Setting Up A Company In Singapore: How To Choose Between A Private Limited vs. Branch

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Singapore is known around the world as one of the best places to set up a company - from great tax rates to strong infrastructure, IP protection and more, it’s hard to beat the benefits of operating here. There are a few considerations to be aware of when it comes to setting up in Singapore, particularly if you’re a foreigner planning to launch your business here - but not to worry, these are all things Accela’s Corporate Secretary team can easily guide you through!

Once you’ve decided you want to incorporate in Singapore, one of your next considerations will be how to set up your company. Two of the types we typically set up for our clients are known as Private Limited (“Companies”) and Branches. If you’re weighing up between the two or simply want to learn a bit more about the options, read on for our explanation of the differences, as well as the pros and cons.

Private Limited (“Companies”)

Any person above the age of 18, foreign or local, can register a Singapore company. There must be at least one person residing in Singapore (a Singapore citizen, a Singapore Permanent Resident, Employment Passholder or Dependent Passholder) appointed as director of the company. Directors must be at least 18 years old and cannot have been bankrupt or convicted of any malpractice. 

A Singapore private limited company can have anywhere from one to 50 shareholders; shareholders can either be a person or legal entity and can be 100% local or foreign. New shares can be issued or existing shares can be transferred to another person after the company has gone through the incorporation process. 

A local address is required in order to register a Singapore company, and it must be a physical address - not a P.O. box. This address can be commercial or residential as long as it is operational and accessible to the public during normal office hours.

One of the big benefits of a private company is that it is a separate legal entity from its owners, which means that owners are not personally liable for the company’s debts or any legal action taken against the company. For businesses with an aim to grow, we recommend incorporating as a private company as it offers significant benefits, including the relative ease of raising capital, ownership transferability and tax exemptions and incentives.

Branches

Foreign companies who plan to expand to Singapore can operate through a Singapore branch office, offshore company or can incorporate a new subsidiary company, among other methods.  A branch office allows the foreign company to operate in Singapore, which means the foreign company can generate profits under its original name from within Singapore. 

Unlike a Singapore subsidiary, a branch office is treated as an extension of the foreign company rather than a separate legal entity, which means that the branch will have the same name as that of the foreign company, and sign contracts under that name. This could be a benefit for well-recognised companies who want to leverage their brand for contracts and financing in Singapore. 

While there are advantages to a branch office, there are also several disadvantages to consider. If any debts or contracts are incurred by the branch office, the foreign company will be held liable. Additionally, the branch office will not be treated as a Singapore tax-resident, unless the foreign company is controlled and managed in Singapore. This means that it may not be eligible for tax exemption on the profits it has earned (learn more here in our guide to Singapore corporate income tax and exemptions). Branch offices are also subject to the same restrictions as the foreign company, so if the foreign company’s bylaws restrict certain activities, the Singapore branch will be limited by these activities also. 

The foreign company must still comply with ongoing regulatory requirements including filing its financial statements with ACRA and having financial statements of its Singapore branch office audited; for these reasons, we recommend setting up a separate corporate bank account for a branch office. 

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 will also be subject to 7% GST on most goods and services supplied. Because the branch office is considered an extension of the foreign company, the branch can easily reallocate profits and capital to the foreign company and remain compliant. 

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Want to learn more? Get in touch with our Corporate Secretary team to set up an introductory meeting: [email protected].