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Comparison of Three Types of Investment Structure in China

 

Private Limited Company (Subsidiary)

Branch Office

Representative Office

Type

  • Legal entity established as a regional holding company or subsidiary of a foreign holding company.
  • Can be wholly-owned by a foreign individual and/or corporate investor.
  • Legal extension of a foreign holding company.
  • Short-term, temporary arrangement with a limited purpose.

Activities

  • Business activities, can be different from the parent company.
  • The company must obtain the relevant business licenses for its operations in Singapore.
  • Business activities, must be the same as the parent company.
  • Gathering information on markets and potential clients.
  • Carrying out research to ascertain product/service information.
  • Developing trade contacts and managing product enquiries.
  • Participating in trade shows and exhibitions.
  • Gathering information on regulatory requirements for the set-up of a permanent entity.

Criteria for eligibility

  • At least one shareholder.
  • One resident director.
  • One company secretary.
  • Initial paid-up share capital of at least S$1.
  • Registered address in Singapore.
  • At least one local representative (Singapore citizen, permanent resident of Singapore, or Employment Pass holder).
  • Registered address in Singapore.
  • Name of the branch office must be the same as the parent company.
  • Staffed by a maximum of five individuals.
  • Foreign parent company with sales turnover of at least US$250,000.
  • Represented by an HQ employee or a Singaporean citizen.
  • May only be established for a maximum of three years.
  • Name of the branch office must be the same as the parent company.

Liabilities

  • No liability by holding company of its subsidiary. Liability is limited to the share capital subscribed in the holding company’s subsidiary.
  • Parent company bears ultimate legal responsibility for all liabilities and must be registered with ACRA.
  • Parent company bears liability for the activities and is responsible for financing operations.

Tax exemptions

  • Can benefit from tax incentives available to local companies.
  • Not eligible for tax exemptions and incentives available to local companies, taxed at the 17 percent corporate tax rate.
  • N/A - representative offices are not permitted to generate income.

Note

  • Preferred structure among small and medium-sized (SME) foreign companies.
  • The foreign company is not required to have a local director or a company secretary.
  • As parent company will bear all the liabilities of its branch office, many foreign companies choose to establish a subsidiary or private limited company rather than a branch office.
  • Ideal choice for foreign investors exploring their investment options before setting up a fully-fledged office in Singapore.
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