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Foreign Subsidiary Incorporation in Singapore

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Foreign Subsidiary Incorporation in Singapore

2021-01-27T16:47:41+08:00January 8, 2015|2 Comments

Definition of a subsidiary company

There are numerous business structures that one can incorporate in Singapore. A subsidiary company in Singapore is usually a private limited company, though it may sometimes be a sole proprietorship or limited liability partnership. The majority shareholder is a corporate entity, and it is not the same as a branch office. The shareholders can be either a local or foreign company. A subsidiary company is not the same thing as a holding company and type of business entity structures for your reference.

A Singapore subsidiary is the most favored form of business registration for small to medium-sized foreign companies keen to establish their presence in the Republic.

A subsidiary company is a separate legal entity. It doesn’t have any liability to the foreign company as its liability is limited to the share capital to which it has subscribed.

The subsidiary company gets the benefit of several tax exemptions as it is considered as a local company.

The name of the subsidiary can be different from that of the parent company and is subject to approval by the Registrar of Companies. The Companies Act requires the appointment of one or more directors. At least one local resident director is needed and what the requirements .

Challenges that might occur while opening a subsidiary office

We at Paul Hype Page & Co always do our best to give realistic expectations to our future and existing clients. We also adhere to the local laws and regulations to provide the best service possible.

Before opening your subsidiary office, we will guide you through the challenges you might face.

Know Your Customer (KYC)

KYC information comprises the facts about customers. These facts enable one to assess the extent to which customers expose a company to certain risks. These risks include money laundering and terrorist financing.

Organizations need to ‘know their customers’ for various reasons which include the following:

  • to comply with the requirements of any relevant law of the country;
  • at the time the due diligence is carried out, to be reasonably certain that the customers are who they say they are;
  • to provide them with the services requested;
  • to guard against fraud, including impersonation and identity fraud;
  • to help the organization to identify the behavior of the customers;
  • to avoid money laundering, fraud, or the handling of criminal or terrorist property;
  • to enable the organization to assist law enforcement by providing available information on customers being investigated following the making of a suspicion report to the relevant authorities.
KYC

Since a subsidiary office is a separate entity on its own, it will be considered a new company to be incorporated. Nevertheless, every directors and shareholder of the subsidiary company will be subjected to the KYC process.

Bank account opening

Opening a corporate bank account for a subsidiary office is much easier than opening than a branch office.

Banks will conduct a KYC check on ever directors and shareholder of the subsidiary company.

In the wake of the 2018 1 Malaysia Development Berhad (1MDB) case that shook the world, banks are looking to safeguard themselves more effectively. Thus, the KYC process is now more complex.

Criminal breaches of trust committed by banks has resulted in severe punishments being doled out. Some of the banks which have committed such offenses include BSI, DBS, and UBS.

Note: If you are looking for a hassle-free bank account opening experience, open a corporate bank account with Aspire Bank will be a good option. With Aspire, you can have fast and user-friendly access to financial services for your business operations anywhere and at any time through your mobile phones. You can also enjoy cashback for your online marketing and “software as a service”.

It is free to open an Aspire Business Account. There are no monthly fees, fall below fees, or FAST transfer fees, and no minimum deposit is required as well. If you are keen, the account can be opened entirely online with Paul Hype Page. Check out more Aspire features on www.aspireapp.com.

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Alternatives

In general, setting up a foreign subsidiary company is simpler than setting up a foreign branch office. However, those who want an even simpler alternative may either set up a family trust for a company or open a related company. In a related company, there will be a common shareholder and director. This will allow the KYC process to be significantly shortened.

Things to know before incorporating a foreign subsidiary

Filing annual returns of a foreign subsidiary

All locally incorporated companies are required to hold an Annual General Meeting (AGM) and file annual returns under S175, S197, and S201 of the Companies Act.

At the AGM, directors are to present a true and fair view of the company’s accounts to their shareholders.

The Companies Act does not prescribe the minimum level of qualification for the person preparing the accounts. However, it is the responsibility of the directors to appoint individuals with the required level of expertise for the preparation of such accounts.

Understand the ACRA Annual Compliance needed to be perform yearly 

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When to hold an AGM and file annual returns

RequirementsDescriptionsCompanies Act
Annual General Meeting (AGM)

1. A company is required to hold its first AGM within 18 months after its incorporation.

2. Subsequent AGMs must be held every calendar year. The interval between AGMs must not be more than 15 months.

Section 175
Audited/Unaudited AccountsThe Annual Return must be filed with the Registrar within the one-month period following the AGM.Section 197

Public/Listed Company

For a public company listed or quoted on a securities exchange in Singapore: Accounts presented at the AGM must be made up to a date not more than four months before the AGM.

