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The Differences Between A Foreign Branch Office And A Subsidiary Company In Singapore

Posted by AM Corporate Services Pte. Ltd. 12. 22. 2017

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Singapore is a world-renowned financial and regional trading hub. Strategic location, coupled with competitive workforce and pro-business environment, makes it a gateway to Asia. As a financial and business hub in Southeast Asia, Singapore is considered an ideal launch pad for foreign companies keen on venturing into this region.

Although Singapore has a number of business structures for consideration, foreign entrepreneurs keen on setting up a company in Singapore usually choose the most common form of registration; that is a subsidiary company or a branch office. There are several major differences between these two types of company incorporation in Singapore, from tax compliance to regulatory requirements.


In order to help you figure out the key featuresa, as well as the pros and cons of choosing any of these options, we have set out a broad comparison between a subsidiary company and a branch office in Singapore.

 

Subsidiary Company in Singapore

Branch Office in Singapore

 

Legal Status

A subsidiary company is considered a separate legal entity, even when all the shares are held by the parent company. It is distinct from its directors and members

 

A branch is the same entity as the head office that is incorporated outside Singapore. Therefore, a branch is not a _ separate entity but only an extension of its head office.   Any action against a branch is tantamount to an action against the head office.

 

Entity Name

It can be the same or different from the parent company's name. The choice of name of a company is subject to the Accounting and Corporate Regulatory Authority (“ACRA”) approval. If the name forms part of another company’s name, that company will have to give a letter of consent to ACRA.

The name of a SIngapore branch office must be the same as that of the parent company and is again subject to ACRA’s approval.

Business Activities

The nature and extent of the subsidiary's activities are governed by its Constitution. The subsidiary is allowed to undertake activities which are different from its parent company.

Activities of a branch are governed by the Constitution / Bye-Laws of the parent company. Activities conducted by branch must be similar to the parent company as it is an extension of the parent company.

Liabilities

The parent company is not liable for debts and losses of its Singapore subsidiary. Liabilities are limited to the subsidiary only.

Liabilities of the branch office in Singapore are extended to the parent company.

Continuity In Law

There is a perpetual succession until wound up or struck off. A subsidiary may only be dissolved, if it is liquidated voluntarily by its members or creditors, or if it is struck off the Register of Companies by ACRA.

There is a perpetual existence until deregistered.

A branch may be de-registered if it ceases to have a place of business or to carry on business in Singapore or its parent company is liquidated and dissolved or it is struck off the Register of Companies by ACRA.

Officers

Subsidiary companies must appoint at least one director who must be ordinarily resident in Singapore, aged 18 years and above. In addition, it is also required to have a qualified secretary resident in Singapore.

A branch is required to have at least one person ordinarily resident in Singapore to act as agent whose authority is limited under the Companies Act, Cap. 50 and applicable only to the acceptance of service of process and notices required to be served on the company in Singapore.

Shareholders

Corporate shareholder who is the parent company

Not applicable.

Keeping Of Statutory Registers & Minute Books

A subsidiary company is required to keep certain statutory registers and minute books under the Act.

The requirement of keeping statutory registers and minute books in Singapore is not applicable to a Branch Office in Singapore.

Accounts

A subsidiary must prepare its own set of accounts and have them audited (unless exempted). Such accounts will also have to be lodged with ACRA on an annual basis.

A branch must annually file with ACRA its head office accounts as well as its own audited accounts (unless exempted) relating to its operations in Singapore.

Registered Office

A subsidiary must have a registered office situated within Singapore.

A branch must have a registered office situated within Singapore.

Annual General Meeting

A subsidiary is required to hold an annual general meeting at least once in every calendar year at intervals of not more than 15 months for the purpose of tabling its annual accounts which shall be made up to a date not more than 6 months before the date of the meeting. The first annual general meeting can however be held within 18 months from the date of incorporation.

The requirement to hold an annual general meeting depends on the laws of the country of incorporation of the parent company.

 

 

Annual Filing Requirements

Annual return must be filed together with the subsidiary’s annual financial statements.

Singapore branch must lodge the following documents with ACRA within 2 months of the parent company’s annual general meeting,

 

  •  A copy of the financial statements of the parent company for the financial year concerned;
  •  Documents accompanying the financial accounts filed overseas in the foreign company’s jurisdiction; and
  •  A copy of the audited financial accounts of the Singapore branch office.

Taxation

A Subsidiary is taxed as Singapore resident entity provided management is based in Singapore. In addition, it is eligible for tax benefits/rebates available to Singapore companies.

Taxed as non-resident entity as management and control lies outside Singapore. As a non-resident entity, branch office is not eligible for tax benefits / rebates offered to a Singapore subsidiary.

 

In conclusion

Choosing the right option for foreign company incorporation in Singapore depends on the type of your business, the specific niche where you operate, as well as the objectives of you and your partners.  Before setting up a company in Singapore, you should consider all your objectives, and seek advice and guidance from professionals to ensure that the type of company you eventually incorporate in Singapore meets all your business needs.



 

 

 

 

Topics: Company Registration