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Epica Learn Series

FAQs About a Subsidiary, Branch, and Representative Office

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Business Entity Options for Registration for Foreign Corporates intending to Register in Singapore

Singapore is indeed offering a wide selection of business structures to foreign business owners. Foreigners must then do their part to learn more about these entity options, before entering in Singapore and review their business goals. Having sufficient knowledge about your own industry will help you determine what business structure is best for your business endeavors.

For first-time investors in Asia, setting up a low-risk and experimental entity in the form of a representative office may be recommended. On the other hand, a branch office or subsidiary company is a more strategic option for those who want to expand their access to Asian markets.

These are the three ways to represent your foreign company, as well as effectively make your business presence more relevant, in Singapore. This article will enumerate the similarities and differences among these three business structures in terms of legal structure, liabilities, and business scope, among others.

A Subsidiary Company

In this case a foreign company registeres a new company in Singapore and owns 100% shareholding in this Singapore entity. The company registered in Singapore is called as subsidiary and the foreign company owing shares is called as a parent company. A subsidiary company has an independent legal existence from its parent company. A foreign company can take 100% of its shares. Foreign business owners striving to set up bigger operations in Singapore or Asia choose this entity type to gain access to Singaporean or Asian markets, ASEAN Free Trade Zones, and FTAs through ASEAN.

With approximately 99% foreign companies registering as subsidiaries, this entity type has been the most commonly preferred option by foreign business owners in Singapore.

A Branch Office

FAQ about subsidiary, branch and representive office - Branch office

A branch office is an extension of its foreign company that is operating in another country. It does not have an independent legal existence from its parent company. There are no separate shareholders for a branch.

Medium to large foreign companies with dedicated operations globally aiming to undertake a wider business scope can choose this entity type. Approx less than 1% of foreign companies prefer this option.

A Representative Office

FAQ about subsidiary, branch and representive office - Representive office

A representative office is not authorized to engage in sales or any sales-related activities. This entity type is created for market research and study purposes only. Its compliance requirements are, therefore, very simplified.

This business structure is the right choice for foreign business owners who are still figuring out their investment choices before committing to a full-scale company in Singapore. Only 0.1% of foreign companies incorporate this entity type.

Subsidiary, Branch, and Representative Office: What Aspects Should Be Assessed?

FAQ about subsidiary, branch and representive office - Aspects

Legal Structure

A subsidiary company, also known as a private limited company, is a standalone legal entity. It is deemed as a local Singapore company, allowing it to enjoy the rights and benefits of being one. It is registered permanently until closed.

A branch office is just an extension of its parent company. It is not deemed as a separate legal entity as it is 100% owned by its parent company. It is registered permanently until closed.

A representative office has no legal status. It is just an extension of its parent company and a short-term management set-up. It must be annually renewed and established for a maximum of three years only. After three years, it must convert to a subsidiary or branch.


FAQ about subsidiary, branch and representive office - Liablities

Liabilities

A subsidiary company has independent liabilities that are limited to it. Its parent company will not be responsible for its debts and liabilities. This arrangement protects the assets of its parent company from the losses caused by business risks.

The liabilities of a branch office reach its parent company. If it incurs liabilities or a huge debt, its parent company must pay on its behalf. This arrangement means that its parent company can be sued in Singapore, and its assets will be at risk.

The liabilities and debts of a representative office extend to its parent company.


Business Activities

A subsidiary company can perform any business activities, whether they are similar to or different from its parent company.

FAQ about subsidiary, branch and representive office - Activities

A branch office is required to conduct business activities similar to its parent company.

A representative office is permitted to perform the following activities only:

  • Research on markets, service/product information, and target clients
  • Generate trade contacts and handle service/product inquiries
  • Engage in trade events and exhibitions
  • Determine regulatory requirements to run a long-term entity
  • Conduct feasibility studies and liaising activities

FAQ about subsidiary, branch and representive office - Name

Name

A subsidiary company can have the same or different company name from its parent company.

A branch office must have the same company name as its parent company, plus the words “Singapore Branch” added at the end of it.

A representative office must have the same company name as its parent company, plus the words “Representative Office” added at the end of it.


FAQ about subsidiary, branch and representive office - Corporate tax

Corporate Tax

A subsidiary company is taxed as a resident entity; hence, it is eligible for various startup grants.

Since a branch office is still managed and controlled by its parent company, it is taxed as a nonresident entity. In Singapore, nonresident entities were not entitled to tax exemptions, incentives, treaties, and grants before 2018. Now, even nonresident companies have been granted some tax benefits. Furthermore, a branch can become a resident entity if it can provide IRAS with certain compliance proofs.

Corporate tax is not applicable to a representative office as it does not generate income.


FAQ about subsidiary, branch and representive office - Audit

Audit

In terms of audit:

  • A subsidiary company is exempted from audit if it meets audit exemption criteria.
  • Audit is required from a branch office.
  • Audit does not apply to a representative office due to the nature of its activities.

FAQ about subsidiary, branch and representive office - Filling account

Filing of Accounts

A subsidiary company must:

  • File its own annual return only
  • Conduct annual general meeting (AGM)
  • Provide financial statements in XBRL format
  • Submit annual tax

A branch office must:

  • File its own audited accounts along with the accounts of its parent company within a specific period of time
  • File annual return
  • Submit annual tax

Filing of accounts is not applicable to a representative office.

Subsidiary, Branch, and Representative Office: What’s the Most Appropriate Option?

Pros and cons of subsidiary - Options

Thoughtful consideration of the abovementioned aspects is of utmost importance as it will help you ascertain the adaptability, scalability, and sustainability of your business. To date, a subsidiary company remains to be the most appropriate option for foreign company registration in Singapore due to its separate legal status, eligibility for tax benefits, and freedom to perform distinct business activities.

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New Setup

S$2,500
S$3,000

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