Definition: What Is Branch Office in Singapore?The Branch (BO) is the most cost-beneficial way to set up your foreign business’ presence in SG as it allows you to save lots of money by avoiding the corporate tax. The Branch, however, has a significant drawback: it doesn’t protect the parent company’s assets because of the mutual legal entity they both share. The parent firm is liable before the Singapore law for every its Branch’s failure. Being only the foreign firm’s extension, this form of business setup fits only those undertakings that aren’t associated with risks.
Benefits and Features of Opening a Branch Office in Singapore
- The parent company and its Singaporean BO have the same legal entity, and, therefore, the foreign company is fully liable for the business failures caused by debts or legal issues in SG. If the Singaporean Branch is sued, the overseas parent company is sued automatically.
- Foreign parent company fully controls its Branch’s activity. The BO isn’t allowed to buy property or make contracts independently. At the registration, the Branch doesn’t get its own Memorandum and Articles of Association, and, therefore, it must act in accordance with its parent company’s one.
- Setup of the Branch Office in Singapore requires appointing 2 Singaporean agents. Apart from them, the foreign company is free to relocate its key employees from abroad.
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Advantages of Setting up Branch Office in Singapore
- If compared with other legal entities that allow earning profit, the Branch office is the cheapest one from the tax point of view. Singapore allows the income earned abroad to be repatriated tax-free. As the BO isn’t considered the tax resident in Singapore, it doesn’t have to pay the corporate tax unless the profit is earned inside Singapore. Singaporean Branches are also freed from paying the capital gain tax. These benefits let you save a lot of money which you can use for innovating and expanding your business.
- Setting up your company’s Branch in Singapore, you can move your crucial staff there using suitable work visas. Executives can shift to the country using either the Employment Pass (after the incorporation procedure and under condition of being hired by the Branch) or the EntrePass (can be obtained before or during half a year after the incorporation under a set of special entrepreneurial requirements).
Disadvantages of Setting up a Branch Office in Singapore
- The form of the Branch Office doesn’t suit businesses which activity is associated with risks (this way, the parent company may face legal prosecutions) or which are going to gain profit inside Singapore (this way, the Branch won’t avoid paying the corporate tax). In such situation, the Subsidiary would be a more winning legal form of business due to its limited liability.
- Like every profitable company in Singapore, the Branch Office is subject to stricter regulations. For example, as the Branch is founded by a corporate body, it is obliged to handle filing of its audited accounts and tax returns annually – not only for itself but also for its parent firm. This way, the authorities will control the source of your incomes to ensure you don’t earn profits inside Singapore without paying taxes.
- The foreign company must appoint 2 Singaporean agents (they must be real people with appropriate skills). Such appointment can be challenging for foreign companies that have scarce connections in Singapore. Luckily, our full Branch Office registration service includes administrative consulting and finding good fits for the positions of the local agents.
Singapore Branch Office TaxThe main benefit of using the form of the BO for the company setup hides in the taxation of the Branch Office in Singapore. As the Branch is legally connected with its foreign parent company, it isn’t considered the Singapore tax resident, and, therefore, incomes earned abroad aren’t subject to paying the corporate tax in Singapore. Revenues collected inside Singapore are taxed on the corporate level as usual. Establishing a Branch Office in Singapore, you win even more as there is no such thing as the capital gain tax. It means that foreign members can get dividends through their Singaporean Branch without paying taxes.
Difference between Branch and Representative Office SingaporeDespite both of these forms of business legal entities can be used by foreign companies for representing their activity in Singapore they have lots of differences between each other.
- Branch and the Representative Office have different legal natures: the first is an extension of the overseas company (they use the same legal entity) and the second has no legal entity at all.
- The Representative office isn’t a company in its traditional meaning because it doesn’t allow gaining profit. This business form can be used only for “representative” activity such as market study, building connections and so on. Contrariwise, the Branch office can be used for a full-scale profit-making activity.
- Having no legal status, the Representative Office doesn’t have to file its accounts or even maintain any statutory papers. For the Branch Office, annual filing is mandatory not only for the Branch itself but also for its foreign parent company.
- Branch is freed from the corporate tax only for profits earned overseas while the Representative Office is freed from paying taxes fully.
Singapore Branch Office Requirements
- Foreign business that wishes to set up its Branch in Singapore needs to suggest the Branch Office’s name that copies the parent company’s name and in the same time doesn’t replicate the name of any Singaporean firm or sound vulgar. This name check should be done before starting the incorporation procedure to avoid hitches in the process. You have an opportunity to reserve the suitable name for your BO for 2 months with an option to expend this reservation. We will help you with the reservation and finding a custom name solution if the parent company’s name already exists in Singapore.
- For setting up the Branch in SG, the foreign company must bring on the board 2 adult Singaporean agents (citizens or PRs). The foreign company is also allowed to bring its executives and key employees to Singapore using suitable work visas: the Employment Pass for employees and executives and the EntrePass for the Branch’s director. All visa applications (except the one for the EntrePass) can be lodged only after the Branch incorporation is finished. We will help you in making reasonable decisions about your staff relocation to ensure your business’ needs are met effectively.
- Singapore Branch must be registered on a real local address. We will assist you in finding suitable commercial premises for your Branch Office and shoulder the registration.
- After the Branch is registered, it will have to organize general meeting and get its audited accounts and the tax returns filed every year.
How to Set up Singapore Branch Office: the Best Scheme and Procedure TimelineThe procedure of starting a Branch Office in Singapore was streamlined and freed from any red tape for the perfect business experience. Only in Singapore, you can open a Branch Office in a single day and even without being physically present in the country. However, to benefit from such flash Branch setup procedure, foreign businessmen need to undergo a complex preparation:
- Name check. Ensure the name you suggest for your Branch is unique in Singapore and copies the parent company’s name in the same time. It shouldn’t be vulgar as well. This name must be mentioned in the Memorandum and Articles of Association you will submit to get your Branch registered. We will help you to check the suggested name for uniqueness and get it reserved for the required period of time.
- Obtaining the Singaporean address. We will help you to find the suitable non-residential property available for purchase or lease.
- Finding and appointing 2 Singaporean agents.
- Getting approval of the government (for some niches).
- Handling the paperwork for the Branch Office registration Singapore: required documents must be compiled according to the local incorporation standards. If you are going to use certified copies, ensure they are endorsed and professionally translated (if they are non-English).
- Preparing work visa applications for the key staff that ought to be relocated to SG.