Many foreign entrepreneurs have established their companies in Singapore due to its welcoming business environment.
Although you might be eager to incorporate your firm in Singapore, the crucial decision you will need to make is what kind of company you would incorporate?
Setting up a branch office, a subsidiary company, or a representative office are the 3 options to establish your company’s presence in Singapore.
So, which one should you pick?
Keep reading to learn the critical differences between each business entity for an easier decision!
Differences Between Subsidiary Company, Branch Office and Representative Office
Each of these business settings operates somewhat differently.
Let’s compare each business structure in-depth to help you decide which company structure suits you best.
It’s important to remember that a representative office is only permitted to conduct market research and liaisoning activities.
A foreign company may operate in Singapore in two different ways: by establishing a limited liability company or a branch office (i.e. subsidiary company).
Legal Status and Liabilities
A Singapore branch office is an extension of the foreign parent company and is not considered a separate legal entity. Hence, all liabilities incurred would also be regarded as parent company liabilities.
A representative office has no legal entity as it’s a temporary administrative arrangement, so any liabilities obtained would fall on the parent company.
On the other hand, a subsidiary company has a separate legal entity distinct from the parent company. Hence, the liabilities incurred by the parent company are limited.
Entity Name and Registration Duration
A branch office name has to be identical to the name of the parent company and sign contracts using that name. A Singapore branch office takes 1 to 2 days to register.
The representative office‘s name must be the same as the parent company and include “Representative Office”. The standard registration time is 3 to 5 days.
A subsidiary company‘s name can be the same or distinct from the parent company’s name, and just like the branch office, it takes 1 to 2 days to register.
Taxation
As a non-resident entity, branch offices are subject to a basic corporate tax rate of 17 per cent; local tax incentives and tax exemption are not accessible.
As a Singapore resident entity, subsidiary companies are subject to a fixed corporate tax rate of 17 per cent, with local tax benefits available.
On the other hand, representative offices are not taxed as they do not generate revenue.
Authorised Activities and Validity Period
A Singapore subsidiary entity can have the same or distinct range of activities from the parent company and are registered forever until they close.
A branch office, however, is limited to the same activities as the parent company and just like the subsidiary company, they can conduct business activity forever until they close.
A Singapore representative office is much more different as it can only carry out feasibility studies or market research as they are not authorised to conduct any profitable business operations.
Corporate Bank Account
A branch office can open its own corporate bank account or use the parent company’s existing one.
A Singapore subsidiary company can open its own bank account in Singapore.
A representative office can open their own bank account as well, but it strictly can only be funded by their parent company.
Annual Filing
Subsidiary companies have to file their own accounts, whereas a Singapore branch office should be filing annual return for their own company and the parent company.
Representative offices have no obligation here as they do not generate income.
Employees and Employment of Officers
There is no restriction in hiring local or foreign staff in a subsidiary company and a branch office.
However, branch offices must appoint at least one local authorised representative, and subsidiary companies must appoint at least one local resident director.
Representative offices however must have a Chief Representative, hired from the head office and they are limited to 5 employees.
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