Singapore Subsidiary versus Branch Office
5 minute read
There are two main legal structures in which a foreign company may conduct business in Singapore.
The type of structure you decide to choose will affect a list of things such as the tax you will pay, liability and more.
Below we have summarised the key differences between the two structures.
(Click here to see a table that shows the pros and cons between the two.)
What is a subsidiary?
A subsidiary is a private limited company (PTE LTD) in which the parent company is a corporate shareholder. If the foreign company is a small to moderate business, then a subsidiary is typically the best option to register an entity in Singapore. Singaporean subsidiaries are eligible to be treated as local tax residents, opening access to attractive tax incentives schemes, including Singapore’s 3 year partial tax exemption for new companies (dependent upon your business activity).
With a subsidiary you will be able to conduct your Singaporean business as a separate legal entity, limit your liability to the subsidiary and enjoy asset protection by the subsidiary company.
In terms of business activity, you can run a business completely different from the parent company.
In terms of annual compliance, you would need to prepare a set of financial statements and submit it in XBRL format when filing your annual return with Accounting and Corporate Regulatory Authority (ACRA).
Key facts about a Subsidiary
To run a subsidiary in Singapore, you need to comply with the following:
The following documents are required for the registration of a subsidiary:
What is a Branch office
In Singapore, a branch office is an extension of a foreign parent company that has been registered outside of Singapore. Why register as a branch office? It is to generate revenue and operation in Singapore for the foreign parent company. A branch office is seen as a non-resident company, hence why it will not be eligible for tax incentives and exemptions in Singapore.
As it is not a separate legal entity, the parent company is liable for all the debts and liabilities of the branch office.
Your business activities have to be aligned with your parent company, meaning it cannot be different. It can also generate commercial revenue aligned to the parent company however, a portion of the profits is subjected to the local corporate tax.
A branch office is required to submit the audited accounts of Parent Company and audited financial statements of its branch office.
Registration requirements for a branch office
Below are some administrative matters that need to be fulfilled as part of the incorporation process:
The following documents are required for the registration of a branch office:
Overview: Pros and cons between the two
Can be different from the Parent Company
Align with the activities of the Parent Company. It cannot be different from the Parent Company. It can generate commercial revenue aligned to the Parent Company however a portion of the profits is subjected to local corporate tax.
Need to prepare a set of financial statements and to submit financial statements in XBRL format when filing annual return with ACRA Singapore.
Branch office is required to submit the audited accounts of Parent Company and audited financial statements of its branch office.
A resident entity in Singapore, can enjoy tax incentives such as tax exemption for the first 3 years (note that it depends on the biz activities i.e. investment holding).
Not eligible for tax incentives as it does not create a resident entity in Singapore
Appointment of officers
at least 1 local resident Director & Company Secretary
at least 1 authorised representative
Can be different from the Parent Company
Must be the same as Branch Office
Registered office address
Yes – foreign ownership is allowed
Serve as an extension to the Parent Company
Opening a bank account
Paid up capital
Minimum $ 1 (at 1 ordinary share) – this will differ if client intends to apply for a work visa
Appointed Officers (Individuals Only)
**Any documents not in English must be translated in English before submission. The firm you have hired may require additional documents as necessary.
This article summarises the key differences between a subsidiary and branch office in Singapore. If you need more help on choosing a business structure that works for you or incorporating in Singapore, contact us to learn more. We are more than happy to help!