Foreign Subsidiary Incorporation
Incorporate a Subsidiary in Singapore
A foreign company may incorporate a Singapore subsidiary company.
A Singapore Subsidiary Company is a Private Limited Company incorporated in Singapore whose major shareholder is a foreign company.
A Singapore Subsidiary Company can have the full ownership of the foreign company and is considered as a separate legal entity. The subsidiary company doesn’t have any liability to the foreign company as its liability is limited to the share capital it has subscribed.
The subsidiary company gets the benefit of several tax exemptions as it is considered as the local company.
The name of the subsidiary can be different from that of the parent company and is subject to approval by the Registrator of Companies. The Companies Act requires the appointment of one or more directors. At least one director must be a Singapore resident (Citizen, Permanent Resident (PR) or Employment Pass Holder).
More information on how to apply for Singapore PR. – Application for Singapore Permanent Residency
Click here to know more about Incorporation Singapore Subsidiary Requirements.
Filing Annual Returns of a Local Company
All locally incorporated companies are required to hold their Annual General Meeting (AGM) and file their annual returns under S175, S197 and S201 of the Companies Act.
At the AGM, directors shall present a true and fair view of the company’s accounts to their shareholders.
The Companies Act does not prescribe the minimum level of qualifications for the person preparing the accounts. However, it will be the responsibility of the directors to appoint individuals with the required level of expertise for preparation of such accounts.
When to Hold an AGM and File Annual Return?
|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 and the interval between AGMs should not be more than 15 months.||Section 175|
|Audited/Unaudited Accounts||The Annual Return must be filed with the Registrar within one month after the AGM.||Section 197|
|For a public company listed or quoted on a securities exchange in Singapore:Accounts presented at the AGM shall be made up to a date not more than 4 months before the AGM.In the case of any other company: Accounts presented at the AGM shall be made up to a date not more than 6 months before the AGM.||Section 201|
Tax Exemption Scheme for New Start-Up Companies
Under this scheme, a newly incorporated branch that satisfies the qualifying conditions can claim for full tax exemption on the first $100,000 of normal chargeable income* (excluding Singapore franked dividends) for each of its first three consecutive YAs.
The exempted amount for each YA is summarised as follows:
|Year of Assessment(YA)||Exempt amount for new start-up companies|
|2005 to 2007||First $100,000 Profits @ 100% (Tax Free) = $100,000|
|2008 onwards||First $100,000 Profits @ 100%(Tax Free)= $100,000 Next $200,000 Profits @ 50% (Tax Free)= $100,000 Total $300,000 Profits (Tax Free)= $200,000|
To qualify for the tax exemption for new start-up companies, your company must:
1. Be incorporated in Singapore (other than a company limited by guarantee**);
2. Be a tax resident* in Singapore for that YA;
3. Have no more than 20 shareholders throughout the basis period for that YA where:
- All of the shareholders are individuals beneficially and directly holding the shares in their own names; OR
- At least one shareholder is an individual beneficially and directly holding at least 10% of the issued ordinary shares of the company.
* A company is resident in Singapore if the control and management of its business is exercised in Singapore.
** With effect from YA 2010, the scheme will be extended to companies limited by guarantee, subject to the same conditions imposed on companies limited by shares.
A company is taxed at a flat rate on its chargeable income regardless of whether it is a local or foreign company.
The tax rates and tax exemption / rebate for each Year of Assessment (YA) are as follows:
|Year of Assessment(YA)||Tax Rate||Tax Exemption/Rebate|
|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.|
How to Determine Your First Year of Assessment
The first YA refers to the YA relating to the basis period during which the company was incorporated.
From the fourth YA onwards, your company will be given partial tax exemption instead of the exempted amount for new start-up companies.
Keeping Proper Records and Time limit to Raise Assessments
Company must maintain proper records of its financial transactions and retain the source documents, accounting records and schedules, bank statements and any other records of transactions connected with your business.
For YA 2008 and each subsequent YA, the record-keeping period has been reduced from seven to five years.
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 & Dependant Pass Holders.
- Can a foreigner be appointed as the local manager? Answer: Yes provided he has an Employment Pass or a Dependant’s 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.