In the first part of the series, we discussed 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. Here, we shall look at the characteristics of the Representative Office.
What Is A Representative Office?
A Representative Office is a temporary establishment that a foreign parent company registers in Singapore to conduct market research activities or feasibility studies on behalf of its parent company. As it does not have any legal status, it cannot engage in commercial or revenue yielding activities, or enter into any contracts or transactions with other individuals or companies.
Like a Branch Office, a Representative Office is not a separately incorporated entity. In other words, the parent company has to bear all its liabilities and risks. And because a Representative Office is not allowed to be engaged in any commercial activities, it does not need to file nor maintain any statutory document or submit tax returns in Singapore.
Foreign companies that wish to establish a Representative Office in Singapore need to contact International Enterprise Singapore – the registration authority for Representative Offices for all sectors except banking, finance and insurance. Foreign companies in these sectors must work with the Monetary Authority of Singapore to register a Representative Office here.
Because a Representative Office is granted only a temporary status, it must be converted into a Subsidiary Company or Branch Office if the foreign parent company wishes to continue its operation here after three years.
A Representative Office is usually a vehicle for foreign companies to set up an administrative office to explore market opportunities in Singapore or manage activities on behalf of its parent company without conducting any commercial activities.
Pros And Cons Of Representative Office
- It is a fairly easy and inexpensive way to start exploring business opportunities in Singapore without having to make significant investments.
- The foreign parent company is not required to have a registered capital when setting up the Representative Office.
- Minimal administration is needed since the Representative Office does not have to maintain any statutory document or file any tax or annual returns to the authorities.
- There is a restriction on the range of activities allowed with a Representative Office, and that includes revenue-generating transactions.
- Since a Representative Office is only meant to be temporary, it needs to be converted into a Branch Office or Subsidiary Company if the parent company wants to be present in the market for the long term.
- The activities of the Representative Office must be confined only to market-related research, building trade contacts, handling product inquiries, coordinating, and participating in trade shows and exhibitions.
- It must not be engaged in any trading activities, including signing any business contracts, issuing invoices and receipts, opening or receiving letters of credit, or providing any service for a fee.
- It can have no more than five employees, and the representative head here must be an employee of the foreign parent company.
- The annual sales turnover of the foreign parent company must be more than USD250,000.
- The foreign parent company must be at least three years old.
- The Representative Office must have the same name as the foreign parent office, and it should also clearly state that it is a Representative Office. The name is subject to the approval of the Registrar of Company.