Singapore Subsidiary Company: Greater Freedom In Conducting Business
While there are several business structures a foreign company can adopt in Singapore
, most business registration firms believe that a subsidiary company is the most ideal as it enjoys greater freedom in conducting business and commercial activities.Because a Singapore subsidiary company is treated as a separate entity from its parent company, it can engage in any business activities including those which are not performed by its main headquarter. With this advantage, it can explore other potential markets which may result to bigger profits.
Another advantage of being considered as two separate entities, foreign companies enjoy limited liability which means that they are protected from the claims, lawsuits, acts, and financial losses of their subsidiary company.
Under the Singapore Companies Act, a subsidiary company is considered a tax resident which makes it eligible for all the tax exemptions and incentives.
(Note: A subsidiary can be wholly owned by a foreign company or have a maximum of 50 shareholders who may be a natural citizen or foreign businessman.)
But to be considered as a tax resident, a subsidiary company should meet these two important requirements: its management and control is exercised locally, and at least one shareholder owns a minimum of 10 percent ownership OR all the individual shareholders have their shareholdings under their names.
Once these requirements have been satisfied, a subsidiary company can enjoy Zero Tax and 50 percent tax break on its first S$100,000 and S$200,000 chargeable income, respectively, within three years of its incorporation in Singapore.
In addition, a subsidiary will enjoy the corporate tax rate just like any private limited companies in Singapore.
Meanwhile, certain industries provide reduced corporate tax rates as long as a subsidiary company operate in one of these following industries: oil trader, cyber trader, securities and insurance, offshore leasing, international commodity trader, arts and antique dealer, Asian currency unit, finance and treasury, just to name a few.
To further encourage companies to invest in projects relating to research and development, the government is also providing tax deductions to businesses that are investing in such projects that aim to maximize work productivity.
While setting up a subsidiary is relatively easy for most foreign companies especially those with a good track record and reputation, they can only operate in Singapore if they will appoint a resident director who may be a natural resident or holder of Employment Pass, EntrePass, Dependant Pass, or PR Status.
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