Foreign Company Regulations in Singapore
A foreign company that wishes to conduct business in Singapore can either a) start a new Singapore company or b) it can operate in Singapore as a foreign company by creating a branch or a representative office. The Singapore Company law lays down certain requirements that foreign companies have to follow when they operate as a foreign company in Singapore (they have to file specific documents and annual financial statements with the Company Registrar; a foreign company must also display its name, registration number and other corporate information in a prominent manner at its place of business and in most of it documents). These and other requirements make this an onerous option which is why most foreign firms choose to start a new Singapore subsidiary company. The rationale for this choice is explained in this article.
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A foreign company wishing to establish a business presence in Singapore has three options:
- A branch office
- A representative office
- A locally incorporated company (often known as a subsidiary company)
A comparative analysis of these options shows that setting up a locally incorporated company is the most advantageous and preferred option for foreign companies. Nonetheless, if you decide to establish a branch office instead of a local company, you will be treated as a foreign company in Singapore and must follow the legal requirements specified by Singapore law for such companies. This article highlights the requirements that all foreign companies must follow in Singapore if they set up a branch office.
According to the Companies (Amendment) Act 2014, “foreign companies” to which the provisions are applicable are companies that:
- Establish a place and carry out business in Singapore or
- Intend to establish and carry out business in Singapore
The Act further states that the expression “carrying on business”:
- Includes administration, management and dealing with property in Singapore in any other manner either as an agent, legal representative or a trustee, whether employees or agents.
- Does not exclude activities that are carried out without any profit view.
However, the foreign company shall not be considered to be “carrying on a business in Singapore”, merely for the following reasons. If in Singapore, the foreign company:
- Is a party to any suit, arbitration or administrative proceeding or any settlement regarding a claim or dispute.
- Conducts meetings concerning internal affairs such as meetings of the shareholder and directors are carried out in Singapore.
- Maintains a bank account.
- Through an independent contractor, carries out a sale.
- Secures an order which is binding in nature as a contract in case where the order is accepted out of Singapore.
- Secures its debts and enforces its rights with regard to securities relating to it.
- Carries out an isolated transaction which is completed within 31 days and is not a transaction of a similar nature that is repeated continually.
- Invests its funds or holds property
- Establishes either a share transfer or share registration office
- Carries out a transaction through a licensed corporation or one that has been approved as per the law by the Monetary Authority of Singapore (MAS), established under the MAS Act, under the arrangement approved by the MAS.
- Carries out such activities as the Minister prescribes.
The above rules are used to determine if a foreign company is covered by the requirements of this article. In general, if you establish a Singapore branch office for your foreign company, you will come under the purview of these regulations.
Documents Required for Registration
To register in Singapore, a foreign company has to submit the following documents with the Registrar (Section 156 of the Companies (Amendment) Act 2014):
- The name and address of the company’s registered office where it is incorporated.
- Certificate of incorporation or any similar document (certified copy)
- Any document stating the charter, statute, the constitution of the company (certified copy). This document is to be submitted only if it is required by the law of the place of incorporation of the foreign company, at the time of incorporation and registration.
- A register of the directors specifying the list of all the directors and the same details as outlined by this Act. The residential address of each of the directors should be mentioned.
- A notice with the name, nationality, residential address and other identification details, as required, of the authorised representatives of the company who reside in Singapore.
- A confirmation statement by the foreign company that the authorized representative has provided his or her consent to act in that capacity.
- A notice stating the situation of the registered office as in Singapore. If the office in Singapore is not open during the usual business hours and days, the days and hours it will be open for public access should be specified.
- A notice stating the following :
- the registration number as issued to the foreign company either on its incorporation certificate or a similar document. If the company does not have any document, the registration number issued by the authority responsible for the company’s incorporation should be stated.
- the kind of business carried out by the foreign company.
- the legal form of the foreign company.
- in case the law of the foreign company’s country of incorporation necessitates the preparation of the audited financial statement, a copy of the same should be furnished to the Registrar.
Furthermore, at the registered office location of the foreign company in Singapore, the following two documents should be readily available for public inspection:
- Either a copy of the company’s Constitution or a power of attorney stating that each authorized representative has been appointed and is binding on the company.
- A copy of a document that authorizes the person executing the constitution or power of attorney on behalf of the company.
All the aforementioned documents have to be prepared in the prescribed format and submitted to the Registrar for the registration process, before the commencement of business operations in Singapore. While you can prepare and submit these documents on your own, it is usually a good idea to engage the services of a reputable corporate services firm for this purpose.
