There’s a reason multinational companies are rushing to set up holding companies in Singapore. They like to think of the city-state as the Disneyland of corporations because of all the impressive business benefits it continues to offer. The corporate perks are exceptional - Singapore itself has been at the top of World Bank’s Ease of Doing Business Index for over a decade now.
That said, one of the businesses you can bet has not been missing out on the whole package is Google’s parent company, Alphabet Inc. It moved into Singapore way back in 2007 and the rest, as they say, is history. The company ultimately grew to become one of the few trillion-dollar companies in the world thanks to, among other factors, Singapore’s perks.
Before all the rumble though, Google started its journey by setting up a holding company in Singapore. And that’s specifically what we’ll be unravelling today. This guide, in a nutshell, teaches you how you can embark on a similar success journey through an SG holding company. But, before we reveal all the secrets, first things first…
What Is A Holding Company?
When it comes to incorporating a company in Singapore, the first corporate options you might be introduced to are the primary types. This is where you learn that you could either set up a sole proprietorship, a limited liability company, or a partnership in Singapore.
But, it doesn’t end there. When you dive deeper, you then get to understand that while sole proprietorships are pretty straightforward, the other two company types can be broken down into subcategories. LLCs have three subclasses and partnerships come in two different forms.
Make no mistake though. Those are just the basics. The intricacies can still get a little bit more complicated, especially if you’re trying to set up shop with a foreign-based entity.
You see, while Singapore is generous enough to give you the chance of setting up any company type ( be it a private limited company or a Pte Ltd, a public limited company, a company limited by guarantee, investment holding company, or a partnership), the whole package comes with additional company extension options. And, as we’ve seen in Alphabet’s case, Google specifically chose to go for a holding company.
Now, in essence, a holding company is a legal entity that happens to own and run other companies in Singapore. The parent company itself doesn’t conduct any business activities. Rather, its sole purpose is acquiring interests from subsidiary companies in the form of shares.
The subsidiaries, on the other hand, proceed to operate just like regular Singapore companies. Then after all the business, their profits are proportionally channeled to the parent holding companies.
And that’s it. The concept is that simple. But then again, this whole arrangement begs the question, why the heck would anyone want to establish a holding company in Singapore? What difference does it make in the long run?
Well, let’s find out by exploring the main features you should expect from an SG holding company.
Why Choose A Holding Company In Singapore?
Main Features Of a Holding Company (Singapore)
- Flexible Structure: A holding company in Singapore has a flexible corporate structure that is not confined to a specific type of company. The Singapore Companies Act allows you to establish a holding company structure in whichever form you like.
That means you could have yours as either a public limited company, a private limited company, or a limited partnership. The choice is yours. We’ve even seen foreign organisations setting up Singapore holding companies as foundations that are limited by guarantee. So, in short, you could say it’s open sesame for everyone.
Besides having a flexible corporate structure, a holding company in Singapore may opt to specialise in different fields. There are investment holding companies, financial holding companies, and other fields as well.
- Limited Liability: A holding company is a distinct legal entity with its own separate liabilities. And the same applies to the accompanying subsidiary companies too. For instance, if a subsidiary company declares bankruptcy, there is no legal obligation for the holding company to pay its creditors.
Consequently, your holding company should protect not just the parent corporation, but also its shareholders from all forms of liability risks. The worst that could happen is failing to make a profit from the subsidiary companies. Otherwise, all the debts and liabilities incurred by the subsidiaries cannot be transferred to the parent holding company or its shareholders.
- Asset Ownership: Stakes in a subsidiary company are not the only thing a holding company can own. It can go ahead and freely acquire other forms of physical and virtual assets in not just Singapore, but also internationally.
And yes, that includes even real estate properties, as well as soft assets like trademarks, patents, and artwork. The list is endless.
- Subsidiary Control: The fundamental objective of establishing a holding company in Singapore is to invest in other companies. And once you subsequently put money in a subsidiary company, you should be able to gain a proportionate amount of equity in the form of shares.
Now that, in other words, translates to control. That means parent companies have a say in the board decisions of its subsidiary company. The parent company continues to manage the subsidiary company despite being recognised as a separate entity. This, of course, is the same case for any wholly-owned subsidiary.
