A Guide to Setting Up a Holding Company in Singapore

The main characteristics of a holding company in Singapore focus on its structural and governance features within a corporate group. These typically include:

• Control over one or more subsidiaries through majority or significant shareholding and voting rights.
• Influence over key strategic decisions, including the appointment and removal of directors.
• Separation of legal liability between the holding company, acting as a parent company, and its subsidiaries supports protecting assets through separate legal status, which helps shield personal assets when risks arise.
• Income derived primarily from dividends, interest, or capital gains arising from its investments.
• Full compliance with statutory requirements in Singapore, including maintaining proper corporate records, appointing a company secretary, and filing annual returns.

These characteristics distinguish a holding company within a group structure while ensuring it remains compliant under Singapore law.

Operating Holding Company (OHC)

An Operating Holding Company owns subsidiaries that carry out active business operations through their own management teams. It often provides centralised management, strategic guidance, or shared services to its subsidiaries.

Key characteristics:

• Owns controlling stakes in operating subsidiaries.
• Engages in some level of business activity or administrative functions.
• Supports group-level management, coordination, and consolidation of financial reporting.
• Subject to the same regulatory requirements as all Singapore companies, including annual returns and statutory audits if thresholds are met.

Examples of holding companies in Singapore include both locally headquartered groups and global corporations that use Singapore as a base for regional or international investments. A holding company in Singapore may own shares in subsidiaries, intellectual property, real estate, or other strategic assets.

Examples of well-known Singapore-based holding companies include:

• DBS Group.
• Singtel.

Examples of global groups with one or more subsidiaries in Singapore include:

• Alphabet.
• Volkswagen.
• Johnson & Johnson.
• Citigroup.

A widely recognised example of a global holding company is Berkshire Hathaway, led by Warren Buffett. Berkshire Hathaway owns controlling or minority stakes in numerous public and private companies, including Duracell, Dairy Queen, The Coca-Cola Company, Apple, IBM, and American Express.

These examples illustrate how a holding company structure is used to manage multiple businesses, other subsidiaries, and other businesses across industries and jurisdictions.

2 Save on corporate taxes in Singapore

One of the most significant financial advantages of establishing a holding company structure in Singapore is improved tax efficiency through tax deferral opportunities and applicable tax deductions compared to worldwide taxation systems. In Singapore, a holding company can operate without the constant concern of double taxation, provided it meets specific conditions, such as earning foreign-sourced income that is not remitted into Singapore. This favourable tax environment allows businesses to focus on their day-to-day operations while retaining more of their earnings, facilitating growth and reinvestment opportunities.

3 Double Taxation Agreements (DTAs)

Singapore has a signed a double taxation agreement with over 80 countries. What this means for you as an entrepreneur with a Singapore resident holding company is that dividends, interests and royalties paid from subsidiary companies can enjoy tax benefits or even be exempt from tax obligations.

Things to note

1. Your subsidiary company should be located in the treaty counties.
2. Your holding company must be considered a tax resident in Singapore.

4 Single-tier corporate tax system

It means that:

• You will only be taxed once for corporate profits.
• There will be no tax liability on the dividends you earn from your subsidiary companies, assuming that the subsidiary company is a resident company or that your Singapore holding company meets the conditions for exemption due to foreign sources of income.
• No withholding tax on dividends issued to residents or non-residents.
• No withholding tax on interests earned from subsidiary companies or parent companies.

Keep in mind that royalties and certain service and accounting fees paid to foreign companies may still be subjected to 10% and 17% tax if the tax rate is not reduced under a tax treaty. Therefore, you must ensure your companies are properly set up to make use of the tax benefits.

5 No tax on foreign-sourced income

A Singapore tax-resident holding company benefits from no taxation on foreign-sourced income, including dividends from subsidiaries, provided the subsidiaries are taxed at least 15% in their country of incorporation. If this threshold isn't met, dividends may incur a tax liability when distributed to the holding company. Additionally, undistributed income from foreign subsidiaries typically remains untaxed, enhancing the holding company's financial positioning as a parent company and allowing for smoother day-to-day operations.

6 No tax on capital gains

Another attractive feature of Singapore holding companies is the absence of capital gains tax. Profits from the sale of shares are not subject to tax if they are deemed capital in nature rather than trading income, allowing business owners to reinvest or distribute profits without additional tax burdens. This characteristic contributes significantly to the overall financial efficiency of the corporate structure, enabling parent companies to maximise their resources and foster growth.

7 Attractive tax rate

Singapore is renowned for having one of the most competitive corporate tax rates globally, currently set at a marginal rate of 17%. Additionally, various incentives and tax schemes can effectively reduce this rate further, making it highly appealing for businesses looking to establish a presence in the region. This favourable tax environment attracts both local and international investors, positioning Singapore as a prime location for setting up holding companies and promoting economic growth.

8 Asset protection

Establishing a holding company provides strong asset protection against liabilities from subsidiaries, including scenarios involving selling subsidiaries or financial difficulties, even where the parent owns controlling interests. The holding company is generally not legally responsible for subsidiary losses, safeguarding your investments. Singapore’s legal framework supports this asset protection, but exceptions exist in cases of fraud, negligence, or unpaid taxes.

Registering a holding company in Singapore is a streamlined process that involves several key steps overseen by the Accounting and Corporate Regulatory Authority (ACRA), the official company registrar in the country.

1 Choose your company name

The first step in establishing your holding company is to choose a unique name that reflects your brand and business vision. Submit this name for approval to the Accounting and Corporate Regulatory Authority (ACRA), ensuring it complies with local regulations and is not too similar to existing names. Once approved, the name will be reserved for 60 days, during which you should complete your registration.

Holding companies in Singapore face several challenges despite the favourable business environment. Key challenges include:

• Ensuring compliance with Singapore's regulatory requirements: This involves timely filing of annual returns, maintaining proper corporate records, and adhering to the Companies Act. Failure to comply can lead to penalties and legal issues.
• Tax planning complexities: Navigating international tax laws, transfer pricing rules, and double taxation agreements can be difficult, especially for holding companies with global subsidiaries. Proper structuring is essential to avoid tax inefficiencies related to dividends, interest income, or gains from foreign sources.
• Managing operational complexity: Overseeing subsidiaries across different industries or regions involves dealing with varying regulatory landscapes, market conditions, and business risks, requiring careful and effective oversight.
• Handling financial risks: Holding companies must manage risks such as currency fluctuations, interest rate changes, and market volatility, as their revenue often depends on investments. The challenge is to ensure stable returns while protecting assets over the long term.