In the case of any other company: Accounts presented at the AGM must be made up to a date not more than six months before the AGM.

Section 201

Tax rates

A company is taxed at a flat rate on its chargeable income regardless of whether it is a local or foreign company.

Tax rates, exemptions, and rebate for each YA

Year of Assessment(YA)Tax RateTax Exemption/Rebate

2010 onwards

17%

Partial tax exemption and tax exemption scheme for new start-up companies
Companies will continue to enjoy the partial tax exemption scheme and tax exemption scheme for new start-up companies as provided in YA 2008 and YA 2009.
In addition, with effect from YA 2010, the tax exemption scheme for new start-up companies will be extended to include companies limited by guarantee, subject to the same conditions.

Key facts to note about Singapore subsidiaries

Shares
The parent company can own 100% of the shares of the Singapore subsidiary.

Local director
A Singapore subsidiary must appoint at least one local director. The director must be a local resident in Singapore, i.e. a Singapore citizen, a Singapore permanent resident, or an Employment Pass holder. Directors must be at least 18 years of age and must not be an undischarged bankrupt or convicted of any malpractice. Foreign companies that plan to relocate their staff from their head offices to Singapore can apply for their Employment Pass after the subsidiary has been registered.

Paid-up capital
The minimum paid-up capital for a Singapore subsidiary company is S$1.

Local registered address
A Singapore subsidiary company must have a registered office in Singapore. The registered address can be a commercial office or a home office.

Company secretary
After incorporation, the directors must appoint a person who is a resident in Singapore as the company secretary.

Auditor
An auditor must also be appointed within three months from the registration date of the Singapore subsidiary company. In this instance, Paul Hype Page & Co can serve as your auditor.

Documents required for Foreign Subsidiary Incorporation

  • Certificate of incorporation of the parent company
  • An extract from the Registrar of Companies that shows the current registered address and directors of the parent company
  • A corporate resolution authorizing a specific individual to sign necessary subsidiary documents on behalf of the parent company
  • Passport particulars and residential address details of individuals who will act as directors of the Singapore subsidiary company
  • Signed Consent to Act As Director by each proposed director
  • Registered address details of the Singapore subsidiary company
  • Memorandum & Articles of Association for the Singapore subsidiary company

All documents must be in English and any non-English documents must be translated into English. Any professional corporate services provider to be engaged may require additional documents.

Foreign Subsidiary Incorporation in Singapore FAQs

Can I use a different company name for my subsidiary?2020-11-12T10:46:13+08:00

Yes, you can use a different name for your subsidiary. Your subsidiary name doesn’t have to be the same as the parent company name. 

Does a subsidiary’s parent company have to be Incorporated in Singapore?2020-06-24T16:01:22+08:00

There is no requirement for the parent company of a subsidiary to have been incorporated in Singapore. Although a certificate of incorporation is required by the authorities, this certificate may be received from the authorities of the country in which the parent company had been incorporated. 

In what instances is a company determined to be a Singapore Tax Resident?2020-06-24T16:01:03+08:00

Singapore’s tax laws define companies which are Singapore tax residents to be those which are managed and controlled in Singapore. This is defined by the location in which board meetings are held. Therefore, all companies which primarily hold board meetings in Singapore are Singapore tax residents.

Is it possible for a Foreign Subsidiary to be a Sole Proprietorship?2020-06-24T16:00:39+08:00

There are no rules stating that a foreign subsidiary cannot be a sole proprietorship. It is a rare occurrence because most foreign subsidiaries are private limited companies. However, it is indeed possible for a foreign subsidiary to be a sole proprietorship. 

2 Comments

  1. Dr. Parry Clark December 12, 2019 at 4:51 am - Reply

    We are wanting to setup a bank account in Singapore. Is the best way to incorporate there? What are charges to setup a subsidiary and the process.

    • Kumaran Tiwiyah December 12, 2019 at 5:06 pm - Reply

      Hello Parry,

      If you have already incorporated your company in Singapore, you may proceed to open a bank account there.

      For the establishment of a subsidiary in Singapore, the ACRA registration fee is S$315. We offer affordable packages which will ensure that your business is established in a suitable manner.

      For any further information on incorporation or corporate bank accounts, you may contact us; we will be able to be of assistance.

      Thank you.
      Paul

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