Company Registration in Singapore for Foreigners

Over the years, Singapore has positioned itself as one of the most attractive destinations for foreign companies looking to establish and expand their business. Singapore has built a business-friendly environment that is bolstered by a range of government policies designed to foster entrepreneurial activity and economic growth. This includes a well-regulated financial sector, tax incentives, and streamlined administrative process. Additionally, Singapore boasts a highly diverse and skilled talent pool. The city-state’s strategic geographic location also offers unparalleled access to key Asian markets, further enhancing its appeal to businesses seeking regional and global expansion.

Foreign companies looking to register in Singapore have several avenues available to them, each offering different advantages depending on the specific needs and goals of the business. These include setting up a local subsidiary, establish a branch office, incorporating a private limited company, among others. Each option provides various levels of control, liability, and tax implications, allowing businesses to select the most suitable structure for their operations.

1. Company registration in Singapore

Foreign companies seeking to establish a presence in Singapore may opt to incorporate a private limited company, commonly referred to as a “Subsidiary”. This structure allows the foreign parent company to operate in Singapore through a distinct legal entity that operates independently. As a separate legal entity, the Subsidiary is solely accountable for its own debts and legal obligations, ensuring that the parent company is insulated from financial liabilities incurred by the Subsidiary.

The Subsidiary must adhere to Singapore’s taxation system and is obligated to appoint at least one resident director. This requirement ensures local representation and compliance with the country’s legal standards. Additionally, the shareholder(s) of the Subsidiary may all be entirely foreign individual(s) or foreign corporation(s). This provides flexibility in ownership structure.

The application for registration of a company must be submitted to ACRA for review and approval. This process ensures that all legal and regulatory requirements are met before the Subsidiary can commence operations.

Key considerations:

• Taxation: Subsidiaries are subject to Singapore’s corporate tax rate of 17%. This rate is notably competitive compared to many other jurisdictions, making it an attractive option for foreign companies. Furthermore, Singapore offers tax incentives and exemptions, which can further reduce the effective tax rate for qualifying companies.
• Risk Management: The separate legal status of the Subsidiary provides significant risk management benefits. Since the Subsidiary is a distinct legal entity, its financial obligations are its own. As a result, the parent company is not liable for the Subsidiary’s debts or legal issues, thereby limiting the potential financial risk to the parent company.
• Business Activities: The subsidiary has the flexibility to engage in business activities that may differ from those of its parent company. This allows for diversification and the ability to tailor operations to suit the Singaporean market or other regional opportunities, without being restricted by the business focus of the parent company.

2. Branch registration in Singapore

Foreign companies looking to venture into the Singapore market as a foreign entity may register a branch in the country. Unlike a subsidiary, a branch is not considered a separate legal entity but rather an extension of the foreign parent company. This distinction has important implications for taxation, legal liability, and operation scope.

A branch in Singapore does not receive tax exemptions under the local taxation system. In addition, the branch is not eligible for audit exemption available to local companies. As a result, it must file audited financial statements of both the branch and its head office on an annual basis with ACRA. This requirement ensures transparency and compliance with Singapore’s regulatory standards, reflecting the financial performance and condition of both the branch and the parent company.

Lastly, the scope of activities that a branch can engage in is limited to those outlined by the parent company. This means that a branch cannot undertake business activities beyond what is permitted by its parent company’s operations, potentially restricting its ability to adapt or diversify in the Singaporean market.

Some key considerations:

• Risk Management: Given that a branch is not a separate entity, any legal action taken against the branch is an action against the parent company. This integration means that the parent company must manage and mitigate risks associated with the branch’s operations, as any financial or legal repercussions directly impact the parent company’s overall liability.
• Financial Reporting: The branch is required to file the audited financial statements of both the Head Office and the branch with ACRA. This comprehensive reporting obligation ensures that both the branch’s and the parent company’s financial activities are transparently disclosed and subject to regulatory oversight.

3. Representative Office set up in Singapore

Foreign companies looking to assess the viability of doing business in Singapore can set up a representative office (RO) to further explore Singapore’s market as a preliminary step. An RO provides a valuable platform for exploring market opportunities, conducting research, and building relationships in Singapore. However, this option does not serve as a long-term business solution and comes with specific limitations.

ROs are restricted to non-commercial activities. They are primarily intended for market research, promotion, and liaison activities. This means that while an RO can gather valuable insights about the local market, engage with potential partners, and promote the parent company’s brand, it is not permitted to engage in direct profit-making activities or generate revenue. In addition, an RO is allowed to operate in Singapore for a period of one year only from the date of commencement. This timeframe provides sufficient opportunity for the foreign company to assess the market and determine whether it wishes to pursue further business activities in the country. Extensions are granted on a case-by-case basis, with the maximum allowable duration being three (3) years. This extension process involves a review by the relevant government authorities and is not guaranteed.

If the foreign company wishes to continue its operations in Singapore after the initial period or if it wishes to engage in profit-generating activities, it will need to transition to a more permanent business structure. This typically involves either setting up a branch or registering a company in Singapore, depending on the company’s business goals and operational requirements.

Some key considerations:

• No Profit-Making Activities: ROs are prohibited from conducting any profit-making activities. This restriction means that while the RO can perform functions related to market exploration and relationship management, it cannot directly engage in commercial transactions or revenue generation activities.
• Limited Operational Period: ROs are generally permitted to operate for a period of 1 year. Subsequent renewal is subject to approval of the relevant government agency. This limited timeframe necessitates careful planning for the transition to a more permanent business structure if the foreign company wishes to maintain a longer-term presence in Singapore.

4. Transfer of Registration (re-domiciliation)

A foreign company seeking to benefit from Singapore’s advantageous business environment have the option to transfer its registration to Singapore through a process known as re-domiciliation. This process allows a foreign company to become a Singapore-registered company while retaining its existing corporate identity and history. Upon successful re-domiciliation, the foreign company will effectively be recognised as a Singapore company and be required to comply with the provisions of the Singapore Companies Act.

Re-domiciliation offers several strategic advantages. Singapore’s stable political climate, robust economic environment, and well-established legal system provide a secure foundation for business operations. Singapore’s pro-business regulatory framework, competitive tax regime, highly skilled workforce, and access to financial and capital markets, are among many other benefits, that the country provides.

However, while re-domiciliation provides numerous benefits, it is crucial that businesses carefully examine others forms of registration to see which suits their needs the most.

Some key considerations:

• Preservation of Corporate History and Branding: Foreign company can preserve its corporate history, identity and branding. This continuity is valuable for maintaining customer recognition, brand equity, and business relationships that have been established in other jurisdictions.
• Irreversibility of the Move: Re-domiciliation is a permanent move and cannot be reversed. It is essential to thoroughly evaluate the implications of this move, as it involves committing to Singapore’s regulatory and operational framework. Currently, Singapore does not offer a mechanism for companies to transfer their registration out of the country once re-domiciliation is completed.