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Branch office Vs Subsidiary company in Singapore?
Accounting, Audit and Assurance Firm in Singapore › Home › Resources @ Precursor › Branch office Vs Subsidiary company in Singapore?
Establishing a Branch Office or a Subsidiary Company in Singapore are two common options available for foreign companies wishing to establish a business presence here. In this post, we are tabling the differences between incorporating a Singapore Branch Office versus a Singapore Subsidiary company to help you in comparing their pros and cons, understand the specific nature and features of each type of entity, in order to assist you in identifying the best Singapore company incorporation option for your needs.
1. Separate Legal Identity and Asset Protection
A Singapore Branch Office is considered an extension of the parent company and is not a separate legal entity of its own. This means that the liabilities of a Singapore Branch Office are derived from the liabilities and assets of the respective parent company that may be located in a foreign nation. It can, however, be sued in Singapore in the case of any dispute. Hence the assets of the parent company will be not protected in this case.
A Subsidiary company in Singapore, on the other hand, is a separate legal entity from the foreign company even if the foreign company holds 100% shares. This means that the foreign company does not have to bear the losses and liabilities of the Singapore Subsidiary company. In this case, the assets of both the subsidiary and the parent company can be protected even if either company are sued.
2. Activities conducted
Singapore Branch Office, as being an extension of its parent foreign company is only allowed to carry out activities defined in its constitution and cannot perform other activities in Singapore that are not aligned with the activities of the respective foreign company.
Singapore Subsidiary company can, however, be made to perform any activity, as long as these are defined clearly at the time of incorporation of the respective Singapore subsidiary company. Being a separate legal entity from its parent foreign company, aligning with the stated activities of foreign company is not necessary.
3. Filing Returns
Singapore Subsidiary companies need to prepare a set of financial statements and to submit their financial statements in eXtensible Business Reporting Language (also known as XBRL) when filing their annual returns with the Accounting and Corporate Regulatory Authority in Singapore (ACRA).
On the other hand, Branch Offices are required to submit the audited accounts of the parent company as well as the audited financial statements of its branch office.
4. Tax exemptions
Incorporation of a Branch Office in Singapore will not create a resident entity for the purposes of tax. Thus, making it ineligible for possible tax incentives that are available for private limited companies in Singapore.
Registration of a Singapore Subsidiary company, on the other hand, could prove to be tax efficient when it comes to the new entity operating as an independent organization. A Singapore Subsidiary company enjoys various benefits, exemptions and advantages that are made available for Singapore resident companies.
In summary, a Branch Office is preferred by Multi-National Corporations (MNCs), banks and insurance companies that want to use the brand name and finances of the parent company to secure licences and business contracts, while a Subsidiary company is preferred by many foreign companies when establishing a business entity in Singapore due to its separate nature providing flexibility of business operations.
Either option could prove to be a good choice as it depends on the business factors that may apply to your unique situation and needs. What
is advisable is that you carefully compare both, evaluate what works best in accordance with your needs and situation and then take an
informed choice.
| TYPES |
SUBSIDIARY COMPANY |
BRANCH OFFICE |
| Entity Name |
Need not be the same as parent company |
Must be the same as the parent company |
| Allowed Activities |
Can conduct all business activities |
Must be the same as the parent company |
| Suitable For |
For Local or Foreign Companies that wish to expand their operations in Singapore |
For Foreign Companies they wish to expand their operations in Singapore |
| Disadvantages |
Continuing Compliance Obligations eg Financial Reports, Audit, AGMS, etc |
Continuing Compliance Obligations eg Financial Reports, Audit etc |
| Ownership |
Can be 100% foreign or locally owned |
Owned 100% by the head office |
| Separate Legal Entity |
Yes |
No |
| Cap on Number of Members |
Yes, max 50 |
Not Applicable |
| Minimum Setting up Requirement |
Minimum One shareholder that can be an Individual or a corporate entity (100% local or foreign shareholding allowed. Must have at least one
resident director |
Must have one Singapore Resident Agent |
| Limited Liability |
Yes |
No |
| Need for Audited Accounts |
Yes if company does not meet audit exemption criteria |
Yes |
| Filing of Accounts with ACRA and IRAS |
Yes |
Yes |
| Annual Filing |
Must file audit report of Subsidiary if company does not meet audit exemption criteria |
Must file Branch Offices as well as parent company’s audit reports |
| Tax Treatment |
May be qualified as Singapore resident entity and hence may be able to enjoy local corporate tax benefits |
Generally taxed as non-resident entity, local tax benefits not available |
| Tax Benefits |
A Subsidiary company, with at least one individual shareholder with minimum of 10 percent shareholding, is entitled to local tax incentives
and rebates if they are qualified for tax residency. |
However, they may still be treated as Singapore tax residents if they are able to satisfy IRAS that certain conditions have been met. For
details on the conditions, refer to Applying
for COR for Non-Singapore Incorporated Companies. |
| Cessation of Business upon Death of a Member/Partner |
No. Equity shares go on in perpetuity |
No |
| Validity Period |
Perpetually until deregistered |
Perpetually until deregistered |
| Normal Registration Time (upon receipt of all required documents) |
3 hours |
3 hours |
| Appointment of Officers |
Must appoint at least one local resident director |
Must appoint at least one authorized agent. |
| Governing Body |
ACRA |
ACRA |
Whether you are still confused about which Singapore company incorporation option is best in your situation or wanting to get a company
incorporated, Precursor has years of experience, an award-winning team of highly qualified professionals, a proven track record and ranked
amongst top 30 firms in Singapore. Right from company incorporation to accounting, auditing, company secretariat and others, Precursor has a
full range of corporate advisory services to help your business grow.
