Singapore Expats

DP opening business abroad - taxation

Discuss about getting a well paid job or career advancement. Ask about salaries, expat packages, CPF & taxes for expatriate.
Post Reply
FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

DP opening business abroad - taxation

Post by FKinSG » Mon, 09 Sep 2024 5:34 pm

Hi all,

I am DP holder living in Singapore, and have been working remotely for a company outside of Singapore with no business in Singapore since 2 years and also paid taxes in Singapore for this job. This worked smoothly.

In addition to this, I'd like to open up my own company outside of Singapore with no business in Singapore. Do you know the tax situation for this if I am co-owner of the company? I couldn't find any useful information on IRAS on this particular situation.

Thanks a lot in advance!

User avatar
PNGMK
Moderator
Moderator
Posts: 9248
Joined: Thu, 21 Mar 2013 9:06 pm
Answers: 11
Location: Sinkapore

Re: DP opening business abroad - taxation

Post by PNGMK » Tue, 10 Sep 2024 7:54 am

I don't believe you can open a Pte Ltd on your own as a DP but I may be wrong.

Re Tax it depends how you pay each shareholder. You could pay dividends, salaries or directors fees all which attract different tax treatment.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

Re: DP opening business abroad - taxation

Post by FKinSG » Tue, 10 Sep 2024 2:05 pm

Thanks :) I don't want to open up a company in Singapore, but abroad - and I have already checked, there aren't any issues on opening it up in that country while being based in Singapore.

My only issue is how I will be taxes in Singapore. Do you have any info on the different taxations depending on dividends, salary or director fee? Or any info where I could read more about it?

User avatar
Strong Eagle
Moderator
Moderator
Posts: 11745
Joined: Sat, 10 Jul 2004 12:13 am
Answers: 11
Location: Off The Red Dot
Contact:

Re: DP opening business abroad - taxation

Post by Strong Eagle » Wed, 11 Sep 2024 5:14 am

FKinSG wrote:
Mon, 09 Sep 2024 5:34 pm
Hi all,

I am DP holder living in Singapore, and have been working remotely for a company outside of Singapore with no business in Singapore since 2 years and also paid taxes in Singapore for this job. This worked smoothly.

In addition to this, I'd like to open up my own company outside of Singapore with no business in Singapore. Do you know the tax situation for this if I am co-owner of the company? I couldn't find any useful information on IRAS on this particular situation.

Thanks a lot in advance!
If you are not opening a company in Singapore, it means that you are opening a company in another country, and tax treaty agreements may apply.

In general, for the purposes of personal income tax, you are generally taxed in the jurisdiction in which you have your primary or permanent residence because that is where you are performing the work.

Therefore, just as you pay your taxes for working remotely for a non Singapore company, you will also pay taxes on income earned from your own remote company.

Now, this situation assumes that you are not tax resident in the country in which you formed your company. In this case, your foreign company would carry you as a foreign contractor, that is, you have no tax responsibilities in your company's country.

Note however, that directors and senior managers of companies often do not get to be considered as foreign contractors and instead are considered to be tax resident for taxation purposes because they run the company.

This is the case with Singapore. If a non-resident foreigner wishes to start a company in Singapore and becomes the managing director or senior manager, then Singapore requires that an income tax of 24 percent be withheld on any payments made to the non-resident director before the payment is made. This can possibly be different if a tax treaty exists.

It is my understanding that you can form a company in Hong Kong without a resident director and not be subject to local Hong Kong taxation (as long as you are paying tax elsewhere) but I've been out of the loop for a while and you would need to verify.

Therefore, it's important to know your status and position in the country in which your company was formed. It is my estimation that most countries don't like companies formed with non-resident directors because of the opportunities for money laundering, while tracking foreign directors can be an impossible task.

Bottom line: Your question cannot be accurately answered without know more about the country and type of business that you have formed. Many countries have tax treaties with Singapore in order to address such issues, and avoid double taxation, but many do not. Point being that you need to know if there are applicable tax treaties and what they say, before an answer can be given.

In the absence of a tax treaty, you could possibly be subject to double taxation. Singapore will tax you because you are tax resident in Singapore. The other country could tax you because you own and run a company there.

FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

Re: DP opening business abroad - taxation

Post by FKinSG » Wed, 11 Sep 2024 8:05 pm

Thanks for the detailed reply!

Concerning personal taxes: yes, I am taxed in Singapore and that has never been a problem even though I work remotely for a Danish company.

Concerning opening up a company outside of Singapore: I would open up the company in Denmark. My personal and company tax situation is clear inside of Denmark. There is a tax treaty between Singapore and Denmark, so I would avoid double taxation.

So, my main question is how my personal tax in Singapore would change if I was a director in a foreign company and either receiving salary and/ or dividends from the company. I can't find any information on this anywhere.

User avatar
Strong Eagle
Moderator
Moderator
Posts: 11745
Joined: Sat, 10 Jul 2004 12:13 am
Answers: 11
Location: Off The Red Dot
Contact:

Re: DP opening business abroad - taxation

Post by Strong Eagle » Thu, 19 Sep 2024 11:50 pm

FKinSG wrote:
Wed, 11 Sep 2024 8:05 pm
Thanks for the detailed reply!

Concerning personal taxes: yes, I am taxed in Singapore and that has never been a problem even though I work remotely for a Danish company.

Concerning opening up a company outside of Singapore: I would open up the company in Denmark. My personal and company tax situation is clear inside of Denmark. There is a tax treaty between Singapore and Denmark, so I would avoid double taxation.

