No matter where you are in the world, there are country-specific requirements associated with the setting up of a holding company. So, while there are many benefits to having a holding company, there are also many regulatory requirements that business owners need to be aware of before starting the process.
This article provides an overview of why you should establish a holding company in Singapore, the steps you should take to do so, and the considerations you should consider once your company has been established.
What Constitutes a Holding Company?
Simply put, a holding company is a parent company with significant stakes in subsidiary businesses or assets. When it comes to investments, a holding company can own the following:
- Companies, both public and private
- Real estate property
- Trademarks and Patents
- Intellectual Property
- Bonds, cash, and other interest-bearing investments, etc.
Types of Holding Companies in Singapore
Companies operating outside the insurance, banking, and finance sectors typically take the form of an investment holding company (IHC).
While a financial holding company is a corporation legally allowed to own other corporations in the banking, financial services, and insurance industries.
What Is the Best Corporate Structure for a Holding Company Based in Singapore?
Private limited companies are the typical recommendation from the Corporate Services Provider (CSP) when registering a holding company.
However, an investment holding company may choose to register as a different type of company, such as:
- Private Limited Company (Pte Ltd), a limited liability company (LLC), or an Exempt Private Company.
- Trust or foundation.
- Limited Partnership.
Which Entity Type Should You Select for Your Holding Company Structure?
Whether you prefer unlimited or limited liability, there are many factors to consider, including:
- Your level of risk tolerance.
- Whether to pay corporate tax (up to 17%) or personal tax (up to 23%).
- Fundraising requirements – Investors prefer corporate vehicles with a separate legal entity.
What Are Singapore’s Requirements for Registering a Holding Company?
Registration as a private limited company is recommended for holding companies, as was mentioned earlier. The following conditions must be met to register a holding company:
- One Singapore dollar in initial paid-up capital.
- Minimum one shareholder, either foreign or local.
- A local director: Some regionally based head of production is required. The applicant must be a legal permanent resident or a citizen of Singapore.
- Resident company secretary(at least one). They must also be a legal permanent resident or a citizen of Singapore.
- Corporate bank account.
- A registered address in the local area. Any physical address other than a Post Office Box is acceptable.
- You should keep all accounting documents for at least five years.
100% ownership by foreigners is permitted, and establishing a company requires no physical presence.
If your business’s annual sales are more than S$1 million, you must register for Value Added Tax (GST).
How to Register a Singapore-Based Holding Company
A holding company can be quickly established in Singapore. If you’re wondering how to set up a holding company, you’re in the right place. In general, you can count on the following:
- Choose a name to represent your company.
- Get in touch with your corporate services company via phone or video chat for an initial consultation.
- Make choices about the legal form of your company (Pte Ltd, for example), the people who will own shares, and who will serve as directors.
- If the foreign investor cannot fill the position, the CSP should assist you in finding a local nominee director.
- The CSP should submit the necessary documents for company registration and obtain ACRA approval of your proposed company name.
- Remotely establish a corporate bank account.
- Request an employment pass (optional).
How Long Will It Take?
The entire time it takes to register a company from start to finish is around a week.
After submitting the necessary paperwork to ACRA, it will take only about an hour before your Singapore holding company is officially operational.
A longer processing time is possible if ACRA forwards the registration application to other authorities for further review.
Establishing a new business bank account typically takes between two and four weeks, and it takes approximately one month for a director’s business visa
Tax Benefits and Incentives for Singapore’s Holding Companies
For foreign investors, the favorable tax regime in Singapore is a significant draw for establishing a holding company there. Some of the tax breaks and incentives provided to holding companies are as follows:
Fewer Taxes on Corporate Income Tax
Companies taxed as holding companies pay a rate of 17%.
Capital Gains Tax Exemption
The sale of an asset, such as a home, stock, or another financial instrument, results in a capital gain, which is not subject to income taxation under normal circumstances.
However, taxes may be due on any profits you make from trading.
Dividends are exempt from taxation
Dividends received from Singaporean corporations are exempt from taxation by the shareholders. Singapore does not impose taxes on foreign dividends.
Absence of Dividend Withholding Tax
Non-resident shareholders are not required to withhold taxes from dividend payments.
Favorable Double Tax Treaties
Including the Double Taxation Agreement (DTA), Singapore has a comprehensive tax treaty network of more than 90 countries.
As a result, Singaporean holding companies will pay less in withholding taxes and be exempt from some local taxes.
No Foreign Company Control Regulations
Singapore is a great place to establish a holding company because it has no CFC regulations. The primary objective of CFC regulations is to prevent companies from shifting their corporate profits to countries with low or no tax rates to minimize their tax obligations.
No Thin Capitalization Restrictions
Prices in any deal between a holding company and a subsidiary must be reasonable and in line with what is known as an “arm’s length” deal.
Thus, the prices should reflect what a sale would expect between completely unrelated parties.
A holding company is an excellent option if you’re looking for flexibility and other benefits. Because of its business-friendly policies in taxation, law, and regulation, Singapore ranks among the top locations for establishing a holding company. However, to ensure that a business sets up the holding company correctly and receives all the benefits associated with it, the services of a professional business services company is highly recommended.