Apply For EP As Director or Employee?

[livelifesingapore]

Hi All,

Kindly help with my employment pass application. i am from NZ and planning to open IT company with 40000 S$ paid up capital and shall be drawing 9000 S$ salary per month for my self.

What are the chances that my EP application will get approved? i am already in talks with some local people who will be acting as local director initially in my firm.

Regards
Andrews

[bgd]

Search for posts by Strong Eagle, he has covered this in great detail.

[Strong Eagle]

Permit me to do some simple arithmetic here. You've got $40,000 in paid up capital. You are planning to pay yourself $9,000 per month. Let's assume you're going to set aside a very modest $4,000 for all of the odds and ends you will need to open up a company... government fees, professional fees, printing, website... I haven't even mentioned something like rent, or employee salaries.

Anyway, that leaves you with $36,000 in paid up capital. Divide that by your monthly salary and you get FOUR... you will be completely out of cash in four months.

So, am I to assume that your pro forma financials and business plan shows startup break even at four months? That is, at the end of four months, your company will be earning at least $9,000 per month to continue to pay your salary? More realistically, will it be earning more than that to cover your company expenses as well?

Because, if you're not planning on break even in four months, then your numbers don't make any sense and your application will get shit canned. Where are you getting the money to pay yourself $9,000 per month with no revenues to cover?

Is it the local idiots who told you that $9,000 is a great number because "big" numbers are better than small numbers? They are full of crap. Have you asked them where the $9,000 is supposed to come from? What are they going to tell MoM when MoM asks where the money is coming from? You're going to get a big fat, "rejected because revenues do not cover salaries".

Really, unless you've got a decent business plan and three years of semi-realistic pro forma financial statements, unless you can convince yourself that you have enough money to survive until you are profitable, you ought to save your own money.

Unless you've already got contracts in hand, it is very rare for a new company to break even in less than six months. What are you going to do when you run out of money? Seriously, if you can't self fund until you're making enough money to pay the expenses of your business and yourself, you're doomed before you begin.

Here's an outline for a business plan. It may not be the plan you use but it's something to think about and something that the authorities here will want to see to make sure that you're not some yahoo trying to use a startup company as a backdoor way to sneak into Singapore.

http://www.herberts.org/miscdocs/Sample ... ntents.pdf

In closing, and by way of example: I paid myself $8,000. I also had $200,000 in paid up capital, and I had several hundred thousand dollars worth of contracts waiting to be executed. Can you see the difference in sustainability in the startup phase?

Edited to add: You want to start an IT business in Singapore? IT startups are the shits in Singapore. You think you're going to approach local businesses with your IT services, whatever they are? You won't. You will be shut out in the cold. Guaranteed... unless maybe you're Chinese and speak the language... even then... no network.

You think you're going to sell into multi-nationals? Good luck. That was my model... regional sales. That's been replaced with global PMO's and global service providers... think Infosys and Tata and Getronics.

Unless you've got a great Rolodex, and unless you've thoroughly researched your market segment and competition, I'd save my $40,000 for something else.

[livelifesingapore]

Hi Strong Eagle,

Thanks for your detailed reply. Let me brief you about my profile..I am into this business from last 10 years and have earned quite well. However as per my knowledge Singapore tax rates are on lower side compare to my home country( correct me if I am wrong). I have already work orders of more than 100k S$ from my global clients. So you can assume I am
Shifting some part of my business to Singapore to save some taxes if MOM allows me to do so. I am not looking for any permanent settlement as I would prefer to stay in Auckland only.

Considering above scenario will you recommend me to start my business there or shall I run my operations remotely from new Zealand. I am ok with both the options.

Thanks

[Strong Eagle]

I cannot advise you on corporate or personal tax consequences as I do not know the situation with respect to New Zealand.

You asked about getting an EP. I've given you my view of what it will take to get an EP... a proper business plan and demonstration that you have revenues to cover your salary.

[bgd]

Both corporate and personal tax rates are much lower here than NZ. If you stay in Auckland then you are liable for NZ tax on your world wide income. That would include your $9,000 salary and any company dividends. Even if you keep the money in the SG company, at some point you will need to transfer it to yourself or your NZ company which will create the tax liability. Talk to a NZ accountant, if you haven't already.

As you've described it, your plans don't make much sense. I don't get the need for an EP or salary if you are in Auckland. Do you mean to relocate to Sg for a time and then return to NZ? If so you will probably fall foul of the "enduring relationship". Again, talk to that accountant.

[x9200]

Perhaps you should also consider MLI.
https://en.wikipedia.org/wiki/Multilate ... t_Shifting

NZ already ratified it. Singapore not yet, but is the part of the treaty so this is going to happen sooner or later.

As far as I understand it, if you keep your vital social/economic bonds and resources in NZ and just operate some business in SG you still may be liable to pay the NZ taxes.

[Strong Eagle]

I notice you made the comment, "I would prefer to stay in Auckland only."

This lends a new wrinkle to your taxation issues, outside of anything to do with New Zealand, of which I know little.

If you are a non-resident director or a non-resident principal (you essentially run it and make all the decisions) of a Singapore based company, then you are subject to a non-resident taxation rate of 22 percent on all compensation received. You don't have legal residence in Singapore, ie, no EP. You pay yourself $1000 from your Singapore company. Your Singapore company sends $220 directly to IRAS, and $780 to you.

[livelifesingapore]

do singapore offer any long term visa say for 1 year, to new entities?? I hope 1 year would be suffix to learn pros and cos of running a business in Singapore. During my last visit to singapore, I met with some guy and he was operating export import business in singapore, that guy is importing items from China and selling those to European countries. I am surprised if MOM has that stringent rules for issuing EPs, how come he got the EP as he is not giving any benefits to singapore economy by creating jobs etc. except paying some corporate taxes.