Working Remotely from Singapore as a Tax Resident - which pass/structure?

[ParanoidAndroid]

Hi all,

Preface: A note of general gratitude to this place for existing. Though I just registered an account in order to post this question, I've lurked around for years and the information shared has been invaluable.

With that said, even after going through dozens of old threads and a decent chunk of the rest of the Internet, I'm not sure of what to do re. my own situation. I will seek professional advice also, I'm just hoping for some feedback from the resident experts which could inform the right sort of questions to ask said professional.

My situation is depressingly complicated so I'll try to keep the outline as brief and clear as I can.

I am an Australian citizen and a Singapore tax resident. I had an EP which was cancelled when I left my job. Since then I've been doing the 90 day visitor pass thing. My partner also an Australian and he has a current EP.

I want to sell products online to the US. Either a dropshipping model or get them made here and ship over. Work on the business myself while in Singapore but not sell anything in Singapore or interfere with the local job market.

To get access to the best e-commerce tools, payment gateways and a US bank account that will receive USD without currency conversion, I plan to set up a single person non resident alien Wyoming LLC. US bank account requires visiting the country in person, which I'm prepared to do.

Here are my ideas so far, I very much welcome your feedback, criticism or alternatives:

IDEA #1: Apply for an LTVP. Understand this is possible if my partner and I fly to Australia, get a JP to notarise our declaration that we are in a common law marriage (which we are), and use this document in my application. Once LTVP sorted, get a LOC to work remotely for a foreign employer.

Concerns: Is it legit if the foreign employer is a company that I own? Is it more difficult to get an LTVP if you used to have an EP but gave it up and hung around on a VP?

IDEA #2: "Work" for my friend's Singapore registered company on an EP (yes he's okay with it). Cough up the requisite taxes on my EP income as a privilege to stay in the country. Get LOC to do my unrelated offshore thing.

Concerns: This idea sounds shadier to me with the potential to go catastrophically wrong.

IDEA #3: Get an LTVP and start a Singapore company. Or my partner can start one. Try to get LOC/EP or some form of authorisation to be an active part of this company as a Singapore resident.

Concerns: This is my least favourite idea. From my research which includes what has been discussed on this board in previous threads, the effort of starting and maintaining a Singapore company is significantly more bullshit than a pass-through entity in Wyoming. Not keen on dealing with two companies and their associated registration and compliance costs, just to do a little e-commerce.

A last point of note, however this works I want to maintain Singapore tax residency. The Australian Tax Office is brutal to non-residents earning income connected to Australia. I'm still getting my head around the wonderful world of US tax laws, but I'm nearly sure that my Wyoming LLC won't be liable for US federal income tax, as the primary place of business operations will be outside the US and I'll have no permanent establishment or staff on the ground in the US. Yes, I will definitely speak to multiple US tax lawyers and CPAs about this.

So the ideal outcome is: work in Singapore legally, declare income in Singapore and pay IRAS, file zero US income with the IRS, be good about collecting/remitting US state sales taxes where I have to, keep immaculate records, and have nothing to do with the ATO for the rest of eternity.

Thanks for reading, and many thanks in advance if anyone can help with advice.

[Strong Eagle]

You have multiple situations with which you must deal. First and foremost is your legal residency situation in Singapore. You are going to get whacked sooner or later with your 90 day visa runs, and that is going to permanently alter your plans when you can no longer get back into Singapore.

You have a couple of choices to obtain legal residency. You can attempt legal residency status through someone else’s legal residency or you can try for your own. For the first choice, it is the EP of your partner that you will need to rely upon, and, you have exactly one path with respect to getting a residency permit via your partner: Get married in the eyes of Singapore. I’ll deal with the second choice further into this note.

You will need to go to the Australian High Commission in Singapore and obtain a letter attesting to the fact that Australia agrees that you are common law married. Be aware that this varies by state and territory, and I have no idea what evidence you will need to present to obtain your letter. Your JP letter will be insufficient for Singapore, you’ll need the high commission letter, and maybe they are going to want your JP letter as part of the evidence. Common law marriage gets you and LTVP and not a DP, although for your purposes, it won’t matter. Common law marriage also means that you are bound by the law with respect to marriage, something more than a couple of folks have failed to realize.

Let’s talk about Singapore tax residency. If you are normally resident (that means you have an EP, DP, LTVP, SC, or PR), then you will pay tax on your earned (active) income in Singapore, regardless of where you earned it, regardless of there the bank is located that your salary was paid into, and regardless of the location of the entity that is paying you. Example: You do remote work for a Boston based fashion boutique. They pay you in French Francs into a Swiss bank account. You file your personal income tax return in Singapore.

It is worth emphasizing this before moving on to your business entities: It doesn’t matter if you work for a company that is a legal entity of Singapore, only sells products in Singapore, or has absolutely no connection to Singapore at all. You pay your personal income in Singapore.

This answers one of your questions: You are tax resident in Singapore if you live here with a legal residency pass. Singapore and Australia do have a double taxation agreement. I am not familiar enough to provide additional advice about Australia taxation. I am plenty familiar with US tax laws and will comment upon your US company idea a bit further in.

Next, let’s talk work passes. If you work for a company that has no legal presence in Singapore, ie, not registered as a legal entity, no office, no nothing, and that company does no business in Singapore of any kind, ie, it does not ship goods to end consumers in Singapore, or rent space, or drop ship, for example, then you do not need a work permit to work for that company. I have verified this with MoM. Example: There was an accountant who moved to Singapore with her husband. She continued to do the books for the company she as working for, doing so remotely with her home computer. The company had no presence whatsoever in Singapore. No work permit required.

