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Dependent Pass not allowed to incorporate a private limited

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Ella Grace
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Dependent Pass not allowed to incorporate a private limited

Postby Ella Grace » Fri, 19 Feb 2010 2:46 pm

I am just wondering what the government has against expat wives who want to work by forming their own companies. I have just been to MOM and ACRA and was informed that I cannot form a private limited company as I am a DP holder. I must first apply for an Entrepass which I heard is difficult to get and I have to have capitalisation of SD50000. By forming a private limited company, I am not stealing work away from locals. In fact, if my co becomes successful, I may be able to employ people. It is also difficult for me to find a job as most employers do not want a DP holder. I am not amused by this.

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Postby sundaymorningstaple » Fri, 19 Feb 2010 3:18 pm

Your subject line is absolutely incorrect and misleading. Dependent Pass holders CAN incorporate a Pte Ltd company.

They have absolutely nothing against expat wives starting companies. But you have to play be the same rules as everybody else. You, by being a trailing spouse, are nothing special to the government unless you are able to contribute to the nations' economy (it was your spouse that they wanted). The way to do that is via the EntrePass Scheme. Why let someone start a company that only benefits themselves. The government wants EntrePass holders to start companies that benefit Singapore by hiring Singaporeans. The government isn't a charity. There has to be a quid pro quo that benefits the country.

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Postby Nath21 » Fri, 19 Feb 2010 3:52 pm

And SMS on a expat salaries SGD50k is not a big deal to come up with considering you can close the company anytime and get your money back. its not like you lose the cash its working capital.

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Postby sundaymorningstaple » Fri, 19 Feb 2010 5:08 pm

Don't forget though, there are "expats" here on Q passes as well which could mean the better part of a year's salary to come up with 50K.

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Postby morenangpinay » Sat, 20 Feb 2010 8:07 am

you dont need to come up with the 50k initially..you can invest more while you are doing the business.

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Postby aster » Sat, 20 Feb 2010 8:26 pm

What do you mean by "invest more" while the business is running?

Is there really a point to raising the paid-up capital / issued share capital of a company? It's a serious question from someone who isn't fluent in all these accountancy issues - I just don't see why the company's account balance isn't the most important thing.

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Postby sundaymorningstaple » Sat, 20 Feb 2010 11:23 pm

Aster,

Good question. The answer isn't simple but here in Singapore I can give you a few reasons. Depending on the business model/industry if you are bidding for contracts, especially if your company is in the construction or services industries and trying for government contracts, Tenders are put out and companies must have a certain paid up capital in order to bid on the contract. If you think about it, it makes sense. If you had a business with only a 50K paid up capital and you were bidding on a multimillion dollar project, even though you might be the lowest bidder, if you were letting out the tender, would you give that big of a tender to that "small" of a company?

Another point regarding capitalization, with only 50K paid up capital, you definitely would have much cashflow movement if you had a government contract whereby it usually takes a minimum of 3 months to get paid from them. Which means, if they do progress payments a month at a time, you would need 4 months worth of salaries and operating expenses before you saw a dime. If you could only manage 50K up front.........

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Postby aster » Sun, 21 Feb 2010 11:46 am

SMS, I definitely see what you mean about raising the capital to simultaneously raise the profile of the company.

I'm sure it sounds better when bidding for contracts to list yourself as Company X with paid up capital of 50k than Company Z with 1k paid up capital, even if the second company has a much healthier bank balance.

When I applied for my EP/DPs, there were no min-requirements for the initial capital of the company, but before I applied the company already made >50k anyway (with me as a non-resident director). I trust that MOM probably checked to see how the company had been doing before issuing a decision?

I hope they don't look at the paid up capital when my EP renewal is up, because I would rather leave that as it is and just maintain a healthy corporate bank balance instead...

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Postby sundaymorningstaple » Sun, 21 Feb 2010 12:32 pm

Agreed. But we need to look at orange & oranges not apples. We are talking about start up versus track records. Any company with a few years of excellent management and "Luck" can show a very healthy balance sheet. That, coupled with good bottom line on the P&L's will go a long way toward meeting the EntrePass' new requirements with regard to revenue, staffing, etc.

I honestly don't know yet whether/how things will be with the new EntrePass rules regarding renewals of EP under the old rulings. Nothing I have found yet as regard grandfather or retroactive requirement for those already set up. Yeah, I reckon there will either be some wailing of "unfair" by those under the new rulings OR a gnashing of teeth by the older one's if they are forced to comply with the new rulings.

Guess you'll let us know how it goes when you renew?

