Differences Between a Subsidiary and Branch Office in Singapore
2 min Read
A subsidiary company or a branch office in Singapore are two common options available to foreign companies wishing to establish their presence here. This quick guide compares the two business entities to help foreign companies decide on the best structure for their particular needs.
What is a Singapore Subsidiary?
A subsidiary is usually formed as a local private limited company, fully owned by the parent company as the sole shareholder (usually with a name ending in ‘Pte. Ltd’). This business entity is typically the best choice for small to medium-sized foreign companies.
With a subsidiary, you can conduct your business as a separate legal entity, limit your liability, and enjoy asset protection by the company. In addition, Singapore subsidiaries can qualify as local taxpayers, opening access to attractive tax incentive schemes, including a three-year partial Singapore tax exemption for new companies (depending on your business activity).
Business activities
A subsidiary company is allowed to carry out business activities that are different from that of its parent company.
Annual compliance
Singapore subsidiaries must prepare a set of financial statements and submit it in XBRL format when filing their annual return with the Accounting and Corporate Regulatory Authority (ACRA).
Documents required to register a subsidiary
- Parent company’s certificate of incorporation
- A copy from the Registrar of Companies that shows the current registered address and directors of the parent company
- A resolution that authorizes an individual to sign necessary documents on behalf of the parent company
- Passport particulars and residential address details of individuals who will act as the directors of the subsidiary company
- A signed Consent to Act as Director (by each director)
- Registered address details of the subsidiary company
- Constitution for the Singapore subsidiary company
What is a Singapore Branch Office?
A branch office is considered an extension of its foreign parent company that has been registered overseas. Since it is a non-resident company, hence it is not eligible for tax incentives and exemptions in Singapore. A branch office is different from a representative office because the company name of a branch office has to be the same as that of the parent company. Besides, a branch office can hire any number of local or foreign staff, while a representative office can only hire a maximum of five employees.
Business activities
The business activities of a branch office must be in line with its parent company, meaning that it should not be different. It can also generate commercial income aligned with the parent company, but some of its profits are subject to local corporate taxes.
Annual compliance
If you own a branch office in Singapore, you must submit annual audited financial statements of the branch office and the parent company.
Documents required to register a branch office
- Copy of the foreign company’s certificate of incorporation
- Copy of the foreign company’s constitution
- Particulars of the directors of the foreign company
- A memorandum of appointment and details of at least one person resident in Singapore (who can act as the authorized representative)
- A memorandum executed by/or behalf of the foreign company that states the powers of the local authorized representative
- Registered address details in Singapore
- Latest audited financial statements of the parent company
Comparison Between a Subsidiary and Branch Office in Singapore
The table below shows a comparison of some of the critical features of the two entity types:
| Comparison Factor | Subsidiary | Branch Office |
| Legal Type | Separate legal entity distinct from its parent company | Not a separate legal entity, but an extension of the parent company |
| Liabilities | The parent company can limit liabilities to the subsidiary | Liabilities incurred by the branch office extend to the parent company |
| Company Name | Can be the same or different from parent company | Must be the same name as the parent company and sign contracts under the parent company name |
| Annual Compliance | Must prepare and submit financial statements in XBRL format when filing an annual return with ACRA | Both parent company and branch office’s financial statements are required to be filed |
| Business Activity | Can be different from the parent company | Limited to the same range of activities as the parent company |
| Validity Period | Perpetually until deregistered | Perpetually until deregistered |
| Taxation | Taxed a flat corporate tax rate of 17% as Singapore resident entity, local tax benefits available | Taxed as a non-resident entity, local tax benefits are not available |
| Constitution | The company adopts its own constitution. | The shareholders, structure of the company, and its activities are directed by the foreign company’s constitution (no separate constitution for the branch office) |
| Paid-up Capital | Minimum $1 (at 1 ordinary share) | Not required |
| Staff Employment | Can hire any number of local or foreign staff | Apart from the chief representative, a maximum of 5 employees can be hired |
| Appointment of Officers: | At least 1 local resident Director & Company Secretary | At least 1authorizedd representative |
| Bank Account | Can open a bank account in Singapore | Can open a new corporate bank account in Singapore or use the same bank account as the parent company |
Conclusion
As you can see from this brief overview, when a foreign company wishes to do business in Singapore, it is important to clarify which type of entity to choose before registering the company. Understanding the comparison between a subsidiary and a branch company will help you avoid unwanted and costly surprises. If you need more help choosing a business structure that works for you or incorporating it in Singapore, please contact us. We will be more than happy to assist you.
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