Singapore Holding Company: A Smart Structure for Success
A Singapore holding company is a business that owns shares in other companies, called subsidiaries. These subsidiaries can be in Singapore or anywhere else in the world. The holding company controls the subsidiaries and manages the overall business.
This smart structure can help you protect your assets, save on taxes, and set your business up for success.
Definition of a holding company in Singapore
A Singapore holding company is a company that holds shares in subsidiary companies. It doesn’t conduct business operations itself. Instead, the holding company fully owns or has a controlling stake in the subsidiaries, allowing it to influence key decisions and strategies.
Characteristics of a Singapore holding company
To set up a Singapore holding company, you’ll need:
- A pre-approved company name
- At least one resident director based in Singapore (who can also be a shareholder).
- The holding company must have a registered address in Singapore that’s been approved by the Urban Redevelopment Authority (URA).
Difference between a holding company and a parent company
While the terms are often used interchangeably, there is a slight difference.
A Singapore holding company is a separate legal entity that holds shares in subsidiaries.
A parent company refers specifically to a company that fully owns or has a controlling interest in another company.
So in most cases, a holding company is also a parent company, but a parent company isn’t always a holding company.
Benefits of setting up a Singapore holding company
Why are holding company structures so popular in Singapore? There are several key benefits:
1. Tax advantages
Setting up a holding company in Singapore comes with a number of tax benefits, such as:
- Tax exemption on certain income and capital gains
- Attractive tax incentives for holding companies
- Extensive network of double tax treaties to reduce or eliminate double taxation
Singapore’s corporate tax rate is already one of the lowest in the world at 17%, but holding companies can enjoy even more tax advantages.
2. Asset protection
A holding company provides asset protection by separating the assets and liabilities of the holding company from its subsidiaries. This limits the liability exposure. So if a subsidiary faces financial or legal issues, the holding company’s assets are shielded. This is a key reason many businesses choose to set up a holding company.
3. Limited liability
To set up a holding company in Singapore, you’ll need to incorporate it as a limited liability company (LLC), limited partnership, trust or foundation with the Accounting and Corporate Regulatory Authority (ACRA). An LLC provides limited liability protection, meaning the holding company’s shareholders are not personally liable for the company’s debts and liabilities beyond their share capital.
4. Ease of incorporation
The process of setting up a Singapore holding company is relatively straightforward. The requirements are similar to incorporating any other type of company in Singapore. You’ll need to choose an approved company name, appoint at least one resident director, and have a registered office address in Singapore. The whole process can be completed in a matter of days.
Types of Singapore holding companies
There are several types of holding companies in Singapore, each with its own specific purpose and characteristics:
1. Investment holding companies
An investment holding company holds investments such as shares, bonds, real estate, and other financial assets. The main purpose is to generate returns on these investments. Investment holding companies are a popular choice for businesses and high-net-worth individuals looking to manage their investment portfolios in a tax-efficient manner.
2. Financial holding companies
Financial holding companies are regulated under the Financial Holding Companies Act 2013. They hold shares in banks, insurance companies and other financial institutions. The Monetary Authority of Singapore (MAS) oversees Singapore financial holding companies to ensure the stability and integrity of the financial system.
3. Intellectual property holding companies
An intellectual property (IP) holding company holds and manages IP assets such as patents, trademarks, and copyrights. It licenses these IP rights to subsidiaries or third parties to generate royalty income. Singapore’s strong IP protection regime makes it an attractive location for setting up an IP holding company.
Singapore holding company structure
How exactly does a holding company structure work in Singapore? Here are the key elements:
Ownership structure
In a holding company structure, the holding company fully owns or has a controlling stake in the subsidiary companies. This allows the holding company to control the subsidiaries. The holding company can own 100% of the subsidiaries (wholly-owned) or a controlling stake of more than 50%. It can also own a minority stake of less than 50%, but this is less common.
Not sure about the difference between branch office vs subsidiary? We have got just the article for you.
Management structure
The holding company’s board of directors is responsible for making strategic decisions and overseeing the overall direction of the group. Each subsidiary company has its own management team responsible for day-to-day operations. The holding company typically appoints representatives to the subsidiary’s board to align the subsidiary’s activities with the group’s overall strategy.
Voting rights
The holding company has voting power in the subsidiary companies in proportion to its shareholding. This allows it to appoint directors and make key decisions in the subsidiaries. For example, if the holding company fully owns a subsidiary, it has 100% voting rights. If it owns 80% of the subsidiary’s shares, it has 80% voting rights. The holding company structure provides a way for businesses to organize their operations, manage risks, and optimize their tax position. It’s a popular choice for companies expanding into new markets or business lines.
Key Takeaway:
Setting up a Singapore holding company is a savvy move for businesses aiming to control subsidiaries, enjoy tax perks, and protect assets. With easy setup steps and options for different types of companies, it’s an ideal strategy for growth-minded firms.
Taxation of a Singapore holding company
Singapore has a single-tier corporate tax system, which means tax paid by a company on its profits is not taxed again when the profits are distributed as dividends to shareholders. Singapore also has an extensive network of over 80 double tax treaties.