Therefore, on a DP or LTVP, you can work for a company anywhere, yours or not, so long as it isn’t entangled with Singapore in any way. Were you to “get them made here and ship over” as you suggested, you would no longer be working remotely, you would be working locally, and would need a business entity AND a work permit. But, you really might want a Singapore business entity when you consider the tax implications of forming a US based LLC.

So, let’s talk about those implications. Depending upon your declaration, your single member LLC will be treated by the IRS as either a sole proprietorship and you will have to report your earnings on form 1040, Schedule C, or you will have to declare as a subchapter S corporation with you as the single shareholder, in which case all profit and loss passes to you as wages and income (generally) for inclusion on your form 1040 US income tax return. As you might guess, this implies that you will need a taxpayer identification number.

Unfortunately, you will be subject to US taxes, and onerous taxes at that. It doesn’t matter that your fulfillment of goods and services happens elsewhere, all that matters is that you are the primary member of a domestically registered LLC. But, since you are a foreign member of the LLC, the foreign partner of the LLC will be deemed to be engaged in a US trade or business and the LLC must withhold 35% of its profits for taxes, paid and filed on a quarterly basis to the IRS. Plenty of people have also run afoul of dual taxation treaties by using an LLC, so you’d also need to check this out very carefully with respect to your Australian tax situation.

My view is that you have two choices. You form a company in Singapore, then apply for your own EP. I’ve written many times on this subject. There are hurdles to be overcome, but if you have experience, a good business plan, and money, you can succeed. Do not look at the Entrepass… that isn’t going to work for you. Having an EP, not having an EP, blah blah blah, doesn’t matter… it’s experience, plan, money.

If you have a friend that has a Singapore registered private limited, then this might be a good way to go. Again, you’ll need to demonstrate the need for the EP with good documentation, but there is nothing to prevent a Singapore company from jumping into additional lines of business. You might be able to do it with a LOC… depends on what the company is doing, how active it is, turnover, etc. Your friend probably doesn’t understand all the implications of giving you an EP. He’s responsible for your bond, filing IR8A’s for your taxes, and taxes paid on profits that you might earn. But, it’s still the best way, I judge.

Anyone can start a company in Singapore… you don’t need a work permit of any kind to be a shareholder. You need a work permit to work for the company in any capacity.

Or, you form an offshore company somewhere with low taxes. Lots of places to do this. Bank accounts for internet transactions might be a bit more of a challenge.

One thing I would recommend is staying as far away as possible from creating any kind of legal entity in the USA. You want to sell product in the USA? Contract with a firm with a USA presence and stay at arm’s length as an independent.

Chew that over and get back to me with more questions.

Cheers.

[Strong Eagle]

Adding a few comments as follow on to my long post:

Hi all,

Preface: A note of general gratitude to this place for existing. Though I just registered an account in order to post this question, I've lurked around for years and the information shared has been invaluable.

With that said, even after going through dozens of old threads and a decent chunk of the rest of the Internet, I'm not sure of what to do re. my own situation. I will seek professional advice also, I'm just hoping for some feedback from the resident experts which could inform the right sort of questions to ask said professional.

My situation is depressingly complicated so I'll try to keep the outline as brief and clear as I can.

I am an Australian citizen and a Singapore tax resident. I had an EP which was cancelled when I left my job. Since then I've been doing the 90 day visitor pass thing. My partner also an Australian and he has a current EP.

I want to sell products online to the US. Either a dropshipping model or get them made here and ship over. Work on the business myself while in Singapore but not sell anything in Singapore or interfere with the local job market.

To get access to the best e-commerce tools, payment gateways and a US bank account that will receive USD without currency conversion, I plan to set up a single person non resident alien Wyoming LLC. US bank account requires visiting the country in person, which I'm prepared to do.

Here are my ideas so far, I very much welcome your feedback, criticism or alternatives:

IDEA #1: Apply for an LTVP. Understand this is possible if my partner and I fly to Australia, get a JP to notarise our declaration that we are in a common law marriage (which we are), and use this document in my application. Once LTVP sorted, get a LOC to work remotely for a foreign employer.

Concerns: Is it legit if the foreign employer is a company that I own? Is it more difficult to get an LTVP if you used to have an EP but gave it up and hung around on a VP?

You'll need a letter from the Australian Singapore High Commission. They'll probably want your JP letter.

You don't need any work permit to work for a foreign employer that has no presence in Singapore.

IDEA #2: "Work" for my friend's Singapore registered company on an EP (yes he's okay with it). Cough up the requisite taxes on my EP income as a privilege to stay in the country. Get LOC to do my unrelated offshore thing.

Concerns: This idea sounds shadier to me with the potential to go catastrophically wrong.

Sounds like to best idea to me. An existing company asking for an EP? Takes work, still easier than starting from scratch.

IDEA #3: Get an LTVP and start a Singapore company. Or my partner can start one. Try to get LOC/EP or some form of authorisation to be an active part of this company as a Singapore resident.

Concerns: This is my least favourite idea. From my research which includes what has been discussed on this board in previous threads, the effort of starting and maintaining a Singapore company is significantly more bullshit than a pass-through entity in Wyoming. Not keen on dealing with two companies and their associated registration and compliance costs, just to do a little e-commerce.

Beg to disagree. That LLC is going to be a pain in the ass. You have to file state reports, even without a state income tax. And, you have to file federal income tax returns, both for the entity and yourself. See more in long reply.

