• Incorporation of foreign branch

Branch company is set up in various locations around the world separate from its head office location. Branches typically increase customer base, accessibility, and speed of distribution of goods and services.

Foreign companies expanding to Singapore need to make a crucial choice of their legal structure for their Singapore business expansion. The decision of setting up a branch or subsidiary is often undermined. To answer this question, the foreign company needs to understand the following:

  • Legal risk tolerance

  • Taxation issues

  • Compliance Challenges

Let’s start off with the fundamental question of: “What is a branch?”

Definition of a branch office

A branch is defined as an extension of the foreign head office company and it can engage in core activities like sales and contracts.

Branch office can carry out the same activities performed by the head office company but is not considered a separate legal entity from it. This means that the head office company is legally bound by any legal contract signed by the branch company even if it is not entered by head office management representative or permission. As such it is common business practice enforce by head office that branch has limited access to their bank account and perform implementation-related tasks without having any individual business discretion.

Therefore, unlike a subsidiary company, the parent company of a branch office entity is completely accountable for the welfare of the branch office.

It is set up in a location separate from that of head office, in various locations around the world to increase customer base, accessibility, and speed of distribution of goods and services.

From the definition above, we can understand the HIGH risk involved but many foreign companies still choose to incorporate a branch due to the followings:

  • Speed of Incorporation: A branch office can be set up relatively quickly as all the registration details as company name, directors and shareholders is the same as Head office.

  • Ease of Commercial Operation: There is no need to set up new accounting, legal, HR and admin system as it is just an extension of Head office. Management wants to use a branch office as an interim step, using it to gain local knowledge and make sales before acquiring or establishing a subsidiary.

Due to the above reasons, foreign company would incorporate a branch and implement control to reduce the risk such as no local bank account and or insist all signing of document by head office directors.

Planning according to your tax landscape

Head office needs to understand where the majority of their worldwide profits and taxation rates of each jurisdiction.

  • Branch company may not be tax in the location that they operated if it does not fulfil the concept of Permanent Establishment hence all profits will be tax in Head office which may have a low tax rate such as Singapore of 17%.

    The branch company can perform non-permanent establishment are activities such as advertisement of products and services and/or communication with regional clients which contribute to Head office commercial activities.

  • Depending branch local tax laws, Companywide or Head office profits may be exposed to taxation in the country where the branch is located.

Therefore, Head office needs to decide what the best worldwide tax exposure approach on branch incorporation decision.

Deciding on your compliance approach

Different structures will lead to different accounting approaches. The head office has to decide what kinds of yearly or monthly compliance they are willing to consolidate. For example, accounting, tax and audit matters.

  • As a branch is a not a separate entity, it may require not need to have multiple government registrations and may not need to maintain a minimum level of capital to operate. It is also likely to face less stringent local regulations and annual reporting requirements.

    Normally, branch office has a lesser compliance issue compared to a subsidiary.

Why Branch Offices Are Important?

One of the strategies firms use to expand the scope of their business operations and internationalize them is to set up branch offices in various places.

Branches are a part of the parent organization. They are incorporated to perform the same business operations as performed by the parent company. Due to the fact that these branch offices are located in multiple different areas, branch offices increase the parent company’s corporate reach, and thus earn more profits for the parent company.

How to Register a Branch Office in Singapore?

STEP 1: Ensure you fulfill the requirements

Before registering a Singapore branch office, it is advised that you contact us to ensure a smooth registration process. There are regulatory requirements to be followed by all foreign companies planning to register a Singapore branch office:

  • Name: The name of the branch office must be in line with that of the foreign parent company.

  • Officers: A Singapore branch office must appoint at least one authorised representative who is legally an ordinarily resident in Singapore (Singapore Citizens/ Permanent Resident) and at least 18 years old.

  • Constitution: The constitution must be the same as that of the parent company. There is no separate constitution for the branch office in Singapore.

  • Registered Address: A Singapore branch office must have a registered office located in Singapore. Registered address must be a physical address and cannot be a PO Box. Use of residential address is allowed for certain types of business.

Business Opportunities in Singapore

STEP 2: Prepare the necessary documents

  • Certified copy of the Certificate of Incorporation of the foreign company

  • Certified copy of the Constitution of the foreign company

  • Particulars of the directors of the foreign branch office/company

  • A memorandum of appointment and details of at least one person resident in Singapore who will act as the authorised representative for the Singapore branch office

  • A memorandum executed by or on behalf of the foreign company stating the powers of a legal permanent resident of Singapore, who will be the authorised representative of the foreign branch office.