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Postby Ella Grace » Sun, 21 Feb 2010 8:12 pm

I don't understand how setting up a private limited company in Singapore benefits only the shareholder. I believe that Sundaymorningstaple is misinformed. When one opens a pte ltd, the co is subject to Singapore taxation. Whatever goods or services that the co sells or renders in Singapore are subject to VAT. So how can setting up a pte ltd co just benefits the shareholder?

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Postby sundaymorningstaple » Sun, 21 Feb 2010 9:02 pm

I would suggest a little more study then. Here are some for a start......

Taxatation:

http://www.iras.gov.sg/irasHome/page04.aspx?id=414

You will notice a 100K exemption is available for start-ups for the first 3 consecutive YA's

GST - Goods & Services Tax (What you are thinking as VAT)

http://www.iras.gov.sg/irasHome/page.aspx?id=2546

You will notice that you will need revenues (turnover) to exceed 1 million before you are even required to collect GST & pay GST.

It easy for a PTE LTD to benefit only the shareholder. If you have no employees (say it's an online business) other than yourself and you withdraw the profits as director fees, your P&L & Balance Sheet look like crap. The government get very little from you as a director as you can delay taking directors fees until you use up the corporate tax exemption (up to three consecutive years). After that, full corporate taxes kicks in but then you start taking directors fees and paying personal taxes on that.

In your haste to disparage me, you have set your self up for a bad fall. It might do you well to look at my profile. Never type in anger. It is only a forum. I doubt very seriously that I am misinformed, I have a 200+ SME group with five registered companies that I've been handling for almost 5 years now. The owner is quite satisfied - guess that's why I'm still there.......

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Postby aster » Sun, 21 Feb 2010 10:34 pm

How flexible is the salary once you are on an EP? Wouldn't the MoM get ticket off if someone lowered (or stopped) their salary once here just for tax reasons? :)

Ideally you'd want to make sure that a "one-man outfit" (like an online business that doesn't employ anyone else) makes at least 100k profit (that's after paying the director's salary/fees) for the first 3 yrs, with anything over that and your personal salary calculated to an ideal level in terms of how much your personal tax is and how much the corporate tax will be over 100k.

Dividends here are on a one-tier-system for the most part, so that 100k (or more) that the company makes in profit (the first 100k tax-free for 3 yrs) can be paid out to the shareholder(s) without incurring any additional taxes. :)

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Postby sundaymorningstaple » Sun, 21 Feb 2010 11:09 pm

You are absolutely correct. The only problem with paying out as dividend OR directors Fees is that in a DP's case, they need to be able to show the income for EP purposes and DF & div are not employment income so do not qualify. So you need to strike a balance in order to maintain the EP, Satisfy the requirements of the EntrePass and keep IRAS happy at the same time. This is why I'm interested to see how IRAS is gonna handle those already on EntrePasses and those who get Entrepasses under the new guidelines which NOW require certain turnovers AND expenses of a certain amount (excluding wages) and employment of staff/locals. This is gonna put a hurtin' on consultants I'm sure. It's gonna be a shakeout I'm afraid.......

I think ideally one would want to come in with as low a pass as possible to give the flexibility and not need to "downgrade" which would not bode well in IRAS's eyes I'm sure (with regards to the Entrepass part).

In case it's somehow been overlooked by those reading/responding in this thread, it might be good to have a look here regarding the new rules for EntrePass.

ftopic63747.html

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Postby aster » Mon, 22 Feb 2010 2:50 am

I actually didn't go down the EntrePass route but went for an EP to be the local director of a company that I have a 100% stake in (until then I was a non-resident director). The company was already operating for several months (I wasn't planning on moving to Singapore then - just wanted to locate my company here) and making good money before the application process began. When I arrived the first FY was drawing to a close.

So I guess that my monthly salary is treated just as a salary and not DF, since I had to set a salary to apply for the EP?

I'll receive my first IR8A this year, will do my first e-filing... man I'm getting the shakes and jitters already... Will IRAS let me know via the myTax portal when it comes time to paying (including a copy of the bill online), as I will probably be away for a couple of weeks at a time in the second half of the year?

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Postby sundaymorningstaple » Mon, 22 Feb 2010 7:03 am

You personal tax bill will come via snail mail. Your corporate tax will be on MyTaxPortal as well as sent to you via hardcopy as well. If you haven't had to do so this year, next year you will have to file an ECI (Estimated Chargeable Income) form which is like an advanced return. It will be either based on the current years tax liability or a good estimate of the current years chargeable income. This can allow you to spread out your income tax payments (if any) over a period of months instead of a lump sum. When the actual bill is computed.

Your corporate accountant will take care of all that for you with some imput from your side.


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