DayTrader wrote:Hello
I'm currently UK resident/domiciled for tax purposes and looking at setting up an offshore Singapore company to reduce my tax liability in a business I am about to start up.
In addition to the required local company secretary there will be a Singapore-based nominee director to fulfil the local director requirement. I will be the only other director and sole shareholder, but will be non-resident (for the time being). The company bank account will be outside Singapore and no money will be remitted into Singapore.
As I understand it, any company profits derived from outside Singapore and not remitted into Singapore are tax exempt.
I will be buying a commodity in Indonesia, and selling it to buyers in Indonesia, Philippines and other countries in SE Asia, outside Singapore. Can one of you knowledgable fellows confirm that in this case there would be no company tax payable in Singapore?
You do not have the foreign income provisions assessed correctly. First, the exemption income must fall into one or more of these three categories:
a) Foreign-sourced dividend
b) Foreign branch profits
c) Foreign-sourced service income
But you don't have foreign dividends because there is no foreign company paying you dividends. You also don't have foreign branch profits because you don't have a foreign branch. And, you don't have foreign sourced service income because you have stated your intent to run an ex-im business.
Therefore, you fail on this point alone. But there is more. There is the expectation that income that is not taxed in Singapore will be taxed elsewhere. You must meet all three of the following requirements.
a) The highest corporate tax rate (headline tax rate) of the foreign country from which the income is received is at least 15% at the time the foreign income is received in Singapore;
b) The foreign income had been subjected to tax in the foreign country from which they were received (known as the "subject to tax" condition). The rate at which the foreign income was taxed can be different from the headline tax rate; and
c) The Comptroller is satisfied that the tax exemption would be beneficial to the person resident in Singapore.
Note that item c) says "would be beneficial to the person resident in Singapore". But you are not in Singapore and one might well wonder why the Comptroller might be "satisfied" with you claiming an exemption when you are not resident.
To actually gain your exemption you would have to do the following when you file your corporate return.
You have to provide the following information in your Income Tax Return (Form C):
1) Nature and amount of income received;
2) Country from which the income is received;
3) Headline tax rate of the foreign country; and
4) Confirmation that foreign tax has been paid in the country from which the income was received. This is to satisfy that the "subject to tax" condition is met.
But, the big elephant in the room is that you haven't mentioned anything about forming a company in Indonesia to carry on your business activities there. Clearly, the expectation of the Singapore government is that you have an external entity and that it pays tax in the country of its jurisdiction. Indonesia will also have the expectation that you will form a proper legal entity
For Indonesia, the corporate tax rate ranges from 12.5 to 30 percent of profits. But the real issue is setting up the business. Beyond the corruption and payoffs that might be necessary to actually get an application approved, there are requirements such as:
a) An investment plan of USD 1.2 million with 300K paid up capital.
b) Restriction on types activities which may restrict foreign ownership to as little as zero percent.
c) Having at least one director with an Indonesian tax card, ie, and Indonesian resident.
d) Having established a commercial domicile for your business.
e) Permits and licenses in place – most will be local and you will need a local “facilitator”
