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Is opening a branch in Singapore the best choice?

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MographExpat
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Is opening a branch in Singapore the best choice?

Postby MographExpat » Mon, 13 Oct 2014 6:03 pm

So I've been planning on starting a business in the United States, but I'm trying to soon move to Singapore so I'm weighing my options.

I know I can start a company in the US no problem and I have existing clients to get the ball rolling immediately. I'll either be sole owner, or co-owner with one partner. What I'm trying to figure out is if it's feasible to create the company in the US and then a few months later open a branch in Singapore. I think a branch is the way to go rather than a subsidiary.

I'm planning on moving to SG myself, so that's what I'm very unclear about. Entrepass seems difficult to say the least but I can't tell if it's possible for my company to hire me on an employment pass. I've been reading that they're cracking down on people that tried to scam the system that way, but I'm trying to do this legitimately with an established foreign company.

The company itself is a motion graphics and animation company. I've been doing research on that and although many say the market is shrinking I believe we would bring unique qualities to the table and need to hire locals designers so I'm hoping we'd be deemed appropriate. I was working freelance in Hollywood and Los Angeles for years and I know the industry in and out there, and I also have connections within the visual effects industry which has footholds in Singapore.

Does this seem feasible or even possible? Would it be better to register the company in Singapore rather than the US first? Part of the reason I'd like to have 2 branches is because it seems entirely possible that you can have your company shut down if you don't bring in a lot of business quickly. I have good contacts in the US, but I don't even know if they count that business towards the $ totals.

Anyway, I'd greatly appreciate any advice or even just a nudge in the right direction. There's so much information and the rules seem to be ever changing so it's a daunting task.

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Strong Eagle
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Postby Strong Eagle » Mon, 13 Oct 2014 10:46 pm

Just to be clear about the terminology you are using:

a) A subsidiary is a Singapore registered private limited where all the stock is wholly owned by the parent company. Almost all the MNC's in Singapore are organized this way.

b) A branch operates differently in that no stock is issued and no memorandum of association. Instead, the branch operates under the parent companies articles of incorporation. For a branch, your company taxation will be the same but you cannot take advantage of various incentives and credits.

You really don't want to try the Entrepass route... the requirements are very onerous these days and it is doubtful you would qualify, let alone generate the necessary spend on employees to be renewed.

The way professionals create companies these days is to hire a normally resident director who then files for an EP for you. If you have skills, experience and resources, you will be granted an EP. I have written on this subject numerous times recently... it really is the only viable way for you to set up shop in Singapore no matter which legal entity you select.

I don't know why you'd want a branch or subsidiary connected with a US corporation... it only complicates your tax matters in the US and possibly in Singapore as well. Since you're the only shareholder (or one of a few) I don't see why you wouldn't just start a private limited with you as shareholder.

As for your line of business... I judge you will have a very tough time trying to round up clients in Singapore. You can certainly work from Singapore to service your business clients elsewhere... but why?

The animation companies in Singapore are feeling increased competition from China and elsewhere because of the labor rates, and you need to carefully consider this when doing a business plan. If you want more information, I'll put you in touch with a friend of mine who runs exactly the type of business in Singapore that you are referring to.

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Postby MographExpat » Tue, 14 Oct 2014 7:17 am

Thanks a lot for the info, that's a huge help!

That would be awesome if you could put me in touch with your friend if you don't mind. I really don't know what the scene is like in Singapore since it's such a specialized field, so it'd be great to talk to someone in it!

You're totally right, I've been reading up on it more and a subsidiary would make much more sense than a branch, that seems like the clear way to go.

The reason for being connected to a US company at all is because the initial plan was for my partner in the US to have a physical presence on the West Coast and I'd open a branch in Singapore. From my experience producers are critical to drumming up work and building relationships and I'd like to have a local presence in that respect. It may not be practical but most of my experience is in Hollywood and I know they're old fashioned about meeting in person.

Like you said, I'm guessing it'd be hard to break into the Singapore market no matter how good or relevant our skills are so I want to keep the padding of having US clients if it takes a long time to make the local connections.

