There are different categories of companies set up in Singapore, from Holding to Subsidiary to Offshore, and the list goes on. Every company type offers numerous advantages to the owners, and fascinating schemes and regulatory requirements are in place for operating a company in Singapore. In this blog, we will walk you through what a Holding Company is, its benefits, and reasons for setting up a Holding Company in Singapore.
What is a Holding Company?
A Holding Company is a parent company, generally a corporation or LLC, limited by shares. The internal structure of a Holding Company doesn’t differ from an LLC’s. They are primarily formed to buy a company’s group assets and control the ownership interests of its subsidiaries.
They aren’t engaged in the production and trading of goods and services. Their chief purpose is to own subsidiary companies’ assets or stocks to establish a corporate group.
In layperson’s terms, any large corporation operating under another name is a Holding Company. Some illustrious examples are JP Morgan, Nestle, and Alphabet (owned by Google).
Benefits of Setting Up a Holding Company in Singapore
There are several benefits of setting up a Holding Company in Singapore, and the salient ones are as follows:
Reduction in Tax Obligations
Singapore Regulatory Requirements, such as ACRA and IRAS, offer numerous tax incentives and advantages to Holding Companies in Singapore. They have formulated a tax regime that must be followed. One of the most astonishing benefits of setting up a Holding Company in Singapore is the lower corporate tax rates.
It will reduce your Tax Obligations. You can even file a single tax return for your Holding Company. It enables you to offset the losses of one subsidiary company against the gains of another. It means the comprehensive taxes payable by all group subsidiary companies will be less than taxes of individual subsidiaries where profits are significant.
Reduction of Risk on Assets
By setting up a Holding Company in Singapore, you will increase the protection of your company assets because a Holding Company is considered a separate legal entity in Singapore from its subsidiary companies.
Our Singapore Business Advisory Consultants highly recommend keeping your organisation’s valuable assets with the Holding Company and letting its subsidiary companies handle the business operations.
It helps to mitigate the risk of giving up on assets by keeping them secured from liabilities and creditors of subsidiary companies, especially in the scenarios of debt and insolvency.
Financial Advantages and Risk Reduction
Setting up a Holding Company in Singapore presents you with a set of advantages, such as a significant financial position compared to its subsidiary company because of owning/holding substantial assets and stocks.
Due to its outstanding business structure, a Holding Company reduces the risk of overall company failure and helps lower the cost of capital. Because of this, Holding Companies have the astounding benefit of raising loans from financial institutions at lower interest rates compared to sole company structure.
They can distribute the loan amount to their subsidiary companies for their business operations and expansion, thereby reducing their cost of capital. Subsidiary Companies are considered LLCs in Singapore, and the financial aid through loans helps them to invest in higher-risk segments of their business.
Note: The Holding Company is liable to repay the loan even if it gives the loan amount to its subsidiary company. Due to this, it builds solid trust amongst financial institutions for Holding and Subsidiary Companies.
Reasons for Setting Up a Holding Company in Singapore
We have ample reasons to persuade you to set up a Holding Company in Singapore, and the key ones are as follows:
You will be delighted that Holding Companies in Singapore enjoy the substantial benefit of relatively easy compliance with the regulations. You are required to fulfil two primary compliance obligations for preserving your Holding Company in Singapore: Financial Reporting obligations and Tax Filing obligations.
Holding Companies must submit their and subsidiary companies’ consolidated accounts in the Financial Reporting obligations. They are also required to submit an entire group balance sheet that must comply with IRAS Financial Reporting Standards.
In Tax Filing obligations, Holding Companies in Singapore can submit a single tax return of their and subsidiary companies by off-setting losses against profits. Such straightforward compliance processes and regulations make it smooth to sustain a Holding Company in Singapore.
Lucrative Tax Regimes
Singapore has one of the best Tax Regimes in the world because of its lower corporate tax rates, business incentives to help companies foster, and Single-Tier Tax system. Such attractive benefits and long-term advantages make Singapore a top choice for setting up a Holding Company. By leveraging these lucrative Tax regimes, you can optimise your Tax Liabilities.
With the Single-Tier Tax System, you are required to pay Company Tax on corporate profits only once in a financial year. Also, taxes aren’t levied on income from dividends and interest from your Subsidiary Companies. Also, Singapore has no capital gains tax, enabling you to sell assets worry-free.
Read our other blog, “Tips to Manage Company Tax in Singapore,” for your reference.
After reading the blog, you will have firm clarification about what a Holding Company is, its benefits, and the reasons for setting up a Holding Company in Singapore. You will enjoy various benefits apart from the ones mentioned in the blog.
You have operational flexibility to set up your Holding Company in Singapore and its subsidiaries in another country where you have assets, investors, stakeholders, and a target audience for growing your business. However, if you have any questions, feel free to contact us.
At Bestar Services, we provide comprehensive assistance for setting up a Holding Company in Singapore from Incorporation to Registration and even with Financial Audit and Assurance and Statutory Services.
Our Business Advisory Consultants in Singapore will assist you with the entire Holding Company setup and registration process in Singapore. Our Financial and Tax Experts will handle the tax compliance and financial reporting segment.
Contact us for a consultation with our Singapore Business Advisory Specialists by calling us on +65 62994730 or emailing firstname.lastname@example.org.