debts and losses of Singapore subsidiary. | Debts and losses of Singapore branch are extended to parent company. | Liabilities extend to parent company. |
| Business Activities | No restrictions on the type of business activities that a company can engage in. | Must be the same as the parent company. | Can only engage in market research and feasibility studies and should not provide services nor render any direct or indirect revenue generation activities on behalf of its parent company. |
| Continuity in Law | Perpetual succession until wound up or struck off. | Perpetual existence until deregistered. | Can only operate in Singapore for a maximum of three years from the date of its inception. During this period, the Representative Office must also be renewed annually. |
| Estimated Registration Time | Usually within 1 day It may take between 14 days to 2 months if the application needs to be referred to another agency for approval or review. For example, if the intention of the company is to carry out activities involving the setting up of a private school, the application will be referred to the Ministry of Education. |
Usually within 1 day It may take between 14 days to 2 months if the application needs to be referred to another agency for approval or review. For example, if the intention of the branch of a foreign company is to carry out activities involving the setting up of a private school, the application will be referred to the Ministry of Education. |
3-5 days |
| Taxes | When the control and management of the company is exercised in Singapore, it is taxed as Singapore resident entity. Tax exemptions and incentives are available. | Taxed as non-resident entity, tax exemptions and incentives applicable to Singapore resident entity are not available. | Not applicable |
| Annual Filing Requirements | Annual return must be filed together with Singapore subsidiary’s annual financial statements. | Singapore branch shall, within two months of its annual general meeting, lodge the
followings with the Registrar:-
|
Not applicable |
| Bank Account in Singapore | No restrictions to open bank account in Singapore. | No restrictions to open bank account in Singapore. | Can open bank account in Singapore to run the cost centre operations which is funded by the parent company. |
| Hiring of staff | No restrictions on hiring local or foreign staff. Hiring of foreign staff is subject to foreign worker quota based on business sector and the company’s workforce. | No restrictions on hiring local or foreign staff. Hiring of foreign staff is subject to foreign worker quota based on business sector and the branch’s workforce. | Chief representative must be a staff member from the parent company. Number of staff for RO should be less than 5 people. |
| Set Up Fee | S$315 (S$15 name application fee and S$300 incorporation fee) | S$315 (S$15 name application fee and S$300 registration fee) | A processing fee of S$200 per year is applicable. The processing fee is non-refundable for unsuccessful or withdrawn applications. |
| Appointment of Officers | Must appoint at least one director ordinarily resident in Singapore. | Must appoint at least one authorised representative who is ordinarily resident in Singapore. | Must appoint a Chief Representative who relocates from head office. |