Singapore Subsidiary Company Information

By Author: Bryan Dickens
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Most business registration specialists in Singapore believe that a subsidiary company is the most ideal setup for foreign companies planning to operate in the country as it provides countless of advantages especially in terms of taxes.

Essentially, a subsidiary company is a private limited company with a foreign corporate entity as its major shareholder instead of a local business organization. But still, this business structure is considered as a local tax resident since it is incorporated in the country.

Being a tax resident, a subsidiary company—even if 100 percent owned by a foreign business entity—is eligible for all the local tax benefits and exemptions.

(Note: While a subsidiary can be owned 100 percent by its foreign parent company, it can have up to 50 shareholders who may be a local resident or foreigner.)

Within three years of its incorporation, a subsidiary company enjoys Zero Tax on its first S$100,000 chargeable income and another 50 percent tax break on its succeeding S$200,000. But to qualify for these tax exemptions, this company should have one individual shareholder ...
... who owns a minimum of 10 percent shareholding and should practice its management and control in Singapore.

While the Singapore government has not explicitly defined management and control, most experts believe that it pertains to the level of authority enjoyed by board of directors rather than the day-to-day operation of a company.

Legally speaking, a subsidiary is a separate entity from its main headquarter, and as a result, the latter is not liable for the financial losses, debts, acts, and lawsuits of its Singapore-based company.

With this arrangement, many corporate lawyers believe that a Singapore subsidiary registration is particularly ideal to foreign companies operating in a highly speculative but still promising industry.

When it comes to confidentiality, foreign companies also enjoy another advantage since they are only required to submit the audited accounts of their subsidiary company and not the main headquarter's. This is not the case of having a branch office, another structure for foreign companies, since it is required to submit even the financial reports of its main headquarter—an arrangement in which most foreign businessmen are not comfortable with.

Because of the advantages of having a subsidiary company, most business registration specialists recommend this particular structure to foreign companies and entrepreneurs, especially to those who have a long-term business plan in the country and want to enjoy greater freedom in conducting business.