BRANCH
Branch is defined as an extension set up by a parent organisation at another location to increase their coverage. It carries the same business activities as the parent company do. The decision control of branch is instructed by and report to the parent company.
SUBSIDIARY
Subsidiary company is holding company locally incorporated and its majority of shares hold by foreign parent company. It considered as a separated entity with the foreign parent company under Singapore corporation law so that the foreign company and its assets cannot be held for the debts and liabilities of the subsidiary. The board directors of subsidiary are decided by the foreign parent company.
DIFFERENCE BETWEEN BRANCH AND SUBSIDIARY:
| Branch | Subsidiary | |
| Legal Type: | Not a separate legal entity but an extension of the parent company | Separate legal entity distinct from its parent company |
| Liabilities | Liabilities extend to parent company | Liabilities limited to subsidiary |
| Entity Name: | Must be the same as the parent company | Can be the same or different from parent company |
| Business Activities: | Must be the same as the parent company | Can be the same or different from parent company |
| Annual Filing: | Must file branch office as well as parent company’s accounts | Must file accounts of the Singapore subsidiary |
| Bank Account: | Can open bank account in Singapore | Can open bank account in Singapore |
| Staff Hiring: | No restrictions on hiring local or foreign staff | No restrictions on hiring local or foreign staff |
| Share capital and Number of Member: |
· 100% belong to the parent company · Max 50 people |
· Majority or 100% belong to parent company · No limitation |
| Appointment of Officers: | Must appoint at least one local authorised representative | Must appoint at least one local resident director |
| Key requirement of setting up |
• Name of the company must be same as the parent company • At least 2 local agent roles acting on behalf of the branch office • Provide detail of the parent company’s director for the registration • Registered office address |
• At least 1 Individual/ Corporate shareholder • At least 1 resident director • At least 1 company secretary • Initial paid-up share capital of at least S$1 • Registered office address |
COMPARISON CHART IN TAX SYSTEM:
| Branch | Subsidiary | |
| Tax Residency in Singapore | Non-resident entity | Resident Entity |
| Double Taxation Agreement (DTA) | Not Applicable | Applicable |
| Corporate Income Tax (CIT) rebate | Applicable | Applicable |
| New Start-up Exemption | Not Eligible | Eligible |
| Tax Exemption of Foreign-sourced Income | Eligible | Eligible |
| Productivity and Innovation Credit (PIC) [ ***only up to YA 2018] | Not Eligible | Eligible |
| Tax Group Relief | Applicable | Applicable |
CONCLUSION
Both of branch office and subsidiaries have their different corporate structure and business benefits in Singapore. According the perspectives under the umbrella of Singapore Tax System, subsidiaries tends to have more tax benefits and incentives than branch offices in Singapore. While, to set up a branch office or subsidiary in Singapore would be depends on the control level that the foreign parent company tend to own and company’s circumstances and needs. For example, if the foreign parent company tends to own fully conducted and extends the same business in Singapore, the corporate requirements of branch office will be suit to the company. Generally, MNCs, bank and insurances companies would prefer to set up a branch office due to the reason of using the brand and finances of the parent company to secure licences and business contracts. On the other hand, subsidiary companies tend to be preferred by many foreign companies when they set up a business entity in Singapore.