If you want to extend your business presence to the profitable market of Singapore, you have two very common options – setting up a branch office and subsidiary company. These options have their pros and cons. In this article, we compare both the options which may help you take the right decision.
Legal Entity – The first thing of concern for any business is legal matters. The Singapore branch office will not be considered as a separate legal entity, as it is viewed just an extension of the parent company. This means the liabilities arising on the branch office will eventually be the liability of the parent company. On the other hand, a Singapore Subsidiary Company enjoys the benefits of a separate legal entity from its establishing foreign company. Even if the parent company holds 100% share of the subsidiary company, it will not be liable if the subsidiary company is sued for a liability.
Operational Activities – As the branch office is not a separate legal entity, its operation cannot vary from its parent company. You can earn benefit by opening a branch office here if you want to extend the business operation that defines your brand. But if you are looking for a change in your basic operations, you’ll have to create a subsidiary company. However, you need to decide this beforehand because the subsidiary company can only involve in the activities that have been mentioned during the incorporation.
Setting up Requirements – There’s no restriction on members of a branch office in Singapore. But, you must have a registered resident agent in Singapore for incorporating your branch office in the country. If you are opting for creating a Subsidiary company in Singapore, you cannot have more than 50 members at a time. There’s no restriction on the shareholders to be foreign or resident, but minimum of one resident director is needed for any foreign subsidiary company.
Return Filing – If you incorporate a branch office in Singapore, you’ll need to file an audited financial statement of the branch in addition to the audited accounts of the parent company to Accounting and Corporate Regulatory Authority of Singapore. On the other hand, a subsidiary company will not be liable to furnish any financial statement of its parent company to the ACRA.
Tax Exemption – The private limited companies incorporated in Singapore are eligible for certain tax exemptions. But these exemption benefits will not be extended to the branch office as it is not a separate legal entity or a resident entity of Singapore. A subsidiary company incorporated in Singapore is eligible for any tax benefits and exemptions that are for the resident companies if it qualifies for the same.
After knowing the difference between the two, you can decide which option suits your business requirements. But in general, the branch office is the preferred option by MNCs, banks, and insurance companies with a brand name. They just want to capture a new market with their brand recognition. Foreign companies interested in entering into new business avenues prefer incorporating subsidiary companies.