Buying a Franchise Business in Singapore: Company Setup, Licences and Withholding Tax on Royalties

Short answer: Most Singapore franchisees incorporate a private limited company, pick the right SSIC code, get the sector licence (for example an SFA Food Shop Licence for a restaurant) and record the trade mark licence with IPOS. Royalties paid to an overseas franchisor are generally subject to 10% withholding tax, unless a tax treaty reduces it.

A franchise business in Singapore is not regulated by a franchise-specific law, so the franchisee’s protection comes mainly from the franchise agreement, the right company structure and getting the tax and licensing steps right from day one. This guide is for the franchisee buying into a local or overseas brand, and covers set-up, licences, the trade mark licence, tax on franchise fees and royalties, and the clauses to review before signing.

Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.

Is there a franchise law or franchise registration in Singapore?

No. Singapore has no statute dedicated to franchising and no register that a franchisor or franchisee must join before trading. The current Acts listed on Singapore Statutes Online include no franchise Act, so the relationship is governed by the franchise agreement and by general laws such as contract, trade mark, tax and sector licensing rules.

That has two practical consequences for a franchisee. First, no franchise-specific law requires the franchisor to give you a disclosure document before you sign, so your own due diligence matters more. Second, the agreement is where your rights live. If it is silent on territory, renewal or exit, there is no statutory default to fall back on. Our earlier overview of how franchise arrangements work in Singapore explains the common franchise models (single-unit, multi-unit and master franchise) in more detail.

Which business structure should a franchisee use?

Most franchisees use a private limited company (Pte Ltd). It separates the outlet’s debts and lease obligations from your personal assets, and many franchisors, landlords and banks expect a company counterparty.

A sole proprietorship is possible for a small single outlet, but the owner is personally liable for the business’s debts, including rent and royalty obligations that can run for years. If you are a foreign investor yourself, Singapore company rules still require at least one locally resident director, which affects how you staff the board.

Landlords and franchisors often ask directors for personal guarantees, and limited liability does not protect you from a guarantee you have signed. A company pays corporate income tax at a flat 17% of chargeable income.

How do you set up the company for a franchise business in Singapore?

You reserve a company name with ACRA, choose the business activity code, and register the company through Bizfile. ACRA charges S$15 for the name application and S$300 for registration.

1. Check the franchise agreement first. Some franchisors require the franchisee company to use a particular name format, or forbid using the brand name in your company name. Agree this before applying.
2. Apply for the company name. During the name application ACRA asks you to pick the Singapore Standard Industrial Classification (SSIC) code that best describes your main business activity, with an optional secondary activity. Our guide on how to find the right SSIC code walks through the choice.
3. Prepare the incorporation documents: directors (at least one ordinarily resident in Singapore), shareholders, a company secretary, a registered office address in Singapore and the company constitution.
4. Register the company on Bizfile and receive the Business Profile.
5. Open a corporate bank account, then apply for sector licences, the trade mark licence recordal and any CPF and payroll set-up for staff.

Raffles Corporate Services can incorporate the company within 1 business day of receiving complete documents, subject to compliance checks. Our Incorporation of Company Package is S$450 one time, and our Annual Corporate Package, which provides a named company secretary and files the annual return, is S$600 a year, as listed on our packages page. To estimate set-up costs and first-year corporate tax, try our free compliance tools and calculators.

What licences does a franchise outlet need?

That depends on the sector, not on the franchise itself. A restaurant, café, food court stall operator or takeaway kiosk needs a Food Shop Licence from the Singapore Food Agency (SFA); other sectors have their own regulators.

The SFA Food Shop Licence costs S$195 and is valid for 1 year. The application is made through GoBusiness and involves a review of the outlet’s layout plan, a pre-licensing inspection and final approval. SFA requires a scaled layout plan showing kitchen equipment, so settle the fit-out design before applying.

Three practical points for franchisees:

• The licence is held by your operating company, not the franchisor. If you later move the outlet into a different company, the licence position needs checking; see our note on what happens when a restaurant changes its operating company.
• Build licensing time into the lease, as rent often starts before the outlet can legally open.
• Outside food, check the GoBusiness licence finder for your activity.

Should the trade mark licence be recorded with IPOS?

It is optional but advisable. IPOS states that a trade mark licence is not invalid just because it was not recorded, but recording it tells third parties the licence exists and serves as prima facie evidence of the transaction.

A franchise agreement almost always includes a licence to use the franchisor’s trade marks. If those marks are registered in Singapore, the licence can be recorded with the Intellectual Property Office of Singapore using Form CM6, at S$60 per trade mark number. Before paying an initial fee, search the IPOS register to confirm the franchisor owns the marks in Singapore. If the brand is not registered here, ask the franchisor to register it first; registration with IPOS is done per class of goods or services.

