foreign sourced dividend, foreign branch profits, and foreign sourced service income of a subsidiary is exempted from taxation
Singapore (PRWEB) September 23, 2014
The subsidiary-parent business structure, commonly used by companies the world-over, has many advantages. As subsidiaries are distinct legal entities, the structure limits the legal liability the parent company has in case the subsidiary fails. In Singapore, the additional major benefit is the many tax soaps that subsidiaries enjoy by virtue of being treated as a local tax-resident by the Inland Revenue Authority of Singapore. A new guide on how to incorporate a Singapore subsidiary company by Asiabiz details these benefits as well as the entire incorporating procedure.
Forming a Singapore subsidiary is advantageous for the parent company because the country's law allow a subsidiary to repatriate its entire profits and capital abroad. Singapore also allows 100 percent foreign shareholding in a subsidiary incorporated under its Companies Act.
“Also, according to the Singapore laws, the subsidiary’s name can be different from that of the parent company, it can match its fiscal year to the parent company to streamline the group's global operations, and can have paid-up capital in the same currency as its parent company to make the accounting procedure easier,” noted Mr. James Nuben, head of taxation at AsiaBiz.
Importantly, a Singapore subsidiary is also given tax exemptions on its foreign sourced income.
“Foreign sourced dividend, foreign branch profits, and foreign sourced service income of a subsidiary is exempted from taxation, but only if the headline corporate tax rate in the foreign country from which the income is received is at least 15 percent, and the income had already been subjected to taxes in that particular country,” explained Nuben.
In addition, subsidiaries in Singapore enjoy the benefits inherent in the subsidiary-parent business structure world-wide.
These include allowing the parent company to raise capital via stock markets for future expansion without putting the parent company's stocks at risk. The structure also helps in keeping the brand identities separate for both the entities if the business activities of a subsidiary are different from its parent company.
“Moreover, the parent company by incorporating a subsidiary can choose to retain some of its business activities as private because not all business operations are suitable for public disclosure,” added Mr. Nuben.
The guide, in separate sections, describes the subsidiary incorporating procedure in Singapore and how to apply for work visas of the foreign staff. Advises on fulfilling every statutory corporate compliance requirement and taking advantage of government tax exemptions schemes such as Corporate Income Tax (CIT) rebate and the Start-up Tax Exemption (SUTE) Scheme are other notables features of the guide.
The final section of the guide explains what, according to the Singapore Companies Act, will happen to the subsidiary in Singapore if its parent company becomes insolvent.
“The effect on the subsidiary is determined by the level of insolvency of the parent company. If the parent company cannot pay its dues and has not sought protection under the bankruptcy laws, selling the stock of its subsidiaries to repay the debts of the parent company is an option.” concluded Mr. Nuben.
To view the full guide please click http://www.asiabiz.sg/how-to/incorporate/singapore-subsidiary-company/
Asiabiz is a Singapore-based consultancy offering business solutions for both local and foreign professionals, investors and entrepreneurs. Our areas of expertise include company incorporation, offshore company set-up, accounting, taxation and other related corporate services. Asiabiz also provides work visa and immigration services to foreign professionals wishing to relocate to Singapore.
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