Setting up businesses across borders is nothing new for most companies these days, and conveniently situated in the middle of Southeast Asia, Singapore just so happens to be one of the best locations to expand into. Setting up a representative office is one of the avenues resorted to most by foreign companies that seek to establish a presence in Singapore. This article compares a representative office with that of a branch office, then goes on to give a short on how setting up a representative office in Singapore. One IBC, with its global expertise and presence, provides tailored guidance and support, ensuring a smooth setup process that aligns with all regulatory requirements.
Differences between a Representative Office and a Branch in business operations
Compare Representative Office and Branch for business presence
Before choosing between representative office vs branch, it will be very important to understand the main differences between the two:
- Representative Office: It is merely a temporary setup to be utilized for market research, promotion, and networking only. No income-generating activities of whatsoever nature shall be conducted by a representative office incorporated in Singapore. It is suitable for companies who need to test the waters before undertaking more significant investments.
- Branch Office: This would also be an extension of the parent company and may undertake commercial activities.A branch office, however, is not a separate legal entity but an extension of the foreign company itself; hence, it cannot enter into contracts or derive revenues.
In fact, whether to choose between a representative office or branch office structure really depends upon your goals and objects in Singapore. For the purposes of just exploring the opportunities and understanding the market, a representative office would be best. A branch office might be more appropriate for where you are ready to engage in commercial activities.
Establishing a Representative Office in Singapore for Business Expansion
Establish a representative office in Singapore to conduct market research
Setting up a representative office in Singapore is relatively easy, but there are certain regulations and steps that have to be followed. A step-by-step guide to help you through is as follows:
1. Eligibility Criteria
Generally, the parent company setting up a representative office in Singapore has to meet the following:
- The company must be established abroad.
- The company must be at least three years old from its date of incorporation.
- The company needs to have at least USD 250,000 in minimum annual turnover.
These conditions ensure that only authentic and financially stable foreign companies establish representative offices in Singapore.
2. Scope of Activities
A representative office has limited scope of operation and cannot:
- Sign contracts in the name of the parent company.
- Earn revenues or carry out activities with the objective of earning profit by offering a service.
- Carry out trading or business activities.
On the other hand, it can conduct market research, explore business opportunities, and act as a liaison between the head office and Singapore entities.
3. Registration Process
- Step 1: The first thing one must do to set one up is apply to Enterprise Singapore, the official government body regulating the conduct of representative office registration. You need to state something about the standing of the parent company and the financial status it is in, besides stating the purpose and activities of the representative office.
- Step 2: Supporting documents would include three-year financial statements, proof of the company’s overseas registration, and staff complement details managing the office.
- Step 3: Application Fee. The registration fee for a representative office in Singapore normally ranges from SGD 200 to SGD 300, depending on the nature of the business.
- Step 4: Await your approval. Once your application is approved, representative office can start its operation in an initial period of one year. Please note that a representative office has to renew its status every year on a yearly basis and the maximum tenure for the rep office in Singapore is three years.
4. Personnel and Staffing
A representative office could also hire employees but the number is only allowed up to five. This can be made of Singapore residents and foreign nationals, subject to an application of work permit.
5. Relocation of Foreign Staff
If you are relocating foreign staff to Singapore to manage and operate your representative office, an application for Employment Pass must be filed on behalf of such personnel. The Employment Pass is a work visa for foreign professionals, managers, and executives. It is tied to the individual’s employment with the rep office and would therefore need to be renewed in line with their contract.
How to Open a Representative Office in Singapore?
Opening a Representative Office in Singapore for Market Presence
Setting up a rep office in Singapore is straightforward, but there are specific regulations and steps to follow. Here’s a step-by-step guide to help you through the process:
1. Eligibility Criteria
These are the requirements the parent company has to fulfill in order to be allowed to set up a representative office in Singapore:
- The company is to be set up overseas.
- It must be in existence for at least three years.
- The annual turnover of the company should be a minimum of USD 250,000.
All these put together make sure that only a foreign company which exists and is viable setting up a representative office in Singapore.These conditions ascertain that only genuine and financially healthy foreign companies are allowed to set up representative offices in Singapore.
2. Scope of Activities
A representative office has limited scope in terms of its operation scale. A representative office is not allowed to:
- Enter into contracts in the name of the parent company.
- Generate income or provide services for profit.
- Conduct trading or business activities.
Instead, it can conduct market research, find business opportunities, and liaise between the head office and Singaporean entities.
3. Registration Process
- Step 1: The application should be made through Enterprise Singapore-a government agency in charge of the registration of representative offices, basic information regarding the parent company, its financial status, and the activities that the rep office will conduct.
- Step 2: Submission of supporting documents which will involve audited statements of accounts of the company for the last three years, proof that the company has been registered abroad, and personnel appointed to be in charge of the office.
- Step 3: In this stage, the filing fee is payable. For setting up a representative office in Singapore, it costs between SGD 200 to SGD 300, depending on the type of business.
- Step 4: Let the application be approved. With approval, a representative office is allowed to immediately commence operations with an initial operation period of one year. Please note that a representative office must reapply annually for continuing operations in Singapore and can only stay there for a maximum period of three years.
4. Personnel and Staffing
An office representative can employ people, but no more than five. These may include residents of Singapore and foreigners – the latter would need to obtain work permits.
5. Relocation of Foreign Staff
If you are sending foreign staff to Singapore to operate your representative office, you would need to apply for an Employment Pass. The Employment Pass is a work visa for foreign professionals, managers, and executives. The Employment Pass is tied to the individual’s employment with the rep office and would need to be renewed in line with their contract.
Conclusion
Setting up a representative office in Singapore will be one of the best avenues for foreign companies wanting to test this enthusiastic market in Singapore without committing to commercial operations. A company will be able to set up a representative office for the insights and to lay the groundwork for future expansion by understanding the difference between a representative office vs branch, and following the steps necessary to do so.
Setting up a representative office in Singapore is rather straightforward, given the parent company is qualified and has complied with all local laws and regulations. In general, this represents a stepping stone to developing business in Southeast Asia when the commercial appraisal of the Singapore market’s potential is warranted.
