Singapore's New Inward Corporate Re-domiciliation Regime to Boost the Country's Competitiveness
During the recent decades Singapore has become one of the most dynamically developing business hubs in the world and the main gateway to the Asian market. Due to its strategic location, pro-business government and ambitious economic policies the country is attracting more and more foreign investors.
With the aim to enhance the country’s competitiveness and facilitate the process of starting a business in Singapore for foreigners, the Parliament of Singapore passed the Companies (Amendment) Bill in March 2017.
The re-domiciliation of a company to Singapore’s jurisdiction becomes relevant when the country where the entity is currently registered makes significant changes in its company operation rules, such as tax rates, or when the business entity wants to enjoy the vast privileges granted in Singapore business friendly environment.
The highlights of the Companies Bill include the introduction of an inward re-domiciliation regime.
Here is an overview of the regime and what it entails for foreign companies.
What is the inward re-domiciliation regime?
Through this new regime, foreign corporate entities will be allowed to transfer their registrations from their original jurisdictions to the Singapore jurisdiction, without having to establish subsidiaries. In so doing, the foreign company’s rights, liabilities, obligations and property will not be changed by the re-domiciliation. The foreign corporate entities using this scheme will thus become Singapore business companies registered under ACRA. Thereafter, they will need to conform to the Singapore's Companies Act.
Why is this regime advantageous to foreign companies?
This regime allows for a greater flexibility to reorganise corporate groups for regulatory, strategic or organisational purposes. In particular, the regime is attractive to foreign companies which are looking to transfer their regional and global headquarters to Singapore, while at the same time keeping their histories, identities and brandings. Given Singapore's renown standing as a leading place to do business in Asia, foreigners who consider either starting a business in Singapore or re-domiciling their companies in the country will benefit from a politically and economically stable location, a pro-business environment and legislation, a strong Intellectual Property administration, as well as an English-speaking and highly skilled workforce. As a gateway to Southeast Asia and more broadly to the Asian region, re-domiciliation in Singapore offers foreign companies proximity to markets and/or suppliers.
How to apply for the regime?
There are several factors to be considered when a company wants to be re-domiciled. First and foremost, the law of the country where the foreign corporate entity is registered must allow outward re-domiciliation to another jurisdiction. To-date, countries which permit re-domiciliation include Canada, Australia and New Zealand. The foreign corporate entity must also be body corporate which can adjust its legal structure to a company limited by shared structure according to the Singapore's Companies Act.
The process for the transfer of registration of a foreign corporate entity is akin to establishing a subsidiary, and the name of the company will need to be reserved with rules of name reservation being applicable. In terms of documentation, a certified copy of the charter, statute, constitution or memorandum in the original place of incorporation; the constitution by which the foreign company plans to be registered; and also a document to show that the company has been de-registered at its place of incorporation are required.
In order to qualify for the regime, the foreign company must either have a revenue of more than S$10 million annually or total assets greater than S$10 million at the end of each financial year. In terms of staff strength, the company must have more than 50 employees at the end of each financial year. The criteria must be met in the two financial years immediately preceding the foreign company's application.
What are the considerations when arranging for this regime?
When a foreign company transfers its entity to Singapore under this regime, there will be tax and stamp duty implications both in the home country and in Singapore.
It is to be highlighted that Singapore does not allow outward re-domiciliation, that is, there is no option to reverse the decision, should the regime no longer suit the company. This means that before taking the decision to re-domicile to Singapore the foreign company should clearly determine its goals as well as evaluate the legal consequences of re-domiciliation. Flexible tax regime should not be the only reason to re-domicile to Singapore. The company should estimate potential strategic benefits and hindrances caused by re-domiciliation.
It should also be noted that re-domiciliation does not create a new legal entity; affect the identity of the foreign company; influence its obligations, liabilities or property rights; or affect the legal claims by or against the foreign company.
The eligibility and qualification criteria as well as the re-domiciliation procedure itself are still undergoing changes and will be clear when the regime comes into effect.