wealthbridge incorporation guideS:

Setting up a Subsidiary Company in Singapore

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A subsidiary company is one controlled by another entity, known as a holding or parent company, i.e. more than 50% of its share capital is owned by the holding company. It is widely used to establish itself in new markets, where the parent company is not yet active.

A subsidiary company, in turn, may also have other subsidiaries under its responsibility, these together with their parent company being referred to as a "group". Each of the subsidiaries may be under the responsibility of one or more companies. If this responsibility is not shared, we have a wholly owned subsidiary.

The subsidiary may only act in accordance with the guidelines laid down by those responsible for its holding company, although for the purposes of regulation and payment of taxes they are considered to be separate entities from the parent company.

Why create a subsidiary company?

  • Risk prevention: Many companies want to acquire other companies, which is why they create subsidiaries, in order to avoid the risks that may arise for the parent company from the negative results of the new company.
  • Development of business abroad: For economic and legal reasons, it is convenient to create a subsidiary company that facilitates the activity of the parent company in the destination country.
  • Maximize benefits: Creating subsidiary companies can mean obtaining greater tax benefits, since in terms of taxes, they are independent of the parent company.

What steps to follow to establish a subsidiary?

The steps for the constitution are the following:

1. Agreement of the administrative bodies of the parent company agreeing on the constitution of the subsidiary.

2. Preparation of the Social Statutes according to Singapore laws. The minimum content is the following:

  • Social denomination.
  • Corporate purpose (activity of the company).
  • Social capital.
  • How to organize the administration (sole administrator, joint or joint administrators, or board of directors).
  • Way to deliberate and adopt agreements.

3. Request of the negative certification of denomination in the Mercantile Registry, to be certain that there is no other company with the same name.

4. Opening of a bank account in the name of the company and deposit of the share capital.

5. Issuance of the deed of incorporation of the company before a Notary. The documentation that must be provided is the following: Registration in the Commercial Registry.

Another way to open a foreign company in Singapore is to set up a branch.

If you want to incorporate a company linked to yours abroad, another option is to set up a branch. In this case, the big difference is that the branch is like a delegation, which does not have its own legal personality and is a simple extension of the parent company, although it also has to be registered in the Mercantile Registry.

Many foreign companies, before creating more complex corporate structures, they do is open a branch and if, over time, the business prospers in Singapore, create a subsidiary.

The subsidiary depends on the parent company. However, this dependency relationship can vary in degree. Thus, the link between the two companies - the subsidiary and the parent company - can reach absolute control, where the subsidiary limits itself to recording the decisions and operations available in the parent company. Or, on the contrary, the corporate union between said subsidiary and parent company can be characterized by a completely independent management in which the subsidiary is autonomous and only informs the parent of its results and, where appropriate, of the dividends or benefits that are distributed among the shareholders.

Regulation of subsidiaries

The subsidiaries are well differentiated entities in terms of legal, fiscal and regulatory conditions. For this reason they differ from the divisions, which are fully integrated businesses within the main company.

However, the subsidiary in a country of a foreign company must follow the same procedures for its creation as any other type of company in the country, plus some previous ones because it is an investment from a foreign entity. In this way, the foreign company must adopt, through the administrative body recognized by the legislation of the country of origin, the corresponding agreement to create the subsidiary and request the corresponding Singapore consulate a certificate in which it becomes clear that the company The parent company is constituted according to the laws of your country and that develops its business activity in a legal manner.

Taxation of a subsidiary

In terms of taxation, a subsidiary is governed by the laws of the country where it resides; In this area, the subsidiaries that operate in Singapore are subject to corporate tax, with their own profits for small companies. However, when the subsidiary distributes dividends to the partners, which will be foreign companies, it will be dividends obtained by non-resident companies, which must pay taxes in general through withholding.

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