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by Strong Eagle » Sat, 28 Nov 2015 6:35 am
Look, pakhan... here's the deal. What is clearly stated in law and applicable regulations is:
a) Your exempt private limited company pays no tax on the first $100,000 of profits, and actually the tax exemption is generous for several years out.
b) You personally pay no tax on dividends in Singapore.
Both of these items are LEGAL. File your corporate tax return and pay nothing. File your personal tax return and pay nothing on your dividends received.
And... like any other civilized country with an income tax system, IRAS knows the norms. They know average directors salaries and fees for various size companies because it is reported every year by every company. They know that the managing director of a $250K turnover company will make $XXX on average.
So... what do you think they are going to say when your personal tax return crosses their desk? Are they going to say, "Gee, what a clever PR fellow... he's escaped all tax obligations by taking dividends. Brilliant! We should encourage more to do the same!"
Or, are they going to say, "What the hell... one more f*cking scumbag PR trying to game the system. It's technically legal but we're going to take him to court because it's a scam... we know what directors make and we will challenge this person in court, for he has not paid himself enough."
So... if your company has earned little or nothing, then the expectation is that you won't have made much money, either. Maybe there are exceptions... you form a company and make a big bet on a diamond mine... it makes you a million dollars and you only invested 20 hours of your time... you might have a case that you did no work, hence, no pay, hence, all dividends.
But, if you've been working 40 hours per week, and alleged that you are paying yourself 7 cents an hour, IRAS may first deny your claim, and then take you to CIVIL court to force you to pay yourself on a realistic basis. And if you lose and continue to fight them, then maybe criminal fraud charges will be filed against you.
Get it now? Your actions are legal. Your actions are also clearly a tax avoidance scheme. If it's only a few dollars then IRAS may say, "F*ck it... not worth the hassle of prosecution." More likely, they will (and have) create tax rulings that essentially say you can't do what you want to do.
What you want to do is legal but contravenes tax rulings. Go ahead... be brave... I'd really like to know the outcome.
And as far as CPF and directors fees are concerned... yes, completely legal... and again... your REP renewal is an entirely discretionary decision for the Singapore government... they can reject you because they don't like which side of your head you part your hair... and if you think that, as a PR, you can pay no CPF and that the Central Provident Fund won't care? Go ahead and try that one, too... I'd like to see the outcome.
You really need to rethink your attempts to game the system... that is what you are attempting to do, isn't it? If you stop being PR you get all your money back, plus interest... where's the downside?
As for upside, my company paid max CPF for its owners/directors... then paid directors fees... we never declared dividends. And, two things happened... anecdotal evidence only... I never had an EP application rejected... never. And, when the recession hit, I was granted corporate tax credits... hard money... to keep people employed... that were more than any tax I payed in, personal or corporate.
Finally... the nasty, shadow guy in me says, "Cut your bullsh*t. Pay your share like everyone else does. Quit being a turd."
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