Advantages of setting up a Branch Office ?
Like a newly-incorporated Singapore subsidiary, a branch office allows the foreign company to continue carry on business in Singapore. This means that the foreign company will be entitled to generate profits within Singapore as well as to hold properties in Singapore.
Unlike a Singapore subsidiary, the branch office is treated as an extension of the foreign company rather than a separate legal entity i.e. the branch office will have the same name as that of the foreign company, and sign contracts under the foreign company’s name. This allows the branch office to leverage the foreign company’s brand to tender for contracts and obtain financing in Singapore.
The lack of separate legal entity status in a branch office brings with it several disadvantages. These include:
1. Lack of limited liability
The foreign company is held liable for any debts or contracts incurred by the branch office.
2. Non tax-resident
Unless the foreign company is controlled and managed in Singapore, the branch office will not be treated as a Singapore tax-resident. This means that it will not be eligible for any tax exemption scheme on the taxable profits it has earned since one of the qualifying conditions state that it must be tax resident in Singapore.
3. Limited range of activities:
The branch office cannot carry out any activities which the foreign company cannot do. For example, if the foreign company’s constitution/charter/by-laws restrict it to certain activities, the branch office is likewise restricted to such activities.
Nevertheless, a branch office may be useful for a foreign company for establishing its initial operations in Singapore. This is because, it allows the foreign company to contract under its own name and leverage its existing reputation, as mentioned above.
How to Set Up a Branch Office in Singapore
Registration of branch offices in Singapore is done online via the BizFile+ portal managed by the Accounting and Corporate Regulatory Authority (ACRA).
A name application fee of S$15 and registration fee of S$300 will be charged on each application.
However, foreign companies may need to engage a registered filing agent in Singapore to assist with and submit the registration on their behalf, which may incur additional service fees.
The filing agent must generally be provided with the following documents or information for submission to ACRA:
- Name and registered office of the foreign company in its place of incorporation
- Certified copy of the foreign company’s certificate of incorporation
- Certified copy of the foreign company’s constitution/charter/by-laws
- Notice of the foreign company’s registration number, business description and legal entity type
- Particulars of the foreign company’s directors
- Particulars of at least 1 Singapore resident who has been appointed to act as the branch company’s authorised representative
- Statement of consent from the branch company’s authorised representative who has consented to their appointment
- Particulars and opening hours of the branch office in Singapore
- The latest audited financial statements of the foreign company (if this is required under the laws of the place of incorporation)
In addition to the above, the filing agent may have its own documentary or procedural requirements for you to comply with.
Registration is generally processed within 3 working days of submission on BizFile+ unless the application needs to be referred to a separate government agency for approval.
For instance, a foreign company intending to open a branch office to provide medical services in Singapore will be referred to the Ministry of Health for its approval. A list of industries where such approval is required may be found here.
Who can hold shares in the branch office?
Since a branch office is considered a simple extension of the foreign company, there are no separate set of shareholders. In other words, the foreign company owns 100% of the Singapore branch office and there cannot be any other shareholders.
What Should I Do After Setting Up a Branch Office?
Once successfully approved and registered, the branch office may commence business in Singapore. However, it may still be required to apply for licences before it can carry out certain business activities, such as the operation of a restaurant. Most licences can be applied for through the one-stop government LicenceOne portal.
The branch office may also need to apply for the relevant employment passes or permits if they wish to transfer foreign employees to work in Singapore. Information on the different types of employment passes or permits may be found on the MOM website.
The branch office also has the choice of setting up a new corporate bank account in Singapore or to use the same accounts as the foreign company.
However, please note that the foreign company must comply with ongoing regulatory requirements such as filing its financial statements with ACRA as well as the audited financial statements of its Singapore branch office. It is therefore recommended that a separate corporate bank account be set up for the branch office.
Do you need to come to Singapore to apply to set up a branch office?
There is no need to come to Singapore to set up a branch office since all registration is done online on BizFile+. Many filing agents in Singapore also offer incorporation services online or through email.
However, you may need to visit Singapore to set up a corporate bank account since most banks in Singapore will require a physical interview with the company’s directors or shareholders.
Must the branch office register for corporate tax?
A branch office is automatically registered with the Inland Revenue Authority of Singapore (IRAS) for corporate tax purposes upon its incorporation with ACRA.
However, it needs to register separately for Goods and Services Tax (GST) with IRAS if its annual turnover exceeds S$1 million.
What is the tax rate for branch offices?
All companies (including branch offices) are subject to a flat corporate tax rate of 17% on taxable income.
Where the company’s taxable annual turnover exceeds S$1 million, it is also subject to 7% GST on most goods and services supplied.
Can the profits of the branch office be repatriated to the foreign company?
Singapore does not have any significant restrictions on remittances or capital movements (i.e. flow of funds in and out of Singapore). Since the branch office is considered an extension of the foreign company, it is generally free to remit or reallocate profits and capital to the foreign company.
Setting up a branch office in Singapore is a simple and straightforward process. It therefore remains an attractive option for foreign companies seeking to set up operations in Singapore.
Procedure to close a Branch Office
A branch office can be closed by notifying ACRA if the foreign company has ceased to have a place of business, or carry on business in Singapore, within 7 days of such cessation. This includes situations where the foreign company has been dissolved or goes into liquidation in its place of incorporation or origin.
The authorized representative of the branch office may alternatively apply to ACRA for the branch office to be struck off the register in the following situations:
- The sole authorized representative wishes to resign but is unable to because the foreign company has failed to respond or appoint a different authorised representative within 12 months from the date of his notice of resignation.
- The sole authorized representative has requested for instructions on whether to close the branch office but the foreign office failed to provide such instructions within 12 months after the date of the request.
If there are no authorized representative, the application of striking off will be filed by the registered filing agent.
Contact Us
Please contact us if you require our help in setting up a branch office for your company.