The company law of Hong Kong does not support the transfer or convert of the domicile of non-Hong Kong companies to Hong Kong. Hence, the incorporation of new corporate bodies in this jurisdiction is the only way to run a business there for foreigners. However, Hong Kong company can migrate to other Common Law jurisdictions in general.
Singapore has revised its company’s laws since 2018, and it’s now possible to change the origin of an overseas company to this pro-business business in eastern Asia. Here we are going to cover the considerations of transferring the company from other jurisdiction to Singapore. And whether you should move your company from other places to Singapore.
What does the domicile mean to a company and its owners?
To a company, domicile means its place of incorporation. Thus the company exists on the laws where it forms and functions according to the rules there. For example, if I register a limited company in Hong Kong, the company is created according to the Hong Kong Companies Ordinance, which governs how the company and its owners to maintain its statutory statue.
The company’s domicile is a strong indication of where the business is running, and thus where its income comes from and where it will be taxed. Some countries offer less-restrictive legislation on doing-business and lower taxation regime in the hope of bringing in inward investments and business activities. Overseas investors are often seeking these signals to find the best place to set up their companies.
What does re-domiciliation to Singapore mean?
Re-domiciliation is a procedure to transfers a company’s registration from one jurisdiction to another. Technically, a new Singapore company will be registered for receiving the assets and structure of the foreign company, and then, the foreign company will be de-registered.
This method is distinct from the establishment of a branch or incorporating a subsidiary in Singapore because it is going to cease the existence of the foreign company in its home country (the original place of incorporation of the company) forever.
What are the alternative to re-domiciliation to Singapore?
Let’s say you are planning to run your offshore business in Singapore, so you are comparing re-domiciliation of your overseas company with setting up a branch and incorporate a subsidiary in Singapore.
For a branch office, it is an extension of an overseas company and is not legally separated from its mother company. So, the governments recognise the branch in Singapore and its mother company are the same entity.
For registering a subsidiary company, the new company in Singapore and its mother company in the foreign country are effectively two separate companies. These two companies are subject to the laws in two different countries, and they can act individually, such as they can engage in contracts on their names.
In contrast, re-domiciliation means you are going to migrate your overseas company into Singapore by converting it into a Singapore local company. After the permanent conversion, you have transferred all rights and liabilities of your foreign company to the new Singapore company, and you have to de-register your original company afterwards.
How does the company’s re-domiciliation work in Singapore?
To transfer the domicile your overseas company to Singapore, you will have to fill in and submit the Application for Transfer of Registration form to the Accounting and Corporate Regulatory Authority (ACRA).
After re-domiciliation approval in Singapore, you will have a duty to de-register your company in its home country within 60 days and submit evidence of this to ACRA, the companies registry of Singapore.
What are the advantages of converting the domicile of a company in Singapore?
Usually, the decision of re-domiciliation comes after comparing the cost and benefits of setting up a brand and subsidiary for commercial, practical or legal reasons.
After a company changes its domicile to Singapore, the company is still the same entity. The business continues in Singapore, implying that all goodwill, creditability and track records remain unimpaired.
A growing number of countries have been tightening their regulation on the taxation arrangement of international corporates, in a bid to fight against base erosion and profit shifting (BEPS).
BEPS describes a scheme employed by multinational corporates seeking to make its profits appear to be earned by its related companies registered in “tax haven” jurisdictions so that the corporates can dodge its tax liability in their home countries.
As one of the measures to fight against BEPS, some countries have introduced special regulation to their corporate bodies receiving global income. If the tax authority in these countries observe that the corporates are aggressively sending out its profits to its related companies overseas for tax avoidance, the earnings in question may become liable for taxation in their home countries. In addition to the tax liability incurred in where the profits are sourced, the same gain may be taxed twice eventually.
As a result, international companies may need to cut their tie with their home countries where the taxation is getting unfavourable to their business. Meanwhile, Singapore is offering a pro-business environment with the low-tax rate, stable society, and straightforward bank account opening. Additionally, Singapore accepts inward re-domiciliation of overseas companies. Moreover, Singapore has signed various Free Trade Agreements with other economies to enhance local business to take part in international trades.
After re-domiciliation in Singapore, the company is registered in Singapore and subject to Singapore tax law, and it can eliminate the risk of being liable for taxation in its home country.
What is the eligibility of inward re-domiciliation to Singapore?
If the foreign corporation is a group of non-Singapore companies, Singapore also allows the re-domiciliation of the entire corporate group of companies as a whole. Then, the overseas company or whole group of foreign companies must fulfil four sets of criteria as follows:
The company’s name must be available for registration and acceptable by the ACRA. If the name is not available, there may be companies which have used the same name or highly similar names.
The company, or the group of companies, has to meet at least two of the three following criteria:
- Total assets worth over S$10 million;
- Annual revenue over S$10 million;
- At least 50 employees;
The solvency requirement states that the company must be able to pay its debts as they fall due over the next 12 months from the date of applying for inward re-domiciliation in Singapore. Also, the company must not be in any statue of liquidation, receivership or any other equivalent winding-up process. Finally, the company’s net asset value must be a positive number, which means the company’s assets must exceed its liabilities.
Firstly, the company’s place of incorporation, i.e. home country, must allow companies to re-domicile outward. Therefore, the home country permits their local companies to transfer their domicile to other countries. For example, Australia, Canada, New Zealand and the British Virgin Islands support 2-way re-domiciliation, these countries enable overseas companies to transfer their domicile inwardly as local companies, and local companies to migrate outwardly.
Second, the home country should be a Common Law jurisdiction, so the company law there is structurally identical to that in Singapore. Hence, the company’s structure, such as directors’ duties and share capital, will be able to continue to apply in Singapore after re-domicilation.
Finally, the company should have complied with all relevant company law in the home country. In other words, the company does not have any open legal cases in the home country.
Re-domiciliation process would involve the corporate law and accounting specialists in both Singapore and home country of your non-Singapore companies. So, it is not a cook-cutter service which can be finished solely by the Singaporean specialist, and the service fee reasonably expensive.
Even if your non-Singapore corporates can meet the four criteria of transferring the registration to Singapore, you must consider that re-domiciliation is an irreversible process.