Foreign Branch Incorporation
Steps to know:
- Incorporate a Singapore Branch Overview
- Incorporation Singapore Branch Requirements
Incorporate a Branch Overview:
A branch of the foreign company that operates in Singapore is legally part of the foreign company and is not its own entity. This is an important point since it means that the foreign company’s head office bears the ultimate responsibility for any liabilities arising due to the acts of commission or omission of the Singapore branch office. Normally, Singapore branch office is non tax resident in Singapore and therefore, there is no tax exemption or advantage compared to Singapore company. However, Singapore branch of a foreign company is considered resident in Singapore if the control and management of its business are exercised in Singapore. Such companies will not need to pay taxes twice on foreign-sourced income under the Double Taxation Agreements (DTAs).
Prior to establishing a place of business or commencing business in Singapore, a foreign company must register itself as a branch with the ACRA. A foreign company is defined in the Companies Act as:
- A company, corporation, society, association or other body incorporated outside Singapore, or
- An incorporated society, association or other body which, under the law of its place of origin, may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose, and which does not have its head office or principal place of business in Singapore.
A branch must have at least 2 authorised agents who ordinarily are resident in Singapore. A list of the directors of the head office has to be notified to the ACRA. A branch must have a registered office in Singapore.
Advantage of a Branch:
It is administratively easier to maintain than a company. In addition, closing a branch is easier than liquidating a company.
Disadvantage of a Branch:
The liabilities of a branch extend to its head office. A branch having a registered office in Singapore means that its head office (foreign corporation) can be served with legal process in Singapore. Another disadvantage is that the accounts of the head office must be lodged with the ACRA and they are available for public inspection.
Comparison Chart for Subsidiary Company Vs Branch Office Vs Representative Office
|Entity Name||Need not be the same as parent company||Must be the same as parent company||Must be the same as the parent company|
|Allowed Activities||Can conduct all business activities||Can only conduct market research or coordinating activities||Must be the same as the parent company|
|Suitable For||For local or Foreign Companies that wish to expand their operations in Singapore||For Foreign Companies that wish to set up temporary vehicle in Singapore to conduct research and act as liaison office||For Foreign Companies thay wish to expand their operations in Singapore|
|Disadvantages||Continuing Compliance Obligations eg Financial Reports, Audit, AGMS, etc||It is a temporary vehicle and cannot generate revenue||Continuing Compliance Obligations eg Financial Reports, Audit etc|
|Ownership||Can be 100% foreign or locally owned||No Ownership||Owned 100% by the head office|
|Separate Legal Entity||Yes||No||No|
|Cap on Number of Members||Yes, max 50||Not Applicable||Not Applicable|
|Minimum Setting up Requirement||Min One shareholder, that can be an Individual or corporate (100% local or foreign shareholding allowed. Must have at least one resident director||Must appoint a Chief Representative who will relocate from headquarters||Must have two Singapore Resident Agents|
|Need for Audited Accounts||Yes||No||Yes|
|Filing of Accounts with ACRA and IRAS||Yes||No||Yes|
|Annual Filing||Must file audit report of subsidiary||Not Applicable||Must file branch office’s as well as parent company’s audit reports|
|Tax Treatment||Taxed as Singapore resident entity, local tax benefits available||Not Applicable||Taxed as non-resident entity, local tax benefits not available|
|Tax Benefits||A subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax incentives and rebates||No Corporate tax. Employees have to pay personal tax||Partial tax exemption|
|Cessation of Business upon Death of a Member/Partner||No. Equity shares go on in perpetuity||Not Applicable||No|
|Validity Period||Perpetually until deregistered||This is a temporary Setup. It is intended not to last more than 3 years||Perpetually until deregistered|
|Normal Registration Time||3 hours||3-5 days||3 hours|
|Appointment of Officers||Must appoint at least one local resident director||Must appoint a Chief Representative who will relocate from headquarters||Must appoint two resident agents|
|Governing Body||ACRA & IRAS||International Enterprise Singapore||ACRA & IRAS|
Here are some common asked questions:
- If my company has one director and one shareholder left, is it compulsory to amend my M&AA?
Answer:While the law does not mandate a company to amend its M&AA to cater to one director company, you may wish to examine your own M&AA to determine if it contains any provisions that will not be operatable if the number of directors is reduced to 1. Every company can draft its own set of M&AA and need not rely solely on the provisions in Table A of the Companies Act. In this regard, please refer to section 4 and 184 of the Companies Act.
- What are the criteria for being appointed as a manager?
Answer: At least one manager must be ordinarily resident in Singapore. All managers appointed must be natural persons and above the age of 18. The manager of the LLP must not be:
- an undischarged bankrupt (unless he has obtained Leave of the High Court or the written permission of the Official Assignee);
- disqualified as an unfit manager of insolvent LLPs under section 34 of the LLP Act;
- disqualified as a manager of a former LLP wound up on grounds of national security or interest and disqualified to act as a manager;
- disqualified as a person who was convicted of offences involving fraud or dishonesty, or other offences connected with formation or management of a LLP;
- disqualified under Sections 149, 149A or 154 of the Companies Act.
- What status is considered locally resident? Is Employment Pass Holder or Work Permit Holder sufficient? What about dependent pass and permanent resident?
Answer: We recognize the followings as “locally resident” – Singapore citizens, Singapore PRs, Employment Pass Holders & Dependent Pass Holders.
- Can a foreigner be appointed as the local manager?
Answer: Yes provided he has an Employment Pass or a Dependents’ Pass.
- Are the duties of a nominee manager the same as a manager?
Answer:There is no such position as a “nominee manager” in an LLP. Anyone who is named as the manager will have to perform the duties and carry out the obligations of a manager as set out in the LLP Act.