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Leaving employment to enterpreneurship

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Siv
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Leaving employment to enterpreneurship

Post by Siv » Tue, 09 Jun 2020 4:35 pm

Hi, guys

I've tried searching this topic, but there isn't something that's specific that addresses the situation I am in. So I am hoping I could get some insight from folks in here.

I have been on an EP in SG for the last 6 years, on an approximate 150K annually. I am a Malaysian and live in JB. I have been commuting daily, considered PR.....but haven't applied yet so far. Simply because I didn't see the point in applying for PR when I don't really want to live in SG.

Have been doing what I have for about 16 years now, and am in my mid-40s and feel that perhaps a change would do me good. I have been looking around, but the more I talk to more companies out there the more I don't want to be an employee and would like to branch out to start something on my own and perhaps in a different field.

Recently, made an acquaintance and saw an opportunity to be a part of something from ground up and in a field that has potential and great opportunities forward. This person is the owner/director of the Pte Ltd company in question, and offered me a 30% share with a view of coming in full time, as a director and CEO, when I am ready to jump ship.

Now, I know that I can't be in employment of another company, nor being a Director or business owner of another company on an existing EP. But I believe that I am able to own shares in a local Pte Ltd company, without any issues. So I have bought in 30% of the shares.

My question is how do I transition to the next step ? What are my options to go across from my current job on EP to the new company where I am already a shareholder ?

Do I just get them to apply an EP for me as an employee ? Or is there another way ?

Any advise is welcomed.

Thanks guys

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PNGMK
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Re: Leaving employment to enterpreneurship

Post by PNGMK » Tue, 09 Jun 2020 5:44 pm

1. EP as an employee
2. Apply for Entrepass
3. Ignore all the above if you're comfortable coming in and out of Singapore as need be on a SVP.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
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Siv
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Re: Leaving employment to enterpreneurship

Post by Siv » Tue, 09 Jun 2020 8:26 pm

PNGMK wrote:
Tue, 09 Jun 2020 5:44 pm
1. EP as an employee
2. Apply for Entrepass
3. Ignore all the above if you're comfortable coming in and out of Singapore as need be on a SVP.
Thanks, mate....

No 1, I suppose the obvious route, however since my title will be CEO and a director as well, not sure is that a good idea ?

As for no 2, I thought that Entrepass was those who want to start a new business (one of the conditions on MOM website is that the company has to be less than 6 months old - this company is already 6 months old this month)

You know I've actually thought of no 3....but....isn't that illegal ? I mean, I will be getting paid monthly on top of dividends/share of profits from the company.

Thoughts ?

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Re: Leaving employment to enterpreneurship

Post by PNGMK » Tue, 09 Jun 2020 8:40 pm

1. Why not? Plenty of CEO's I know here are on EPs
3. It depends on what you are doing here. If it's mainly meetings then I don't see a problem but if you're overseeing operations then probably not.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

Siv
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Re: Leaving employment to enterpreneurship

Post by Siv » Thu, 18 Jun 2020 10:57 am

PNGMK wrote:
Tue, 09 Jun 2020 8:40 pm
1. Why not? Plenty of CEO's I know here are on EPs
3. It depends on what you are doing here. If it's mainly meetings then I don't see a problem but if you're overseeing operations then probably not.
Noted, thanks PNGMK.

I've been exploring these options and been having more discussions with the owner of this new venture I intend to be part of, and because our operations are regional with Malaysia being a target market as well, with me being Malaysian I can continue to be based in Malaysia and still go in and out of Singapore as and when necessary. And I've been thinking maybe its time to consider just leaving all this EP process once and for all...and just be a director and shareholder of the company.

The only question is....how would my monthly remuneration be handled. It would be called Director's Fees, but how would that be handled ?

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Re: Leaving employment to enterpreneurship

Post by PNGMK » Thu, 18 Jun 2020 11:19 am

Myasis Dragon can probably commment better than me but I think the Director's fees will be subject to withholding taxes. Also dividends.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

Siv
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Re: Leaving employment to enterpreneurship

Post by Siv » Thu, 18 Jun 2020 11:31 am

PNGMK wrote:
Thu, 18 Jun 2020 11:19 am
Myasis Dragon can probably commment better than me but I think the Director's fees will be subject to withholding taxes. Also dividends.
Thanks, mate. Yeah, SMS has also mention Myasis Dragon as well when I asked him earlier on.

I will try to PM him.

