A subsidiary or subsidiary is owned and controlled by another corporation known as a holding or parent company. Subsidiaries are common in the business environment and most multinational corporations operate through these structures. There are several advantages to forming subsidiaries as separate legal entities compared to forming divisions of a single company. For example, a subsidiary must comply with the tax, liability and other regulations of its home country, not the country of the holding company. For example, a subsidiary may sue and be sued separately from the holding company, and its obligations typically do not transfer to its parent company.

Singapore has managed to position itself as the preferred jurisdiction for companies of all sizes looking to do business in Asia. Singapore's business environment is conducive to foreign investors due to rather liberal requirements and various advantages such as strategic location, availability of skilled multilingual workforce, smart immigration policy, excellent intellectual property protection and efficient legal system. Among other benefits, Singapore's tax policy and tax treaties are certainly worth mentioning and are discussed below. Some of the more specific benefits of establishing a subsidiary in Singapore include:

Paid-up capital can be in the same currency as that of the holding company (easier settlement procedure)
Free choice of the company's financial year, thereby aligning it with the balance sheet dates of the holding company (simplified accounting procedure)
The name of the subsidiary may differ from that of the holding company
Freedom to repatriate all profits from Singapore

Main basic requirements
During the formation of a subsidiary company, at least one local director needs to be appointed who is a Singaporean citizen or permanent resident or who holds an employment pass. Upon incorporation, a company secretary must be appointed who is also resident in Singapore. The minimum paid-up capital for a subsidiary company is 1 SGD, and this can be 100% owned by the parent company. A subsidiary in Singapore must have an office — either commercial premises or a home office — and statutory records need to be kept there.

To form a subsidiary, the following documents are required:

The holding company’s certificate of incorporation
Proof of the holding company’s directors and current registered address
Authorisation of signature on behalf of the holding company
Copies of the subsidiary directors’ passports
Signed consent to act as directors
Registered address for the subsidiary
Articles of association and memorandum for the subsidiary
Possible applications
In addition to the various benefits of having a subsidiary company in Singapore, there are circumstances when it is crucial to opt for a subsidiary rather than a branch office or simply a new division. The main purpose of a subsidiary is to allow local or foreign companies to expand their operations. But what if you want to expand your business in a completely different direction to that of your current business? While a branch office is an extension of the parent company and is therefore only allowed to carry out activities which are in line with the purpose of that company, a subsidiary is allowed to perform any activities as long as these are stated at the time of its incorporation.

Taxation for subsidiary companies in Singapore
Singapore’s tax system is considered simple and investor-friendly. The corporate tax rate does not exceed 17% and there is no tax on capital gains or dividends. All foreign-sourced income is exempt from tax as long as it has been subject to tax in another country. In addition, Singapore has an extensive list of double tax agreements (DTAs) with over 70 countries around the world, which allows investors to avoid double taxation. This extensive DTA network, together with 0% tax on capital gains and dividends, makes Singapore a smart and financially friendly choice for the incorporation of a subsidiary company.