It’s worth noting, however, that even with such control privileges, holding corporations are never part of the day-to-day management of their secondary companies. So, you might want to drop the idea of taking charge of your subsidiary company operations.
- Business Returns: In the end, a Singapore holding company is expected to generate capital gains from its subsidiaries. And the good thing is, neither ACRA nor IRAS caps the amount of corporate profits you can make.
The subsidiary companies are free to channel their profits directly to their parent holding companies. Hence, a single holding company in SG could comfortably generate business returns from multiple subsidiaries at the same time.
- No Business Activities: An SG holding company is more or less a dormant corporation. All you can do with one is trading assets or shares, and then perhaps proceed to control the acquired subsidiaries. That’s as far as you can go.
So, in case you’re wondering, the answer is no. Your parent company won’t be able to conduct regular business activities.
- Company Ownership: While the Accounting and Corporate Regulatory Authority (ACRA) essentially treats holding companies like domestic entities, it doesn’t lock out foreigners from the registration process.
Both locals and foreigners can go ahead and establish a holding company in SG. Then once the company is up and running, they can as well establish domestic subsidiaries. Singapore, in fact, is an ideal location for foreign investors as the country is open to foreigners.
- Corporate Tax: The Inland Revenue Authority of Singapore (IRAS) subjects every single holding company to the standard corporate tax laws. But, don’t be alarmed. With time, you’ll notice that Singapore’s business taxation comes with numerous tax benefits, and oftentime, even asset protection.
You can, for instance, expect a corporate income tax rate of not more than 17%. Then to top it off, Singapore offers a range of supplementary tax incentives to its holding companies, which could cumulatively save you a significant amount of money over the long haul.
There is also a 0% withholding tax for dividends, and Singapore does not have any capital gains tax. These tax incentives are meant to attract investors and entrepreneurs into the country with minimal to no tax obligations.
- Corporate Compliance: By virtue of being either a limited liability company or a partnership entity, a holding company won’t save you from Singapore’s corporate compliance obligations. The relevant agencies and government bodies will expect you to comply with a variety of short-term and long-term requirements without fail.
If you choose to incorporate a holding company in the form of a Singapore LLC, for example, ACRA will be checking to ensure that you appoint a company secretary and a company auditor in due time. Plus, you’ll be required to hold AGM meetings, file corporate returns, apply for business licenses, etc.
On a brighter note though, at least Singapore has been considerate enough to shield holding companies from some of the complex processes. If you’re dealing with a finance-based holding company, for instance, you could make compliance much easier by capitalizing on Singapore’s Financial Holding Companies Act.
Now, having said all that, there’s no denying that there are multiple factors here that favorably set holding companies apart from the rest of the corporations. You can think of them as the core benefits that invariably convince even foreign businesses to establish a holding company in Singapore.
Pros And Benefits Of A Holding Company In Singapore
- Holding companies in Singapore are free to take up as many subsidiary companies as they wish. ACRA doesn’t apply any limits.
- The Singapore Companies Act allows holding companies to own not just corporate shares, but also other forms of virtual and physical assets. That means they can purchase and sell off real estate, stocks, trademarks, patents, etc.
- A Singapore holding company comes with limited liabilities. The entire company plus its assets and shareholders are protected from all the liabilities incurred by subsidiaries. Hence, even debts cannot possibly be recovered from parent companies.
- Holding companies in Singapore have control rights over their subsidiaries. They can make board decisions and coordinate administrative duties.
- Both foreigners and locals can comfortably establish a holding company in SG. What’s more, ACRA allows them to register even the corresponding subsidiaries.
- Setting up a holding company in SG automatically grants you a range of corporate tax exemptions and incentives. Corporate income tax, for example, doesn’t go beyond 17%. Plus, IRAS exempts foreign inventors from paying taxes on their dividend earnings.
- A holding company can freely generate income from multiple subsidiary companies at the same time.
- Singapore has been generous enough to make the compliance process much simpler for some of the holding companies. Financial corporations, for instance, can count on the Financial Holding Companies Act.
- The stakes in a holding company can be traded freely between outgoing and incoming parties. This keeps the business running even after its original founders have exited.
- Once you establish a holding company in SG, you can deduct some of the general expenses based on the businesses you choose to venture into. These include regulatory expenses, statutory expenses, as well as direct and indirect expenses.