Thanks again

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Re: Leaving employment to enterpreneurship

Post by Myasis Dragon » Thu, 18 Jun 2020 10:15 pm

Siv wrote:
Thu, 18 Jun 2020 10:57 am
PNGMK wrote:
Tue, 09 Jun 2020 8:40 pm
1. Why not? Plenty of CEO's I know here are on EPs
3. It depends on what you are doing here. If it's mainly meetings then I don't see a problem but if you're overseeing operations then probably not.
Noted, thanks PNGMK.

I've been exploring these options and been having more discussions with the owner of this new venture I intend to be part of, and because our operations are regional with Malaysia being a target market as well, with me being Malaysian I can continue to be based in Malaysia and still go in and out of Singapore as and when necessary. And I've been thinking maybe its time to consider just leaving all this EP process once and for all...and just be a director and shareholder of the company.

The only question is....how would my monthly remuneration be handled. It would be called Director's Fees, but how would that be handled ?
Facts that are relevant to your situation:

Being a shareholder is essentially irrelevant to this discussion. Shareholders elect directors to run the company. You are not an employee. You don't get paid. You are an investor as a shareholder. Owning shares doesn't affect any other part of your legal status.

As a sidebar, what's the point of owning 30 percent of the shares? That means someone else owns 70 percent of the shares, and you can never, ever, prevail in a shareholders vote at an AGM or EGM. It does mean that you have a right to 30 percent of dividends, if ever distributed but that's about it. However, investing options into a Pte Ltd is a whole 'nother topic so I'll leave it there.

The following paragraphs are applicable if you think you want to do this without an EP.

Even though you are a Malaysian, you still require a work permit to work in Singapore. Now, even the ICA and MoM will admit that there are tons of Malaysians coming in to Singapore everyday who do not have a work permit; further, it is really hard to catch them unless someone is reported. The key though, for you, is that you are non-resident without a work permit, having neither the right to work nor reside in Singapore.

If you go to Changi, it is obvious that thousands of people coming in from KL are here to work in Singapore, for varying periods of time, and not to visit the Merlion. In reverse, I flew to KL every week for 3 or 4 days for 18 months. Technically, I was supposed to have a Malaysian work permit, a major pain in the ass to obtain, but during that 18 months, not once was I asked how come I traveled to KL so much, in spited of tons of immigration stamps in my passport.

I illustrate this not to suggest that you can travel as much as you want between Malaysia and Singapore but to point out that this business travel is in a gray area... do it too much and you might end up being asked if you are working in Singapore without a work permit. Unlikely, but possible. There are residency and taxation rules around the amount of time spent in Singapore, 60 days, no tax, 60 to 182 days, non-resident tax, and more than 183 days, resident tax. In all the times I went through immigration at Changi, I saw maybe 4 or 5 people pulled out of line and taken to the ICA counter.

Next, you absolutely cannot be a director of a Singapore Pte Ltd while holding an EP issued to another company, except under very special circumstances. For example, you're on an EP working for Stan Chart and you are requested to sit on the board of one of the bank's major clients. You would need to make application to MoM to hold this position.

I know this to be a fact from my own situation. I left Singapore before winding up my company. I needed a resident director while I closed things down. A friend on EP agreed to do it. I registered him on Bizfile. 3 months later I got a notice stating that he couldn't be a director. Fortunately, I was days from the final steps of closure. So, yes, the databases are shared.

What does this all mean for you?

First, PR is irrelevant in this situation, at least initially. If you can't get an EP, you won't get a PR. And if you're going to live in JB, that's probably going to count against you anyway as the 'R' part of PR means "resident".

Second, the Entrepass that was mentioned is also irrelevant to this situation. Entrepass is for foreigners wanting to start a business in Singapore, and while the gahmen has improved the terms and conditions, the hoops you have to jump through are still pretty onerous. But, you have stated that you would be going to work for a Singapore Pte Ltd. The person you know is an "owner/director". Therefore, this person must be a Singapore citizen or PR, not a foreigner (unless he started his company with an Entrepass), and the company already exists.

This leaves you with two options.

You can choose to be a non-resident director. You are classified as a non-resident director of a Singapore company because you don't have the legal right to live and work in Singapore (no employment pass).

For tax purposes, non-resident directors, and certain senior management positions of Singapore companies (CFO, CIO, CEO, global sales manager, etc), are considered to be working for a Singapore company, in Singapore, regardless of actual residence, and are therefore resident for tax purposes. In this situation IRAS requires that the company withhold income tax at the rate of 22 percent before sending the money to you. You get paid $1000, the company withholds $220 and sends it to IRAS, and then sends the $780 to you.

Since you are living in Malaysia, you will be tax resident there for personal income tax, and Singapore and Malaysia have a tax treaty so that you will not be double taxed by Malaysia (a credit of some sort, if I recall).

