Singapore has a positive reputation as one of the global business hubs in Asia, and as such, Singapore continues to attract foreign companies in hordes. Many companies and corporations operate in the country through a subsidiary, or a wholly-owned subsidiary.
Okay, of course, a foreign company could alternatively choose to operate a representative office or a branch office. But, as it turns out, most of the foreign companies in Singapore choose to proceed with a subsidiary corporation.
In this article, we'll explain what a subsidiary company means in Singapore, plus the benefits that come with it. You also get to learn how to set up a subsidiary company in Singapore, as well as all the requirements you need to comply with during and after the incorporation process.
A subsidiary is essentially a company within a company. The Singapore Companies Act describes it as a company that is largely controlled by another company, and for that to occur, the parent company has to own at least 51% of the shares or take up the bulk of the board of directors’ positions.
A subsidiary is not a distinctly independent category. Rather, subsidiary registration in Singapore is only possible if you choose to have it as a public or a Pte Ltd. The parent company's liability is also limited to the amount of capital invested in the subsidiary, and the subsidiary is considered a separate business entity from its parent company.
Singapore doesn’t limit the amount of stake the parent company can own. That means your corporation will be free to own even 100% of the shares. A corporation has the right to fully own their subsidiary. This is called a wholly-owned subsidiary company, or when the subsidiary is 100% owned by their parent corporation, and acts on behalf of the parent company, but may still be considered a separate legal entity.
What’s more, the act allows both local and foreign entities to set up a subsidiary company in Singapore. And when it comes to that, the Accounting and Corporate Regulatory Authority (ACRA) is the body that reviews incorporation applications, registers subsidiary companies, and audits their compliance status over the long haul.
That means the company is incorporated as an autonomous entity that exists separately from the parent company. Any liabilities arising from the subsidiary’s operations cannot be transferred to the parent company. Not even its debts.
As a local resident company in Singapore, for instance, your subsidiary won’t be subjected to foreign business tax rates. Instead, the Inland Revenue Authority of Singapore (IRAS) will apply the standard corporate tax benefits for domestic companies.
ACRA, for example, requires you to prepare and submit a company constitution during registration, accompanied by a valid company address, as well as a list of all the shareholders and directors. Then IRAS, on the other hand, expects you to adhere to all the tax laws plus the corresponding income filing schedules.
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All things considered, the upsides of subsidiary companies substantially overshadow the accompanying downsides. And, for the sake of clarity, here’s a summary of principal benefits you’ll be entitled to after setting up a subsidiary company in Singapore:
If a foreign company intends to incorporate a subsidiary in Singapore, the company has to satisfy the following fundamental requirements for the registration process. It should have:
Then the documents you’ll be expected to submit during subsidiary company incorporation are:
It’s worth noting, however, that setting up a subsidiary company in Singapore is a multi-step process that starts with name registration, followed incorporation, and then the subsequent compliance procedures come last. Many foreign companies prefer to work with a corporate services firm in Singapore for assistance in filing these requirements and documentation.
First and foremost, you need to register a unique company name before you even begin registering a subsidiary company in Singapore. You can do this by filing an application directly with ACRA through its BizFile+ portal. The whole procedure will cost you S$15, after which ACRA will go ahead and reserve the business name for 60 days.
As soon as the name is approved, you can proceed to kickstart the subsidiary incorporation process from the same BizFile+ website. For this procedure, however, you should go to “Start a New Business” and then pick the “Local Company” option.
This is where you get to specify the type of company you’d like to set up. So, you can go ahead and pick either a private limited company or public limited corporation, before supplementing that with the subsidiary option.
On the portal, ACRA will also require you to submit the details of the parent company, plus the particulars of the subsidiary’s shareholders and directors. These should further be accompanied by the subsidiary’s company constitution, as well as its shareholder agreement, and physical address details.
In the end, ACRA will charge you S$300 for incorporation, which when added to the initial business name registration fee pushes the combined cost of setting up a subsidiary company in Singapore to S$315.
ACRA will review your application in about 1-2 days. And if everything checks out, you’ll receive a notification of the incorporation via email. The confirmation will also come with the official company registration number, which you could as well use as a virtual certificate of incorporation.
But, if you still insist, you can submit the request online. ACRA will then prepare a hardcopy of your subsidiary company incorporation certificate, which you can pick from its office on the next business day. This will cost you an extra S$50.
Otherwise, you could also submit an online request for your subsidiary’s company business profile. BizFile will charge you $16.50 for the service, but you should have the complete profile in PDF form within an hour or so.
At this point, you should have successfully incorporated your subsidiary! Incorporation is just the first part. There’s so much more to setting up and maintaining a subsidiary company in Singapore. ACRA, IRAS, and a couple of other government agencies expect your newly-registered subsidiary company to:
And so on and so forth. Your specific compliance requirements depend on the type of business you’ll be doing in Singapore, the corresponding corporate income, company size, mode of operation, etc.
Let us help you with the process of setting up a subsidiary company in Singapore
Thankfully, you don’t need to visit Singapore if you intend to set up a subsidiary company. The whole process is conveniently conducted on the web via ACRA’s BizFile+ portal. It provides tools for registering not only your business name, but also the accompanying subsidiary company.
While ACRA allows you to incorporate the subsidiary company online without ever setting foot in Singapore, your luck could eventually run out when it comes to the post-incorporation procedures like opening a corporate account.
Believe it or not, most Singapore banks do not facilitate remote account opening. You might have no choice but to send at least one company representative to an appropriate local bank. The bank may then conduct a physical interview before finally creating the corporate account.
While the Singapore Companies Act requires both foreign and local parent companies to own at least 51% of their subsidiaries, it doesn’t limit the corresponding maximum equity. That means even foreign corporations can as well own 100% of their subsidiary companies.
Yes, of course. What you choose to do with your subsidiary company’s revenue is all up to you. The Singapore Companies Act gives you the freedom to share the profits between the company’s shareholders, including the parent corporation.
Well, it depends. But, overall, IRAS uses pretty much the same tax policies it applies to domestic limited liability companies. And yes, that also includes the accompanying tax incentives
Therefore, in addition to various tax exemptions, you can expect to pay a corporate income tax rate of about 4.25% to 17%, depending on your company’s net income level.
As we’ve established, parent companies are completely shielded from the debts and claims that arise from their subsidiary companies. A subsidiary company can become insolvent and file for bankruptcy without transferring its liabilities to the parent company.
However, and rather unfortunately, this privilege doesn’t apply both ways. And the reason is, subsidiary companies are owned by parent companies. That alone makes them assets, which could be liquidated to pay off their parent companies’ debts in case of insolvency.
Having covered all the essentials, these guidelines should get you started on setting up a Singapore subsidiary company. And, in the long run, the whole process could take you months or weeks of following up on the compliance issues.
But, on the other hand, you could also fast-track everything and get your Singapore subsidiary company up and running in just a matter of days or hours. The trick here is to follow the same old route recommended by ACRA for a subsidiary, which entails working with company incorporation service providers like WealthBridge.
Yes, that’s right. We’ve done this for years. So, of course, you can bet our subsidiary experts know all the hacks for seamless company incorporation and compliance in Singapore.
