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Foreign firms allowed to re-domicile to Singapore from Oct 11
FOREIGN companies can now transfer their registration from their original jurisdiction to Singapore.
This will allow foreign companies to re-domicile to Singapore, instead of having to set up a subsidiary here, reducing operational disruption to the company.
Such transfers are possible under the new inward re-domiciliation regime that took effect on Oct 11 - one of the key changes made to the Companies Act in March.
The move is expected to boost Singapore's competitiveness as a business hub, by facilitating the transfer or the setting-up of business in the city-state for foreigners.
A foreign corporate entity that re-domiciles to Singapore will become a Singapore company and will be required to comply with the Companies Act like any other Singapore-incorporated company.
But re-domiciliation allows a company to preserve its corporate history and branding, while taking advantage of Singapore's political stability, stable legal structure and highly skilled workforce, for example.
"This change is very welcomed as it provides greater flexibility to the reorganisation of corporate groups. This is especially important at a time when some traditional group structures are being re-thought in the light of greater tax transparency and Base Erosion and Profit Shifting (BEPS) developments," global professional services firm EY said in a recent publication.
BEPS refers to the tax avoidance strategies used by multinational companies to exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the auspices of the Organisation for Economic Co-operation and Development (OECD), over 100 countries and jurisdictions are collaborating to implement measures to tackle BEPS.
EY also pointed out that there were a number of factors that foreign companies would need to consider before re-domiciling.
"The company may not be able to be re-domiciled if the country where it wishes to transfer its registration from does not have a re-domiciliation regime, or does not allow for outward re-domiciliation to another jurisdiction."
Countries such as Canada, Australia and New Zealand permit re-domiciliation.
EY added: "When re-domiciling, there may also be tax and stamp duty implications. The company needs to know how the transfer will be treated for tax and stamp duty purposes in the home country and assess whether they are prepared for the consequences, in addition to the tax implications in Singapore."
And, in order to qualify for the new regime, a foreign company must either have a revenue of more than S$10 million annually or total assets greater than S$10 million at the end of each financial year. It must also have more than 50 employees at the end of each financial year.
This criteria must be met in the two financial years immediately preceding its re-domiciliation application.
Corporate secretarial firm AM Corporate Services also pointed out that Singapore does not allow outward re-domiciliation - that is, there is no option to reverse the decision, should the regime no longer suit the company.
"This means that before taking the decision to re-domicile to Singapore, the foreign company should clearly determine its goals as well as evaluate the legal consequences of re-domiciliation," it said on its website.
Information pertaining to the commencement notification and the relevant subsidiary legislation can be found at the Accounting and Corporate Regulatory Authority (ACRA) website at www.acra.gov.sg.