The differences you should know about Representative Office and Branch Office in Singapore

Singapore is an international trade hub, and many businesses choose to establish activities there. Companies must make an important choice about whether to create a branch office (BO), or a representative office (RO) in Singapore. All options have benefits and drawbacks, and businesses should evaluate their particular requirements and goals before making a decision. A foreign business seeking to establish an office or expand its activities in Singapore has several company structure options. The following piece analyzes the three types of business entities in order to help a foreign company determine the best structure for its particular needs.

When a foreign company wants to expand its operations in Singapore, it has two main options: it can either set up a branch office (BO) or a representative office (RO). Although both types of offices allow foreign companies to conduct business in Singapore, they differ significantly in terms of their legal structure, scope of activities, and taxation. In this article, we will explore the differences between a BO and an RO in Singapore.

Legal Structure

A branch office (BO) is a legal entity that is an extension of the parent company. It is considered a separate legal entity from the parent company, but it is not considered a separate legal entity from the parent company in Singapore. This means that the parent company is liable for all of the BO’s debts and obligations in Singapore. A BO is required to register with the Accounting and Corporate Regulatory Authority (ACRA) and file an annual return, just like a Singapore incorporated company.

On the other hand, a representative office (RO) is not a legal entity in Singapore. It is simply an extension of the parent company and cannot enter into contracts or conduct business on its own. An RO is not required to register with ACRA but is required to register with the International Enterprise (IE) Singapore. It is also required to file an annual declaration stating its activities in Singapore.

Scope of Activities

A branch office (BO) is allowed to engage in a wider range of business activities than an RO. A BO can conduct business in Singapore just like a Singapore incorporated company, except that it is limited to the activities that the parent company is engaged in. A BO can enter into contracts, buy and sell goods and services, and borrow money. It can also open bank accounts and hire employees in Singapore.

An RO, on the other hand, is limited to non-commercial activities. It cannot engage in any business activities that generate revenue. An RO is only allowed to conduct market research, gather information about potential customers, and promote the parent company’s products and services. It cannot enter into contracts or transact business in Singapore.

Taxation

The taxation of a branch office (BO) and a representative office (RO) is also different in Singapore. A BO is considered a tax resident in Singapore and is subject to Singapore’s corporate tax rate of 17%. However, a BO can also take advantage of Singapore’s extensive network of double tax treaties to reduce its tax liability.

An RO, on the other hand, is not considered a tax resident in Singapore and is not subject to Singapore’s corporate tax rate. However, an RO is required to pay withholding tax on any payments made to it by the parent company. The withholding tax rate is currently 15%, but it can be reduced or waived under Singapore’s double tax treaties.

Which Option to Choose?

The choice between a branch office (BO) and a representative office (RO) will depend on the foreign company’s objectives and the nature of its business activities in Singapore. If the foreign company wants to engage in commercial activities in Singapore and generate revenue, it should set up a BO. However, if the foreign company only wants to conduct market research and promote its products and services, an RO may be a better option. For further detailed information regarding requirements, you can check our articles about Branch Office Registration and Representative Office Registration.

Another factor to consider is the level of control that the parent company wants to have over its operations in Singapore. A BO provides more control over its operations, but it also entails more compliance requirements and legal obligations. An RO, on the other hand, is easier to set up and maintain but provides less control over its operations.

Finally, foreign companies can conduct business in Singapore through a branch office (BO) or a representative office (RO). Both have their own difficult compliances to follow, so it’s best to seek advice from the experts. Oakwood provides customized company formation solutions designed specifically for Foreign Entrepreneurs, Foreign Companies, and Singapore Residents to assist businesses in Singapore. Please contact us at +65 8940 3532 (Kelly) if you have any further questions.