Redomiciliation can have very positive impacts on companies which undergo this process. When a company changes its location of registration to Singapore, it may gain many benefits which it would previously have found inaccessible, thus vindicating the decision to re-domicile.
Redomiciliation is the process by which an organization transfers its registration from one country to another country. In the process of redomiciliation, the company is not establishing an overseas branch or incorporating a subsidiary abroad.
When an organization from a foreign country establishes a branch in Singapore, it is still the same overseas organization conducting business in Singapore. The foreign organization is therefore mainly governed by the laws of its home country.
When a subsidiary is incorporated by a foreign organization in Singapore, there are effectively two companies: the foreign parent company and the Singapore subsidiary. The Singapore subsidiary has a separate legal status from the overseas parent company and can sign contracts on its own. This corporate group would subsequently be regulated by both the law of its home country (for the parent company) and Singapore law (for the subsidiary).
Reasons for Redomiciliation
Organizations redomicile for various reasons. Some of these reasons may be practical, commercial, legal, or a combination of more than one of the preceding.
Redomiciling may be a positive business move from a commercial perspective. As has been mentioned, when a company changes its domicile to Singapore, the company is still the same entity; the only difference that its place of incorporation changes from its previous country to Singapore. This creates business continuity, which is helpful when the re-registered Singapore company plans to seek credit from banks in Singapore or needs to demonstrate its track record in its area of expertise so as to get a license whenever necessary.
To some extent, these problems can be overcome since an overseas parent company can guarantee the loans taken by its Singapore subsidiary or share expertise and control the operations of its new subsidiary. Nevertheless, this represents an advantage of redomiciliation.
Tax Advantages in Singapore due to Redomiciliation
Singapore taxes companies at a lower corporate tax rate than most other countries in the world. Some foreign companies have noticed this fact and shifted some of their operations to a Singapore subsidiary. However, this may become less viable in the future.
This increased difficulty might take place because many countries plan to tighten their rules on the taxation of international corporate groups so as to reduce base erosion and profit shifting. These are measures by which a company seeks to make it appear as if the profits earned by that company are in fact profits earned by its related company, so as to have those profits taxed at the rate of the second country.
However, due to the effects of redomiciliation, the company will cease to be registered overseas and it will be primarily subject to Singapore law, including for taxation purposes. It will not be taxed at the corporate tax rates of its original place of incorporation. The company will therefore avoid the risk of being liable for taxation twice under such tightened taxation rules.
If the company’s original place of incorporation imposes unjust regulatory requirements on the company such as a high corporate tax rate, redomiciliation to Singapore could help with avoiding the effects of those unjust requirements.
If you need any assistance with your international tax planning, we at Paul Hype Page & Co will provide you with our best services. Our experts who have much knowledge and understanding about international taxation will help you navigate the world of international taxation to allow you to reduce your tax burden by as much as possible by using legitimate and legal means.
Leverage on Singapore’s Free Trade Agreement Memberships
Redomiciling and substantially shifting operations to Singapore are usually related. Therefore, redomiciliation makes it easier for a company to take advantage of the various free trade agreements in which Singapore is involved.
When Redomiciliation is Necessary
The simplest solution for many company owners who intend to relocate their company is to dissolve it in one country and subsequently incorporate a new one in another. However, not everyone is ready to dissolve an existing company and register a new one in another jurisdiction. For example, if a company has gained the reputation of being a reliable business partner, has formed an extensive customer base, or has good market positions, maintenance of business relations with the partners and existing contractors will be very important to it.
In such situations, redomiciliation may become a viable option because the existing company proceeds with its bank accounts, assets, business contacts, and the known firm name intact. At the same time, it is important to note that various banks may use different approaches regarding continuation of bank accounts in case a client company changes its jurisdiction. Also, redomiciliation does not automatically entail change of tax residency.
Tax residency is just one of the many elements of taxation in Singapore. Corporate tax, withholding tax, personal income tax, and many others are also important. Thus, understanding taxation in Singapore can sometimes be difficult. Fortunately for you, the tax specialists of Paul Hype Page & Co who are well-versed in all matters dealing with Singapore taxation are always ready to be assistance regarding such topics.
The redomiciliation procedure includes the necessary formalities both in the original and the new jurisdiction. A company’s transfer to a new jurisdiction is possible only in case if redomiciliation is allowed by the laws of both jurisdictions and their corporate legislation is similar to some extent. Some jurisdictions do not allow the registration transfer of foreign companies in the jurisdictions or the registration transfer of domestic companies out to other countries. One of these jurisdictions is Singapore. Therefore, in Singapore, redomiciliation cannt be used to convert a Singapore company into a foreign one; only the converse is possible.
How to Redomicile
To redomicile a foreign company to Singapore, a business owner has to fill in adn submit an Application for Transfer of Registration form to the Accounting and Corporate Regulatory Authority (ACRA), which regulates business entities in Singapore. The application has to be accompanied by the following :
a) A certified true copy of the Memorandum of Association, Articles of Association, or equivalent constitutional documents (which were submitted when originally incorporating the company).
b) A copy of the constitution which the company will use if successfully redomiciled as a Singapore company. While the company’s existing constitutional documents may almost entirely be adopted if the company was incorporated in another common law jurisdiction, there will be certain aspects of Singapore law that may mean additional clauses will need to be inserted. For example, Singapore requires all companies to have an “objects clause” in their constitution. This clause lays out the purpose of the company. In contrast, the existing constitutional documents of foreign companies may not have an objects clause as some jurisdictions adopt the default rule that companies have unrestricted purposes.
c) The following relevant prescribed documents:
Certified copy of the foreign certificate of incorporation or equivalent
A signed written declaration by all the current company directors that the company meets the solvency requirements
From each of the proposed directors individually:
– A declaration of their consent to act as director upon redomiciliation
– A declaration that they are neither disqualified nor debarred from acting as a director in Singapore (this primarily relates to having been found to have failed in their duties as director of another Singapore company previously)
– If they intend to take shares in the company, a declaration of their intent to take a number of shares in the company upon redomiciliation, if they do not already have shares in the company
A written declaration from each of the proposed secretaries stating:
They consent to act as the company’s secretary
They have not been debarred from acting as a secretary in the past
If the company is proposing to redomicile as a public company, they have the relevant professional or academic qualifications to be the secretary of a public company (typically a qualified lawyer, accountant, or a member of the Singapore Association of the Institute of Chartered Secretaries and Administrators)
If the redomiciliation is being handled by a lawyer or a filing agent, a confirmation statement from the lawyer or filing agent that each proposed director has consented to act as a director and has not been disqualified, and that each proposed secretary has consented to act as a secretary.
The prescribed fee. This is currently S$1,000.00 and is non-refundable.
Can any Company owner, whether local or Foreigner, re-domicile their Company?
As of October 11, 2017, Singapore has adopted a regime which allows for greater flexibility to re-organize corporate groups for regulatory, strategic, or organizational purposes. In essence, it allows foreign corporate entities to transfer their company’s registration to Singapore and become a Singapore company limited by shares under the Inward Redomiciliation Regime under Part XA of the Companies Act of Singapore (sections 355 to 364A).
Can redomiciliation be undone?
Once redomiciliation is completed in Singapore, it can no longer be undone. The Companies Act does not provide for redomiciliation back to the original place of incorporation.