- A holding company allows you to consolidate and centralize the control of multiple business ventures.
Unfortunately, it’s not all good news. A Singapore holding company also happens to come with its fair share of challenges. Some of the primary drawbacks you can expect along the way include:
What Are The Challenges Of A Holding Company In Singapore?
- Running business operations through subsidiaries complicates the whole administration structure. So, eventually, holding companies are forced to control their business ventures indirectly.
- A holding company can only influence the major board decisions in its subsidiaries. It can’t closely manage the day-to-day operations that come thereafter.
- A Singapore holding company does not have the privilege of conducting business activities. You can only rely on subsidiary companies.
- Holding companies largely favor the interests of major shareholders. The minor shareholders, on the other hand, often have trouble following up on the intricate network of subsidiaries.
- Because of the multiple levels of administration between holding companies and their subsidiaries, bureaucracy bottlenecks are pretty common.
- When the subsidiary business operations are not completely clear, it becomes difficult for the market to establish the true value of a holding company’s shares. Consequently, the share price might be overestimated or underestimated.
- Keeping up with all the standard compliance requirements can be very exhausting over the long haul.
- Holding companies are rarely credited for the exemplary performance of their subsidiary companies.
Is A Singaporean Holding Company Right For You?
And there you have it. All the principal features, plus the benefits and challenges that come with holding companies in Singapore. You should now have a good idea of the type of stuff you should expect along the way.
What might not be clear, however, is the question of setting up a holding company in SG. Would you say that you’ve finally made up your mind about the whole issue? Is a Singapore holding company worth pursuing or not?
Well, based on our experience with foreign and local business-people, it turns out that these revelations could also complicate your decision-making process. Think about it. There is now quite an overwhelming number of factors to consider, and the whole process becomes even more challenging when you further compare holding companies with other types of corporations in Singapore.
So, how exactly can you decisively make up your mind about setting up a holding company in SG?
Admittedly, there are many different ways of approaching this issue. But, all things considered, we’d particularly advise you to prioritize the basics. That, in other words, means reviewing the most important features of a Singapore holding company while taking into account all the objectives you intend to achieve with your company.
Here are a couple of critical questions to help you with that:
- Is Your Business Domestic or Foreign-Based?
Holding companies and subsidiaries are typically associated with foreign-based enterprises which, unlike domestic businesses, don’t have the privilege of setting up plain companies in Singapore.
So, they are forced to stick with holding companies, subsidiaries, branch offices, and representative businesses.
- How Many Businesses Are You Planning To Venture Into?
Singapore holding companies are particularly ideal for parent corporations that are seeking to venture into a wide range of businesses. Subsidiaries make it easier for them to capitalize on multiple companies simultaneously.
- Are You Planning To Acquire and Transfer Assets In Singapore?
If you’re a foreigner, it becomes conveniently easy to acquire and transfer assets in Singapore through a holding company. Such corporations can register and own both physical and virtual assets, just like Singapore citizens.
You could also cleverly leverage a holding company for intergenerational asset transfers. The trick is to consolidate an expansive estate and subsequently transfer it as a single unit. This alone should attract solid tax deferrals.
- Are You Engaging In High-Risk Business Operations?
Setting up a holding company in SG gives you the chance to distribute business risks between several subsidiaries. And, in the end, you even get to protect the parent company from the possible liabilities.
- Is Your Business Expanding or Starting From Scratch?
While startups tend to have a difficult time coordinating multiple subsidiaries at the same time, the whole process should, contrastingly, be a breeze for large established multinationals. Subsidiary companies provide a perfect breeding ground for deploying supplementary entities and expanding business operations.
- Are You Seeking To Keep Some Of Your Business Activities Discrete?
By placing parent companies at the background of their subsidiaries, holding companies provide a great deal of confidentiality. Corporations can, for example, discretely conduct market trials through proxies without directly revealing the primary brand names.
- Is Your Corporation a Multinational That Pays Taxes To Different Countries?
While Singapore-based corporations can go ahead and set up holding companies, multinationals are the prime targets here. They get to launch new bases in Singapore while taking advantage of the Double Taxation Agreements (DTAs) between IRAS and dozens of countries.
This alone insulates holding companies from cases of double taxation across international territories.
