Series on Singapore tax laws – Part 11

Structuring business operations in Singapore

Presence in Singapore can be set up by way of representative office, a branch or subsidiary

Representative office

  • Approval of International Enterprise Singapore is required
  • Activities are limited to general support and administration such as promotional, marketing, information gathering and liaison work undertaken on behalf of head office
  • Representative office of a foreign commercial entity may operate in Singapore for a maximum of three years from its commencement date, provided the representative office status is evaluated and renewed

Branches and subsidiaries –

  • Branch shall be non-resident in Singapore as control and management is with head office
  • Subsidiary can be either resident or non-resident depending on whether control and management is exercised in Singapore

Notes –

Depending on the tax treaty or domestic law of the resident, tax credit or unilateral credit may be claimed. However, a subsidiary being the resident in Singapore is entitled for tax treaty and unilateral relief in all cases.

The investor should also consider the tax jurisdiction in the home country i.e. whether branch losses arising in Singapore can be set off against head office expenses

Method of profit extraction and repatriation –

Profits can be extracted from Singapore entity in the following ways –

  • Payment of dividends
  • Management fees or allocation of head office expenses
  • Interest, royalty, technical assistance fees etc.

Structuring business operations outside Singapore –

Considerations to be kept in mind –

  • Availability of tax treaty between Singapore and the foreign country –
    Availability of tax treaty shall provide for lower withholding tax on certain incomes. Further, in case of dividends, relief for underlying tax can still be claimed if Singapore company has at least 25% shareholding in the foreign subsidiary
  • Whether the form of entity set up will have impact on profit extraction and repatriation – The form of extraction can affect the returns to the shareholders in view of the different rates of tax that can be imposed and the amount of tax relief that can be claimed
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