By Vlad Cuc, specialist in company formation matters
Singapore is aiming to become one of the biggest financial centers in Asia-Pacific by providing tax incentives to foreign companies establishing in the city-state. Not only do foreign investors benefit from tax incentives, but for those setting up holding companies in Singapore the process will take about three days only and minimum requirements.
As a definition, holding companies are legal entities which own shares and control other companies. The main objective of a holding company is not related to completing commercial activities, but to reduce the risks incurred by the owners of such business entity, as their obligations are limited to the shares or assets associated with the subsidiary in which the holding company invested.
|Legal entities used|| |
Private and public limited liability companies
|Incorporation with the Accounting and Corporate Regulatory Authority (ACRA)|
|Approx. 8 weeks|
Quick, flexible incorporation procedure, access to double tax treaties
|Precautions||Legal address in Singapore, one resident director, one resident company secretary.|
|Shareholding structure|| |
At least 1 shareholder
|Minimum Capital|| |
No minimum amount imposed
|Taxation||Standard corporate rate of 17%|
|Control||Full control of the foreing shareholders is permitted|
|Accounting and Reporting||Annual financial statements must be filed. Audited financial statements are required for entities with total revenue of more than 10 million SGD and assets valued at more than 10 million SGD.|
|Number of double taxation treaties||Approx. 90|
Singapore is an appreciated destination by those interested in setting up such companies. Our local specialists can help if you want to open a company in Singapore.
Our local company formation experts can offer information on the types of companies available for registration in the Republic.
The establishment of a holding company in Singapore has many benefits, among them, being:
For detailed information on the requirements related to starting a holding company in the city-state, you can fully rely on our company registration representatives in Singapore.
The Accounting and Corporate Regulatory Authority (ACRA) recognizes investment holding companies registered in Singapore and defines them as entities which are set up with the purpose of obtaining incomes generated through ownership of real estate property, rentals or shares in other companies. ACRA defines this type of income as “non-trade earnings”, which is why holding companies in Singapore are granted a special status and benefit from many tax and expenses deductions.
Our Singapore company formation experts can offer more information on the status of holding companies in the Republic. We can also support those interested in opening a branch office in Singapore.
Holding companies are usually registered as subsidiaries and mainly known as private limited companies in Singapore. This type of structure is employed by small and medium-sized foreign enterprises. Foreign investors are strongly advised to request the services of experts in company registration in Singapore and ask about the taxation system and incentives they can benefit from. Foreign businessmen must know that the registration procedure of a holding company must be done through the services provided by a professional firm.
Even if a Singapore holding company will follow the same company formation as any other business, there are various aspects to take into account, among which some of the most important refer to:
Apart from these, a holding company in Singapore enjoys other benefits, as the legislation in the city-state favors the creation of such structures. Moreover, a holding company does not have any restrictions related to the assets it may own in Singapore. Also, it can have Singapore-based or foreign-based subsidiaries, which allows for flexibility in terms of taxation. With respect to the taxation of the holding, it is good to notice that it can benefit from Singapore’s double tax treaties network which is quite extensive.
The holding company can also enjoy the special incentives granted by the Singapore government to other types of companies. Among these, we mention the Development and Expansion Incentive and the Pioneer Status Incentive or other Headquarter Incentives.
From an accounting point of view, a holding company can benefit from consolidated books which implies less paperwork and the offset of gains from one the subsidiaries when another one is at loss.
Those who need more information on the advantages offered by a holding company can rely on the expertise of our Singapore company formation representatives.
In order to register a holding company in Singapore at least one shareholder is required. The Singapore holding company is also required to have at least one resident director and as many foreign directors as it wants, but usually, two directors are appointed. The shareholder is also allowed to act as a director of the holding company in Singapore. Another requirement for the holding company’s staff is to appoint a resident secretary within six months of the registration. The Singapore holding company is required to deposit a minimum share capital of S$1 and must also have a registered office approved by the Urban Redevelopment Authority.
When it comes to the requirements related to setting up a company in Singapore in the form of a holding company, the Company Law requires a minimum of 1 SGD in the case of a limited liability company. It should also be noted that the LLC is the most employed type of structure for a holding.
