Relocating to Singapore being employed and self-employed

[DarkOrion]

Hello Singaporean Expats!

We are a family of three, considering to move to Singapore and I would like to ask a couple of question, as my search has not lead to concrete answers. A bit of background info:

We are a couple with two children, EU passport holders, living and working in Switzerland. I am discussing with my employer about a potential relocation to Singapore, as a company transfer in the local office. At the same time, I have a sole proprietorship (no conflict of interest with my current employer as it is in a different sector). The sole proprietorship in CH is not a legal entity. This means that I issue invoices, get paid, calculate the P&L of this business as if it would be something independent of my salary, and then add it to my and my wife's salaries in our tax return. Based on this, they calculate the additional money we need to pay for social security contributions and insurances and our tax is calculated at the effective tax rate of the combined income. And since we are not talking about a legal entity, I am personally liable for all potential losses with my private assets. The benefit is that it is extremely simple, very cost efficient, requires no VAT to be charged for revenues below CHF 100k (~SGD 144k) per year and also requires a very simple accounting (an excel file with aggregated income and expenses, maybe 10 to 15 lines).

So, if we consider moving to Singapore, and given that my employer can convince the authorities to give me a pass to come over there, I have found the following (please correct me if I am wrong):

I will most probably get a EP, which means I will be allowed to live and work for the employer that applied for the EP for one or two years and then a renewal would be required if we decide to stay there longer.
My wife and my children will get a Dependent's Pass.
My wife is not automatically allowed to be employed. She would have to apply to positions, as if she was not living in the country and the potential employer would need to go through all the hoops to get her the EP.
For EP holders, the Sole Proprietorship is not an option, so having the same setup that I have here would not be possible.
For EP holders, setting up a company (legal entity) is also not an easy option. You need approval by the employer and the government, and I doubt that for a newcomer this would be given out so easily on top of a local employment contract.

What I do not know:
Would it be possible for my wife to setup such a company and be employed under such a company, just so that we are able to have this business in SG? And would this hinder her from finding a normal job in Singapore?
If not, would it be allowed if I set up a company (legal entity) in Switzerland and get a director in Switzerland (accounting offices do that for a fee, especially if you have been a resident for some many years) and get dividends in Singapore? Would it be allowed and how would it be taxed?
Regarding pension contributions, my understanding is that for EP holders, the only deductions applied on the gross salary is the tax and there is nothing to account for pension contributions and other insurances. Is that correct? If yes, this means that I need to calculate my combined gross salary with employer's contributions in one figure here in CH and then 'convert' this amount to SGD for my transfer package, correct? And could I continue to top-up my swiss pension fund while living in Singapore (this would be partially possible I think in CH) from an SG perspective?

Overall, as you can see, my main concern is how to transfer the sole proprietorship in SG. I do not want to stop operations, as I am devoting very limited time (maybe less than 10 hours a month) and earn a good income (more than SGD 8k on average a month) as it is based on a lot of work I did in the past and now earn something like monthly royalties. Any suggestions are more than welcome.

[taxico]

i have a slightly similar thing. on the years i spend enough time in SG, i declare it as royalties with IRAS.

my IP paperwork with the people that pay me also uses the same terminologies although i have to review things once or twice a month.

payment is made directly to me. no business or company is involved.

it is not considered by IRAS as a “job” which i found out during an audit.

[DarkOrion]

i have a slightly similar thing. on the years i spend enough time in SG, i declare it as royalties with IRAS.

my IP paperwork with the people that pay me also uses the same terminologies although i have to review things once or twice a month.

payment is made directly to me. no business or company is involved.

it is not considered by IRAS as a “job” which i found out during an audit.

Thanks for the response. First of all, is it right to assume that IRAS is the Singaporean tax authorities, right?

Also, I am not sure I used the term royalties correctly. According to Wikipedia, the definition of royalty is as follows:

A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation.

And this is exactly the case, I am providing a software for use and receive a percentage of the revenues per quarter. Here in CH, I issue invoices and declare it as income, minus the business related deductions. Would I be able to do such a thing in Singapore, just manually add it on top of my salary and get taxed on that as well, without having to get any kind of approval by the authorities, etc.? If yes, this would be a simple, clean and efficient solution, I would just need an accountant to file the tax return for me, I don't know how the system works there with taxation.

[PNGMK]

You don't need to change much. You don't technically need to register a "sole proprietership" in Singapore.

You can invoice in your name and collect the royalties into Singapore and declare them as part of your Singapore income (if you consider the income to be derived in Singapore and taxable).

You're really over thinking it. I charge clients all over the world and just invoice them in my personal name here. While I am a PR it doesn't change for you and in fact, you're better off NOT registering an entity here as an EP (as you need a PR / SC director).

As for your wife she should be able to get a DP and remain barefoot in the kitchen.

[DarkOrion]

(if you consider the income to be derived in Singapore and taxable).

