Foreign Branch Incorporation
Why Branch Offices Are Important
One of the strategies firms use to expand the scope of their business operations and internationalize them is to set up branch offices in various places.
Branches are a part of the parent organization. They are incorporated to perform the same business operations as performed by the parent company. Due to the fact that these branch offices are located in multiple different areas, branch offices increase the parent company’s corporate reach, and thus earn more profits for the parent company.
Differences Between a Branch Office and a Subsidiary Company
Many might be unsure about the differences between a branch office and a subsidiary company. These are the differences:
- A branch office is set up by its parent company. It is intended to perform the same type of business operations in a different location.
- A subsidiary company’s full or partial controlling interest is held by another company abroad.
Definition of a Branch Office
A branch is defined as an extension of the parent organization. Branch offices are set up in a location separate from that of the parent organization. This is done to increase their brand coverage and scope of operations. The branch carries out the same activities performed by the head office.
Branch offices are not considered a separate legal entity from the parent company. Unlike a Singapore subsidiary company, the parent company of a branch office entity is completely accountable for the welfare of the branch office.
Setting up branches in various locations has been known to increase customer base, accessibility, and speed of distribution of goods and services.
Registering a Branch Office in Singapore
Prior to commencing business in Singapore, a foreign company in Singapore must register itself as a branch with the Accounting and Corporate Regulatory Authority (ACRA), the country’s company registrar. Foreign companies are those which have been incorporated in a country other than Singapore. After registration with ACRA has been completed, the branch office will be granted the status of a legal entity. Although the registration itself is typically completed in less than a day, the entire process can take up to a week to complete. This is because the signing of registration documents, name reservation, and client due diligence processes must all be completed.
It is not necessary for the company’s representatives to visit Singapore for the purposes of branch office registration. This is because corporate service providers can work and communicate with clients via email or other online methods.
It should also be noted that branch offices set up by foreign small and medium-sized enterprises (SMEs) are rare. Foreign SMEs tend to set up subsidiaries. This is due to the fact that subsidiaries usually have greater business flexibility, more tax advantages, fewer liabilities, and fewer obligations related to financial accounts.
Singapore Branch Office Registration Requirements
Before registering a Singapore branch office, it is advised that a corporate service provider be contacted to ease the registration process. There are regulatory requirements to be followed by all foreign companies planning to register a Singapore branch office. They are as follows:
- Name: The name of the branch office must be in line with that of of the foreign parent company.
- Officers: A Singapore branch office must appoint at least one authorised representative who is legally an ordinarily resident in Singapore. This representative must also be at least 18 years old.
- Constitution: The constitution must be the same as that of the parent company. There is no separate constitution for the branch office in Singapore.
- Registered Address: A Singapore branch office must have a registered office located in Singapore as required by the Singapore Companies Act.
Documents Required for the Registration of a Foreign Branch
- Certified copy of the Certificate of Incorporation of the foreign company
- Certified copy of the Constitution of the foreign company
- Particulars of the directors of the foreign branch office/company
- A memorandum of appointment and details of at least one person resident in Singapore who will act as the authorised representative for the Singapore branch office
- A memorandum executed by or on behalf of the foreign company stating the powers of a legal permanent resident of Singapore, who will be the authorised representative of the foreign branch office
- Details of the branch office’s Singapore registered office address
- Latest audited financial statements of the parent company
In cases where the parent company is relatively new and there are no annual reports and audited accounts, the needed information can be self-declared. Supporting details such as company brochures can be used to support the application.
Corporate Bank Account Opening
After the incorporation of the branch office, the next step to be taken is the same as the step after incorporation of any other company. This step is to open a corporate account in any one of the international and local banks in Singapore. The corporate bank account is to be opened either by one of the company’s directors or authorised signatories. Authorised signatories are people who have been appointed to operate a corporate bank account.
In Singapore, corporate bank accounts can either be opened in person or online. Depending on how long the bank takes to verify the account, the process can take anywhere from one day to multiple weeks. Usually, the physical presence of authorised signatories or directors during the setting up of the account will expedite the process.
The primary advantage of a corporate bank account is the fact that it facilitates separation of one’s business and personal finances. This allows for easier management of business finances, grants a higher level of protection against potential future corporate liabilities, and makes it easier to evaluate and monitor a company’s general business performance.
It must be remembered that procedures will vary between banks. Every bank in Singapore also offers different advantages and perks. When choosing a bank for a corporate bank account, some details that must be taken into consideration include minimum balance, accounts which are able to hold multiple currencies, and the amount of initial deposit which is required.
Choosing the most appropriate bank for a corporate bank account can be a challenging task. This is where we at Paul Hype Page & Co come in. We will help you understand all the different advantages offered by Singapore’s various banks, then work with you so that you can best decide which is the most suitable.
Taxation of a Singapore Branch Office
A branch office is taxed at the standard corporate tax rate in Singapore once every financial year. This rate is 17%. However, unlike companies that have been registered in Singapore, branch offices will not benefit from any tax incentives because they are considered non-tax residents.
Branch offices are not tax residents because their control and management takes place somewhere other than Singapore. The phrase “control and management” refers to decisions made regarding corporate and strategic matters related to the company. Such decisions are usually made by the members of the company’s board of directors during meetings.
Regardless of whether your company is a tax resident or non-tax resident, we at Paul Hype Page & Co will ensure that you pay as little tax as Singapore’s laws will allow. Our tax planning team will see to it that your tax burden will be reduced by as much as possible.
Since the management of the branch office is situated outside Singapore, it is the parent company’s responsibility to appoint a local agent who will communicate with the authorities about matters related to the payment of taxes.
Although a branch office is not required to file the same accounting documents as a local incorporation, the parent company is obligated to send to its Singapore branch:
- copies of the financial accounts for the year of assessment
- documents related to the financial accounts filed with the tax authorities in the country of origin of the branch office
All the paperwork must be sent no later than two months after the annual general meeting (AGM) of the parent company.
The branch office must also file an ECI form which provides information on the branch office’s income generated in Singapore. The Singapore branch office must also have its accounts audited by a chartered accountant. Singapore branch offices are required to file a tax return on an annual basis.
Foreign Branch Office Annual General Meetings
Every company in Singapore is required to hold an annual general meeting (AGM). The same is true of foreign branches. During an AGM, the company’s financial statements will be presented to shareholders, who will then ask questions about the current state of the business.
AGMs are led by the meeting’s chairperson. The chairperson of the AGM also usually serves as the chairperson of the board of directors. However, should there be no chairperson, any other member is allowed to take up the role. Before an AGM begins, the company secretary must prepare all documentation which will be required.
In some cases, a branch office or any other foreign company might not be able to hold an AGM within the allowable time period. However, there is a way for branch offices and other foreign companies to overcome this problem. They may make a request to ACRA to ask for a one-off extension of up to two months. Despite this fact, though, not all foreign companies may do so. Only those which must prepare head office financial statements under the laws of their place of origin or incorporation, but not have to table any financial statements at an AGM, may apply for this extension. Those which do so must apply before the annual filing deadline. There is a charge of S$200 imposed for the application.