In the first part of the series, we wrote about the three most common business structures in Singapore, namely, Sole Proprietorship, Partnership and Private Limited Company. In the next three articles, we will introduce the three business structures that foreign individuals or foreign companies can incorporate in Singapore. These are Subsidiary Company, Branch Office and Representative Office. Let’s take a look at Branch Office here.

Copywriting for incorporating a branch office

What Is A Branch Office?

While Subsidiary Companies are more common for foreign companies wishing to make inroads into new markets, there are other types of business structures that they can consider. One of which is the Branch Office.

A registered Branch Office in Singapore is an extension of its foreign parent company registered outside of Singapore. Here’s the difference between a Subsidiary Company and a Branch Office – while a Subsidiary is a separate legal entity, a Branch Office cannot be incorporated as a separate entity. This means that a Branch Office has to have the same name as the foreign parent company, and it also has to carry out business activities and transactions, including the signing of contracts and agreements, in the name of its parent company. Liabilities and legal risks of the Branch Office are also extended to its parent company. Thus, any debt or liability incurred by the Branch Office will be borne by the foreign head office.

In terms of taxation, a Singapore Branch Office is considered a non-resident company under the Singapore law. This means that it is not eligible for any existing tax incentives and assistance schemes that start-ups or companies that are incorporated here enjoy. Any profits from operations carried out in Singapore will be subject to existing local corporate tax.

Since the characteristics of a Branch Office aren’t as attractive as a Subsidiary Company, why would a foreign company set up a Branch Office? Some foreign companies prefer to set up a Branch Office during the initial stage of overseas business expansion. Many companies that are trying to establish their footprints in a new market find the Branch Office structure easier to control. Usually, companies prefer a tighter rein in their overseas business activities during the early stage of business expansion, and thus, not having a separate entity suits them well. At the same time, it can leverage its established brand and reputation to get market share in a new territory.

Pros And Cons Of A Singapore Branch Office

Pros:

  • It allows the foreign parent company to establish a presence in the market and conduct business freely. Profits can also be repatriated without restrictions.
  • In Singapore, Branch Offices are quick and easy to register.
  • Companies with a highly recognised brand can make full use of their brand identity to market their products and services.  

Cons:

  • Since the Branch Office isn’t a separate legal entity, all its debts, liabilities and risks are extended to its foreign parent company.
  • It is also not entitled to the local tax incentives, exemptions and assistance schemes because of its non-resident business entity status.
  • Unlike Subsidiary Companies, Branch Offices can only conduct the same business activities as its parent company.

Compliance Requirements

As mentioned above, establishing a Branch Office in Singapore is relatively quick and easy. Here are the compliance requirements:

  • The Branch Office must have the same name as the foreign parent office, and it should also clearly state that it is a Branch Office. Also, the name (in English) must not be the same or similar to another business name or existing trademark or contain any offensive or vulgar words. The name is subject to the approval of the Registrar of Company.
  • It must appoint two authorised representatives who are Singapore citizens, PRs or foreigners with a valid work pass.
  • It can only conduct the same business activities as the parent company.
  • It needs to have a registered office address. While PO Boxes are not permitted, virtual office addresses are allowed.

About the Writer:

Judy Tham is a writer and founder of One Elephant, a copywriting firm in Singapore. She co-authored Are You Brand Dead?, one of the few books on branding in Asia that focuses on SMEs.