Your second option is to get the EP. This seems, by far, to be the simplest option. You must terminate your existing EP but you've got to do that anyway to be a director. And obviously, if you're going to be a resident director, you need the EP to be resident.

You've got a solid track record. The company exists, is operated by a Singapore citizen or PR, and is able to make you a decent offer. You should not have the issues that many small companies do in trying to hire EP's, especially startups, that cannot demonstrate revenues sufficient to support the salary requirements of an EP. Strong Eagle has written extensively on this subject... that you must have a realistic business plan to show that this isn't some sort of scammy setup to get residency in Singapore. Have something ready to support your EP application.

Your personal tax situation remains the same. You just have a new EP and a new Singapore company that you work for. Directors fees vs salary is a wash. You get taxed the same on either of them. Only PR's and citizens see a difference between the two with respect to CPF contributions.

That's your situation and options as I see them. Good luck.

Siv
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Re: Leaving employment to enterpreneurship

Post by Siv » Fri, 19 Jun 2020 8:37 am

Myasis Dragon wrote:
Thu, 18 Jun 2020 10:15 pm
Siv wrote:
Thu, 18 Jun 2020 10:57 am
PNGMK wrote:
Tue, 09 Jun 2020 8:40 pm
1. Why not? Plenty of CEO's I know here are on EPs
3. It depends on what you are doing here. If it's mainly meetings then I don't see a problem but if you're overseeing operations then probably not.
Noted, thanks PNGMK.

I've been exploring these options and been having more discussions with the owner of this new venture I intend to be part of, and because our operations are regional with Malaysia being a target market as well, with me being Malaysian I can continue to be based in Malaysia and still go in and out of Singapore as and when necessary. And I've been thinking maybe its time to consider just leaving all this EP process once and for all...and just be a director and shareholder of the company.

The only question is....how would my monthly remuneration be handled. It would be called Director's Fees, but how would that be handled ?
Facts that are relevant to your situation:

Being a shareholder is essentially irrelevant to this discussion. Shareholders elect directors to run the company. You are not an employee. You don't get paid. You are an investor as a shareholder. Owning shares doesn't affect any other part of your legal status.

As a sidebar, what's the point of owning 30 percent of the shares? That means someone else owns 70 percent of the shares, and you can never, ever, prevail in a shareholders vote at an AGM or EGM. It does mean that you have a right to 30 percent of dividends, if ever distributed but that's about it. However, investing options into a Pte Ltd is a whole 'nother topic so I'll leave it there.

The following paragraphs are applicable if you think you want to do this without an EP.

Even though you are a Malaysian, you still require a work permit to work in Singapore. Now, even the ICA and MoM will admit that there are tons of Malaysians coming in to Singapore everyday who do not have a work permit; further, it is really hard to catch them unless someone is reported. The key though, for you, is that you are non-resident without a work permit, having neither the right to work nor reside in Singapore.

If you go to Changi, it is obvious that thousands of people coming in from KL are here to work in Singapore, for varying periods of time, and not to visit the Merlion. In reverse, I flew to KL every week for 3 or 4 days for 18 months. Technically, I was supposed to have a Malaysian work permit, a major pain in the ass to obtain, but during that 18 months, not once was I asked how come I traveled to KL so much, in spited of tons of immigration stamps in my passport.

I illustrate this not to suggest that you can travel as much as you want between Malaysia and Singapore but to point out that this business travel is in a gray area... do it too much and you might end up being asked if you are working in Singapore without a work permit. Unlikely, but possible. There are residency and taxation rules around the amount of time spent in Singapore, 60 days, no tax, 60 to 182 days, non-resident tax, and more than 183 days, resident tax. In all the times I went through immigration at Changi, I saw maybe 4 or 5 people pulled out of line and taken to the ICA counter.

Next, you absolutely cannot be a director of a Singapore Pte Ltd while holding an EP issued to another company, except under very special circumstances. For example, you're on an EP working for Stan Chart and you are requested to sit on the board of one of the bank's major clients. You would need to make application to MoM to hold this position.

I know this to be a fact from my own situation. I left Singapore before winding up my company. I needed a resident director while I closed things down. A friend on EP agreed to do it. I registered him on Bizfile. 3 months later I got a notice stating that he couldn't be a director. Fortunately, I was days from the final steps of closure. So, yes, the databases are shared.

What does this all mean for you?

First, PR is irrelevant in this situation, at least initially. If you can't get an EP, you won't get a PR. And if you're going to live in JB, that's probably going to count against you anyway as the 'R' part of PR means "resident".

