Option 1: Singapore Subsidiary Company
A subsidiary company is a locally registered private limited company that is owned or controlled by another company. Singapore is able to grant 100% foreign ownership. Hence, an offshore company can incorporate a local private limited company and own its 100% shareholding.
A subsidiary company is the most favorable choice of option for small to medium size foreign businesses who want to setup their presence in Singapore. It is considered as a local company which entitled to Singapore tax benefits; and also a separate entity from the foreign parent company. The parent company will not be extended to the liabilities from the subsidiary company.
Option 2: Singapore Branch Office
A branch office in Singapore is a registered legal entity acting as an extension of the overseas company. The overseas company has to bear the responsibility for the Singapore Branch Office since it is an extension of the parent company. As a branch office is not considered as a resident entity, it will not receive any Singapore taxation benefits. Therefore, it is not preferred by small to medium size companies.
The name of the branch office must be certified before the registration and also must correspond to the name of the parent company. If the name has been registered by an existing company, the company registrar may disapprove the registration. Under the Singapore Companies Act, the branch needs at least 2 local agents who are Singapore residents (citizen, permanent resident, or employment pass holder) and accept services of process and notices. A registered office is needed in Singapore for a branch office in Singapore.
A Singapore branch office should only conduct business activities in the scope of its head company and only the earnings from its Singapore operations will be accounted to the local tax rates.
Option 3: Representative Office
Foreign companies usually set up a representative office in Singapore for the purpose of exploring the market or establishing a presence in Singapore without conducting any business or profiting activities. It is a temporary setup without a legal entity on it’s own and cannot enter into any business contract, issuing of invoices, or open letter of credit, etc.
The overseas company bears implicit liability for the activities of the Singapore representative office. A representative office may engage a sum of not more than 5 local employees as support staff but must assign representative from the foreign company’s head office. The foreign company needs to register with the Monetary Authority of Singapore (MAS) if it is in banking and insurance sector.