Is withholding tax payable on franchise fees and royalties paid overseas?

Usually, yes. Under section 12(7) of the Income Tax Act 1947, royalties for the use of movable property (including intellectual property) and payments for the use of commercial knowledge or information are deemed to be derived from Singapore when borne by a Singapore resident, so the Singapore franchisee must withhold tax before paying a non-resident franchisor.

According to the IRAS withholding tax rates table:

Franchise invoices often bundle an initial fee, royalties, marketing fund contributions, training and support. Classify each component separately, because the rate and even the need to withhold can differ. Our article on reviewing withholding tax by invoice component shows the approach.

The process each time you pay the franchisor:

1. Identify the date of payment. IRAS treats it as the earliest of the date the payment is due under the agreement, the date it is credited to the franchisor, or the date it is actually paid.
2. Check whether Singapore has a tax treaty (an Avoidance of Double Taxation Agreement, or DTA) with the franchisor’s country and what rate it sets for royalties.
3. To claim the treaty rate, obtain a Certificate of Residence from the franchisor, certified by its home tax authority, in English, and covering the relevant year.
4. File the withholding tax (Form S45) and pay IRAS by the 15th of the second month after the date of payment. A treaty exemption still has to be filed.
5. Pay the franchisor the net amount, unless the agreement requires you to gross up.

For penalties and the wider rules, see our guide to section 45 withholding tax and treaty relief.

Watch the gross-up clause. If the agreement says payments are made “without deduction”, you still must withhold, but you bear the tax yourself on top of the royalty.

Does GST apply to royalties paid to an overseas franchisor?

For most franchisees, no GST is payable on the overseas royalty itself. Reverse charge, where the Singapore customer accounts for GST on imported services as if it were the supplier, applies to GST-registered businesses that are not entitled to full input tax credit, such as businesses making exempt supplies.

A typical restaurant or retail franchise makes taxable supplies only, so it is usually entitled to full input tax credit and reverse charge does not apply. IRAS also notes that a business that is not GST-registered must consider registration if its taxable turnover, or its imported services and low-value goods where it would not be entitled to full input tax credit, exceed S$1 million over a 12-month period. If your business has exempt income, read our explainer on GST reverse charge on imported services.

Can the company deduct the initial franchise fee and ongoing royalties?

Ongoing royalties paid to earn the outlet’s income are generally revenue expenses. The upfront franchise fee needs more care, because IRAS only allows deductions for expenses that are revenue in nature, not capital.

IRAS describes capital expenses as investments expected to provide long-term benefits. A fee buying a multi-year right to operate a brand may be argued to be capital, while fees for training or opening support may be revenue. Ask the franchisor to itemise the initial fee and have the treatment reviewed in your first tax computation.

Which franchise agreement clauses should you review with a lawyer?

The costly clauses are usually about money, territory and exit. Have a Singapore lawyer review the agreement before you sign or pay any non-refundable deposit; if you need one, you can speak to a lawyer through our sister site.

• Fees: initial fee, royalty basis (percentage of gross sales or fixed), marketing fund, technology fees, and whether payments are net of withholding tax or grossed up.
• Territory: whether you have exclusivity, and whether the franchisor can sell online or through delivery platforms into your area.
• Term and renewal: length, renewal conditions and any renewal fee, compared against your lease term.
• Supply and refits: mandatory suppliers, minimum purchases, and how often you must refurbish.
• Termination and exit: grounds for termination, cure periods, post-termination non-compete, and whether you can sell the outlet to a buyer.
• Governing law and dispute forum: an overseas franchisor may choose its home law and courts, which raises the cost of any dispute.

If you will hire foreign staff for the outlet, our associated MOM-licensed agency at Singapore Employment Agency handles work pass applications.

Frequently asked questions

Do I need the franchisor’s approval to register my company?

Not from ACRA, but most franchise agreements require the franchisor’s consent to the franchisee entity and restrict use of the brand in the company name. Check the agreement before applying for the name.

Is withholding tax payable if the franchisor is a Singapore company?

No. Withholding tax under section 45 applies to payments to non-residents. A Singapore-resident franchisor is taxed on its royalty income through its own corporate tax return.

Who pays the withholding tax, the franchisee or the franchisor?

The legal duty to withhold, file and pay IRAS sits with the Singapore payer, the franchisee. Who bears the economic cost depends on the agreement: if it has a gross-up clause, the franchisee effectively bears it.

What happens if I miss the withholding tax deadline?

IRAS imposes a 5% late payment penalty, then up to a further 1% per completed month after 30 days, capped at 15% of the unpaid tax.

Last reviewed: 20 October 2026. The Editorial Team, Raffles Corporate Services.