Now, for the sake of clarity, let’s assume that after analyzing all these factors, you’ve ultimately discovered that a Singapore holding company is indeed the best fit for you.
So, where do you even begin the process of setting up the company? What documents do you need to incorporate a holding company in SG?
How To Set Up A Holding Company In Singapore
Documents And Requirements For Setting a Holding Company In Company
Now, for starters, you need to prepare the following before proceeding to the main incorporation procedure,
- Company constitution (otherwise popularly known as the Memorandum and Articles of Association).
- A unique company name.
- Proof of the company’s registered business address.
- A detailed statement on the breakdown and allocation of the company shares.
- Particulars of the company’s directors and shareholders.
Once you have all that ready, you should then conduct an appraisal of the proposed company to ascertain that it meets the basic requirements. It should have:
- At least one shareholder, who can be an individual or corporate entity.
- At least one director, who should be a Singapore resident.
- A registered local address.
- A company constitution.
- A minimum paid-up capital of S$1
- A company secretary, who should be a Singapore resident.
If everything is in order, you can happily move on to the main act. This is the part where we ultimately embark on the application for setting up a holding company in SG.
Step By Step Procedure Of Setting Up A Singapore Holding Company
- Name registration comes way before the holding company incorporation procedure. So, you might want to begin by securing yourself a perfect but unique name for your Singapore holding company, and then have it approved by ACRA.
Now, to get started, make your way to ACRA’s BizFile+ portal and fill in the business name registration form. This procedure will cost you S$15 and, if everything checks out, you’ll receive an approval within an hour or so. That means CRA will reserve the name for 60 days.
- With the name, you can now kick-start the holding company registration process from the same website. Choose the primary company type you’d want, combine that with the holding company option, and then fill in all the fields accordingly. BizFile will request your company’s details, as well as its accompanying support documents.
The application fee here ranges between S$300 and S$1,200 for foreigners, while locals get a much cheaper rate of S$50 to S$600.
- Luckily for you, ACRA is very efficient when it comes to company registration and incorporation in Singapore. As long as you meet the minimum requirements, you should count on incorporating your Singapore holding company in about 2-3 days. ACRA will send the confirmation via email, along with the holding company’s registration number.
This is not just any random number though. Rather, you can think of the digits as your company’s official Unique Entity Number (UEN), as well as the virtual version of the certificate of incorporation. You’ll need it as you open a corporate bank account, sign lease documents, and file your compliance documents.
Meanwhile, if you fancy a hardcopy version of the certificate of incorporation, you can request one from ACRA for S$50. You might also want to throw in a company business profile but at a small fee of course.
What Should You Do After Setting Up A Holding Company In Singapore?
Now, this is the point where we congratulate you for incorporating a holding company in Singapore. You’ve officially joined the bandwagon of the world’s most elite businesses.
But, while you let that sink in, we have some other news for you. Although the hard part’s over, the process of setting up a Singapore holding company is not done yet. There are still a couple more requirements you need to comply with after registering the holding company.
- Appointing a holding company auditor within 3 months of incorporation.
- Appointing a holding company secretary within 6 months of incorporation.
- Opening a corporate bank account with one of the many local or foreign banks based in Singapore.
- Holding the holding company’s first Annual General Meeting (AGM) along with all the stakeholders within 18 months of incorporation.
- Filing the holding company’s annual returns within 30 days of the AGM.
- Filing corporate tax by the 30th of November.
- Setting up the accompanying subsidiary companies in Singapore.
And the list goes on and on, with the specifics changing from one company type to another.
Where To Start
If you’ve made it this far, there’s no doubt in our minds that you’re indeed an ambitious businessperson who’s pretty serious about setting up a Singapore company — to be specific, a holding company. Hence, we’re quite confident that you’ll have an easy time using our guide to follow through with incorporation.
But, get this — the whole process of setting up a holding company can be much simpler. ACRA advises all types of businesses, including multi-nationals, to let specialised corporate services firm like WealthBridge handle everything on their behalf. In this case, setting up your own holding company.
Yes, that’s right. You can bet we know pretty much every trick in the book of holding company creation, business incorporation and Singapore company compliance. We’ve served countless companies over the years, and are more than capable of assisting you with your paperwork.