The income is definitely not going to be derived in Singapore, it is not even going to be paid into a Singaporean bank account as it is going to be in EUR and it makes no sense to convert. And apart from the fact that I want to do this correctly, I do not think that there would be a way for anyone in Singapore to find out. Maybe in case I would need to declare my world-wide bank accounts with the balance in the tax return like we have to do here in CH. Maybe in that case the tax authorities see deposits which cannot be explained.

Ok, it is clear, just issue invoices, collect the royalties and declare this in my return. I would need an accountant to do this for me for tax optimization purposes, but at least now I know it is not a show-stopper, especially when it comes to permits, authorizations, etc.

With regards to my question for the salary conversion, am I right in my understanding that for EP holders, the only deduction is the tax and the EP holder has to care by himself for pension fund, insurances, etc.? So, in the hypothetical scenario that I earn CHF 8'000 per month here, the fair conversion would be the following:

1. Gross Salary in CH: CHF 8'000.
2. Total employer costs including employers contributions in CH: CHF 8'000 + c.25% (example) = CHF 10'000
3. Use this link (https://www.numbeo.com/cost-of-living/c ... rrency=CHF) to translate the monthly CHF 10'000 to SGD 13,600 as a 'fair' conversion.
4. Out of this amount, every month only the SGD 1,211 would be deducted as I would be an EP according to this link (https://sg.talent.com/tax-calculator?sa ... =Singapore) and therefore I would have a net monthly payment of SGD 12,389 to distribute among my expenses and pension fund in Switzerland, correct?

Thanks for all your help, really valuable to know such things in advance to be able to negotiate properly...

[taxico]

Also, I am not sure I used the term royalties correctly. According to Wikipedia, the definition of royalty is as follows…

…I am providing a software for use and receive a percentage of the revenues per quarter.

i didn’t read your wiki quote. IRAS has their own definition on IP (income tax act).

[PNGMK]

You only need to report income derived in Singapore on your local tax forms here.

I would simply omit any mention of foreign derived income or royalty.

You do need to double check the defintion of "derived in Singapore" - it means technically if you've worked on the product, sold it, marketed it whatever while resident in Singapore you need to calculate the income derived from that activity. In actuality....

[PNGMK]

Your tax calculations look about right. There are very few deductions on income tax available to EP, the primary one available is "SRS" but unless you are here for the long haul (a decade maybe) the "Supplementary Retirement Scheme" makes no sense to invest in as you can only access funds at retirement.

[malcontent]

Contributions made by employer to pension/provident fund constituted outside Singapore on employment exercised in Singapore are taxable.

This was a change IRAS made around the mid-late 2000’s and I have suffered for it ever since.

[DarkOrion]

Thank you very much for this valuable input, definitely going to take it into account when I negotiate my relocation package with the HR department.

You only need to report income derived in Singapore on your local tax forms here.

I would simply omit any mention of foreign derived income or royalty.

You do need to double check the defintion of "derived in Singapore" - it means technically if you've worked on the product, sold it, marketed it whatever while resident in Singapore you need to calculate the income derived from that activity. In actuality....

This is quite different in CH, where we have to declare global assets (and be taxed on them) and global income and be taxed on it in CH or be taxed on local income using marginal tax rate calculated based on global income.

Contributions made by employer to pension/provident fund constituted outside Singapore on employment exercised in Singapore are taxable.

This was a change IRAS made around the mid-late 2000’s and I have suffered for it ever since.

How about if you yourself put the money in the pension fund outside SG instead of the employer? Would this be taxable from SG point of view?

[PNGMK]

Thank you very much for this valuable input, definitely going to take it into account when I negotiate my relocation package with the HR department.

You only need to report income derived in Singapore on your local tax forms here.

I would simply omit any mention of foreign derived income or royalty.

You do need to double check the defintion of "derived in Singapore" - it means technically if you've worked on the product, sold it, marketed it whatever while resident in Singapore you need to calculate the income derived from that activity. In actuality....

This is quite different in CH, where we have to declare global assets (and be taxed on them) and global income and be taxed on it in CH or be taxed on local income using marginal tax rate calculated based on global income.

Contributions made by employer to pension/provident fund constituted outside Singapore on employment exercised in Singapore are taxable.

This was a change IRAS made around the mid-late 2000’s and I have suffered for it ever since.

How about if you yourself put the money in the pension fund outside SG instead of the employer? Would this be taxable from SG point of view?

1. That's why people move their wealth here.
2. If it's from taxed income there is no effect.

[DarkOrion]

1. That's why people move their wealth here.
2. If it's from taxed income there is no effect.

Ok, thanks for this!

[malcontent]

How about if you yourself put the money in the pension fund outside SG instead of the employer? Would this be taxable from SG point of view?

PNGMK is right, with your own contribution from post-tax income, there’s no effect. And since you won’t get any upfront tax benefit, you have to weigh the benefit of doing this carefully.