Branch vs Representative vs Subsidiary in Singapore
If you’re a business entrepreneur or investor looking to expand your business into the thriving Asian market, Singapore may be your ideal destination. Known for its strategic location, political stability, business-friendly environment, and robust infrastructure, Singapore has become a top choice for many companies. However, before you register a business in Singapore you must choose the appropriate legal framework for your presence in Singapore. In this article, we’ll be briefly comparing a Branch Office vs a Representative Office vs a Subsidiary Company in Singapore. By the time it’s over, you’ll know enough to make a choice that fits your company’s objectives.
Branch Office in Singapore
What is a Branch Office?
A Branch Office in Singapore functions as an extension of a foreign parent company, carrying out similar commercial operations within Singapore. It is not a distinct legal organization but rather a mere representation of the parent company.
- Ownership: The parent company owns and controls the Branch Office.
- Liability: The debts and liabilities of the Branch Office are the responsibility of the parent firm.
- Name: The Branch Office must adopt the parent company’s name and may include the term “Singapore Branch.”
- Activities: It is capable of carrying out a variety of business operations, subject to regulatory approval.
- Taxation: Profits are taxed at the parent company’s tax rate in its home country.
- Reporting: Must file annual financial statements and other relevant documents with the Accounting and Corporate Regulatory Authority (ACRA).
Why Choose a Branch Office in Singapore?
A Branch Office is an excellent choice for businesses looking to maintain a closer connection to their parent company while benefiting from Singapore’s strategic location.
Key benefits include:
- Control: The operations of the Branch Office are fully under the authority of the parent firm.
- Funding: Access to funding and resources from the parent company.
- Global Image: It can help establish a global image for your brand.
- Flexibility: The ability to participate in a variety of commercial endeavours.
Representative Office in Singapore
What is a Representative Office?
A Representative Office in Singapore is a legal entity that acts as a liaison between the foreign parent company and potential customers and partners in Singapore. It’s not allowed to take part in profitable endeavours.
- Ownership: The foreign parent company owns and controls the Representative Office.
- Liability: It is not allowed to enter into contracts or engage in profit-generating activities.
- Name: Must use the parent company’s name with “Singapore Representative Office.”
- Activities: Restricted to non-revenue-generating tasks like promotion and market research.
- Taxation: It is tax-exempt in Singapore since it doesn’t generate profits.
- Reporting: Must submit annual reports to the International Enterprise Singapore (IES).
Why Choose a Representative Office in Singapore?
A Representative Office is a suitable choice for businesses aiming to explore the Singaporean market without engaging in profit-generating activities.
Key benefits include:
- Market Research: It allows businesses to conduct in-depth market research.
- Relationship Building: Facilitates the establishment of connections with potential customers and partners.
- Cost-Efficiency: Lower operating costs since it can’t generate revenue.
Subsidiary Company in Singapore
What is a Subsidiary Company?
A Subsidiary Company in Singapore is a distinct legal organization from the foreign parent corporation. It’s a locally incorporated company in Singapore, and the parent company owns its shares.
- Ownership: The shares of the subsidiary company are owned by the parent corporation.
- Liability: Liability of the parent firm is capped at the amount invested in the subsidiary.
- Name: The Subsidiary Company must have a unique name but may include the parent company’s name.
- Activities: Can take part in a variety of business operations without the need for regulatory approval.
- Taxation: Subject to Singapore’s corporate tax rates, currently competitive in the region.
- Reporting: Must file annual financial statements with ACRA.
Why Choose a Subsidiary Company in Singapore?
A subsidiary company is the ideal choice for companies wishing to have a significant local presence in Singapore.
Key benefits include:
- Limited Liability: The liability of the parent business is capped at what it invested in the subsidiary.
- Autonomy: The Subsidiary Company is a separate legal organization that conducts business independently.
- Local Image: It establishes a local image for your brand, enhancing credibility.
- Tax Benefits: Access to Singapore’s favourable tax regime.