Second, the Entrepass that was mentioned is also irrelevant to this situation. Entrepass is for foreigners wanting to start a business in Singapore, and while the gahmen has improved the terms and conditions, the hoops you have to jump through are still pretty onerous. But, you have stated that you would be going to work for a Singapore Pte Ltd. The person you know is an "owner/director". Therefore, this person must be a Singapore citizen or PR, not a foreigner (unless he started his company with an Entrepass), and the company already exists.

This leaves you with two options.

You can choose to be a non-resident director. You are classified as a non-resident director of a Singapore company because you don't have the legal right to live and work in Singapore (no employment pass).

For tax purposes, non-resident directors, and certain senior management positions of Singapore companies (CFO, CIO, CEO, global sales manager, etc), are considered to be working for a Singapore company, in Singapore, regardless of actual residence, and are therefore resident for tax purposes. In this situation IRAS requires that the company withhold income tax at the rate of 22 percent before sending the money to you. You get paid $1000, the company withholds $220 and sends it to IRAS, and then sends the $780 to you.

Since you are living in Malaysia, you will be tax resident there for personal income tax, and Singapore and Malaysia have a tax treaty so that you will not be double taxed by Malaysia (a credit of some sort, if I recall).

Your second option is to get the EP. This seems, by far, to be the simplest option. You must terminate your existing EP but you've got to do that anyway to be a director. And obviously, if you're going to be a resident director, you need the EP to be resident.

You've got a solid track record. The company exists, is operated by a Singapore citizen or PR, and is able to make you a decent offer. You should not have the issues that many small companies do in trying to hire EP's, especially startups, that cannot demonstrate revenues sufficient to support the salary requirements of an EP. Strong Eagle has written extensively on this subject... that you must have a realistic business plan to show that this isn't some sort of scammy setup to get residency in Singapore. Have something ready to support your EP application.

Your personal tax situation remains the same. You just have a new EP and a new Singapore company that you work for. Directors fees vs salary is a wash. You get taxed the same on either of them. Only PR's and citizens see a difference between the two with respect to CPF contributions.

That's your situation and options as I see them. Good luck.
Thanks, MD. That's a lot of useful info, and quite a bit to digest.

I'm a 30% shareholder because that's the amount of investment I put in. However the owner and me will be running the show together equally in decision making and operations. It's only the profit sharing that follows the %.

She doesn't have experience in the market she wants to go into, and I do. So essentially I make the calls in everything related to that part of the business.

My only concern, frankly, is my chances of getting an EP now with the new company. This company is actually new, established in 2020 and small (there's a total of 4 staffs, all locals)….now, I've done this EP dance twice in the last 6 years and both times were for huge global companies. With this one....I'm not so sure.

So just in case my EP doesn't come thru...I am exploring my options.

It will likely be the non-resident director route. I don't think I can be paid a 'salary' so we would have to work out how I get paid. Probably quarterly director fees or something like that.

If there's anything else you can think about or any anecdotes, please feel free to share. And thanks again for your advice.

Cheers

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Re: Leaving employment to enterpreneurship

Post by Myasis Dragon » Fri, 19 Jun 2020 11:06 pm

My only question is: Why wouldn't you try the EP route first? If it succeeds, you're in and done in the simplest way possible. If it fails, the non-resident director fallback doesn't require any approvals.

Either way, you'll have to give up your existing EP, and if I'm not wrong (correct me if I am wrong, SMS), you can apply for a new EP while holding your existing EP... changing jobs, as it were.

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Re: Leaving employment to enterpreneurship

Post by sundaymorningstaple » Sat, 20 Jun 2020 1:22 am

This is true. In fact it's always been our advice on here. Get an IPA (In principle approval) before you give your notice. Never quit your job and then apply as that is a sure recipe for disaster.

Siv
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Re: Leaving employment to enterpreneurship

Post by Siv » Sat, 20 Jun 2020 10:51 am

Myasis Dragon wrote:
Fri, 19 Jun 2020 11:06 pm
My only question is: Why wouldn't you try the EP route first? If it succeeds, you're in and done in the simplest way possible. If it fails, the non-resident director fallback doesn't require any approvals.

Either way, you'll have to give up your existing EP, and if I'm not wrong (correct me if I am wrong, SMS), you can apply for a new EP while holding your existing EP... changing jobs, as it were.
Yep, this is what I plan to do as well. Thanks to this forum since I moved to JB 6 years ago and in dealing with EP process twice now, I am well aware always give up existing EP only after new EP approved 8-)

Thanks again MD, and SMS for your last post on this.....much appreciated. I will bump this thread up again after all the dust settles and where I land, for sure. In case anyone in the same boat for the future....

Cheers

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