Foreign companies that are planning to establish a business presence in Singapore may register a subsidiary company which is basically a private limited company with a foreign (or local) corporate entity as a major shareholder.

A Singapore subsidiary company, even if 100 percent owned by a foreign entity, is still eligible for tax exemption on its first S$100,000 chargeable income within three years of its incorporation. But to qualify for this exemption, a startup company should have at least one individual shareholder who has a minimum of 10 percent ownership.

In addition, this business model is also treated as a local resident which means that it can also enjoy the local tax benefits.

With the advantages in taxes, this business model is attracting thousands of foreign companies every year.

In addition, foreign companies enjoy limited liability protection in which they are not legally liable for the losses and debts of their subsidiary company which is treated as a separate legal entity.

Another advantage is that a subsidiary company is allowed to conduct any business activities, even if not performed by its parent company, as long as these are legal in Singapore.

These are the other advantages of setting up a Singapore subsidiary company: no requirement when it comes to the number of staff (both foreign and local residents), no limit on the total business spending, and no need to file the audited accounts of its parent company from abroad.

Requirements for Setting Up a Subsidiary Company

A Singapore subsidiary company is required to have a registered local office where it should keep all its statutory documents.

To legally operate in the country, it is a prerequisite to appoint at least one resident director who may be Singaporean citizen, permanent resident, or holder of Employment Pass. Meanwhile, it is important that all the appointed directors are at least 18 years old and have not been convicted with any malpractices.

It is also a requirement to appoint a Singapore resident as a qualified secretary within six months of incorporation, and an auditor within three months of company registration.

In case that a parent company is planning to relocate its foreign staff to Singapore, it should assist its employees during the application of Employment Pass which is a work visa for professionals and skilled employees with college education.

As a separate legal entity from its parent company, a Singapore subsidiary company must exercise its management and control in the country which means that local resident directors can enjoy greater freedom when it comes to making decisions for their business.

Meanwhile, aside from a subsidiary company, a foreign company may also register a representative office or Singapore branch office if it plans to have a presence in Singapore.