Comparison of Branch Office vs Representative Office vs Subsidiary Company in Singapore
Now, let’s compare these three business structures with a handy comparison table:
|Criteria||Branch Office||Representative Office||Subsidiary Company|
|Legal Status||Not a distinct legal corporation, but an extension of the overseas parent firm.||Temporary setup with no legal status; cannot engage in commercial profit-making activities.||A distinct legal entity from the parent corporation, typically structured as a private limited company.|
|Liability||The parent company has total responsibility for the obligations and liabilities of the branch.||The parent company is responsible for its activities, but since it cannot make profits, liability is limited.||The subsidiary company is liable for its debts and liabilities; the parent company’s liability is limited to share capital in the subsidiary.|
|Allowed Activities||Can engage in commercial activities that fall within the scope of the parent company’s business.||Only permitted to conduct market research, feasibility studies, and act as a liaison office; cannot generate revenue.||Can conduct any legal business activity independent of the parent company’s activities.|
|Taxation||Taxed as a non-resident entity, profits attributed to the branch are taxed at the non-resident rate.||Not applicable, as it cannot generate revenue.||Taxed as a resident entity, which may provide tax advantages and access to tax treaties.|
|Duration of Setup||Can be set up for an indefinite period, as long as the parent company exists.||Typically granted for 1-3 years and can be extended for up to a maximum of three to five years, depending on the industry.||Indefinite, as long as the company is active and in compliance with statutory requirements.|
|Registration Process||Must be registered with the Accounting and Corporate Regulatory Authority (ACRA) in Singapore.||Must be registered with the Singapore Economic Development Board or International Enterprise Singapore.||Must be registered with ACRA as a distinct organization.|
|Ownership||100% owned by the parent company.||Not applicable, as it is a non-commercial office.||Can be 100% foreign-owned, but local ownership is also possible.|
|Annual Filing Requirements||The audited accounts of the parent firm and the branch offices must be filed.||No annual filing, but must renew its status and notify the authorities of its actions.||Must file annual returns and tax returns in Singapore; subject to audit requirements.|
|Staff Requirements||No statutory requirement for local staff, but at least one authorized representative must be a resident of Singapore.||Must have a chief representative who lives in Singapore.||Must have a minimum of one Singaporean resident serving as a local director.|
Why Set Up a Branch Office vs a Representative Office vs a Subsidiary Company in Singapore?
Now that you have a better understanding of the differences between these three options, you may wonder which one is the best fit for your business. The choice ultimately depends on your business goals and priorities.
- Branch Office: Opt for a Branch Office if you want to maintain a close connection with the parent company, require access to funding and resources, and prefer a familiar global image.
- Representative Office: Choose a Representative Office if your primary focus is market research and building relationships in Singapore, without engaging in profit-generating activities.
- Subsidiary Company: If you aim to establish a strong local presence, enjoy limited liability, and take advantage of Singapore’s favourable tax benefits, a Subsidiary Company is your best bet.
How Can OnDemand International Assist You in Opening a Singaporean Business?
We at OnDemand International are aware of the opportunities and difficulties associated with growing your company in Singapore. Depending on your needs, we offer full services to assist you in establishing a Branch Office, Representative Office, or Subsidiary Company in Singapore. Our team of professionals can help you with every step of the procedure, from compliance to company registration.
Choosing the right legal structure for your business in Singapore is a critical decision that will shape your operations and potential for success. Whether you opt for a Branch Office, Representative Office, or Subsidiary Company, each has its unique advantages and is tailored to different business objectives. By partnering with OnDemand International, you can ensure a smooth and efficient process for setting up your business in Singapore, allowing you to focus on what truly matters – growing your presence in this dynamic market.
Contact OnDemand International today and let us help you navigate the process of starting a company in Singapore. We’re here to support your expansion efforts and help you make the right choice for your business goals.
Yes, it is a legal requirement to have a local director for a Subsidiary Company in Singapore. However, a Branch Office or Representative Office does not require a local director.
Singapore offers competitive corporate tax rates, with the standard corporate tax rate currently set at 17%.
Yes, it is possible to convert a Branch Office or Representative Office into a Subsidiary Company in Singapore, subject to regulatory requirements.
Yes, Representative Offices are limited to non-revenue-generating operations, like market research and promotion.