For foreign companies seeking to set up in Singapore, there are three optional business entities.
● Representative Office: A foreign company may establish a representative office in Singapore to undertake promotional and liaison activities on behalf of the parent company. A representative office in Singapore has no legal status and is not permitted to engage in business, conclude contracts. It is thus not liable for Singapore income taxes. A Representative Office in Singapore has very limited use since it cannot engage in any business activities other than promotional activities. A Representative Office is usually valid for one year and must re-apply for a continuation of its status after the expiry of the initial period of approval.
● Branch Office: A branch office is registered in Singapore as an extension of its parent company and not as a separately incorporated entity. The liabilities of a branch office extend to its parent company. It is considered a non- resident company for tax purposes. Hence, it is not eligible for tax incentives commonly available for new start-up resident companies.
● Subsidiary Company (private limited company): A subsidiary company is a private limited company incorporated in Singapore with the parent company as its shareholder. A Subsidiary Company is incorporated in Singapore as a limited liability company, which is a separate legal identity. The foreign company’s liability is limited to the value of the shares it subscribes into the subsidiary. The foreign parent company may own 100% of the subsidiary’s shares. The Subsidiary Company is also entitled to local tax incentives (e.g. newly incorporated companies pay zero tax on the first S$100,000 of chargeable income for the first 3 consecutive years). For small to medium-sized foreign businesses, a subsidiary company is the most preferred choice of registration in Singapore.