subject: AsiaBiz Explains on Singapore Subsidiary Registration [print this page] A Singapore subsidiary company is viewed as a locally incorporated private limited company with a foreign corporate entity as its main shareholder. With this setup, it is popular among foreign companies that want to enjoy the local tax rates, developmental incentives, and tax exemptions.
According to business professionals, a subsidiary company allows 100 percent foreign ownership and may still qualify for the tax exemptions as long as it will meet these two requirements:
- It practices its control and management in Singapore. While the government has not explicitly defined "control and management," most pundits believe that it refers to the level of authority of the board of directors instead of the company's day-to-day activities.
- At least one shareholder owns 10 percent shareholdings OR it has no more than 20 individual shareholders, instead of corporate entities, who have their shares under their names. (Note: Under the Singapore Companies Act, a subsidiary may have one to 50 shareholders regardless if they are local or foreign individuals/entities.)
These companies, also called as "exempt private companies," are qualified to receive 100 percent and 50 percent tax exemptions on their first S$100,000 and S$200,000 chargeable income, respectively, within three years of their Singapore subsidiary registration.
On the other hand, companies which did not meet the two criteria may still be eligible to some developmental incentives that are usually in the form of lowered corporate tax rates (typically 5 to 10 percent).
In addition, some companies which have invested in research and development projects that aim to increase the workers' productivity or improve their quality of life may also qualify for government-proposed incentives.
Aside from the tax exemptions and developmental incentives, a Singapore subsidiary company also enjoys greater freedom in conducting business and commercial activities. This is not the case for a branch officeanother business structure for foreign corporate entitiesthat is prohibited to engage in business that is not performed by its foreign parent company.
Another advantage of a subsidiary is that it enjoys no restrictions when it comes to the repatriation of its earnings and capital to its foreign company abroad. With this notable advantage, this setup is particularly attractive to a significant number of foreign companies including those operating in small- and medium-sized enterprises.
However, the "limited liability" is probably the most enticing feature of a Singapore subsidiary company. With this arrangement, foreign companies cannot be held liable for the acts, debts, financial losses, and lawsuits of its subsidiary which is viewed as a separate legal entity.
AsiaBiz Explains on Singapore Subsidiary Registration
