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I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

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bistkei
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I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

Postby bistkei » Mon, 04 Jan 2016 9:08 pm

I live abroad and owner of a Ltd. based in Singapore using a nominee director service. I am the solo share holder. The company is maker of software products. I am planning to move to Singapore after obtaining an EP through my own company.

The company just turned 2.
First year's revenue was SGD140K and profit was SGD120K.
Second year's revenue was SGD270K and profit was SGD240K.
I expect the third year's revenue to be around SGD400K and profit to be around SGD360K.

Since I am technically not a employee of my own company at the moment, so far, I've been collecting dividends from the yearly profits.

I am looking forward to move to Singapore to focus & grow on my business by the end of 3rd year. Therefore looking forward to obtain EP through my own company. If I am not mistaken, I am technically eligible for applying and getting a EP but I have doubts if that would be the case in real life. I am not entirely sure what does my case look like when authorities process my application.

Some more facts:
- I am 31 and I have wife and an infant which need dependent passes.
- Company was established with a paid capital of SGD 1.
- I have personal savings around SGD350K which I will keep in SG.
- I am not planning to hire anybody else at the moment. It will be just me, employed by my company.

1) Do you think I will be available to get an EP? Considering the fact that I will be the only employee/director of the company, are there any restrictions?
2) If I am not mistaken, the requirement should be have a salary of around SGD6000-6500 for my case. Would it matter if I try to minimize the salary I collect (for tax benefits)? Would it increase my chance to obtain a EP if I am to have more salary from my company?
3) Initially, I don't want to contribute to CPF, how would it be possible? Would it decrease my chance of obtaining a EP, would it be negative when renewing EP?

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Re: I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

Postby Strong Eagle » Tue, 05 Jan 2016 1:55 am

a) Who is making the software products right now? You?

b) Are you a director of the company?

c) Has the company paid corporate tax in Singapore?

d) Where are the company's software products sold, and by whom? Is your invoicing done by the Singapore company? To local companies or foreign entities?

e) Is there anyone in Singapore besides the nominee director?

f) If you are the software developer, why didn't your company just pay you to develop the software?

g) Why did you create a Singapore private limited if you live abroad?

bistkei
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Re: I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

Postby bistkei » Tue, 05 Jan 2016 2:35 am

a) Yes, it's me and that's only me.
b) Yes.
c) Yes, it has paid corporate tax in both years since company was founded.
d) Products are sold to everyone around the world through a reseller based in US. (I don't live in US)
e) There is also a resident local director (since I live abroad). I receive help from one of the local company administration services.
f) I am the solo shareholder and I didn't need a compensation from this company. I have other incomes. So I kept the earnings in the company. It's my funds either way. I am not residing in Singapore, I don't have an EP and I am not a employee of my company at the moment. Is there anything wrong with this approach?

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Re: I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

Postby Strong Eagle » Tue, 05 Jan 2016 3:59 am

Is there anything wrong with this approach?


No, not necessarily... but you might be thinking about what you will say to the government authorities when they ask.

First, a brief historical perspective. When the Entrepass was first cooked up in 2004 to attract foreign expertise, it was easy to get. Nobody verified that you really had the capital or that you knew what you were doing. As a result, it was mightily abused by those seeking an easy way into Singapore. Twice the requirements have been tightened, such that only a well-financed, well connected technology company will qualify. And you really wouldn't want an Entrepass anyway because of the onerous requirements for renewal.

The changes to the Entrepass made it nearly impossible for the average professional to start a business in Singapore, and thus, MOM has, on a case by case basis, awarded employment passes to people who start a private limited with a nominee director, then apply for the EP. However, the key to success is to have a the expertise, money, and a line of business that MOM deems "suitable". For example, in the Entrepass thread, there is a person who wanted to use his computer repair talents to form a PC repair company. He was rejected, and while there may have been other issues with his application, I judge that his application was rejected because he would be in direct competition with the zillion single man repair shops you can find at Sim Lim Square and elsewhere.

I judge that your chances of getting an EP would be quite good. You have a successful business. You have paid corporate tax. Your business is a desired technology business. I'd say your nominee director ought to make application for your EP.

You have a few problems, though. First of all, if your Singapore private limited has had revenues, then it has invoiced in Singapore. Unless you can prove up that your nominee director was handling the invoices and putting the deposits in the bank, then somebody has been working for free in Singapore and IRAS doesn't like people working for free.

It all boils down to IRAS definition of "services performed in Singapore". Services performed in Singapore by a foreigner are subject to a withholding tax. You might want to get a throwaway email address and ask IRAS, and I bet that even if you are sitting at a computer in Kenya, writing invoices for your Singapore firm, you will be considered to be performing services in Singapore, especially because no contract payments were made to any other person or entity to perform this task.

Similarly, you are a director. While you are paying corporate tax on a larger net income because you didn't have directors fees expenses, your methods could be seen as a ploy to avoid paying the required withholding taxes for non-resident directors. Further, since you have a nominee director which is essentially a bookkeeping transaction so you can have a Singapore Pte Ltd, IRAS may come back at you saying that you are a managing director or CEO, and since your company is local, the work you do managing the company is subject to Singapore tax at the non-resident rate.

I'm not saying that any of this is going to come to pass... the question of when you are rendering services in Singapore in the age of remote computing and the internet is not an easy one. But, you should for sure check your situation with IRAS before filing for any EP application to ensure that you have not run afoul of the "services performed in Singapore" regulations.

Other than that, I'd say your chances are very good.

Cheers.

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Re: I live abroad, have a Ltd. in SG, been managing remotely, considering to move to SG. Questions about road to EP

Postby bistkei » Tue, 05 Jan 2016 4:43 am

Thank you very much for the insight. I should definitely investigate this topic in more detail.


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