Singapore Company Registrar: Setup Singapore Branch Office

A Singapore branch office is a business structure ideal to foreign corporate organizations

planning to expand their operation in the country which has one of the strongest economies in the world.

Legally speaking, a branch office is considered as an extension of a foreign company, meaning, the latter does not enjoy limited liability protection. With this, a parent company is directly liable for the debts and financial losses of its Singapore branch office.

To operate a branch office, the Singapore Companies Act requires foreign companies to appoint two resident agents who will be responsible for all the matters related to their branch office. These agents should accept the provision that they are personally liable for all the penalties imposed on a branch office for any malpractices and breach of law.

As an extension of its parent company, a Singapore branch office will not enjoy any tax incentives and exemptions which are commonly offered to Singapore-incorporated private limited companies.

Another disadvantage is that a branch office does not enjoy confidentiality protection since there is a requirement that it should submit its head offices annual accounting reports to the Accounting and Corporate Regulatory Authority (ACRA).

When it comes to business activities, a branch office is limited to the commercial undertakings performed by its foreign parent company. With this, it cannot engage in activities which are not performed by the main headquarter.

Because of the limitations of a branch office, some business professionals are more likely to recommend a subsidiary company to foreign corporate entities as this setup gives them a greater freedom when it comes to conducting business. In fact, it is allowed to engage in any activitiesincluding those which are not part of the business of its parent companyas long as it is considered legal in Singapore.

Another advantage of a subsidiary company over a branch office is that it is considered as a tax resident, as a result, it is qualified for the local tax rate, developmental incentives, and tax exemptions which typically include Zero Tax on the first S$100,000 chargeable income and another 50 percent tax break on the S$20,000 succeeding income incurred within three years of its incorporation.

However, one advantage of a branch office over a subsidiary company is that the foreign companies can have a direct control on their Singapore auxiliary office. This is not the case in a subsidiary which is required to exercise its management and control locally.

by: Diane Enriquez

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