Definition: What Is Singapore Subsidiary Company?The Singapore’s Subsidiary is the option for foreign businesses who would like to spread their presence to the country, save on taxes, and protect their assets at the same time. Being of the same legal nature as the Private Limited Company, the Subsidiary contains all benefits of the latter: a standalone legal entity, which protects possessions of the parent company’s founders from losses associated with business risks, and advantageous tax mode. The form of the Subsidiary fits a well-established foreign business that is going to concentrate the major part of the new Subsidiary’s shares in its hands. It is the perfect choice for foreign parent companies who would like to use Singapore location as the firing pad for developing their service and reaching the Asia-Pacific market.
Benefits and Features of Opening Subsidiary Company in Singapore
- Legal Status:
- Legal entity detached from its members and directors
- Liability of the Subsidiary’s members has a limit equal to their shares
- In case of debts and losses, Subsidiary’s members are not liable personally
- Subsidiary can sue or be sued in its own name as well as own property
- Parent company concentrates the major part of the Subsidiary’s shares in its hands.
- The maximum number of members is 50 (including corporate ones); the minimum is 1 (the parent company). Membership of particular shareholders doesn’t define the Subsidiary’s existence: even if its members resign, sell their shares, die, or become bankrupt, the Subsidiary continues functioning within the frame of its shares.
- You can easily transfer the Subsidiary’s ownership by selling its shares. This feature makes this business structure very flexible and vital.
- Subsidiary can augment its paid-up capital by issuing new shares for new investors.
- Form of the Subsidiary is beneficial if you plan to deal with banks and investors. The company with limited liability has a more appealing and trustworthy image. Investors that are looking for sound infusions and reliable projects are more likely to invest in the Subsidiary as this form of business provides protection for the personal assets.
- Benefits of the Subsidiary allow you to expand your services and win your clients’ loyalty more effectively.
- Subsidiary must have at least 1 native Singaporean director at the very beginning. Later, it can be replaced by the real one by using the Employment Pass. Directors can also use the EntrePass (entrepreneur visa) if they need to participate in the Subsidiary’s incorporation and take the charge of the company right away.
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Advantages of Setting up Singapore Subsidiary Company
- Subsidiary’s detached legal entity is separated from the directors’ and members’ personal ones, and, therefore, in case of the Subsidiary’s legal issues or debts, the liability of the firm’s owners is limited with the funds they contributed into the firm’s paid-up capital in the beginning, and their personal possessions stay invulnerable.
- Tax benefits: Singapore offers new Subsidiaries not only one of the planet’s lowest corporate tax (17%) but also lots of tax incentives and governmental programs that allow to direct funds you would spend on taxes to innovating your firm in SG.
Disadvantages of Setting up Singapore Subsidiary Company
- Subsidiary is a company, and, therefore, it is subject to much stricter rules and regulations. One of them is a requirement to get the firm’s audited accounts and tax returns filed yearly.
- Costs of running such company as the Subsidiary are higher due to a bunch of administrative requirements.
- Setting up the subsidiary requires appointing a local director. This can be challenging for foreign businesses that are new to Singapore. Luckily, our full Subsidiary setup service includes administrative consulting and appointing a good fit on the position of this local executive.
- Shareholders’ resolution is enough for removing the Subsidiary’s director.
- Singapore values transparency in doing business and sets higher disclosure standards. The founders of the Subsidiary will be scrutinised for having any hidden motives or secret interests.
- If the form of the Subsidiary is used for unlawful actions or a fraud, the firm’s limited liability won’t protect guilty directors.
- When receiving loans from banks or lenders, directors are usually asked for some personal guarantees, and, this way, they can expose their individual assets to risks.
- Winding up of the Subsidiary must be done according to certain legal procedures.
Singapore Subsidiary Company Legislation
- Any person (or a foreign company) is allowed to register a Subsidiary provided that he/she submits the document called the Memorandum and Articles of Association which clarifies such facts as the Subsidiary’s name, its share capital and how the company is going to limit its members’ liabilities.
- Singaporean companies must obey the governmental Companies Act. Moreover, some sectors may have their own specific regulatory documents. For example, the Banking Act for the banks and so on. You should clarify such specific legislation features of your particular niche with our incorporation specialists.
- Singapore welcomes foreign capital and doesn’t set restrictions for the totally foreign ownership of the company. The repatriation of profit is also welcomed. After the Subsidiary pays the corporate tax, which is 17% in Singapore, its foreign members can enjoy their dividends without paying the capital gain tax.
- Legal entities that imply limited liability (such as the Subsidiary or the Private Limited company) are preferable, and the government boosts small and medium business with tax incentives and various programmes that help them to save on taxes if they invest in innovations.
- Subsidiary is a distinct legal entity that is responsible for its acts within in the scopes of its share capital.
- Subsidiary must be would up according to certain legal procedures.
