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Branch office Vs Subsidiary company in Singapore?
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Branch Office and Subsidiary Company in Singapore are two of the most well known and preferred types of company incorporation in Singapore from foreigner’s perspective. In this post, we’re comparing both Singapore branch office and Singapore subsidiary company to help you comparing their pros and cons, specialties and features in order to identify the best Singapore company incorporation option that works for you. 

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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 activity 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 when filing annual returns with the Accounting and Corporate Regulatory Authority in Singapore.

However, 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 branch office in Singapore is not considered a resident for the purposes of tax. Thus,  making it ineligible for tax incentives that are available for private limited companies in Singapore.

Registration of a Singapore Subsidiary company, on the other hand, is very tax efficient when it comes to them working 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 multinational 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.

No option is better than another and may apply to your unique situation and needs. What’s advisable is that you carefully compare both, evaluate what works best in accordance with your need 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

Min One shareholder that can be an Individual or corporate (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, award-winning team of highly qualified professionals, proven track record and does rank amongst top 30 firms in Singapore. Right from company incorporation to accounting, auditing, company secretariat and others, precursor has a full range of corporate services to help your business grow.

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