Incorporation of a Singaporean subsidiary company
A subsidiary or daughter company is owned and controlled by another company, called the holding or parent company. Subsidiary companies are very common in the business environment and most multinational corporations operate via these structures. In comparison to creating divisions of a single company, incorporation of subsidiaries as separate legal entities has various benefits. For example, a subsidiary company is required to conform to the tax, liability and other regulations of its home country, not the country of the holding company. For example, a subsidiary company can sue and be sued separately from the holding company and its obligations will not normally be transferred to its parent.
Singapore has managed to position itself as the preferred jurisdiction for businesses of any size seeking to operate in Asia. Singapore’s business environment is favourable to foreign investors due to rather liberal requirements and various benefits, such as a strategic location, the availability of a skilled, multilingual workforce, smart immigration policies, excellent intellectual property protection and an efficient legal system. Among other advantages, Singapore’s taxation policies and tax treaties are certainly worth pointing out and will be discussed further below. More specific benefits of subsidiary incorporation in Singapore include:
- Paid-up capital can be in the same currency as that used by the holding company (easier accounting procedure)
- Freedom to determine the company’s fiscal year, making it possible to match the accounting dates of the holding company (easier accounting procedure)
- The subsidiary’s name can be different from that of the holding company
- Freedom to repatriate all profits away from Singapore
Main basic requirements
During the formation of a subsidiary company, at least one local director needs to be appointed who is a Singaporean citizen or permanent resident or who holds an employment pass. Upon incorporation, a company secretary must be appointed who is also resident in Singapore. The minimum paid-up capital for a subsidiary company is 1 SGD, and this can be 100% owned by the parent company. A subsidiary in Singapore must have an office — either commercial premises or a home office — and statutory records need to be kept there.
To form a subsidiary, the following documents are required:
- The holding company’s certificate of incorporation
- Proof of the holding company’s directors and current registered address
- Authorisation of signature on behalf of the holding company
- Copies of the subsidiary directors’ passports
- Signed consent to act as directors
- Registered address for the subsidiary
- Articles of association and memorandum for the subsidiary
In addition to the various benefits of having a subsidiary company in Singapore, there are circumstances when it is crucial to opt for a subsidiary rather than a branch office or simply a new division. The main purpose of a subsidiary is to allow local or foreign companies to expand their operations. But what if you want to expand your business in a completely different direction to that of your current business? While a branch office is an extension of the parent company and is therefore only allowed to carry out activities which are in line with the purpose of that company, a subsidiary is allowed to perform any activities as long as these are stated at the time of its incorporation.
Taxation for subsidiary companies in Singapore
Singapore’s tax system is considered simple and investor-friendly. The corporate tax rate does not exceed 17% and there is no tax on capital gains or dividends. All foreign-sourced income is exempt from tax as long as it has been subject to tax in another country. In addition, Singapore has an extensive list of double tax agreements (DTAs) with over 70 countries around the world, which allows investors to avoid double taxation. This extensive DTA network, together with 0% tax on capital gains and dividends, makes Singapore a smart and financially friendly choice for the incorporation of a subsidiary company.
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