Singapore has a positive reputation as one of the global business hubs in Asia, and as such, Singapore continues to attract foreign companies in hordes. Many companies and corporations operate in the country through a subsidiary, or a wholly-owned subsidiary.
Okay, of course, a foreign company could alternatively choose to operate a representative office or a branch office. But, as it turns out, most of the foreign companies in Singapore choose to proceed with a subsidiary corporation.
In this article, we'll explain what a subsidiary company means in Singapore, plus the benefits that come with it. You also get to learn how to set up a subsidiary company in Singapore, as well as all the requirements you need to comply with during and after the incorporation process.
What is a Subsidiary Company?
A subsidiary is essentially a company within a company. The Singapore Companies Act describes it as a company that is largely controlled by another company, and for that to occur, the parent company has to own at least 51% of the shares or take up the bulk of the board of directors’ positions.
A subsidiary is not a distinctly independent category. Rather, subsidiary registration in Singapore is only possible if you choose to have it as a public or a Pte Ltd. The parent company's liability is also limited to the amount of capital invested in the subsidiary, and the subsidiary is considered a separate business entity from its parent company.
Singapore doesn’t limit the amount of stake the parent company can own. That means your corporation will be free to own even 100% of the shares. A corporation has the right to fully own their subsidiary. This is called a wholly-owned subsidiary company, or when the subsidiary is 100% owned by their parent corporation, and acts on behalf of the parent company, but may still be considered a separate legal entity.
What’s more, the act allows both local and foreign entities to set up a subsidiary company in Singapore. And when it comes to that, the Accounting and Corporate Regulatory Authority (ACRA) is the body that reviews incorporation applications, registers subsidiary companies, and audits their compliance status over the long haul.
Why Set Up a Subsidiary Company in Singapore?
Main Features of a Singapore Subsidiary Company
- Controlled by Parent Company: A Singapore subsidiary company only gets to retain its status in the country if the parent company persistently maintains at least 51% ownership. The parent company must be the majority shareholder of the subsidiary or local company.
And, while the parent company could as well retain all the shares, subsidiary companies are open to third-party minority shareholders. Even individuals could take up shares in a subsidiary company that is owned and ran by a foreign corporation.
- Limited Liability: By virtue of being either a public limited company or a private limited company, a Singapore subsidiary company automatically comes with liability restrictions.
That means the company is incorporated as an autonomous entity that exists separately from the parent company. Any liabilities arising from the subsidiary’s operations cannot be transferred to the parent company. Not even its debts.
Hence, setting up a subsidiary in Singapore should protect your primary corporation and its assets from all forms of liability disputes.
- Property Ownership: In terms of liabilities and assets, it just so happens that subsidiary companies in Singapore get the privilege of taking up property ownership. Once you set up a subsidiary company, you can purchase, register, and dispose of property under its name.
This applies to real estate as well, which is why foreign corporations manage to acquire and sell buildings in Singapore.
- Local Resident Status: By setting up a Singapore subsidiary company, your newly registered company automatically acquires the much-coveted local resident status. And that alone entitles the subsidiary to a whole range of corporate benefits.
As a local resident company in Singapore, for instance, your subsidiary won’t be subjected to foreign business tax rates. Instead, the Inland Revenue Authority of Singapore (IRAS) will apply the standard corporate tax benefits for domestic companies.
So, you can expect a tax rate of not more than 17% on your corporate income, plus a variety of tax exemptions.
- Paid-Up Capital: Don’t let your limited startup capital discourage you from setting up a Singapore subsidiary company. ACRA allows you to proceed with a paid-up capital of as low as S$1.
Then once you incorporate the company, you can expand its capital by trading some of its shares with investors. In fact, you can grow it as much as you like since ACRA is pretty flexible. It doesn’t apply a maximum limit to the paid-up capital.
- For-Profit Organization: Unlike companies limited by guarantee, a subsidiary company in Singapore is considered a for-profit organization. That means you’ll be free to engage in revenue-generation activities, and then share the subsequent spoils between all the shareholders based on their individual equities.
- Transfer of Company Ownership: Just like we’ve seen with regular public and private limited company’s, the ownership of subsidiary entities in Singapore is regulated by their share equity. In essence, the amount of stake and control you have in a subsidiary company is determined by the percentage of shares you acquire.
- Statutory Compliance: The downside to setting up a subsidiary company in Singapore is, it comes with all the standard corporate compliance requirements.
