hapchap wrote:As a sole proprietor based overseas, am I supposed to pay taxes in Singapore or my host country? I'm confused, because profits from my online business will be going into my Singapore bank account (intend to set up business account), but at the same time I am not living in Singapore.
On this
SME portal page, it says
Any income that is “accrued” or received in Singapore by a person or business is subject to income tax.
My goal is to pay taxes
in Singapore. What would be my best option, please?
You really need to contact IRAS for a definitive ruling and not just listen to the opinion of the armchair quarterbacks on this board.
Having said that: My view is that you will pay your personal income taxes in Singapore and not in your host country.
Here is why: Normally, Singapore follows reciprocal taxation laws, and those laws generally say that income is taxed by the country in which you are normally resident. So, if I am resident in Singapore but working for a company based in Indonesia, I am taxed in Singapore. Similarly, if I am working in Malaysia, it doesn't matter where the company I work for is based, I pay taxes in Malaysia.
But, Singapore makes specific exemptions to this rule for owners, directors, and key managers of a business or company. In this case, because the company is a legal entity in Singapore and you are the manager, then you are considered to be working in Singapore for the company, no matter where you are located. I know this to be true for non-resident directors, and for key managers of a company who are non-resident: They are taxed at 22 percent which must be withheld before the funds are delivered to the non-resident manager or director.
Your case is more complicated for two reasons. First, your are talking about a sole proprietorship and not a private limited. I believe that you are still subject to the "key manager" provisions; however, you must confirm this aspect to know if your income is taxable in Singapore or not.
Second, you are a citizen. All of the IRAS webpages assume that the non-resident manager or director is a foreigner, and thus subject to the 22 percent tax rate and withholding. Again, you must contact IRAS to see how this regulations pertain to you.
Yours is an unusual situation and I would much appreciate it if you will post your findings when you contact IRAS regarding this matter. I've found that they usually respond to email inquires in two or three days.