Corporate income tax
The usual corporate tax rate in Singapore is 17%. However, holding companies can enjoy tax exemption on certain income and capital gains. This makes the effective tax rate much lower, especially for holding companies that derive most of their income from dividends and capital gains.
Withholding tax
Singapore does not levy withholding tax on dividends paid by Singapore companies to shareholders. This applies to both resident and non-resident shareholders. It’s one of the key tax benefits that make Singapore an attractive jurisdiction for setting up holding companies.
Capital Gains tax
Singapore does not have a capital gains tax regime. Gains derived from the sale of shares are not taxable if they are capital in nature. This means that holding companies can dispose of their investments in subsidiaries without incurring any tax liability on the gains.
Tax incentives
Singapore offers various tax incentives for holding companies, such as tax exemption on foreign-sourced dividends and capital gains, as well as reduced withholding tax rates under tax treaties. These incentives further reduce the effective tax rate for holding companies. For example, under the Foreign-Sourced Income Exemption scheme, dividends received from foreign subsidiaries are tax-exempt if certain conditions are met. This allows holding companies to repatriate profits from their overseas subsidiaries without incurring additional tax in Singapore.
Double taxation agreements
Singapore has an extensive network of over 80 double tax treaties. This helps to reduce or eliminate double taxation of income earned by Singapore holding companies from their overseas subsidiaries. Under these treaties, the withholding tax rates on dividends, interest, and royalties paid by overseas subsidiaries to the Singapore holding company are often reduced. Some treaties even provide for capital gains tax exemption. This extensive treaty network is a key advantage of using Singapore as a holding company jurisdiction. It allows holding companies to minimize their global tax obligations and avoid double taxation on their income.
Setting-up a Singapore holding company
Setting up a Singapore holding company is a straightforward process. Most holding companies are incorporated as private limited companies, which is the most common type of business entity in Singapore.
Incorporation process
The incorporation process can be completed online via the BizFile+ portal maintained by the Accounting and Corporate Regulatory Authority (ACRA).
The key steps include:
- Reserving a company name
- Preparing the incorporation documents, such as the constitution and consent to act as director
- Submitting the incorporation application and paying the registration fee
The whole process can be completed within a few hours if all the required information and documents are in order. Once the application is approved, the company will be issued a certificate of incorporation.
The team at Sleek can do the heavy lifting for you and incorporate a business in Singapore fast.
Required documents
To incorporate a Singapore holding company, you will need to prepare the following documents:
- Constitution of the company
- Consent to act as director
- Identity proof of directors, shareholders, and company secretary
- Registered address of the company
If the directors or shareholders are not physically present in Singapore, they can sign the documents electronically or appoint a professional services firm to handle the incorporation process on their behalf.
Minimum share capital
The minimum share capital for a Singapore company is S$1. However, it is advisable to have a higher share capital to demonstrate financial substance, especially if the holding company will be applying for tax incentives or opening bank accounts.
Appointment of company secretary
Every Singapore company must appoint a company secretary within 6 months of incorporation. The company secretary must be a natural person who is ordinarily resident in Singapore. The company secretary plays an important role in ensuring that the company complies with its statutory obligations, such as filing annual returns and maintaining statutory registers. Most holding companies engage a professional services firm to provide company secretarial services.
Opening a corporate bank account
After incorporating the holding company, you can proceed to open a corporate bank account with a bank in Singapore. This will allow the holding company to receive funds from its subsidiaries and make investments. The documents required for opening a corporate bank account typically include:
- Certificate of incorporation
- Constitution of the company
- Proof of identity and address of directors and signatories
- Business plan or profile of the holding company
The bank may also request for additional documents depending on the nature of the holding company’s business and the source of its funds.
Compliance requirements for Singapore holding companies
Like any other Singapore company, holding companies must comply with various statutory requirements. These include filing annual returns, preparing financial statements, and maintaining statutory registers.
1. Annual filing requirements for holding companies in Singapore
Singapore companies must file an annual return with ACRA within 7 months after the end of their financial year. The annual return contains information such as the company’s registered address, directors, shareholders, and share capital. Holding companies must also file a tax return with the Inland Revenue Authority of Singapore (IRAS) by 30 November each year. The tax return should report the company’s income, expenses, and tax computations for the previous financial year.
2. Accounting and audit requirements for Singapore holding companies
Singapore companies must prepare financial statements that comply with the Singapore Financial Reporting Standards (SFRS). The financial statements must give a true and fair view of the company’s financial position and performance. Holding companies that meet certain criteria must have their financial statements audited by an independent auditor. The criteria include:
- Having revenue exceeding S$10 million for the financial year
- Having total assets exceeding S$10 million at the end of the financial year
- Having more than 50 employees at the end of the financial year
Holding companies that do not meet these criteria can be exempted from audit if they meet certain conditions, such as having all their shareholders approve the exemption.