ACRA, for example, requires you to prepare and submit a company constitution during registration, accompanied by a valid company address, as well as a list of all the shareholders and directors. Then IRAS, on the other hand, expects you to adhere to all the tax laws plus the corresponding income filing schedules.
And that’s not all - following up on all the corporate compliance requirements in Singapore can get pretty overwhelming, especially if your subsidiary is not backed by a compliance specialist like WealthBridge.
Pros and Benefits of a Subsidiary Company in Singapore
All things considered, the upsides of subsidiary companies substantially overshadow the accompanying downsides. And, for the sake of clarity, here’s a summary of principal benefits you’ll be entitled to after setting up a subsidiary company in Singapore:
- Since a subsidiary company is an autonomous corporate entity that runs separately from its parent company, it remains solely responsible for all its liabilities. Even the debts it incurs along the way cannot be recovered from the parent company or any of its shareholders’ personal assets for that matter.
- Subsidiary companies in Singapore are eligible for a wide range of tax benefits and exemptions. The corporate income tax rate, for instance, falls between 4% and 17%.
- It gives foreign companies the privilege of incorporating in Singapore and subsequently running as local resident companies.
- You can proceed setting up a subsidiary company in Singapore with a paid-up capital of S$1.
- Even when external shareholders come in, the parent company retains ultimate control over the subsidiary or local company.
- It can hold, purchase, register, and dispose of property under its name. That includes even real estate property where the head office may or may not be located.
- You can choose to increase your subsidiary company’s capital through share trading.
- The ownership of a subsidiary or local company is flexible and can be transferred between parties through the trading of shares.
- By establishing a subsidiary company in Singapore, both domestic and foreign corporations get the chance to pursue other ventures under a different brand name.
- A subsidiary company in Singapore can either be a public limited company of a private limited entity. The choice is yours.
- The revenue generated by a subsidiary company can be directly repatriated to the parent company. However, the subsidiary's debts are not necessarily the responsibility of the parent corporation.
How to Set Up a Subsidiary Company in Singapore
Documents and Requirements for Setting Up a Subsidiary Company in Singapore
If a foreign company intends to incorporate a subsidiary in Singapore, the company has to satisfy the following fundamental requirements for the registration process. It should have:
- At least one elected or proposed director who resides in Singapore.
- A paid-up capital of at least S$1.
- A valid company physical address in Singapore.
- At least one shareholder, who should be the parent company.
- At least 51% ownership by the parent company.
- An explicitly-detailed company constitution.
- A registered company name.
Then the documents you’ll be expected to submit during subsidiary company incorporation are:
- The parent company’s certificate of incorporation.
- The subsidiary company’s constitution, which is also known as the Memorandum and Articles of association. It should state not only the company’s activities and operating rules, but also its administrative structure, as well as the interrelationships between its shareholders.
- A signed statement of each director consenting to act as the subsidiary’s director.
- Copies of the appointed directors’ identification documents.
- Proof of the appointed directors’ residential addresses.
- Proof of the subsidiary’s physical address.
- The personal details of the company’s secretary.
- A shareholder agreement.
It’s worth noting, however, that setting up a subsidiary company in Singapore is a multi-step process that starts with name registration, followed incorporation, and then the subsequent compliance procedures come last. Many foreign companies prefer to work with a corporate services firm in Singapore for assistance in filing these requirements and documentation.
Step-By-Step Procedure for Incorporating a Subsidiary Company in Singapore
Step 1: Reserve a Unique Name
First and foremost, you need to register a unique company name before you even begin registering a subsidiary company in Singapore. You can do this by filing an application directly with ACRA through its BizFile+ portal. The whole procedure will cost you S$15, after which ACRA will go ahead and reserve the business name for 60 days.
Step 2: Register the Company
As soon as the name is approved, you can proceed to kickstart the subsidiary incorporation process from the same BizFile+ website. For this procedure, however, you should go to “Start a New Business” and then pick the “Local Company” option.
This is where you get to specify the type of company you’d like to set up. So, you can go ahead and pick either a private limited company or public limited corporation, before supplementing that with the subsidiary option.
Step 3: Submit Necessary Details
On the portal, ACRA will also require you to submit the details of the parent company, plus the particulars of the subsidiary’s shareholders and directors. These should further be accompanied by the subsidiary’s company constitution, as well as its shareholder agreement, and physical address details.
Step 4: Pay the Fees
In the end, ACRA will charge you S$300 for incorporation, which when added to the initial business name registration fee pushes the combined cost of setting up a subsidiary company in Singapore to S$315.