  • Details of the branch office’s Singapore registered office address

  • Latest audited financial statements of the parent company

In cases where the parent company is relatively new and there are no annual reports and audited accounts, the needed information can be self-declared. Supporting details such as company brochures can be used to support the application.

Note :

  • All documents must be in English or officially translated in English.
  • All copies of documents must be certified true copies by a notary public, or you must bring the originals to our office for sighting.
  • If you are overseas, you 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 branch. Our compliance department may ask for additional information if necessary.

STEP 3: Register as a branch with the Accounting and Corporate Regulatory Authority (ACRA)

STEP 4: After registration with ACRA has been completed, the branch office will be granted the status of a legal entity.

Although the registration itself is typically completed in less than a day, the entire process can take up to a week to complete. This is because the signing of registration documents, name reservation, and client due diligence processes must all be completed.

Note :

  • The company’s representatives DO NOT need to visit Singapore for branch office registration. This is because Paul Hype Page can work and communicate with you via email or other online methods.
  • Branch offices set up by foreign small and medium-sized enterprises (SMEs) are rare. Foreign SMEs tend to set up subsidiaries. This is due to the fact that subsidiaries usually have greater business flexibility, more tax advantages, fewer liabilities, and fewer obligations related to financial accounts.

Taxation of a Singapore Branch Office

A branch office is taxed at the standard corporate tax rate in Singapore once every financial year. This rate is 17%. However, unlike companies that have been registered in Singapore, branch offices will not benefit from any tax incentives because they are considered non-tax residents.

Branch offices are not tax residents because their control and management takes place somewhere other than Singapore. The phrase “control and management” refers to decisions made regarding corporate and strategic matters related to the company. Such decisions are usually made by the members of the company’s board of directors during meetings.

Regardless of whether your company is a tax resident or non-tax resident, we at Paul Hype Page & Co will ensure that you pay as little tax as Singapore’s laws will allow. Our tax planning team will see to it that your tax burden will be reduced by as much as possible.

Since the management of the branch office is situated outside Singapore, it is the parent company’s responsibility to appoint a local agent who will communicate with the authorities about matters related to the payment of taxes.

Although a branch office is not required to file the same accounting documents as a local incorporation, the parent company is obligated to send to its Singapore branch:

  • copies of the financial accounts for the year of assessment

  • documents related to the financial accounts filed with the tax authorities in the country of origin of the branch office

All the paperwork must be sent no later than two months after the annual general meeting (AGM) of the parent company.
The branch office must also file an ECI form which provides information on the branch office’s income generated in Singapore. The Singapore branch office must also have its accounts audited by a chartered accountant. Singapore branch offices are required to file a tax return on an annual basis.

Foreign Branch Office Annual General Meetings

Every company in Singapore is required to hold an annual general meeting (AGM). The same is true of foreign branches. During an AGM, the company’s financial statements will be presented to shareholders, who will then ask questions about the current state of the business.

AGMs are led by the meeting’s chairperson. The chairperson of the AGM also usually serves as the chairperson of the board of directors. However, should there be no chairperson, any other member is allowed to take up the role. Before an AGM begins, the company secretary must prepare all documentation which will be required.

In some cases, a branch office or any other foreign company might not be able to hold an AGM within the allowable time period. However, there is a way for branch offices and other foreign companies to overcome this problem. They may make a request to ACRA to ask for a one-off extension of up to two months. Despite this fact, though, not all foreign companies may do so. Only those which must prepare head office financial statements under the laws of their place of origin or incorporation, but not have to table any financial statements at an AGM, may apply for this extension. Those which do so must apply before the annual filing deadline. There is a charge of S$200 imposed for the application.

Foreign Branch Incorporation FAQs

Must the accounts of the head office lodge with ACRA?2020-11-19T10:00:25+08:00

Yes, the accounts of the head office must be lodged with ACRA. 

Can a Foreigner be appointed as the manager of the Company?2020-06-24T15:55:36+08:00

Yes, as long as the foreigner has an Employment Pass or a Dependent Pass.

What status is considered locally resident? Are Employment Pass holders locally resident? What about Dependent Pass holders and Permanent Residents?2020-06-24T15:55:16+08:00

Singaporean citizens, Singapore permanent residents (PRs), Employment Pass Holders, and Dependent Pass Holders are locally resident.

If my company has one director and one shareholder, is it compulsory to amend my company’s M&AA?2020-06-24T15:54:51+08:00

While the law does not compel a company to amend its memorandum and articles of association (M&AA) to cater to a one-director company, you may wish to examine your own M&AA to determine if it contains any provisions that will not be operable if there were just one director. 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. For further information, refer to section 4 and 184 of the Companies Act.

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