A last point of note, however this works I want to maintain Singapore tax residency. The Australian Tax Office is brutal to non-residents earning income connected to Australia. I'm still getting my head around the wonderful world of US tax laws, but I'm nearly sure that my Wyoming LLC won't be liable for US federal income tax, as the primary place of business operations will be outside the US and I'll have no permanent establishment or staff on the ground in the US. Yes, I will definitely speak to multiple US tax lawyers and CPAs about this.

So the ideal outcome is: work in Singapore legally, declare income in Singapore and pay IRAS, file zero US income with the IRS, be good about collecting/remitting US state sales taxes where I have to, keep immaculate records, and have nothing to do with the ATO for the rest of eternity.

Thanks for reading, and many thanks in advance if anyone can help with advice.

Bad idea. Forming a US based entity is like getting stuck to the tar baby. You will pay taxes. You will file returns. You will be additionally penalized for being a foreign partner.

[PNGMK]

I agree with SE on avoiding the Wyoming thing. For some reason it's the current sexy response to the issue of getting a back k account and low tax entity but I tend to agree avoiding IRS is a good idea.

If your business plan is viable have your friend add it into his existing business as a subsidiary activity.

[ParanoidAndroid]

Hi SE,

Many thanks for your insights and recommendations. I was hoping you would reply and greatly appreciate you taking the time to provide so many details.

You have multiple situations with which you must deal. First and foremost is your legal residency situation in Singapore. You are going to get whacked sooner or later with your 90 day visa runs, and that is going to permanently alter your plans when you can no longer get back into Singapore.

You have a couple of choices to obtain legal residency. You can attempt legal residency status through someone else’s legal residency or you can try for your own. For the first choice, it is the EP of your partner that you will need to rely upon, and, you have exactly one path with respect to getting a residency permit via your partner: Get married in the eyes of Singapore. I’ll deal with the second choice further into this note.

You will need to go to the Australian High Commission in Singapore and obtain a letter attesting to the fact that Australia agrees that you are common law married. Be aware that this varies by state and territory, and I have no idea what evidence you will need to present to obtain your letter. Your JP letter will be insufficient for Singapore, you’ll need the high commission letter, and maybe they are going to want your JP letter as part of the evidence. Common law marriage gets you and LTVP and not a DP, although for your purposes, it won’t matter. Common law marriage also means that you are bound by the law with respect to marriage, something more than a couple of folks have failed to realize.

Agree 100%, it’s the lack of any sort of legitimate residency that’s my primary concern. Sadly, the requirements to achieve Australian de facto relationship status, my prerequisite for a shot at LTVP, are not that simple to understand or execute.

http://www.mom.gov.sg/passes-and-permit ... s-required
According to MOM I need one of these three things:

#1. Copy of the common-law marriage certificate.

#2. A letter from the embassy acknowledging that the work pass holder (WPH) and spouse are in a common-law relationship under the laws of their country.

#3. An affidavit from the WPH declaring that the WPH and spouse are in a common-law relationship under the laws of their country. The affidavit must also be notarised in that same country.

http://singapore.embassy.gov.au/sing/consular.html
And yet according to ACH:
Please note that the Australian High Commission cannot issue individual letters for de facto spouses or witness a statutory declaration regarding their de facto status.

https://www.homeaffairs.gov.au/about/co ... lationship
http://smartraveller.gov.au/services/le ... letter.pdf
Anyway, proving our de facto status shouldn’t be difficult according to the pages linked above. We’ve been together for 7 years and have co-signed leases both in Australia and our current one in Singapore (I signed while I still had EP). Yet Option #2 seems off the cards already if ACH “cannot” issue an acknowledgement letter or notarise a declaration. From their wording it seems that even if we got the JP declaration they still wouldn't hand over a letter. But this shouldn't matter? Since the notarised declaration itself would suffice according to MOM.

http://www.bdm.nsw.gov.au/Documents/app ... ration.pdf
Option #1 is also complicated (because why wouldn’t it be? ). We can apply remotely for de facto relationship registration, however at least one of us must be a resident in the state of application, and neither of us has lived Australia for years.

Thus it seems to me that Option #3 is the only viable one, for my partner to get his affidavit notarised in Australia in person. If anyone reading this has any experience otherwise please do share, I’d love to avoid the long flight if there’s any shot at getting this sorted at the embassy. I’ll call both ACH and MOM on Monday to check if any exceptions may be made in our case.

Let’s talk about Singapore tax residency. If you are normally resident (that means you have an EP, DP, LTVP, SC, or PR), then you will pay tax on your earned (active) income in Singapore, regardless of where you earned it, regardless of there the bank is located that your salary was paid into, and regardless of the location of the entity that is paying you. Example: You do remote work for a Boston based fashion boutique. They pay you in French Francs into a Swiss bank account. You file your personal income tax return in Singapore.

It is worth emphasizing this before moving on to your business entities: It doesn’t matter if you work for a company that is a legal entity of Singapore, only sells products in Singapore, or has absolutely no connection to Singapore at all. You pay your personal income in Singapore.

This answers one of your questions: You are tax resident in Singapore if you live here with a legal residency pass. Singapore and Australia do have a double taxation agreement. I am not familiar enough to provide additional advice about Australia taxation. I am plenty familiar with US tax laws and will comment upon your US company idea a bit further in.

