Incorporation Singapore Subsidiary Requirements
Definition of the Term “Foreign Subsidiary”
In Singapore, a foreign subsidiary is defined as a private limited company which has been incorporated in Singapore and which has a corporate entity as its primary shareholder. Most small or medium-sized foreign companies that intend to build a presence in Singapore or the Asia-Pacific region in general will often choose to incorporate a foreign subsidiary.
How to Incorporate a Foreign Subsidiary in Singapore
Accounting and Corporate Regulatory Authority (ACRA) Requirements
- Directors: A minimum of one resident director (a Singapore Citizen, a Singapore Permanent Resident, or a person who has been issued an EntrePass, Employment Pass, or Dependent Pass) is mandatory.
- Shareholders: The shareholder can be an individual or a corporate entity. Complete local or foreign shareholding is allowed. A director can also be a shareholder, although this is not necessarily the case.
- Paid-up Capital: The minimum paid-up capital for registration of a Singapore company is S$1.
- Registered Address: The address must be a physical local address. It may not be a PO Box
- Company Secretary: The Companies Act requires one company secretary who must be a natural person and a resident of Singapore.
- Company Constitution
- Company Name
- Unless exempt from audit requirements under the Companies Act, every company must appoint an auditor within three months after its incorporation. Only small exempt private companies and dormant companies are exempt from audit requirements. A small exempt private company is one that meets the following conditions:
- The turnover for the financial year is less than S$5 million.
- The company does not have more than 20 shareholders.
- The company does not have, directly or indirectly, a corporation as a beneficial shareholder.
Singapore resident individual shareholders and directors require either a copy of a Singapore IC or a copy of the individual’s passport if the individual is not a citizen of Singapore.
Non-resident individual shareholders and directors require a copy of a passport and a copy of residential address proof such as a recent utility bill, residential phone bill, tax bill, or cable TV bill.
Each corporate shareholder of the newly-incorporated company must note the following:
- All documents must be in English or officially translated in English.
- All copies of documents must be certified true copies by a notary public. Otherwise, documents can also be brought to our office for sighting.
- Those who are currently abroad can email us the scanned copies of documents so we can proceed with preparing the necessary incorporation documents. However, we must receive the certified true copies or sight the originals at our office before we can incorporate the company.
- Our compliance department may ask for additional information if necessary.
Solutions Provided by Paul Hype Page & Co
- Name check and reservation
- Preparation of memorandum and articles of the company, as well as other incorporation documents
- Preparation of registration forms
- Professional and filing fees
- E-certificate of incorporation
- Preparation of compliance corporate kit including corporate seal, share certificates, register and minutes book
- Minutes of first board meeting
- Resolution to open a bank account
Requirements for Opening a Corporate Bank Account
Once a company has been incorporated, a corporate bank account with any of the local and international banks in Singapore must be opened. Opening a corporate bank account in Singapore is a simple and quick procedure. One’s choice of bank should depend on which one offers corporate accounts features that fulfill the banking needs of the company.
The following documents are required to open a corporate bank account in Singapore:
- Completed corporate account opening forms
- Board of directors’ resolution approving the opening of the account and the signatories to the account
- Certified true copy of certificate of incorporation (must be certified by the company secretary or one of the directors)
- Certified true copy of company’s business profile from company registrar
- Certified true copy of Company’s Memorandum and Articles of Association (MAA)
- Certified true copies of passport or Singapore IC
- Residential address proof of directors, signatories, and ultimate beneficiary owners
Those who are in Singapore only have to bring the originals. The bank will make a copy of them. The Singapore bank may also ask for additional documents.
Generally, most banks require that the account signatories and majority directors be physically present in Singapore for signatures at the time of the opening of the company bank account.
However, some banks will accept the signing of documents at one of their overseas branches or in front of a notary public.
What Must Be Done After Incorporation of a Foreign Subsidiary
Even after the subsidiary has been incorporated, there is still much to be done. At this point, the subsidiary exists as a separate legal entity from the company to which it is linked.
This subsidiary will often be required to apply for a license if it is to operate in any of several certain industries. The subsidiary is to apply for this license under its own name.
If the subsidiary’s foreign parent-company is interested in sending some of its workers to work in the Singapore subsidiary, the parent-company must apply for Employment Passes or any other relevant passes or permits. The parent-company may refer to the Singapore Ministry of Manpower’s website for further information.
Of course, the new subsidiary is required to comply with all regulatory requirements in Singapore which are currently in force. There is much information on the Internet about such requirements, so learning about them is not a difficult task.
Benefits of Setting Up a Foreign Subsidiary in Singapore
There are several reasons why a foreign parent-company might choose to set up a foreign subsidiary in Singapore. Since a subsidiary and its parent-company are separate legal entities, the parent-company will not be directly liable for any debts incurred by the subsidiary. It will also not be held responsible if any legal action is to be taken against the subsidiary.
If the subsidiary were to become insolvent, the parent-company may be able to reduce its liabilities to the subsidiary’s assets. It can also prevent these assets from being claimed by a creditor.
If the control and management of the subsidiary is in Singapore, a foreign subsidiary which has been incorporated in Singapore will be regarded as a tax resident of Singapore. This means that because Singapore’s corporate tax rates are among the lowest in the world. Therefore, the subsidiary will most likely be taxed less than it would have been if it had been operating from its home country.
Further Information About Singapore Foreign Subsidiaries
A subsidiary does not have to operate under the same name as its parent-company. It may opt to operate under any name which has received approval from ACRA. It may also conduct business activities which are different from those conducted by its parent-company.
Registration for subsidiary incorporation may be completed online at BizFile+. Therefore, it is not necessary for one to go to Singapore to incorporate the subsidiary. However, one has to go to Singapore to set up a corporate bank account. This is because most of Singapore’s banks require a face-to-face interview with the shareholders or directors of the company.
A foreign subsidiary may repatriate any of its own capital or profits to its parent-company. The Companies Act spells out any capital return requirements which may apply.
Just like any other company based in Singapore, foreign subsidiaries are taxed at the standard corporate tax rate of 17% on taxable income. Should the subsidiary’s annual turnover exceed S$1 million, the subsidiary will also be subject to a 7% Goods and Services Tax (GST) charge on most of the goods and services it supplies. Subsidiaries are also eligible for some of Singapore’s tax exemption schemes and tax benefits. For the first three years of assessment (YAs), subsidiaries receive a complete tax exemption on the first S$100,000 of chargeable income and a further tax exemption of 50% on the next S$200,000. The subsidiary’s next S$300,000 of chargeable income will have its first S$10,000 given a 75% tax exemption and the next S$290,000 a 50% tax exemption. Subsidiaries may also receive tax reductions or exemptions on income from countries with which Singapore has signed Double Taxation Agreements (DTAs).
Subsidiaries which have been incorporated in Singapore are automatically registered for corporate income tax after they have been incorporated. The Inland Revenue Authority of Singapore (IRAS) will be duly notified of this fact. Subsidiaries with an annual turnover of S$1 million or more will have to register separately for GST status with IRAS.