So, my main question is how my personal tax in Singapore would change if I was a director in a foreign company and either receiving salary and/ or dividends from the company. I can't find any information on this anywhere.

I preface my remarks with the note that you really need to contact a Danish accountant who has familiarity with international tax issues. I am not an expert in Danish taxation rules

A useful article worth a look, covering the global nature of Danish taxation.

https://lifeindenmark.borger.dk/money-a ... -taxation-

If I read everything correctly, you already fall into the category of "limited tax liability" because you don't live in Denmark but you do work for a Danish company, and you are a Danish citizen.

https://skat.dk/en-us/individuals/taxat ... -liability

Therefore, you are required to report your earnings while living in Singapore on your Danish income tax return, for the Danish company for which you are currently working.

The taxation treaty document that covers your situation can be found here:

https://www.iras.gov.sg/media/docs/defa ... =96a156a_7

With respect to your current employment, I refer you to page 15 of the document above, "ARTICLE 23 - ELIMINATION OF DOUBLE TAXATION", which specifies how double taxation is handled between Singapore and Denmark. A quote:
Where a resident of Singapore derives income from Denmark which, in accordance
with the provisions of this Agreement, may be taxed in Denmark, Singapore shall,
subject to its laws regarding the allowance as a credit against Singapore tax of tax
payable in any country other than Singapore, allow the Danish tax paid, whether
directly or by deduction, as a credit against the Singapore tax payable on the income
of that resident.
As I see it, you must pay income tax to the Danish authorities for your earnings while living in Singapore and working for the Danish company, and, you must also pay income tax to the Singapore authorities because you are tax resident in Singapore.

However, Singapore will grant you a tax credit for taxes due on a dollar for dollar basis on the taxes you paid in Denmark. In other words, you are assessed Singapore tax, then credited with tax payments based on your tax payments to Denmark. Do you agree with this? Because this differs from paying Singapore income tax and then not declaring the Singapore income on your Danish return (or claiming a Danish tax credit on Singapore tax paid). Is this how you currently handle things?

Since the company you are proposing to create is also a Danish company, I judge that the rules will be exactly the same... your are a non-resident Danish citizen working for a Danish company. Things get more complicated because of the rules concerning the taxation of small company profits (see again the double taxation paragraphs) but the idea is the same... you get taxed in Denmark and get a tax credit against Singapore taxes in Singapore.

As I said, Danish accountant, knowledgeable in international tax affairs, will probably need to sort this. The two issues I see are:

a) If you're paying tax in Singapore right now, and not paying tax in Denmark, I'd say that's not the way the taxation treaty works, but as I said I am not a tax expert.

b) You need to determine the best type of business to setup in Denmark to minimize your tax liability.

FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

Re: DP opening business abroad - taxation

Post by FKinSG » Fri, 20 Sep 2024 1:58 pm

Wow, thanks for looking into this. I'm afraid the question has opened up a topic that I wasn't really intending to get answered - all my tax issues in Denmark are solved. I have official notice from tax authorities in Denmark that I am not obliged to pay taxes while residing in Singapore despite working for a Danish company. I also have written notification from MoM that I am allowed to work for the Danish company as long as they don't have any business in Singapore. And I've had an accountant prepare my taxes here in Singapore for the past years. So, I don't really have any open questions on my current tax situation. It was more the tax situation in Singpore if I'd open up a business abroad, especially if that would involve getting dividends. But I can see that this is a very special case, probably there is no information on similar cases available like I'd hoped for when I posted this message.

User avatar
Strong Eagle
Moderator
Moderator
Posts: 11745
Joined: Sat, 10 Jul 2004 12:13 am
Answers: 11
Location: Off The Red Dot
Contact:

Re: DP opening business abroad - taxation

Post by Strong Eagle » Sat, 21 Sep 2024 4:09 am

All very interesting... especially the part about no taxes due in Denmark for your current employment.
In general, dividends, even foreign sourced dividends, are not taxable in Singapore but after reading through the complexities of Danish tax law, I'd say you've got a whole 'nother set of communications with the Singapore and Danish tax authorities with respect to your own startup business.

FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

Re: DP opening business abroad - taxation

Post by FKinSG » Tue, 24 Sep 2024 2:33 pm

Yes, it seems to be a very special situation - surprising with all the remote workers since COVID. I have asked tax authorities in both countries whether they have more information on this and else I will need to check with tax advisors...

sith
Newbie
Newbie
Posts: 1
Joined: Fri, 27 Dec 2024 11:42 am

Re: DP opening business abroad - taxation

Post by sith » Fri, 27 Dec 2024 1:57 pm

Hi
I am also planning to convert my EP to DP and start working for overseas company remotely.
Which is something similar to your current scenario. would you mind helping me out with any legal or tax related considerations I should do?

FKinSG
Newbie
Newbie
Posts: 6
Joined: Mon, 09 Sep 2024 5:26 pm

Re: DP opening business abroad - taxation

Post by FKinSG » Wed, 15 Jan 2025 10:19 pm

Hi,

I'm filing the normal tax declaration every year, though prepared by an agent. I guess you need to check the countries of your overseas employers and what tax treaty they have. I did write to MoM to get a confirmation on my situation. But otherwise, I don't do anything special.

Post Reply
  • Similar Topics
    Replies
    Views
    Last post

Return to “Careers & Jobs in Singapore”

Who is online

Users browsing this forum: No registered users and 2 guests