Why foreign companies choose to incorporate Singapore subsidiary companies

As a foreign entity plans to incorporate company in Singapore, getting confused about which option to choose for a best long-term business in Singapore is very much possible. Amongst 3 major options of company incorporation that exists for foreign companies, Singapore subsidiary company registration is the best option for most companies, irrespective of their size such as small, medium or large or multinational.

Here are 6 key reasons why subsidiary company in Singapore is best option to choose.

1. 100% foreign share holding is allowed

According to Singapore companies act, 100% foreign share holding is allowed for a Singapore subsidiary company. While there is a mandatory requirement of at least one local Singapore resident director while incorporation, directors are not necessarily required to be the share holders and the share holders and directors of a Singapore subsidiary company can be different entities. This flexibility allows foreign companies to run their business in Singapore.

2. Assets of parent foreign company are treated separately

While incorporating company as a foreign entity, one fear that occurs is the liability, especially a case of debt if arises. Fortunately, in Singapore, the liabilities of a Singapore company are based on share capital and not the assets of the parent company I.E. the foreign company that has incorporated the Singapore subsidiary company. Parent foreign company is not required to declare its assets and thus are not held liable in any case.

3. Local tax benefits can be enjoyed

Singapore is often cited as a leading example of countries that continue to have a lower corporate income tax rates in order to attract foreign businesses to invest in the Country. Singapore’s low tax rate is, in fact, one of the major reasons that inspire foreigners to incorporate company in Singapore. Under Start-up Tax Exemption Scheme (SUTE), tax exemption is given on normal chargeable income of up to S$300,000 for each of the first three consecutive years of operation. In fact, for the first S$100,000, after 100% exemption, the exempt amount is S$100,000. Then for the next S$200,000, after 50% exemption, the exempt amount is S$100,000.

Hence the total exempt amount for income up to S$300,000 is S$200,000. 
Subsidiary company in Singapore is usually treated as resident and is hence can be entitled to enjoying all the tax benefits that are available to Singapore private limited companies, including a low corporate tax rate of 17% as well as the income tax based on the single-tier system.

PLEASE SEE OUR LATEST UPDATE ON THE IMPACT OF BUDGET ANNOUNCEMENTS MADE IN FEBRUARY 2018 ON THE TAX EXEMPTIONS FOR COMPANIES by clicking here.

4. Exemption and Government grants can be enjoyed

Since Singapore subsidiary company is given the status of a local/resident company, its also entitled for receiving various tax exemptions as well as government grants that are given by Singapore government to local (private limited) companies. This includes different types of grants offered to companies such as Capability Development Grant and Enhanced Isprint Grant.

5. Minimum paid up capital is Sgd 1

Many countries around the world including Europe have legal requirements for minimum authorized, subscribed and paid-up capital that is quite high for domestic companies. Sometimes their amount is tens of thousands of Euros.
Fortunately, a Singapore company can be registered with a minimum paid-up capital of S$1 (Or its equivalent in any currency). This is a big attraction for many companies, knowing that they can start businesses in Singapore easily without having to invest a huge amount of capital on the onset.

6. Tax Reliefs/exemptions for Singapore subsidiary companies

If the subsidiary company meets the requirements of tax residency, they can qualify for certain tax benefits. The companies can benefit from the tax exemptions provided under the Avoidance of Double Taxation Agreements (DTAs). Singapore has signed with other countries and tax exemption for new start-up companies. Lastly, under section 13 (8) of the Income Tax Act, a subsidiary company that has tax residency, can also enjoy tax exemption on foreign-sourced service income and foreign-sourced dividends.

Government and tax authorities keep on bringing extra benefits and advantages for foreign companies time-to-time which can be applied on Singapore subsidiary companies.

Conclusion

While there are at least 3 major company incorporation options in Singapore, those who choose subsidiary company registration as the type of their incorporation receive maximum benefits as described above. Enjoying these benefits, however, is only possible if the respective company files timely annual financial statements, complies with Singapore laws and operates a fair business in accordance with Singapore’s policies. The company's management team is required to be watchful, aware and interested in grabbing every possible opportunity so that the maximum funds and advantages can be availed in the favour of the company.

Precursor has years of proven expertise in not only highest quality, quick and fully compliant company incorporation in Singapore, but also a full range of corporate services after incorporation such as working end-to-end in assisting The clients in the various tax exemptions, government grants and benefits of other schemes that are applicable. The expertise of doing all the rigorous work required in complying and securing various grants and exemptions makes precursor the obvious first choice for serious companies that are looking to establish a long-term profitable business in Singapore.