Great to hear for Singapore. I have absolutely no problem with paying tax here, it's just getting permission to do so that's tricky. For Australia, my understanding is you only pay tax on active income if you’re a resident on the 183 day rule (it might be 90 days, I forget), or if conducting business connected to Australia. Have spent many an hour on hold with the ATO regarding tax obligations as I neglected to properly close off some business affairs before leaving Australia. Finally they confirmed I’m out of the tax system and thus don’t need to file any returns until such time as I re-establish residency; active income earned while residing overseas is not subject to Australian tax provided the country of residence collects tax on said income. So that part, at least, is relatively straightforward.

Next, let’s talk work passes. If you work for a company that has no legal presence in Singapore, ie, not registered as a legal entity, no office, no nothing, and that company does no business in Singapore of any kind, ie, it does not ship goods to end consumers in Singapore, or rent space, or drop ship, for example, then you do not need a work permit to work for that company. I have verified this with MoM. Example: There was an accountant who moved to Singapore with her husband. She continued to do the books for the company she as working for, doing so remotely with her home computer. The company had no presence whatsoever in Singapore. No work permit required.

Therefore, on a DP or LTVP, you can work for a company anywhere, yours or not, so long as it isn’t entangled with Singapore in any way. Were you to “get them made here and ship over” as you suggested, you would no longer be working remotely, you would be working locally, and would need a business entity AND a work permit. But, you really might want a Singapore business entity when you consider the tax implications of forming a US based LLC.

All very useful to know, especially the working remotely vs. locally tip. Does permission to work for offshore companies also extend to EP holders, or are they not allowed to work in any capacity beyond the terms of their EP employment? If the latter, then I'd lean toward the LTVP + some kind of offshore setup, as I don’t think you can have an LTVP and start/manage your own Singapore company at the same time? Actually I’m not sure about that last one, just get the impression it would look like I was trying to get around EP requirements if I did this.

So, let’s talk about those implications. Depending upon your declaration, your single member LLC will be treated by the IRS as either a sole proprietorship and you will have to report your earnings on form 1040, Schedule C, or you will have to declare as a subchapter S corporation with you as the single shareholder, in which case all profit and loss passes to you as wages and income (generally) for inclusion on your form 1040 US income tax return. As you might guess, this implies that you will need a taxpayer identification number.

Unfortunately, you will be subject to US taxes, and onerous taxes at that. It doesn’t matter that your fulfillment of goods and services happens elsewhere, all that matters is that you are the primary member of a domestically registered LLC. But, since you are a foreign member of the LLC, the foreign partner of the LLC will be deemed to be engaged in a US trade or business and the LLC must withhold 35% of its profits for taxes, paid and filed on a quarterly basis to the IRS. Plenty of people have also run afoul of dual taxation treaties by using an LLC, so you’d also need to check this out very carefully with respect to your Australian tax situation.

I was planning on the sole proprietorship treatment. Australia and US have a tax treaty but since I'm not an Australian resident I don't think I can apply it to exempt withholding tax. Singapore and the US don't have a treaty but Singapore does offer some kind credits and exemptions I might be able to use. I wasn't able to find clear information online re. how this might work with the US in particular, so was going to consult with a CPA who hopefully has more of a clue than me.

An ITIN would actually be of use in setting up the US bank account; apparently most banks don’t accept non-resident alien clients these days and those that do prefer you have an ITIN if you don’t have an SSN.

Anyway I guess that’s neither here nor there if the US LLC is in fact a shit idea. Google is overflowing with conflicting information on tax treatment of non-resident aliens. After a few weeks of reading and re-reading various blog posts and IRS PDFs, I’d nearly been swayed towards the position of this fine gentleman: http://ustax.bz/non-us-entrepreneurs/.

Granted he comes across shady as hell, but on the other hand he’s an experienced CPA and US tax attorney and Googling his name + ‘scam’ or + ‘reviews’ only brings up one minor customer service complaint. Some other self-proclaimed tax expert netizens agree with him, others don’t. Still, I suppose ‘too good to be true’ claims usually are, especially when the guy so claiming sells associated services. Speaking with several different impartial professionals and asking about specific case rulings pertaining to this subject is on my long list of To-Dos.

Which is not to imply I'm discounting your advice in any way; you obviously know more about this stuff than me by many orders of magnitude and I'm very grateful. I merely want to get as many qualified opinions as possible. Due diligence and all that fun. Though just from a common sense standpoint, it’s not hard at all to believe that voluntarily embroiling myself in US tax system could turn out to be a dumb move.

My view is that you have two choices. You form a company in Singapore, then apply for your own EP. I’ve written many times on this subject. There are hurdles to be overcome, but if you have experience, a good business plan, and money, you can succeed. Do not look at the Entrepass… that isn’t going to work for you. Having an EP, not having an EP, blah blah blah, doesn’t matter… it’s experience, plan, money.

Anyone can start a company in Singapore… you don’t need a work permit of any kind to be a shareholder. You need a work permit to work for the company in any capacity.

Thanks for referring me to the other threads. Have had a look through and don't think the Singapore company + EP option is viable in my case. I had a successful e-commerce store in Australia some years back, but what I want to do now would be a completely different model and target market for me. I have no track record or sales to show either for the type of products or for the US market. So based on discussions in other threads, I don't think MOM would approve me for an EP.

If you have a friend that has a Singapore registered private limited, then this might be a good way to go. Again, you’ll need to demonstrate the need for the EP with good documentation, but there is nothing to prevent a Singapore company from jumping into additional lines of business. You might be able to do it with a LOC… depends on what the company is doing, how active it is, turnover, etc. Your friend probably doesn’t understand all the implications of giving you an EP. He’s responsible for your bond, filing IR8A’s for your taxes, and taxes paid on profits that you might earn. But, it’s still the best way, I judge.

