Over the years, Singapore has proven itself to be a popular destination for multi-national companies to set up regional and global headquarters. In 2019, Dyson, a British technology company famous for its high-tech household appliances such as vacuum cleaners and hairdryers, announced that it would be moving its global headquarter from the UK to Singapore to be closer to customers and manufacturing centres and to reflect the increasing importance of Asia to Dyson’s business.
Singapore is an attractive destination for businesses around the world because of its stable political and business environment, competitive corporate tax regime, extensive network of tax treaties, highly skilled workforce and strategic geographical location. Well-known for being the gateway to Asia and beyond, Singapore is an ideal jurisdiction for companies that want to expand their business operations and customer base in Asia. Foreign companies looking to redomicile to Singapore can benefit from these favourable conditions.
Singapore’s business-friendly policies make it easier for companies to set up their headquarters here. Singapore-incorporated companies can be 100% foreign-owned and there are no restrictions on the movement of foreign currency into or out of the country. In fact, the Singapore government actively encourages foreign companies to set up their headquarters in Singapore through a range of incentives. In particular, companies that carry out global or regional headquarter activities of managing, coordinating and controlling business activities for a group of companies may be able to enjoy concessionary tax rates on their qualifying income.
As more multi-national companies are now looking to set up their headquarters in Singapore, this article seeks to provide an overview of how foreign companies can relocate their headquarters or holding company to Singapore and outlines the accompanying key legal considerations.
2. SINGAPORE’S INWARD REDOMICILIATION REGIME
Since 2017, foreign corporate entities (“FCE”) can transfer their places of registration to Singapore with minimal disruptions to their existing business operations and without losing their corporate history and identity by availing themselves to Singapore’s redomiciliation regime implemented through the Companies (Amendment) Act 2017 and the Companies (Transfer of Registration) Regulations 2017 (the “Redomiciliation Regime”).
FCEs that are looking to move to Singapore may apply to transfer their places of registration under the Redomiciliation Regime to enjoy a seamless transfer process.
To be able to avail itself to the Redomiciliation Regime, the FCE must meet certain prescribed minimum requirements on size of the company and solvency criteria. The FCE must be a body corporate that can adapt its legal structure to the companies limited by shares structure under the Companies Act of Singapore (the “Companies Act”). An FCE that redomiciles to Singapore will become a Singapore company limited by shares and will be required to comply with the regulatory requirements in the Companies Act going forward (see Section 3.2.7 Ongoing Compliance in Singapore below).
Changing the place of registration under the Redomiciliation Regime does not create a new legal entity or affect identity of the FCE or its continuity as a body corporate. The obligations, liabilities, properties or rights of the FCE and the legal proceedings it is involved in also remain unaffected. This minimises the disruption to operations of the FCE and retains the FCE’s corporate identity and branding in the process. The FCE may be required to notify its contractual counterparties of the change of place of registration. Bank accounts may remain in place, but banks are likely to require the relevant documents pertaining to the redomiciliation.
To make an Application for Transfer of Registration under the Redomiciliation Regime, the Accounting and Corporate Regulating Authority of Singapore has indicated that the processing time may take up to two months from the date of submission of all required documents. This includes the time required for referral to another government agency for approval or review. Once approved, the redomiciled FCE must de-register in its place of incorporation within 60 days of the date of registration in Singapore and register all pre-existing charges in accordance with the registration regime under the Companies Act (i.e., within 30 days of redomiciliation).
When redomiciling, the tax implications for the FCE in the outgoing jurisdiction as well as in Singapore must be taken into consideration. The outgoing jurisdiction may levy capital gains tax, exit tax or stamp duty tax on the outgoing FCE. Singapore tax laws provide for tax credit for companies successful in their redomiciliation to Singapore subject to conditions and the approval by the Minister for Finance. There are also special tax treatment of certain items of expenses incurred or assets acquired by a redomiciled company that has never carried out any trade or business in Singapore before the transfer.
More importantly, FCEs will only be able to redomicile to Singapore if the original jurisdictions in which they are registered have an outward redomiciliation regime, or at least authorise the outward redomiciliation of companies registered in such jurisdiction. In particular, places such as the United Kingdom and Hong Kong do not currently authorise the transfer of the place of registration of its domestic companies to other countries. Jurisdictions that allow for outward redomiciliation include Australia, Canada and New Zealand.