{"id":20678,"date":"2018-03-19T17:07:15","date_gmt":"2018-03-19T09:07:15","guid":{"rendered":"https:\/\/glutenfreepleasure.com\/__proxy_domain\/www.3ecpa.com.sg\/?page_id=20678"},"modified":"2026-09-01T08:42:31","modified_gmt":"2026-09-01T00:42:31","slug":"why-setup-a-singapore-company-as-an-intermediary-subsidiary","status":"publish","type":"page","link":"https:\/\/glutenfreepleasure.com\/__proxy_domain\/www.3ecpa.com.sg\/resources\/guide-to-setup-singapore-business\/why-setup-a-singapore-company-as-an-intermediary-subsidiary\/","title":{"rendered":"Why Setup A Singapore Company As An Intermediary Subsidiary"},"content":{"rendered":"

[vc_row][vc_column][vc_column_text]<\/p>\n

Why Establish a Singapore Company as an Intermediary Subsidiary?<\/b><\/h2>\n

\"Why<\/p>\n

Southeast Asia stands out as one of the fastest-growing regions globally, driven by rapid economic development, abundant resources, and a cost-effective, skilled workforce. The ASEAN Free Trade Agreement further enhances cross-border opportunities in sectors such as infrastructure, technology, and agri-business, making the region highly attractive to global investors.<\/span><\/p>\n

For many international companies, <\/span>Singapore<\/b> serves as the ideal gateway to manage and expand operations across Southeast Asia. The country\u2019s low corporate tax rates, absence of capital gains tax, and extensive double taxation treaties make it a leading destination for <\/span>company registration<\/b> and regional headquarters setup.<\/span><\/p>\n

Choosing <\/span>Singapore company incorporation<\/a><\/b> provides businesses with a stable, transparent, and business-friendly environment backed by a robust legal framework and strong financial infrastructure.<\/span><\/p>\n

Some of the key considerations are as follows:<\/span><\/p>\n

 <\/p>\n

Availability of Avoidance of Double Taxation Agreements<\/u><\/h3>\n

The originating<\/span> country may not have established double taxation agreements (also commonly referred to as tax treaties) with all subsidiary countries. Using a <\/span>Singapore company<\/span><\/a> as <\/span>an <\/span>intermediary holding company will solve this issue. <\/span>Singapore has concluded <\/span>over 100 DTAs and tax information exchange agreements as of 2025<\/b>, particularly with Southeast Asian countries.<\/span><\/p>\n

Double taxation agreements are <\/span>essential for<\/span> promoting international trade and investment by improving the transparency of information and certainty of tax positions. They are also essential<\/span> for eliminating double<\/span> taxation that can arise from cross-border transactions, thereby reducing business costs.<\/span><\/p>\n

A Singapore company can easily qualify as a tax resident to enjoy DTA benefits if the <\/span>control and management of its business is exercised in Singapore (e.g., by conducting board meetings locally and maintaining key decision-making functions in Singapore)<\/b><\/p>\n

 <\/p>\n

No capital gains tax<\/u><\/h3>\n

Capital gains are subject to tax in home countries, <\/span>such as<\/span> the US and India. In Singapore, there is no tax on capital gains. Having a Singapore company to hold its<\/span> subsidiaries ensures the<\/span> avoidance of capital gains tax on the disposal of any subsidiary.<\/span><\/p>\n

 <\/p>\n

Taxability of dividends<\/u><\/h3>\n

It is common for subsidiaries to distribut<\/span>e profits to the parent company through<\/span> dividends. Certain countries may impose taxes on the receipt of dividends. In Singapore, foreign dividends can be t<\/span>ax-exempt<\/span> if they fulfil the following conditions:<\/span><\/p>\n

    \n
  1. The highest corporate tax rate (headline tax rate) of the foreign jurisdiction from which the income is received is at least 15% at the time the foreign income is received in Singapore;<\/li>\n
  2. The foreign income had been subjected to tax in the foreign jurisdiction from which they were received (known as the “subject to tax<\/a>” condition). The rate at which the foreign income was taxed can be different from the headline tax <\/span>rate; and<\/li>\n
  3. The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.<\/li>\n<\/ol>\n

    For this \u201csubject to tax<\/span>\u201d condition, tax paid or payable on foreign-sourced dividends received in Singapore includes:<\/span><\/p>\n

      \n
    1. The<\/span> dividend tax, which is income tax levied on the dividend by the foreign country of source<\/span>,<\/span> and<\/span><\/li>\n
    2. The underlying tax is income tax<\/span> paid or payable by the <\/span>dividend-paying<\/span> company on the income out of which the dividend is paid.<\/span><\/li>\n<\/ol>\n

      Dividends can be<\/span> maintained in a Singapore intermediary company and<\/span> not be taxed <\/span>back in the ultimate holding company <\/span>in the home country.<\/span><\/p>\n

      From YA 2025 onwards, IRAS has simplified administrative requirements by allowing companies to submit a <\/span>self-declaration with supporting foreign tax credit documentation<\/b> instead of undergoing lengthy assessments.<\/span><\/p>\n

       <\/p>\n

      Consolidation and group relief<\/u><\/h3>\n

      Companies that wish to develop new lines of <\/span>business<\/span> or venture in<\/span>to new business sectors may have various business activities<\/span>. Separate entities can be incorporated for each business activity and be grouped under an intermediary holding company. Financial results are consolidated at<\/span> the<\/span> intermediary holding company level. Singapore companies which are part of a group within Singapore can enjoy the benefits of the group relief scheme. Group relief enables Singapore companies to deduct unutilised capital allowances\/ trade losses\/ donations of a Singapore company from the assessable income of another Singapore company in the same group.<\/span><\/p>\n

      With the <\/span>ongoing implementation of Pillar Two (Global Minimum Tax of 15%) in 2025<\/b>, Singapore has aligned its group relief policies to ensure multinational groups continue to benefit from tax efficiency while maintaining compliance with OECD standards.<\/span><\/p>\n

       <\/p>\n

      Mitigating risks<\/u><\/h3>\n

      There <\/span>may be a need to establish a branch in Southeast Asia<\/span>. Instead of having the <\/span>company in the home country as the branch\u2019s head office, a Singapore company can serve as its head<\/span> office.  As a branch is an extension of a head office, the risks can be better managed at <\/span>the<\/span> Singapore intermediary company level and not affect the ultimate holding company back in the home country.<\/span><\/p>\n

      \"Why<\/u><\/h3>\n

      Fund raising<\/u><\/h3>\n

      Fundraising may be required for a <\/span>specific<\/span> region, rather than for the entire. A <\/span>Singapore company can be established to attract investors on a sub-group level. There is also the option of <\/span>an <\/span>Initial Public Offering (IPO) in Singapore.<\/span>
      \n<\/span>Commercial reasons should back the structuring of companies,<\/span> and not just for tax benefits, if the group structure is planned well to include an intermediary Singapore company, unnecessary withholding taxes can be saved through reduced tax treaty rates or exemption. Capital gains tax or further tax on dividends can also be avoided.<\/span><\/p>\n

      Singapore has introduced <\/span>new financing schemes and sustainability-linked bonds<\/b> to support regional fundraising, making it more attractive for businesses seeking green or ESG-compliant investments.<\/span><\/p>\n

       <\/p>\n

      How to Set Up a Subsidiary Company in Singapore?<\/b><\/h3>\n

      Setting up a subsidiary company in Singapore enables foreign businesses to establish a local presence, enjoy full ownership, and operate as a separate legal entity.<\/span><\/p>\n