I'd rather not involve my friend's company directly in my business, especially if I go the dropshipping from Asia route which comes with counterfeit and QC risks baked in. Wouldn't be fair to pass those risks onto him. So for Idea #2, we were tossing around the notion of a non-kosher setup where I pay him so he can pay my EP salary but I don’t actually do work for him or just do token work. Another Australian friend of ours has long had this arrangement with his Singaporean friend's company so apparently it can be done. In which case I’d be allowed to live and pay taxes here and could also work for my offshore entity. But as mentioned earlier, such an arrangement is an inherently shady, so I'd rather avoid it.

Or, you form an offshore company somewhere with low taxes. Lots of places to do this. Bank accounts for internet transactions might be a bit more of a challenge.

One thing I would recommend is staying as far away as possible from creating any kind of legal entity in the USA. You want to sell product in the USA? Contract with a firm with a USA presence and stay at arm’s length as an independent.

I'm thinking LTVP + offshore is my safest and simplest path for now ... would you agree? Since establishing a US company seems like a no-go, do you have any recommendations for suitable jurisdictions? I looked briefly at places like Panama, Belize and BVI but was then advised that a Wyoming LLC would be best for my situation. (Said adviser is a rep for a company that sells Wyoming LLC registration services, surprisingly enough! )

Looks like I'll have to do more research re. the US bank account. There may be a few banks left that'll consider opening for an offshore company. Perhaps not for such places as mentioned above though.

I agree with SE on avoiding the Wyoming thing. For some reason it's the current sexy response to the issue of getting a back k account and low tax entity but I tend to agree avoiding IRS is a good idea.

If your business plan is viable have your friend add it into his existing business as a subsidiary activity.

Hi PNGMK,

Appreciate you replying with your insights. Also your contributions to the forum in general, I've been reading a lot of value from both you and SE in the course of my research.

Thanks again both!

[Strong Eagle]

All very useful to know, especially the working remotely vs. locally tip. Does permission to work for offshore companies also extend to EP holders, or are they not allowed to work in any capacity beyond the terms of their EP employment?

Another poster in a different thread making enquiry of MoM on this issue. MoM responded that the EP falls under the same rules... no local presence, no violation of EP work rules. You do need to be aware of your employment contract; moonlighting is often prohibited.

I've looked at the webpage for the tax advisor. He's saying exactly what I said in part of his web page: You want to do all your fulfillment through arm's length thirds parties that have US registration to avoid "running" your business in the USA and thus be subject to US tax laws.

Singapore statutes are very similar. If you're a non-resident director of a Singapore registered company, or provide significant managerial services as a non-resident, then your income is subject to Singapore income tax even though you don't meet any physical residency criteria.

Reading further into his webpage, he differentiates between foreign and US sources income, and if you are selling product in the US, that's US sourced income. Then he says:

A non-US person has to pay US tax on income only if that income is “effectively connected with a trade or business in the United States,” meaning that they have to be ETBUS and the income must be connected with the activity that makes them ETBUS.

And this is where our opinions begin to diverge. If you selected the product, if you set the prices, if you determined the third party independent fulfillment company, then you are executing activities and actively managing. And if you are listed as the foreign partner in a LLC, then you are resident for tax purposes. Active, plus resident, equals, pay tax.

Then his website falls apart in the logic department. In the "Setting up a Structure" section, he tells you all about setting up a LLC BUT, he never once mentions the tax implications of that LLC. I say this causes you to pay tax, apparently he says it doesn't.

I would urge you to follow up with this gent, for two reasons. The first is that any time I have ever seen a great, too good to be true, easy deal for US tax avoidance, it has turned out to be bullshit, and as an American with companies overseas and in the US, I've looked at lots of alternatives. But, I could be wrong, and if I am wrong, your research can educate me into what actually works here.

The second reason is this guy is something of a bullshit artist when he makes statements like this:

Then, other tax pros figure that if you don’t have to pay US tax, then they won’t be able to charge you fees to file your US tax return. And they like charging you fees more than they like actually understanding how US tax really applies to you.

This is so much bullshit. I've met plenty of uneducated and stupid accountants but none who purposely tried to steer me wrong to make a buck.

I leave you with a couple of links.

http://www.epgdlaw.com/llc-foreign-owners/

https://www.myusacorporation.com/articl ... neurs#bm30 (Even if you are using a third party, you are still earning US income, taxable to LLC partners).

https://www.offshorecapitalist.com/taxa ... oreigners/

And to help you sleep at night: https://www.irs.gov/publications/p519

I'll close again by restating my original viewpoint: I would avoid doing anything that gets me trapped into the US tax system if I can avoid doing so.

[PNGMK]

Honestly you have a few tough issues. Solving them logically and in sequence will lead the way forward.

1. Getting a bank account in a low income tax jurisdiction. Sounds straightforward but isn't anymore with KYC. Singapore banks will not issue one without a DP at minimum (or possibly an ongoing banking relationship).

2. Tax residency. You can be non tax resident for everywhere and anywhere. People do this now. However item 1 causes them problems.

3. Actual physical residency. I have friends who have managed to hang onto a bank account here or in other nearby countries somehow (and who knows for how long the bank will let them, I regularly receive notices for KYC for an association I run here and even Amex did one on me the other day) and they do the APAC circuit with clever planning and cheap flights. Sort of digital nomad style. Personally I think the days of this working are ending. Bali and Jakarta amd Malaysia and Thailand and HK are turning border visa runners away. The immigration departments are starting to wisen up and I expect we will see coshare work places raided in Th, Id and My soon enough.