Singapore Subsidiary Company Tax
- The same as the Pte Ltd, the Subsidiary can benefit from one of the planet’s lowest corporate taxes. In Singapore, the new Subsidiary is also granted with tax incentives, so the corporate tax would be counted this way:
- 0% tax rate for the first revenue of 100,000 SGD;
- 8.5% tax rate for the next 200,000 SGD earned;
- 17% thereafter.
- After the corporate tax is paid, the gain made by the Subsidiary (dividends) isn’t subject to the gain tax.
- If the company expects to have the annual turnover of over 1,000,000 SGD, it must get registered for paying the value-added tax which is, by the way, one of the lowest on the planet – 7%.
Difference between Branch and Subsidiary SingaporeBoth the Subsidiary and the Branch Office are used for spreading the presence of the parent company to Singapore and they both are founded by the parent company, but they have significant differences that make them polar in some aspects:
- For the Subsidiary, the parent company is only one of its shareholders, as other members (up to 49) can hold the Subsidiary’s shares. For the Branch, the parent company holds 100% of its shares.
- The Subsidiary has its own legal entity while the Branch shares the same legal entity with its founding parent company. As the Branch performs solely as an extension, it exposes the parent company to risks: it will be liable for all debts or legal issues of its Branch. That is why, if your business is associated with risks, the form of the Branch Office isn’t for you.
- The Subsidiary is more flexible and independent: its ownership can be changed by selling its shares; it can buy property, make contracts, sue and be sued in its own name. In the same time, the Branch’s activity is totally controlled by the parent company that holds its shares and gets 100% of its profit.
- Establishing of the Subsidiary requires appointing a local director while setting up the Branch will require at least 2 local “agents”.
- Both the Subsidiary and the Branch have to file their audited accounts and tax returns every year, and the Branch has to do so for itself and its parent company at that.
- Branch has a significant tax benefit: it doesn’t have to pay the Singapore’s corporate tax for profits earned abroad (the source of income will be tracked throught the instrumentality of the audited accounts). The Subsidiary is a tax resident, and, therefore, it has to pay the corporate tax at the rate of 17% (incentives are available).
Singapore Subsidiary Company Registration Requirements
- To be able to participate in the Subsidiary registration in Singapore, you have to be older than 18 y.o.
- Singapore sets no maximum limit for the paid-up capital. The minimum amount is as low as 1 SGD. The “nationality” ratio of the shares doesn’t matter in Singapore: the Subsidiary’s share capital can be totally foreign.
- Number of members (including the parent company) mustn’t exceed 50.
- To set up the Subsidiary in Singapore, you need to suggest a unique name for it. It doesn’t have to sound similar to the parent company’s name, but you aren’t allowed to use the name of any existing Singaporean company or the one that sounds vulgar. It is reasonable to handle the name check before starting the Subsidiary’s registration procedure to avoid any hitches. After you select the suitable name, you can get it reserved for 2 months and extend the reservation afterwards if needed.
- Subsidiary must have a local registration (the office’s address). We will assist you in finding an appropriate non-residential property for your Subsidiary and handle the registration.
- According to the local company regulations, a foreign parent firm must appoint a local secretary and a local executive (director). This is usually a temporary solution as the real director can replace the Singaporean upon arriving in SG on the Employment Pass or the EntrePass.
- Foreign executives aren’t obliged to relocate to SG: they can make all crucial decisions and manage their Singaporean companies from overseas. However, their powers are limited. If you need to take the full charge of your Subsidiary from the very beginning and be able to sign contracts, you need to obtain the EntrePass. For grasping this visa, the executive must be able to prove the future Subsidiary’s paid up capital of at least 50,000 SGD, provide an innovative business plan, and involve the investment of over 100,000 SGD from venture or angel investors. If this is hardly accomplishable in your case, the director can replace the local nominee by being hired by his Subsidiary and getting the Employment Pass for this hire.
- Overseas business wishing to set up a Subsidiary in Singapore may need to get a special governmental approval (needed for certain niches, for example, the financial one) and undergo licensing.
How to Open Singapore Subsidiary Company: the Best Incorporation Scheme and TimelinesThe procedure of registering the Subsidiary in Singapore is fast and transparent: if you fulfil every criterion, you can get your new Subsidiary setup completed in a single day without any red tape! Nevertheless, to benefit from such easy and flash procedure, overseas entrepreneurs need to go through such steps of complex preparation:
- Name check. You can use only a unique name that has no coincidences with the local companies’ names and the one that doesn’t sound vulgar in the same time. We will help you to check your suggested name for uniqueness and help in its reservation.
- Obtaining the local SG address (finding the suitable commercial property available for purchase or lease)
- Appointing the Singaporean secretary and a director.
- Getting the governmental approval (if needed).
- Preparing the set of required documents for the subsidiary’s incorporation (paperwork must be done according to the local standards: if you provide certified copies, take care of endorsing them; non-English papers must be professionally translated).
- Developing visa schemes for executives and key staff that need to be relocated to SG and preparing applications.