Well-known companies such as Google, Great Eastern and Scoot are subsidiaries of holding companies. A holding company is one that owns assets such as property, intellectual property and stocks, instead of engaging in the operating activity itself. Holding companies enjoy several advantages as the regulatory framework in Singapore provides preferential treatment to such structures. Find out if setting up a holding company makes business sense to you.
Wide selection of business structures
A holding company can be structured in different forms, with the most widely used structure being a limited liability company. Other company structures may include a limited partnership, a trust or a foundation. For advice on which structure is ideal for your business, consult an experienced corporate services provider.
Operate anywhere in the world
Upon setting up a holding company in Singapore, your subsidiaries and assets can reside in Singapore or anywhere else in the world. There are also no limitations on the domiciliation of assets. Holding company structures thus provide excellent business flexibility.
Your holding company can pool the resources of its subsidiaries. This means that if a subsidiary performs well, the parent company benefits; if the subsidiary performs poorly, the parent is not punished beyond the loss of its original investment. For example, if a subsidiary company declares bankruptcy, its creditors cannot legally pursue its holding company. Loss insulation is thus a key business benefit. Engage a corporate services provider who can assist you in splitting up assets among different subsidiaries so that the lines of liabilities are clear.
Attractive tax regime
Setting up a holding company in Singapore can yield attractive tax benefits. You may qualify for tax incentives such as Pioneer Status or Development and Expansion Incentives. An experienced tax advisor will be able to lower your overall tax bill with the right corporate structure, including leveraging double-tax agreements and reduction of personal and corporate taxes, while ensuring there is strong commercial justification for your holding company’s overall structure. The group may also consider intra-group financing strategies, such as by lending retained earnings of a profit-making subsidiary to another that is in a growth phase. Tax exemptions can also be obtained on foreign-sourced earnings, provided that requirements are met. As Singapore does not have any capital gains tax, this is something that would greatly benefit your holding company as well.
Simple compliance processes
Compliance processes for holding companies in Singapore are kept simple. Besides tax filing obligations, holding companies are typically required to submit the consolidated accounts of the company and its subsidiaries, as well as a balance sheet, at the end of each financial year. Your financial statements must comply with the prescribed Accounting Standards to give a true and fair view of the company’s financial status.
Protect your assets
When you split your assets into different subsidiaries, it is easier for you to transfer the ownership of your assets, or sell them. This is due to the separation of accounts. In fact, you can sell off a subsidiary as a whole without having to go through the hassle of restructuring your business or engage in complex audits. Especially for high net worth individuals, holding company structures can protect personal assets and shield you from any liabilities or lawsuits.
Holding companies are often set up for the purpose of transferring whole assets to the next generation. Such intergenerational transfers can defer taxation while allowing the whole estate to be seamlessly transferred as a single unit. The most-used structure for such purposes is a trust. Besides clear governance rules, you can engage a corporate services provider who specialises in risk management, asset protection and wealth preservation. A good corporate services provider will structure a complete plan for you which may include family offices, foundations, wills and lasting Power of Attorney.
Reduce failure probabilities
Another reason to set up a holding company is to reduce the probability of a systemic failure of an entire business. By establishing individual subsidiaries instead of a single company, you can lower the risk of failure.Holding companies can also provide downstream guarantees in order for their subsidiaries to enjoy better financing terms. For instance, you may set up subsidiaries for capital-intensive projects that are separate from operating subsidiaries. If a subsidiary with high indebtedness fails, its financial cash flow problems will not affect other subsidiaries. Banks tend to take this into consideration, thus achieving an overall lower cost of capital.
A holding company and its subsidiaries are usually controlled through a board of directors. Thus, by setting up these structures, you can ensure centralised coordination and control, while providing each arm the flexibility to operate independently. You will also ensure visibility over company ownership and governance policies. In some instances, investors may prefer for all intellectual property assets to be owned under a single subsidiary so that they can be more efficiently managed.
By insulating the owners from the day to day operations of a subsidiary, owners can maintain confidentiality about their participation. Foreign investors are strongly advised to request the services of experts in company registration in Singapore in setting up a holding company here. For most company structures that you pick, at least one shareholder and one resident director are required. There is usually no limit on the number of foreign directors for holding companies.
Set up a Holding Company with Corporate Services Singapore
Corporate Services Singapore can work with you to fulfill your needs through a holding company structure. We will assist you in evaluating the various assets that are part of your business, such as equity holdings, businesses and intellectual property assets, as well as advise you on the different tax considerations, from corporate and withholding tax on dividends and capital gains tax if any.
To set up a well-designed holding company structure in full compliance of the law, give Corporate Services Singapore a call at 6602 8286 or email us at email@example.com.