Even if the minimum share capital is 1 SGD, the investors can choose the amount necessary for the operations of the holding. Another important aspect of the share capital requirements for any type of company in Singapore, including holdings, is that the local government does not impose an authorized share capital. Also, the holding company can increase the capital of its subsidiary at any time, provided that it amends the Articles of Association and notifies ACRA about the changes.
Other characteristics of holding companies are that they require to have a registered address and bank account in Singapore. The company address will indicate the residency of the holding, while the bank account is a mandatory requirement for company formation in Singapore.
Being a resident company, the Singapore holding will benefit from many tax advantages, among which:
It is also possible for a holding company to apply for the headquarter incentive scheme which implies locating the regional or international main office of the holding company in Singapore. From here, the holding will be able to control subsidiaries in other countries.
Please see the scheme below on the holding company in Singapore:
The Singapore tax legislation contains a special supplement called the Financial Holding Companies Act which was enabled in 2013. This act provides for the main requirements related to the creation of a financial holding company under the form of a co-operative or limited partnership. Financial holdings are divided into intermediary and ultimate companies.
According to the law, a financial holding company can be defined as an entity that has at least one subsidiary registered as a bank or licensed insurance company registered or established in Singapore. Also, the holding company must hold at least 50% of the assets or capital in the respective subsidiary. Alternatively, the holding company can hold 50% of the liabilities or be entitled to 50% of the revenue generated by the subsidiary.
It is important to note that financial holding companies are required to appoint an independent auditor to oversee their activities.
A financial holding company registered in Singapore can complete the following activities:
No matter the activities a financial holding company enters, it must obtain the written consent of the Monetary Authority of Singapore.
If you are interested in setting up a company in Singapore or in opening a branch office here and need assistance, you can rely on the services provided by our team of agents who specialize in business registration.
Under the same Financial Holding Companies Law, the shareholding of the holding provides for both natural persons and other companies resident respectively registered in Singapore owning shares in the holding company. These can own between 12% and 20% of the shares in a designated holding company.
A 12% controller, respectively 20% controller in the holding imply:
It is possible for financial holding companies to complete mergers and acquisitions of banking institutions with the consent of the Ministry of Finance.
When incorporating a holding company, shareholders will usually take into account the taxes they are required to pay. From this point of view, Singapore has concluded many double tax treaties which allow a subsidiary to transfer dividends at very low withholding tax rates. Also, the corporate tax rates vary depending on the profits a holding company makes. Foreign businessmen opening holding companies in Singapore will also be interested in knowing that capital gains are not subject to taxation.
Holding companies in Singapore are allowed to deduct some of the expenses related to the investments they make. ACRA provides for the following types of deductible expenses in the case of holding companies:
Direct expenses include in insurance, management fees, the property tax and repairs brought to the property owned by the Singapore holding company. Among the indirect expenses are costs related to renting office space, directors’ fees, bills, allowances and salaries of the employees and even contributions to the national retirement scheme.
Regulatory expenses incurred by a holding company in Singapore include the costs associated with the accounting and audit services contracted by the company, secretarial costs and charges related to banking services.
Apart from these, holding companies in Singapore can apply for various incentives under governmental programs. The most employed ones are the Headquarter Scheme, the Pioneer Scheme, the Development and Expansion Program. Our company formation agents in Singapore can explain what these incentives consist in.
Our experts who can help you open a company in Singapore invite you to watch the video below and see how to open a holding company in this jurisdiction:
If you are a foreign investor and want to open a company in Singapore which will have the status of a holding company, you will need to appoint a local agent to complete the incorporation procedure. This is a mandatory requirement, no matter the type of entity chosen for registration.
Our experts in company registration in Singapore will first take you through the requirements you need to fulfill in order to own a business in the city-state. They will then help the investor prepare the documents needed to register the company with the Companies Register and the Inland Revenue Authority Office in Singapore.
Among the benefits you will obtain by using our services is a vast experience related to the incorporation procedures of various types of companies, including holding companies. Also, the timeframe related to the registration procedure can be significantly reduced and the probability of having any document missing from the application file will be very low. We will also help with the opening of the company’s bank account with one of the agreed banks in Singapore.
You can rely on us for any questions related to the establishment of a Singapore holding company and for guidance in setting up any business form in this state.