Setting Up a Holding Company in Singapore

In Singapore, a holding company is a type of business entity that provides financial and managerial support to its subsidiaries. Categorised as either an investment holding company or a financial holding company, a holding company does not have any active business operations and does not produce goods or services itself; rather, its purpose is to own valuable assets as a separate legal entity. Examples of assets can include intellectual property, trademarks and stocks.

Advantages of setting up a holding company

Also referred to as a “parent”, holding companies can be used to protect assets and create a more streamlined structure for business operations. For example, holding companies can be used to consolidate ownership of multiple businesses. This can make it easier to manage the businesses and reduce administrative costs. A holding company can also offer enhanced legal protection for your business assets. By acquiring shares from its subsidiaries, a holding company can help to diversify its risks and protect them from creditors.

Setting up a holding company in Singapore also comes with a number of tax benefits:

Low corporate tax rate at 17% compared to other countries: With the partial tax exemption available for holding companies, the effective tax rate can be further reduced.
No capital gain tax: This pertains to the gains derived from sale of properties, shares and financial instruments in Singapore.
Extensive double tax treaties (DTTs) network with other countries: Singapore has signed The Avoidance of Double Taxation Agreements (“DTAs”) with close to 100 countries to avoid taxing the same income twice i.e. the same income is taxed in the country of source where the income arises and the country of residence of the taxpayer.

Combined with a pro-business economy and business-friendly environment, Singapore provides a level of certainty for business owners. The political landscape is also relatively stable, guaranteeing a conducive environment for doing business. Taken together, these factors make Singapore an attractive choice for businesses to set up a holding company. In fact, one of the benefits of establishing a holding company in Singapore is the ease with which it can be done. The process is relatively straightforward and can be completed in a relatively short period of time.

How to start a holding company in Singapore

To set up a holding company in Singapore, you will need to incorporate it as a limited liability company (LLC), limited partnership, trust or foundation with the Accounting and Corporate Regulatory Authority (ACRA). Do note that you should have the following ready before proceeding with the registration procedure:

A minimum of $1 paid-up capital.
A registered office address in Singapore
At least one resident director in Singapore. The resident director can also be a shareholder of the company.
Have one or more shareholders within the company.
A company name approved by ACRA.

With your SingPass and identification number, you can log in to the BizFile+ website and begin the incorporation process. The BizFile+ website will guide you through the necessary steps and provide you with all the forms and documents that you need to complete the incorporation. This will require:

Company name
Your registered office address
Company constitution, also known as the Memorandum and Articles of Association
Details of the company’s directors and shareholders
Signed consents from those acting as the director and company secretary of the company

Once you have submitted all the required information and paid the registration fee of $315, you will receive confirmation that your company has been successfully incorporated. You will be issued with a Certificate of Incorporation and a Business Profile. These documents are necessary to open a corporate bank account and manage your holding company in Singapore.

Should you not have a SingPass, you can also engage a registered filing agent under ACRA like Chartsworth to assist with preparing all important documents.

Know your tax and accounting obligations as a holding company

After you have set up your holding company, there are certain compliance requirements that you will need to adhere to. These include keeping accurate records that list all transactions made by the company, filing annual returns with ACRA, and paying corporate tax.

Bear in mind that any income earned by the holding company during the financial year, including dividends and interest, will be subjected to tax. However, if you are an investment holding company, you will be able to enjoy tax deductions for expenses incurred in relation to investments that are not for trading purposes. Expenses are categorised into Direct Expenses, Statutory and Regulatory Expenses as well as Other Allowable Expenses. You can deduct the expenses from the investment income if it falls under:

Direct Expenses incurred to earn investment income. Insurance and property tax for rental properties are examples of revenue expenses that can be deducted from its respective source of investment income.
Statutory and Regulatory Expenses such as fees for accounting, annual listing, audit and income tax services.
Other Allowable Expenses such as directors’ fees, office rental, office utility charges and staff salaries, for example. Take note that the total amount should not go above five per cent of the holding company’s gross investment income.

As an investment holding company, keep in mind that capital allowances cannot be claimed as you are not carrying on a trade or business. Instead, you are allowed to claim for fixed assets purchased to replace existing assets under deductible expenses. It is also important to note that unutilised losses cannot be carried forward to set-off the income of future Years of Assessment (YAs).

Furthermore, you will need to hold an Annual General Meeting (AGM) every year. An AGM is a formal meeting of a company’s shareholders whereby they review the company’s financial statements over the past year and run through other business transactions. As required by Section 201(5) of the Companies Act, the directors of a holding company must also prepare the following 2 reports for the AGM:

The consolidated financial statements of the group comprising the holding company and its subsidiaries. This should comply with the Accounting Standards and provide a comprehensive view of your group’s financials, including assets, liabilities, equity, income, expenses and cash flows. You can accomplish this with accounts consolidation services.
The balance sheet of the holding company showing its financial position at the end of its financial year.

Get started

When your holding company is registered, you will need to appoint a professional company secretary within six months of incorporation – moving forward. Overall, setting up a holding company can offer many benefits, including enhanced asset protection, tax efficiency, and greater control over the group’s overall business operations. If you are looking to incorporate a new holding company in Singapore, Chartsworth can help to streamline the process for you.

From the preparation of registration forms to the provision of a qualified corporate secretary or nominee director, our company incorporation services can save you time and take care of the paperwork associated with setting up your holding company. Tap into a team of expert professionals who can manage the incorporation process efficiently and effectively. Moving forward, you can also reach out to us for accounting, tax and corporate secretarial services. Get in touch with us today for more information.

Setting Up a Holding Company in Singapore

Advantages of setting up a holding company

How to start a holding company in Singapore

Know your tax and accounting obligations as a holding company

Get started

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