That is a good question, *why* I would even come to Singapore to do it. I settled on Southeast Asia years ago and determined Singapore had the most opportunity for real growth and first world income, while being in a very strategically useful area. Singapore *was* recruiting heavily at Los Angeles conferences and I met many Singaporean designers. Also, outsourcing is becoming a *huge* issue with the VFX industry, I'd like to head that off at the pass and be able to work in Asia if need be when it inevitably happens to the graphics industry as well. Lastly, just for the adventure, while I'm still young!

It's far premature but my ultimate goal would be to have nimble branches/subsidiaries at key locations in the East and West. As a freelancer I already work with worldwide clients and I see that as the future for motion graphics companies too as broadband becomes ubiquitous. Chinese competition will surely be a big issue in the near future but for some reason China hasn't seemed to jump on the motion graphics train yet. VFX and 3D animation I'm sure is already an issue just as India has flooded the VFX market with cheap skilled labor.

The major question for me now is:

Do you think that there are any other major downsides to incorporating in the US and then opening a subsidiary in Singapore as opposed to having it solely in Singapore?

The benefit of having a US based location seems to outweigh any tax downsides to me (although I don't know the details on the taxes yet). Ideally I'd like to incorporate in the US, keep my US clients, open a subsidiary in Singapore and hire myself on an Employment Pass. Then hire a couple local employees full time and any other designers as needed or on a freelance basis. I'll need to network and hustle hardcore to break into the industry here, but I can keep the US clients in the meantime. Does that sound feasible to you at all?

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Postby nakatago » Tue, 14 Oct 2014 7:39 am

MographExpat wrote:That is a good question, *why* I would even come to Singapore to do it. I settled on Southeast Asia years ago and determined Singapore had the most opportunity for real growth and first world income, while being in a very strategically useful area. Singapore *was* recruiting heavily at Los Angeles conferences and I met many Singaporean designers. Also, outsourcing is becoming a *huge* issue with the VFX industry, I'd like to head that off at the pass and be able to work in Asia if need be when it inevitably happens to the graphics industry as well. Lastly, just for the adventure, while I'm still young!


You may want to research the fate of LucasArts/ILM in Singapore. There was some rumors about reducing headcount there but it's all hearsay to me. You may be a better judge of poring through news or googling with the right keywords.

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Postby MographExpat » Tue, 14 Oct 2014 8:31 am

nakatago wrote:You may want to research the fate of LucasArts/ILM in Singapore. There was some rumors about reducing headcount there but it's all hearsay to me. You may be a better judge of poring through news or googling with the right keywords.


Thanks for the heads up! I looked into it and it seeeems like LucasArts (the video game division) was shut down when Disney bough it last year. As far as I can tell though, they just built a huge new building in Singapore for the film and animation divisions, so that seems like a positive development.

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Postby Strong Eagle » Wed, 15 Oct 2014 4:01 am

I still don't see why you wouldn't want to create an independent SG private limited as opposed to a subsidiary, which will cause you additional tax headaches in the USA.

I'll get hold of my friend and see if he is willing to chat.

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Postby MographExpat » Thu, 16 Oct 2014 2:54 am

Strong Eagle wrote:I still don't see why you wouldn't want to create an independent SG private limited as opposed to a subsidiary, which will cause you additional tax headaches in the USA.

I'll get hold of my friend and see if he is willing to chat.


Hmm I'm not sure anymore. I just always assumed I would since my roots are in the US and I want to do business there, but if I'm physically located in SG it doesn't seem to make much sense. I guess that since it seems my residency in SG is at the hands of a capricious system that I would like the option of consolidating back in the US if I can't keep residency. Also I need to research the tax situation of doing business in the US as a foreign company, I don't know much about that.

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Postby Strong Eagle » Thu, 16 Oct 2014 4:33 am

You just want two companies that are separate... for the US a LLC or S Corp and for Singapore a private limited or LLC. Since you only have one or two shareholders, separate entities is not an issue. As an owner of a foreign company you'd have to file form 5471 showing ownership percentage, P&L, etc. But, no tax liability ensues from this report.

You don't want to pay dividends from your Singapore company since they would be taxed as passive income to you in the USA. Pay it all out in salary, housing, and directors fees and avail yourself of the foreign earned income exclusion.

Winding up a company in Singapore is relatively easy and inexpensive... pay off creditors, give the remaining assets to the shareholders.


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