SingaporeSetup.com Identifies Top Reasons Why Foreign Companies Prefer to Setup a Subsidiary Company in Singapore

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According to analysis done by SingaporeSetup.com, a subsidiary company is the most preferred vehicle among foreign companies that wish to conduct business from Singapore.

Singapore Subsidiary Company

Foreign companies want to maximize the benefits Singapore has to offer and a subsidiary company is the preferred type of incorporation entity for most small to mid-size businesses.

A recent analysis done by http://www.SingaporeSetup.com- a leading business setup information portal, has identified key reasons why a Singapore subsidiary is the preferred incorporation entity among the three incorporation choices available to foreign companies.

Singapore's commercial system allows for various types of entities to be setup for the purpose of conducting business in Singapore. Foreign companies are allowed to pick from three types namely a Singapore branch office, Singapore subsidiary company, or a Singapore representative office. According to the analysis done by SingaporeSetup.com, a subsidiary company is the most preferred vehicle among foreign companies that wish to conduct business from Singapore. The top reasons for choosing to incorporate a subsidiary company include:

#1: Separate Legal Entity. A subsidiary company is a locally incorporated limited entity. 100% foreign ownership is allowed in a subsidiary company, which is rendered a separate legal identity from that of the foreign parent company. Owing to its distinctive legal persona, its debts and liabilities cannot hold the foreign company accountable, thus offering complete security to the assets and capital of the foreign company. Even if the foreign company is the sole shareholder of the subsidiary company, its liability is still limited only up to the subscribed share capital.

#2: Flexibility in Scope of Business Activities. The subsidiary is locally controlled as the regulations require a locally resident Board of Directors. This enables greater control and flexibility to the subsidiary and as a distinct entity it can pursue business interests that diverge from the parent company's scope of activities. Ownership is transferable and additional shareholders can be appointed thus enabling additional capital injection for expansion purposes. This facilitates easy acquisition and mergers with interested partners locally.

#3: Tax Benefits. A subsidiary company is deemed as a local resident; therefore subjected to the local tax regime. Singapore's tax rates are most competitive and companies are charged only 17% on taxable income. After all qualifying deductions and exemptions, the effective tax rate could be as low as 9% for the first three years after inception. Singapore follows a territorial tax policy therefore foreign sourced incomes are exempted from local taxes. As a resident, the Singapore subsidiary of a foreign company can also benefit from the various tax treaties that the country has signed with other tax jurisdictions.

#4: Access to Local Incentives and Funding Schemes. A subsidiary, being deemed a resident, can also enjoy the innumerous benefits that arise from the trade pacts that the country has signed with its trading partners. Apart from trading privileges, as a resident, the company can also avail the benefits of financial incentives and funding schemes declared by the government. Moreover, a locally registered company reflects the long term commitment of the company to Singapore thus easing the potential of raising capital locally.

#5: Less Compliance Requirements. The ongoing compliance requirements of a subsidiary company also has less complications and does not involve the parent company's financial statements and audited reports. This provides substantial confidentiality to the foreign company and also relieves it from the hassles of unwanted paper work. It is more of a stand-alone entity which packs maximum benefits.

Commenting on the findings of the analysis, Ms. Catherine Lee - a senior editorial board member of the SingaporeSetup.com site said “Singapore is evolving as the most preferred destination for foreign companies to house their Asian ventures. This preference is attributable to the open economic policies, transparent commercial regulatory framework, competitive tax regime and the world class infrastructure that is accentuated by a competent and formidable workforce. Foreign companies want to maximize the benefits Singapore has to offer and a subsidiary company is the preferred type of incorporation entity for most small to mid-size businesses”.

More information about foreign company registration in Singapore can be found at http://www.SingaporeSetup.com.

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Manish Ghosh
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