4. Insurance, liability, customs paperwork really require a valid LE. That's the path I would pursue. Open an LE here in Singapore, even with the hassles of finding a resident director and build the business to the point where it can issue you a pass.

5. Finally to answer your point about USA presence for the best payment gateways... This is what brings people and companies together in partnerships. If you really have a solid idea you could visit trade shows in that specialised area in the USA and approach the best of class vendors there for an agent or lreseller arrangement. The biggest MNC in the world still rely on agents and partners... Why would your little company be any different? Tue companies I know in Singapore building good stuff and selling it online all use partners or friends or relatives in the USA to keep that door and payment gateway and account open. The massive company I worked for until very recently believe it could be virtual.... It didn't work out.

[ParanoidAndroid]

Hi SC,

You've given me a lot to think about. I'll chew over the minutiae and update with a draft Plan B next week. Will also have news after calling MOM and ACH re. the LTVP requirements; I know this is a headache for lots of Australians here in similar situations, so hopefully can make a positive contribution to the general knowledge base.

Another poster in a different thread making enquiry of MoM on this issue. MoM responded that the EP falls under the same rules... no local presence, no violation of EP work rules. You do need to be aware of your employment contract; moonlighting is often prohibited.

Thanks, excellent to know I have the option for either pass. Will check out some other non-US jurisdictions to potentially set up in.

The points made by you and PNGMK about doing this through a Singapore company are also compelling. Will give more thought and research to this also.

Then his website falls apart in the logic department. In the "Setting up a Structure" section, he tells you all about setting up a LLC BUT, he never once mentions the tax implications of that LLC. I say this causes you to pay tax, apparently he says it doesn't.

I would urge you to follow up with this gent, for two reasons. The first is that any time I have ever seen a great, too good to be true, easy deal for US tax avoidance, it has turned out to be bullshit, and as an American with companies overseas and in the US, I've looked at lots of alternatives. But, I could be wrong, and if I am wrong, your research can educate me into what actually works here.

Haven't spoken to him before but yeah it will be good to see what he comes back with. If he can point to any cases where his position has been argued successfully. Though I sort of get the feeling his MO is 'take the risk and I'll happily represent you for an exhorbitant fee if/when it goes wrong.'

1. Getting a bank account in a low income tax jurisdiction. Sounds straightforward but isn't anymore with KYC. Singapore banks will not issue one without a DP at minimum (or possibly an ongoing banking relationship).

I have several personal accounts in Singapore, guess that's good if I need to open a business account here since they already know who I am. Will sort out the legal residency thing first before rocking that boat.

2. Tax residency. You can be non tax resident for everywhere and anywhere. People do this now. However item 1 causes them problems.

Would much rather be a Singapore tax resident. More power to the digital nomads who manage to pull off a tax free existence; I'm just not made for constant travel. Planes horrify me on a lizard brain level.

3. Actual physical residency. I have friends who have managed to hang onto a bank account here or in other nearby countries somehow (and who knows for how long the bank will let them, I regularly receive notices for KYC for an association I run here and even Amex did one on me the other day) and they do the APAC circuit with clever planning and cheap flights. Sort of digital nomad style. Personally I think the days of this working are ending. Bali and Jakarta amd Malaysia and Thailand and HK are turning border visa runners away. The immigration departments are starting to wisen up and I expect we will see coshare work places raided in Th, Id and My soon enough.

Hopefully can secure legal physical residency asap with an LTVP. Once that's sorted out I'll at least have some security and can explore the best business setup either here or offshore.

4. Insurance, liability, customs paperwork really require a valid LE. That's the path I would pursue. Open an LE here in Singapore, even with the hassles of finding a resident director and build the business to the point where it can issue you a pass.

I agree that would be the best ultimate outcome. A thought: could incorporate in Hong Kong remotely, bank in Singapore, work for it legally via LTVP (unless having a bank account for the foreign entity in Singapore qualifies as doing business in Singapore?). Close down HK and switch to Singapore private limited when the sales figures justify, and apply for EP at the same time. Bonus points for not having to fly anywhere to set up an offshore bank account.

5. Finally to answer your point about USA presence for the best payment gateways... This is what brings people and companies together in partnerships. If you really have a solid idea you could visit trade shows in that specialised area in the USA and approach the best of class vendors there for an agent or lreseller arrangement. The biggest MNC in the world still rely on agents and partners... Why would your little company be any different? Tue companies I know in Singapore building good stuff and selling it online all use partners or friends or relatives in the USA to keep that door and payment gateway and account open. The massive company I worked for until very recently believe it could be virtual.... It didn't work out.

Partnering could something to consider down the line. For now, as a startup, I'd rather focus on building up a sales record so potential future partners take me seriously. Access to US banking would be nice, though probably not at the expense of getting on the IRS's radar. Will do more research but may just have to deal with the high foreign transaction fees, at least for the short term.

Tangentially, I've learned that Stripe (and possibly some other gateways) allow online purchases to be settled in USD if the bank account is Canadian. They don't allow this for any other countries, annoying because I already have a USD account in Singapore. Probably the same foreign withholding headaches for setting up shop in Canada though; I haven't done any in-depth research on this yet but just on the surface doesn't strike me as a tax-friendly place.

Thanks again both!

[ParanoidAndroid]

Hi SC,

Just rereading through one of the links you posted earlier and caught this, didn't see it the first time:

A positive point to make is that foreign owners may act as consultants to the LLC under a written Consultant’s agreement completing all consulting work within their home country and billing the LLC in the United States for this service. By doing so, it may be possible to eliminate profits thus avoiding some taxation, as well as U.S. situs (located) earnings, which would be subject to the U.S. tax regime, even for non-residents.

