Are you considering expanding your business in Singapore by setting up a subsidiary? Perhaps you're a foreign company aiming to establish a presence in the country? Or maybe you're simply curious about what a subsidiary is and how it could benefit your future business routes.
However, in this guide, we will take you through the process of setting up in Singapore. The benefits it offers, and the requirements you need to fulfil. After all, setting up a subsidiary can be a strategic move for businesses looking to expand their operations in Singapore.
What is a Subsidiary?
A subsidiary is a company that is majority-owned or controlled by another company, known as the parent company. In Singapore, the law treats a subsidiary as a separate legal entity from its parent company.
This means that the parent company is not directly liable for the subsidiary's debts or any legal actions taken against the subsidiary.
To qualify as a subsidiary, the parent company must own at least 51% of the subsidiary's shares. The parent company can be either a Singapore-based or foreign company.
Why Set Up a Subsidiary?
Setting up a subsidiary in Singapore offers several benefits for both local and foreign companies. One of the key advantages is the limited liability protection it provides. As a separate legal entity, the subsidiary's debts and legal obligations are separate from those of the parent company. Therefore, if the subsidiary becomes insolvent, the parent company's liabilities and risks are limited only to the assets of the subsidiary.
Additionally, Singapore-incorporated subsidiaries are considered local tax residents if their management takes place locally. This allows foreign companies to take advantage of Singapore's competitive corporate tax regime by setting up in the country.
Registration Process for a Subsidiary in Singapore
It is a straightforward process that is done online through the BizFile+ portal managed by the Accounting and Corporate Regulatory Authority (ACRA).
To register, you will need to provide the following information to ACRA:
- Brief description of business activities
- Shareholders' particulars
- Directors' particulars
- Registered address
- Company secretary's particulars
- Company constitution
The general requirements and procedure for registering a subsidiary are the same as those for registering a private limited company in Singapore. If the parent company is a foreign company or if any of the directors or shareholders of the subsidiary are foreigners, it is advisable to engage a registered filing agent in Singapore, such as a law firm or corporate services firm, to assist with the registration process.
If you're ready to embark on the exciting journey of establishing your subsidiary in Singapore, don't navigate these waters alone. Leverage our expertise to ensure a seamless registration process. Contact us today.
Required Information for Subsidiary Registration
When registering in Singapore, you will need to provide certain information about the company. Here is a breakdown of the required information:
Choose a unique name for your subsidiary that is not already in use by another business. ACRA will review and approve the name before the registration process can proceed.
Brief Description of Business Activities
Provide a brief description of the business activities in which the subsidiary will engage. This will help ACRA classify the company under the appropriate industry code.
You will need to provide the particulars of the shareholders of the subsidiary, including their names, addresses, and the number of shares each shareholder will hold.
Provide the particulars of the directors of the subsidiary, including their names, addresses, and identification details. At least one director must be a resident of Singapore.
Provide a registered address for the subsidiary. This can be a physical address or the address of a professional firm providing registered office services.
Company Secretary's Particulars
Appoint a company secretary for the subsidiary and provide their particulars, including their name, address, and identification details. The company secretary must be a resident of Singapore.
Prepare a company constitution that outlines the rules and regulations governing the subsidiary's operations. The constitution should cover matters such as the company's objectives, the rights and obligations of shareholders, and the procedures for holding meetings.
Engaging a Registered Filing Agent for Foreign Companies
If the parent company is a foreign company or if any of the directors or shareholders of the subsidiary are foreigners, it is advisable to engage a registered filing agent in Singapore to assist with the registration process. This requirement exists because foreigners do not possess a SingPass account, which is necessary for accepting appointments as shareholders or directors.
A registered filing agent, such as an incorporation service firm, will have the necessary expertise and experience to guide you through the registration process and ensure compliance with all the requirements.
Once it is successfully registered, there are several post-incorporation requirements that you need to fulfil to ensure compliance with Singapore's regulatory framework.
Opening a Corporate Bank Account for the Subsidiary
After incorporation, it is recommended to open a corporate bank account in the subsidiary's name. This will help with proper financial accounting and separation of the subsidiary's funds from those of the parent company. Most banks in Singapore require a physical interview with the company's directors or shareholders to open a corporate bank account.
However, the emergence of digital banking has brought new conveniences. Now, you have the option to apply for a digital business account, which can be done entirely online without the need for any physical meetings. This process is not only 100% digital but also significantly quicker compared to setting up an account with traditional commercial banks.
Ongoing Regulatory Compliance for Subsidiaries
After setting up a subsidiary, it is important to ensure ongoing compliance with Singapore's regulatory requirements. This includes maintaining proper accounting records, holding annual general meetings, filing annual returns with ACRA, and complying with tax obligations.
Subsidiaries are subject to a flat corporate tax rate of 17% on all taxable income. They may also be eligible for certain tax benefits and exemption schemes.
Subsidiaries incorporated in Singapore are automatically registered for corporate income tax. However, they may need to separately register for Goods and Services Tax (GST) if their annual turnover exceeds S$1 million.
Curious to learn more about GST, read our blog: GST 2024 Rate Change Comprehensive Guide
Setting up a subsidiary in Singapore can be a strategic move to expand your business operations and take advantage of the country's favourable business environment. By following the registration process and fulfilling the necessary requirements, you can establish a separate legal entity that offers limited liability protection and access to Singapore's competitive tax regime. Engaging a company like Grof can help streamline the process and ensure compliance with all regulatory obligations.