Financial Statements to be Filed
The Companies (Amendment Act) 2014 stipulates that foreign companies are required to submit financial statements annually to the Registrar that have been prepared up to the end of the previous financial year. A declaration should also be attached stating that the copies submitted are true copies of the original, and in case the financial statements have been audited, the auditor’s name should be provided.
According to the Act, “Financial statements” means:
- The financial statements prepared by the company as per the law of the country where it is incorporated, when the company is required to do so by law. The financial statements should be prepared in accordance with the accounting standards that will be accepted by the Registrar. The financial statements should be submitted within 60 days from the date of the annual general meeting of the company.
- In case the company is not required to prepare financial statements in its country of incorporation, the financial statement would be prepared in a form by the directors as if the company was a public company incorporated in Singapore and would include details that are customarily required from such a public Singapore company. The financial statements should be submitted within the same time period as applicable to a public company.
The Registrar can send a notice to the company to provide additional details in the financial statement and request other related documents, as determined to be necessary by the Registrar. However, the Registrar cannot ask the company to provide any more details than those that a public company incorporated under the Companies Act in Singapore, would be required to provide. In other words, the financial disclosure requirements for a foreign firm will never exceed those for a public Singapore incorporated company.
In addition to its financial statements, a foreign company needs to submit the following to the Registrar each year:
- Audited statement: Assets utilized and liabilities that are arising out of the Singapore operations upto the date of balance sheet.
- Audited profit and loss account: Of the operations of the company in Singapore for the previous financial year which complies with the Accounting Standards.
- Name of auditor: The auditor who audited the documents.
A foreign company should allocate the expenses according to the operations and administration of the company in Singapore as well as the other place of business to ascertain the profit or loss that has arisen in its Singapore operations.
A foreign company which is dormant in Singapore should submit the following to the Registrar:
- Unaudited statement: Assets utilized and liabilities that are arising out of the Singapore operations.
- Unaudited profit and loss account: Of the operations of the company in Singapore.
A foreign company is considered dormant in Singapore, when no accounting transaction has been executed by the company over a period of time for its Singapore operations. The status of the “dormant” company will change only when a transaction is carried out by it.
All foreign companies operating in Singapore will have to follow the above provisions relating to financial statements. Since the regulations for a Singapore company are not as onerous, creating a new Singapore company may be a better option. But if for any reason, you do wish to operate as a foreign company in Singapore by starting a branch office, it will be a good idea to engage the services of a reputable Singapore corporate services firm for assistance with these matters.
Filing Tax Return and Estimated Chargeable Income (ECI)
The Inland Revenue Authority of Singapore (IRAS), for the purpose of taxation, states that a “company” includes the following types of entities:
- A business either incorporated or registered as per the Companies Act and has “Pte Ltd” or “Ltd” in its name or
- A foreign company that is registered in Singapore (branch of a foreign company) or
- A foreign company that is either registered or incorporated outside Singapore.
Such companies have to comply with the following two requirements annually:
- Filing of corporate tax return with IRAS by 30th November following the financial year end and
- Filing of Estimated Chargeable Income (ECI) within a period of three months from the financial year with the IRAS. The ECI states the approximate taxable income of a company for an assessment year. The taxable income is computed after deduction of the tax allowable expenses. Besides the taxable income, the ECI Form should also state the revenue generated by the company . Only companies that are specifically provided with administrative concession are not required to file the ECI.
Public Disclosure Requirements
Foreign companies are required to state their name, place of incorporation, and the liability of the members (if limited) on the bill heads, notices, letters and on any official communication. This requirement is explicitly outlined in Section 162 of the Companies (Amendment) Act 2014.
The company will have to state the limitation of liability of its members outside its registered office and at every place of establishment in Singapore. However, if the company name has the words “Limited” , “Ltd”, “Berhad”, “Bhd” at the end of its name, the requirements of stating the above information at various places is removed. Thus, it is a good idea to include these words in the company name if you have a limited liability company.
In addition to the above, the unique entity number of a foreign company which is provided by the Registrar should also be displayed on all official documents and communications of the company.
A foreign company, when establishing a place in Singapore, should not only decide the business structure it wishes to set up in the country, but also pay close attention to the additional requirements for foreign companies as stated by the law. It is a good practice to engage the services of a good Singapore-based corporate services firm to help comply with these requirements.