Now that's interesting ... do you think it would/wouldn't work in my case? Sounds like another 'too good to be true' scenario.

Provided the taxes weren't too onerous, I'd happily deal with quarterly reporting and all that fun in exchange for access to US banking.

Thanks again

[Strong Eagle]

Hi SC,

Just rereading through one of the links you posted earlier and caught this, didn't see it the first time:

A positive point to make is that foreign owners may act as consultants to the LLC under a written Consultant’s agreement completing all consulting work within their home country and billing the LLC in the United States for this service. By doing so, it may be possible to eliminate profits thus avoiding some taxation, as well as U.S. situs (located) earnings, which would be subject to the U.S. tax regime, even for non-residents.

Now that's interesting ... do you think it would/wouldn't work in my case? Sounds like another 'too good to be true' scenario.

Provided the taxes weren't too onerous, I'd happily deal with quarterly reporting and all that fun in exchange for access to US banking.

Thanks again

Well... Singapore has pretty much the same setup as well... if you are a non-resident consulting into a Singapore registered company, you are arm's length and not subject to withholding tax for income if a couple of conditions are met. First, your consulting activities are not actively managing the company. And second, you're not a director. Otherwise, payments to non-resident people are considered to be offshore managers/employees and tax must be withheld prior to payment.

What do you think about this scenario?

So... I'm an IRS agent, sitting in my 20 year old office chair, ensconced in my baby shit colored office, reviewing the folder in front of me that's sitting on my bashed in green army surplus desk with the drawer that won't open. OK, they're using a third party drop ship... sure that changes the tax nature of the business but then again, fulfillment companies do solve a lot of problems, so I'll call that a legitimate tool.

Hmmm... but the single member of the LLC is actually only a consultant... an expense item, and someone who receives no salary. Gee, there is nobody else managing the company... no one to sign the contracts with the fulfillment company. No one to file the tax reports. No one to manage the day to day affairs. A one person army who is actually only a consultant? Could this be a ruse for the purposes of avoiding tax? How incredibly clever... it's the 44th one I've seen today.

What do you think? That the IRS agent is going to say, "Yeh, this is a legitimate interpretation of the tax code," or, "This isn't kosher, I'm pulling out form f*ckyou326, telling you that your claim of being an arm's length consultant is disallowed?"

This might fly if there were additional domestic LLC members who would stand in as active management. Then the foreign member can have "special expertise" and sufficient justification for paying the member as a consultant can be made.

Again, don't rely on me, solely... contact a few US based accountants. I'll PM mine to you... she's very knowledgeable in international tax matters and will probably give you an opinion for free, especially if you were going to move forward and needed a great accountant.

I'll close by expounding on PNGMK's comments regarding banks. It's tough. In Singapore, there have been multiple money laundering scandals, including major banks caught up in Malaysia's infamous 1MDB corruption scandal. Quite a few fined, several closed. Your little pissant business'es accounts will be about as welcome as a fart in a lift... you don't contribute much to the bottom line but you've got hard to trace overseas transactions from/with/to other unknown companies and bank accounts. To launder or not to launder, that is the question.

Ditto for the USA. Pretty easy to open an account, especially a credit union account with checking privileges if you are domestic. Foreign component? Holy crap, Batman... money laundering... tax avoidance... offshore bank accounts. With you being non-resident, and not having any domestic partners in the USA, you're a red flag on any bank's application process. Virtually impossible to vet or prosecute overseas, not worth the hassle.

You can thank all the scammers out there for making your legitimate business goals a pain in the ass. I judge you will be best off attempting to own business bank accounts where you hold legal residence.

[PNGMK]

Your bank account will time out eventually without residency I'm afraid.

The payment gateway issue is a big battle ground right now. You only have to see how successful wechat and alipay are in China to wonder why whatsapp and FB haven't a simar micro payment system. I'm sure we will see something soon. Even Grab and Uber are trying to jump into this space and challenging the Rothes child cartels. Of course as others have pointed out in the bitcoin thread this is an area ripe for block chain tech.

[ParanoidAndroid]

So... I'm an IRS agent, sitting in my 20 year old office chair, ensconced in my baby shit colored office, reviewing the folder in front of me that's sitting on my bashed in green army surplus desk with the drawer that won't open. OK, they're using a third party drop ship... sure that changes the tax nature of the business but then again, fulfillment companies do solve a lot of problems, so I'll call that a legitimate tool.

Hmmm... but the single member of the LLC is actually only a consultant... an expense item, and someone who receives no salary. Gee, there is nobody else managing the company... no one to sign the contracts with the fulfillment company. No one to file the tax reports. No one to manage the day to day affairs. A one person army who is actually only a consultant? Could this be a ruse for the purposes of avoiding tax? How incredibly clever... it's the 44th one I've seen today.

What do you think? That the IRS agent is going to say, "Yeh, this is a legitimate interpretation of the tax code," or, "This isn't kosher, I'm pulling out form f*ckyou326, telling you that your claim of being an arm's length consultant is disallowed?"

This might fly if there were additional domestic LLC members who would stand in as active management. Then the foreign member can have "special expertise" and sufficient justification for paying the member as a consultant can be made.

You paint a vivid picture. Yeah thought that might be the case. Alas I don't know anyone in the US that I'd trust as an additional member. Maybe it would fly if my partner registered the LLC and I invoiced it as an arms length consultant. He 'manages' the company and I provide marketing services or whatever.

