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Income tax while working remotely in singapore for HK

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The Ref
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Income tax while working remotely in singapore for HK

Postby The Ref » Tue, 22 Aug 2017 11:13 am

I have a friend who lives in HK and is employed in HK. His family is here in Singapore so he often works in the Singapore office as a remote worker for HK.

Because of the amount of time he has spent here, HR are telling him he needs to pay SG tax as he has "worked" here for >60 days and < 183 days (including weekends). He is employed from the HK legal entity, paid in HKD from the HK entity, pays tax in HK and flies here on his own cost and is not given any financial support from the company for working in SG. The only "evidence" of him working here are the door logs as he swipes in when he is here.

He has a PEP which may need to be cancelled as he no longer is employed in Singapore and has been officially unemployed in SG for more than 6 months. For this reason he will definitely be treated as a tax resident by the IRAS (https://www.iras.gov.sg/irashome/Individuals/Foreigners/Learning-the-basics/Individuals--Foreigners--Required-to-Pay-Tax/)

I have searched the forum history but there is nothing quite like this circumstance.

So basically the way I see it he is a tax resident (due to PEP) that needs to pay tax on the money he is paid from the Singapore business (i.e $0) however HR are saying he needs to also pay on his HK earnings.

Strong Eagle and SMS, I would be keen to hear your views on the SG tax implications of this.

Thanks

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Re: Income tax while working remotely in singapore for HK

Postby Strong Eagle » Wed, 23 Aug 2017 3:27 am

The Ref wrote:I have a friend who lives in HK and is employed in HK. His family is here in Singapore so he often works in the Singapore office as a remote worker for HK.

Because of the amount of time he has spent here, HR are telling him he needs to pay SG tax as he has "worked" here for >60 days and < 183 days (including weekends). He is employed from the HK legal entity, paid in HKD from the HK entity, pays tax in HK and flies here on his own cost and is not given any financial support from the company for working in SG. The only "evidence" of him working here are the door logs as he swipes in when he is here.

He has a PEP which may need to be cancelled as he no longer is employed in Singapore and has been officially unemployed in SG for more than 6 months. For this reason he will definitely be treated as a tax resident by the IRAS (https://www.iras.gov.sg/irashome/Individuals/Foreigners/Learning-the-basics/Individuals--Foreigners--Required-to-Pay-Tax/)

I have searched the forum history but there is nothing quite like this circumstance.

So basically the way I see it he is a tax resident (due to PEP) that needs to pay tax on the money he is paid from the Singapore business (i.e $0) however HR are saying he needs to also pay on his HK earnings.

Strong Eagle and SMS, I would be keen to hear your views on the SG tax implications of this.

Thanks


A few observations.

  1. The location of the paying party, the currency used, and the bank into which salary is paid has no bearing whatsoever on as to whether the or not the salary received is taxable in Singapore. For example, an American could be working for Dell, Singapore, but paid by Dell out of Austin, Texas in US dollars into her local US bank account and she would still be liable for Singapore taxes but generally not liable for US income taxes, within the limits of the US foreign earned income exclusion.

  2. Your friend is in violation of PEP reporting requirements. He is supposed to report any change in employment status within one week of the change. The MoM website says that "you or your employer" must notify of the change. My view is that he has no PEP at all, and is in danger of being tossed out of Singapore for violation of the employment rules.

    Finally, IF your friend had a valid PEP, it still would not be the deciding factor as to whether or not he had taxable salary. What matters is where you were working when the income was received, and for how long.

  3. Certainly for Singapore, Malaysia, and Thailand (the countries I am familiar with, although I would bet Hong Kong falls into the same boat), if you are working in that country you must pay tax in that country if you exceed a certain number of days. For example, if you are legally resident in Singapore, say, an LTVP, and you are working for an entity that has no presence in Singapore, then you don't need a work permit but you do need to pay taxes on the income you earn since you are earning it in Singapore.

Now, here is where things start getting fuzzy in my mind. IRAS is pretty clear on when things are taxed... less than 60 days, no tax, up to 183 days, non-resident tax, more than 183 days, resident tax. But what's not so clear is whether that income can be earned in Singapore without having a valid work permit.

Consider: People obviously fly in and out of Singapore all the time for business meetings. A company flies in the senior VP from HK to close a big deal. Doing business? I'd say so. Under the radar? Definitely, because nobody is filling out any kind of form stating the number of days worked.

Consider: I flew in and out of KL from Singapore at least weekly for almost 18 months, due to the fact that I had a split team… half in Singapore, half in KL. Technically, I was spending a lot more than 60 days in KL and I should have had a work permit, and I should have paid Malaysian tax rates. But, in the entire time of flying out on Friday, flying in on Wednesday, not once was I ever asked about my residency or what I was doing. And I met many business people at the airports doing exactly what I was doing.

Fuzzy stuff, part 2: You say he “flies here on his own cost and is not given any financial support from the company for working in SG.” Is he actually working for the company when in Singapore? Is he being paid as an employee while in Singapore? If the answers are yes, then it is irrelevant if he is paying his own costs, and yes, his tax obligation is in Singapore, AND, the money he earns while in Singapore is not taxable in HK… Singapore has a similar setup, were it working in reverse.

Fuzzy stuff, part 3: At the end of your post, you say, “that needs to pay tax on the money he is paid from the Singapore business (i.e $0).” Are you implying that the HK entity also has a Singapore entity for which this guy works?

If the answer to that question is yes, then undoubtedly, he needs an EP issued by the Singapore entity, and he needs to pay Singapore income, because, as I said at the very beginning, “the location of the paying party, the currency used, and the bank into which salary is paid has no bearing whatsoever on as to whether the or not the salary received is taxable in Singapore.” He is working for a Singapore legal entity; he must pay Singapore tax and he must have a valid work permit.

One last edited thought: You say, "He has a PEP which may need to be cancelled as he no longer is employed in Singapore and has been officially unemployed in SG for more than 6 months." But, this statement cannot possibly be true if he is working for a Singapore registered entity while in Singapore. Again, it doesn't matter where he is getting paid from, what matters is that he is working in Singapore.

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Re: Income tax while working remotely in singapore for HK

Postby PNGMK » Wed, 23 Aug 2017 5:03 am

The Singapore HR are trying to normalise his situation (and I agree) against some conflicting issues. If he's in the office that much then I would understand their concerns as it most likely looks like he is engaged in a tax avoidance scheme as HK has a lower income tax % than Singapore. Some further notes:

1. There is no PAYE or PAYG tax; Singapore HR cannot force him to pay taxes but of course Singapore can file an IR8A - which would show the HK entity paying your friend but then IRAS would want that tax paid by your friend. I can't recall if there is a dual taxation treaty between HK and Singapore but it's possible your friend may be subject to dual taxation.

2. I don't understand the PEP cancellation issue but I agree with SE that if he is working in Singapore that much he needs a work visa as this looks beyond the normal SVP business meetings type work arrangement. As I said it looks like Singapore HR is trying to normalize the arrangement so they don't have a potential compliance issuue. How he sorts it out I don't know but as a start I would suggest he stop working remotely in the Singapore office for one.

Is your friend being treated as a 'hypo tax' case by his employer.
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