3. Statutory registers for holding companies in Singapore
Singapore companies must maintain various statutory registers, including:
- Register of members (shareholders)
- Register of directors
- Register of directors’ shareholdings
- Register of charges (if the company has any charges on its assets)
These registers must be kept at the company’s registered office or a prescribed place. They must be updated within 14 days of any changes and made available for inspection by the company’s members and public upon request.
Advantages of Singapore as a holding company jurisdiction
Singapore is a popular jurisdiction for setting up holding companies due to its attractive tax regime, business-friendly environment, and strategic location. Here are some of the key advantages of using Singapore as a holding company jurisdiction.
Stable political and economic environment
Singapore is known for its stable political environment and pro-business policies. The government is committed to maintaining a transparent and efficient regulatory framework that promotes economic growth and attracts foreign investment. Singapore has consistently ranked as one of the easiest places to do business in the world. It has a well-developed infrastructure, skilled workforce, and strong legal system that protects the rights of investors.
Robust intellectual property protection
Singapore has a strong intellectual property (IP) protection regime. It is a signatory to major international IP treaties, such as the Paris Convention and the Patent Cooperation Treaty. Singapore’s IP laws are regularly updated to keep pace with technological developments and international best practices. The country has a specialized IP court that deals with IP disputes and a fast-track system for patent applications. This robust IP protection regime makes Singapore an ideal location for holding companies that own valuable IP assets, such as trademarks, patents, and copyrights.
Well-developed infrastructure
Singapore has a well-developed infrastructure that supports the efficient operation of businesses. This includes:
- World-class transportation network, including a modern airport and seaport
- Reliable and affordable telecommunications and internet connectivity
- Efficient logistics and supply chain management services
- Robust financial system with a wide range of banking and financing options
This infrastructure enables holding companies to manage their global operations effectively from Singapore. It also facilitates the flow of funds and resources between the holding company and its subsidiaries.
Strategic location
Singapore is strategically located at the heart of Southeast Asia, providing easy access to the region’s fast-growing markets. It is within a six-hour flight radius of most major cities in Asia Pacific. Singapore also has a network of free trade agreements with major economies, such as China, India, Japan, and the United States. This provides preferential access to these markets for Singapore-based companies. For holding companies with subsidiaries in Asia Pacific, Singapore serves as an ideal base to manage and coordinate their regional operations. It also provides a gateway for companies looking to expand into the region.
How can Sleek help you keep your company compliant?
Our accounting team supports many Singapore holding company clients prepare:
– Consolidated Group Accounts for the Holding Company and its Subsidiaries
The purpose of this report is to show the consolidated assets and liabilities of both the holding company and its subsidiaries and hence the financial position of the entire group.
Keen to find out more about consolidated management accounts? We have just the guide for you.
– Group Unaudited Financial Statements (for submission to ACRA)
The Financial Statements convey the business activities and financial performance of the holding company. They will include the company balance sheet, income and cashflow statements.
Key Takeaway:
Setting up a Singapore holding company offers juicy tax perks, like no capital gains or withholding taxes on dividends and sweet incentives for foreign-sourced income. Plus, it’s a breeze to start one online and tap into global markets thanks to Singapore’s solid reputation, strategic location, and vast double tax treaty network.
Conclusion
So, there you have it – everything you need to know about a Singapore holding company: a structure that can help you save on taxes, safeguard your assets, and set your company up for success. And with Singapore’s business-friendly environment and attractive tax incentives, it’s no wonder why so many companies are choosing to set-up shop here.
But don’t just take our word for it. Pour over details and if you have any questions about setting up a holding company, talk to a member of the team at Sleek to understand if establishing a hold on a Singaporean company aligns with what you’re trying to achieve in business.
Who knows, it could be the key to unlocking your company’s full potential and taking things to the next level.
Ready to take the leap? Let’s do this!
Singapore holding company FAQs
What is a Singapore holding company?
A Singapore holding company is a type of business entity established primarily to own shares in other companies. Its main function is to hold assets such as stocks, bonds, and real estate, and to manage group activities without engaging in direct commercial operations.
What are the advantages of setting up a holding company in Singapore?
Singapore offers several benefits for holding companies, including favorable tax treaties, a strategic geographic location, a stable political environment, a robust legal framework, and attractive corporate tax rates. Additionally, there is no capital gains tax and Singapore has extensive double taxation agreements with many countries.
What types of assets can a Singapore holding company own?
A Singapore holding company can own a wide range of assets including shares in other companies, intellectual property, real estate, and other investment instruments. It can also act as a vehicle for mergers and acquisitions.
Are there any specific tax benefits for Singapore holding companies?
Yes, Singapore holding companies enjoy various tax benefits such as exemptions on qualifying foreign-sourced income, reduced withholding tax rates on dividends and interest due to extensive tax treaties, and the absence of capital gains tax. Additionally, the corporate income tax rate in Singapore is relatively low.
What are the requirements for setting up a holding company in Singapore?
To set up a holding company in Singapore, you need at least one shareholder, one director who must be a resident of Singapore, a company secretary, a registered office address in Singapore, and an initial paid-up capital. The company must also comply with annual filing and tax reporting obligations.
