Preface: I setup a company in Thailand because it was the only way I could contract with the Thai firms for which I was doing business. I set it up under the Thai American Amity Treaty so while I still needed seven shareholders, I could retain a majority foreign ownership.
You are correct... it is not the simplest thing to setup a company in Thailand, and the two million Baht capitalization for foreigners to get a work permit can be problematic... we put the money in the bank, then immediately loaned it back out to a director (which made closing down the company most difficult). I also used a serviced office that kept an open office for companies like mine... if the authorities dropped by, my name placard and a picture of the wife and kids appeared on the desk. The fees I paid were interpreted as salaries for my "Thai workers". Having said that:
BenDover wrote:Regarding your question why I don't setup a company in the country where I will be living: It will be Thailand and I won't be working there.
As you will see, this question is relevant to the taxation situation (and feel free to reject my question): How are you living legally in Thailand? If you're on a Thai wife visa, then all the requirements for a foreigner starting a company don't apply at all... have her start it. And, if you are on a wife visa, then you are resident for tax purposes.
If you don't have a Thai wife and you don't have a company to get a valid work permit, then your only long stay visa choices are retirement (over 50 and 800,000 Baht into a bank account), or a business visa (working for a Thai company). Call me confused about your legal status in Thailand.
All my work is done outside Thailand and Thailand specifically doesn't tax foreign income (as long as the income is not brought into the country the same year it is earned - which I'm not doing anyway).
This is not quite accurate. Thailand is like the USA in that it taxes its residents on worldwide income. But, if you are not tax resident in Thailand, then only your income earned in Thailand is taxable. However, if your primary residence is in Thailand, then you are tax resident and this clause is not applicable to you. You pay tax on worldwide income, subject to the provisions of the dual taxation agreements that Thailand has entered into. If you pay tax in Singapore, you wouldn't pay it again in Thailand. Your Thailand residency status matters and I would contact someone very familiar with Thailand income tax before committing to a course of action.
On top of that, any service management company willing to rent you a director is going to want to climb up your company's ass with a microscope.
That's the point I don't get: exactly these service management companies recommend the mentioned approach of only declaring dividends. Why would they put themselves in such a situation?
It's all of them recommending the same approach and they tell me it's the standard thing to do and there's no problem with it.
Because they are stupid. These are the same people that apply for an employment pass for a foreigner in a new startup company, with a monthly salary of $9,000 for a company that has no revenues, and when it is rejected, they stand there with a confused look on their face. They think big money means easy EP approval.
Because they are unaware that Singapore is a signatory to FACTA and other Asian and European agreements to catch tax evaders. Because they are unaware that IRAS has issued detailed instructions to Singapore banks for the purposes of stopping tax evasion. From the document:
The Common Reporting Standard (CRS) is the global standard for the automatic exchange of Financial Account information between jurisdictions for tax purposes, with the objective of detecting and deterring tax evasion by taxpayers through the use of offshore banks and other Financial Accounts.
And in the end, they are stupid because they don't understand why the tax relief for new companies is granted. It's not granted so that someone can scam the system like you (and many others) have suggested. Tax relief is granted on the profits of new, startup companies so that they will have additional funds to grow their company.
IRAS actively seeks out tax evasion schemes. Sure, sometimes, it's a case of not reporting revenues that you actually earned. But, it is also tax evasion to say that the value of the labor you performed during a tax year is zero... you know it's not... and IRAS will eventually come back on you as to why you don't pay yourself anything. It's rather obvious, isn't it? You are evading taxes on income.
But, hey... don't take my word for it. Call IRAS. Tell them what your service management companies have suggested and see what they say. I'll lay a sizable bet they're going to tell you what I just told you.
I'm not trying to avoid any taxes here, I want a legally safe solution because I'm not fancy of any trouble later on. However, it is quite difficult to figure out what is a correct solution if everyone tells something different, even those who should know (service management companies).
My plan is to pay myself a salary that covers my monthly expenses (let's say 5,000 SGD), I would pay the non-resident tax of 15% on that and everything above that would be via dividend payment.
How can I know if this doesn't put me on the spot with IRAS or who could tell me?
This is the main question I actually have.
Your last paragraph is the more reasonable approach. The amount of salary you set should be determined by the average salaries for a similar position in a company doing a similar type of work. And certainly, there can be a broad band of salaries... some people don't make much money, some are much better at running a company. But again, if you are the sole shareholder, it's still pretty clear to IRAS as to what is going on. You could pay yourself directors fees or a bonus in lieu of dividends and be taxed. You can only know if your approach is successful when IRAS doesn't come knocking on your door.
Again, call IRAS. Confirm that you will be treated as a non-resident professional for tax purposes. I think my interpretation is correct but I'm not the one that matters.
Another alternative available to you is to incorporate in another country... there are many tax havens available to you.