Step 5: Wait For ACRA to Review Your Application
ACRA will review your application in about 1-2 days. And if everything checks out, you’ll receive a notification of the incorporation via email. The confirmation will also come with the official company registration number, which you could as well use as a virtual certificate of incorporation.
But, if you still insist, you can submit the request online. ACRA will then prepare a hardcopy of your subsidiary company incorporation certificate, which you can pick from its office on the next business day. This will cost you an extra S$50.
Otherwise, you could also submit an online request for your subsidiary’s company business profile. BizFile will charge you $16.50 for the service, but you should have the complete profile in PDF form within an hour or so.
What Should You Do After Incorporating a Subsidiary Company in Singapore?
At this point, you should have successfully incorporated your subsidiary! Incorporation is just the first part. There’s so much more to setting up and maintaining a subsidiary company in Singapore. ACRA, IRAS, and a couple of other government agencies expect your newly-registered subsidiary company to:
- Open a corporate bank account with one of the local or international banks based in Singapore.
- Appoint a company auditor within 3 months of incorporation.
- Appoint a company secretary within 6 months of incorporation.
- Apply for the relevant business licenses and permits, including employment passes for foreigners who wish to work in Singapore.
- Hold the first Annual General Meeting (AGM) within 18 months of incorporation, and thereafter have the meetings every year.
- File the company’s annual tax returns with IRAS by November 30th every year.
- File the company’s annual returns within 1 month of the AGM.
- Declare the Estimated Chargeable Income (ECI) within 3 months of the company’s financial year-end.
- Apply for relevant government incentives plus startup schemes in Singapore.
And so on and so forth. Your specific compliance requirements depend on the type of business you’ll be doing in Singapore, the corresponding corporate income, company size, mode of operation, etc.
Singapore Subsidiary Company FAQs
Should You Go To Singapore To Set Up a Subsidiary Company?
Thankfully, you don’t need to visit Singapore if you intend to set up a subsidiary company. The whole process is conveniently conducted on the web via ACRA’s BizFile+ portal. It provides tools for registering not only your business name, but also the accompanying subsidiary company.
Can You Open Your Subsidiary’s Corporate Bank Account From The Web?
While ACRA allows you to incorporate the subsidiary company online without ever setting foot in Singapore, your luck could eventually run out when it comes to the post-incorporation procedures like opening a corporate account.
Believe it or not, most Singapore banks do not facilitate remote account opening. You might have no choice but to send at least one company representative to an appropriate local bank. The bank may then conduct a physical interview before finally creating the corporate account.
Are Foreign Corporations Allowed To Own 100% of the Subsidiary Companies?
While the Singapore Companies Act requires both foreign and local parent companies to own at least 51% of their subsidiaries, it doesn’t limit the corresponding maximum equity. That means even foreign corporations can as well own 100% of their subsidiary companies.
Can A Subsidiary Company’s Earnings Be Carried Over To Its Parent Company?
Yes, of course. What you choose to do with your subsidiary company’s revenue is all up to you. The Singapore Companies Act gives you the freedom to share the profits between the company’s shareholders, including the parent corporation.
What’s The Tax Rate For Subsidiary Companies In Singapore?
Well, it depends. But, overall, IRAS uses pretty much the same tax policies it applies to domestic limited liability companies. And yes, that also includes the accompanying tax incentives
Therefore, in addition to various tax exemptions, you can expect to pay a corporate income tax rate of about 4.25% to 17%, depending on your company’s net income level.
Is a Subsidiary Company Protected From Its Parent Company’s Liabilities?
As we’ve established, parent companies are completely shielded from the debts and claims that arise from their subsidiary companies. A subsidiary company can become insolvent and file for bankruptcy without transferring its liabilities to the parent company.
However, and rather unfortunately, this privilege doesn’t apply both ways. And the reason is, subsidiary companies are owned by parent companies. That alone makes them assets, which could be liquidated to pay off their parent companies’ debts in case of insolvency.
How to Get Started
Having covered all the essentials, these guidelines should get you started on setting up a Singapore subsidiary company. And, in the long run, the whole process could take you months or weeks of following up on the compliance issues.
But, on the other hand, you could also fast-track everything and get your Singapore subsidiary company up and running in just a matter of days or hours. The trick here is to follow the same old route recommended by ACRA for a subsidiary, which entails working with company incorporation service providers like WealthBridge.
Yes, that’s right. We’ve done this for years. So, of course, you can bet our subsidiary experts know all the hacks for seamless company incorporation and compliance in Singapore.