Again, don't rely on me, solely... contact a few US based accountants. I'll PM mine to you... she's very knowledgeable in international tax matters and will probably give you an opinion for free, especially if you were going to move forward and needed a great accountant.

Thank you, that would be greatly appreciated. I'm going in circles trying to figure all this out. A few more days of staring at screens and apparently, whether I have a US entity, a foreign entity or no entity at all I will still be liable to 30% withholding as a non-resident. Which could be offset IF I have no US permanent establishment AND reside in a tax treaty country. Hong Kong has no tax treaty so that's probably out; Canada does but not sure if simply registering an entity in Canada qualifies it as 'resident', and what the Canadian tax implications of that would be.

Then there's the 50/50 allocation of US and foreign source income, which would seem to apply in the case of US buyers and foreign source inventory. So maybe it would just be 15% withholding. Reasonable, provided Singapore would allow claiming a tax credit for the rest.

I'll close by expounding on PNGMK's comments regarding banks. It's tough. In Singapore, there have been multiple money laundering scandals, including major banks caught up in Malaysia's infamous 1MDB corruption scandal. Quite a few fined, several closed. Your little pissant business'es accounts will be about as welcome as a fart in a lift... you don't contribute much to the bottom line but you've got hard to trace overseas transactions from/with/to other unknown companies and bank accounts. To launder or not to launder, that is the question.

Ditto for the USA. Pretty easy to open an account, especially a credit union account with checking privileges if you are domestic. Foreign component? Holy crap, Batman... money laundering... tax avoidance... offshore bank accounts. With you being non-resident, and not having any domestic partners in the USA, you're a red flag on any bank's application process. Virtually impossible to vet or prosecute overseas, not worth the hassle.

You can thank all the scammers out there for making your legitimate business goals a pain in the ass. I judge you will be best off attempting to own business bank accounts where you hold legal residence.

Indeed. I'd still like to try for a US account or at least a Canadian one that can settle in USD; some alien non-residents are still making this work according to several offsite threads. Depends on the bank and who you get when you walk in. Failing that, UOB offers a foreign corporate account with 30k minimum balance (better than DBS and Citi who want 50k).

Your bank account will time out eventually without residency I'm afraid.

Had a feeling that was the case. I have active GIRO payments set up; maybe that's helped keep it alive in the meantime.

The payment gateway issue is a big battle ground right now. You only have to see how successful wechat and alipay are in China to wonder why whatsapp and FB haven't a simar micro payment system. I'm sure we will see something soon. Even Grab and Uber are trying to jump into this space and challenging the Rothes child cartels. Of course as others have pointed out in the bitcoin thread this is an area ripe for block chain tech.

I hope we see something soon. Current status quo is compound bullshit.

[Strong Eagle]

Your bank account will time out eventually without residency I'm afraid.

There must be a couple of contributing factors. I closed my business accounts at UOB in Singapore three years after I left. They were informed of my new overseas residence, I never had an issue with any banking facilities, which I had to use from time to time as I wound down the company.

I still have my personal account at Stan Chart, now five years since I left. If I put any money in it, and it doesn't meet minimum balance thresholds, they charge me $4 per month until my balance goes to zero. They leave the account active for about six months, then make it dormant. If I deposit a few dollars into the account, it becomes active again, and they start taking their $4 surcharge again until the balance goes to zero, at which time we repeat the cycle.

[PNGMK]

Your bank account will time out eventually without residency I'm afraid.

There must be a couple of contributing factors. I closed my business accounts at UOB in Singapore three years after I left. They were informed of my new overseas residence, I never had an issue with any banking facilities, which I had to use from time to time as I wound down the company.

I still have my personal account at Stan Chart, now five years since I left. If I put any money in it, and it doesn't meet minimum balance thresholds, they charge me $4 per month until my balance goes to zero. They leave the account active for about six months, then make it dormant. If I deposit a few dollars into the account, it becomes active again, and they start taking their $4 surcharge again until the balance goes to zero, at which time we repeat the cycle.

The banks seem to all vary differently on policy and risk but they will all know that the OP's EP has expired and at some point she will run out of time. There has definitely been an uptick in KYC audits since the 1MDB scandal but maybe it's died down for awhile. Having a valid postal address to send mail to definitely helps (I'm acting as a postal agent for a few ex Singapore friends bank accounts).

[Strong Eagle]

Your bank account will time out eventually without residency I'm afraid.

There must be a couple of contributing factors. I closed my business accounts at UOB in Singapore three years after I left. They were informed of my new overseas residence, I never had an issue with any banking facilities, which I had to use from time to time as I wound down the company.

I still have my personal account at Stan Chart, now five years since I left. If I put any money in it, and it doesn't meet minimum balance thresholds, they charge me $4 per month until my balance goes to zero. They leave the account active for about six months, then make it dormant. If I deposit a few dollars into the account, it becomes active again, and they start taking their $4 surcharge again until the balance goes to zero, at which time we repeat the cycle.

The banks seem to all vary differently on policy and risk but they will all know that the OP's EP has expired and at some point she will run out of time. There has definitely been an uptick in KYC audits since the 1MDB scandal but maybe it's died down for awhile. Having a valid postal address to send mail to definitely helps (I'm acting as a postal agent for a few ex Singapore friends bank accounts).

That is very true. They have also had 14 years of experience with me and my company. Our outgoing transactions were for employees, airlines, hotels, apartments. Our incoming transactions were all from large MNC's.

Starting fresh, with unknown vendors and unknown sources of income is indeed another story.