Open a Sole Proprietorship on a DP and getting the LoC

[Lflower]

Hi eveyrone,
First of all, thanks for the awesome thread. I have been reading all the information available here carefully and finally registered an SP and emailed MOM for LoC forms. Unfortunately, I received a reply saying that they do not issue a LoC for SP anymore, as of 29 April 2016. Needless to say, I am gutted. I have been here for two years on DP and applied for numerous jobs with no success, so freelancing under SP was supposed to be my genious idea to do some work while I am here. I still wanted to post an update on this issue since this thread has been a great help. I wish I could share more cheerful news though

[Strong Eagle]

Hi eveyrone,
First of all, thanks for the awesome thread. I have been reading all the information available here carefully and finally registered an SP and emailed MOM for LoC forms. Unfortunately, I received a reply saying that they do not issue a LoC for SP anymore, as of 29 April 2016. Needless to say, I am gutted. I have been here for two years on DP and applied for numerous jobs with no success, so freelancing under SP was supposed to be my genious idea to do some work while I am here. I still wanted to post an update on this issue since this thread has been a great help. I wish I could share more cheerful news though

There is nothing on the MoM website that says LOC cannot be issued to SP. Was this just one person you spoke to, a letter you received? I'm not saying that they have not closed the door to a person forming a SP then applying for LOC, it's just that if its only one person, there is still opportunity. If there is a published regulation change, that is another matter.

[sundaymorningstaple]

Hi eveyrone,
First of all, thanks for the awesome thread. I have been reading all the information available here carefully and finally registered an SP and emailed MOM for LoC forms. Unfortunately, I received a reply saying that they do not issue a LoC for SP anymore, as of 29 April 2016. Needless to say, I am gutted. I have been here for two years on DP and applied for numerous jobs with no success, so freelancing under SP was supposed to be my genious idea to do some work while I am here. I still wanted to post an update on this issue since this thread has been a great help. I wish I could share more cheerful news though

There is nothing on the MoM website that says LOC cannot be issued to SP. Was this just one person you spoke to, a letter you received? I'm not saying that they have not closed the door to a person forming a SP then applying for LOC, it's just that if its only one person, there is still opportunity. If there is a published regulation change, that is another matter.

SE, was it ever published on a .gov site that they 'could' get a LoC on an SP? Or was it also an unpublished but known availability?

[Strong Eagle]

SE, was it ever published on a .gov site that they 'could' get a LoC on an SP? Or was it also an unpublished but known availability?

Nope... the only thing on the page regarding LOC is that an "employer" can make application for a LOC. This page was last updated 2 July 2015.

http://www.mom.gov.sg/passes-and-permit ... of-consent

They may well have decided to clamp down internally for some reason, and, we need to obtain more anecdotal evidence to determine if this is now policy.

Can your connection down there help?

[sundaymorningstaple]

I'll see what I can come up with.

[The Ref]

My ex seems to have fallen foul of this as well. She had a meeting with MOM this morning so if I find out anything I will update here.

[Lflower]

Thanks SE, SMS and The Ref for the replies. I will follow up with MOM to see whether I can get any more info. When I logged into EPOL, I saw a message that there was a change regarding LoC since 29 April, but the change was something like anyone applying for LoC now needs to fill out a LoC declaration form. So there must have been some kind of policy change regarding LoC since 29 April 2016, but it is not published in detail.

[LivingDream]

Hi all, I have been following this thread for some 6 months now as I am in the same situation as many of you. I am on a DP (wife is on EP) and I am looking to establish a business entity in Singapore. My recent experience mirrors some of your previous comments and I would like to share with you.

I followed the advice of members of this forum and other helpful websites and applied for a LOC under a sole proprietorship. This included a business plan, statement of reason for no applying for EntrePass, CV etc. Two weeks later a letter arrived from MoM stating that my application was rejected - no reason given on the letter. Upon contacting MoM, they advised that my application was not suitable as a LOC but rather an EP. The rational given kind of made sense to me. The LOC would be tied to my wife's EP and a loss of her EP would mean that my own eligibility to work would also disappear - this would also impact any business relationships I have developed here in Singapore.

Now I am left with two options, 1. reapply for an EP under the sole-proprietorship or 2. incorporate a company and apply for an EP under this construct. Apparently option 1 is carried out in a similar way to the LOC only that it requires the use of the EP Online portal - which I have not gained access to as yet. Option 2 will be more costly as it will require the use of a local agency. I am not too sure which to proceed with but I hope that one of these options provides me with a route to employment in Singapore soon.

[Varcelos]

Hello everyone,

My situation is already familiar here: spouse has an EP and I have a DP, but would like to work freelance while staying in SG.

I was reading up on information about getting an LOC by forming a sole proprietorship company and got discouraged by a recent information that ACRA might be demanding an EntrePass for sole proprietorship companies, even to DP holders, and therefore you could not get an LOC. See:
http://www.thomasabeesh.com/327/registe ... ietorship/ (final original post update)
https://www.acra.gov.sg/How_To_Guides/S ... ietorship/ (registration requirements)

But do you really need to register sole proprietorship with ACRA?
If you go to this ACRA FAQ (https://www.acra.gov.sg/ask_ACRA_FAQs/), point 8, it states:
"Any activity that is carried on continuously for the purpose of gain must be registered with ACRA. However under the new Business Names Registration Act, any person carrying on business in his or her own name is exempted from registration with ACRA."

The Business Names Registration Act, Part I, Point 4.1 (a) does exclude a person making business using its own name from ACRA registration, and Point 4.5 (b) does not seem to exclude foreign/non-resident/resident citizens from the above.

Am I completely in the wrong here, or is this the SG equivalent to a liberal professional working freelance? And if this is it, would it be impossible to apply to a LOC at MOM using this form of employment? Because it is mind boggling how someone is going to meet the EP critera just to keep a freelance job for little over a year.

Thanks and good luck to everyone watching this thread.

EDIT: spelling mistake

[Strong Eagle]

One more edit: Nobody "requires" an Entrepass, language notwithstanding on the ACRA website. Entrepass requirements have become so onerous that no practicing professional in money laundering... er... financial management, forex trading, management consultancy, project management, etc could ever hope to get an EP under the Entrepass scheme. I have emails from MOM acknowledging that fact and noting that the formation of a pte ltd and application for an EP are considered on a case by case basis.

I hadn't read that section of the business act previously. It rather turns the whole thing into an assumed names registration, doesn't it?

So, if you call your business, "Sum Ting Wong", and that happens to match your passport or identity card, then you don't need to register. But if you call your business, "Sum Ting Wong Photography" you must register the name. At least that's how I read it.

It's really for somebody like the karung guni man. He's got a truck (excuse me, lorry), picks up recyclables and sells them off to recycling plants. No invoices, no cheques, no name on the side of the lorry door. Just a dude driving around honking his bicycle horn. So, if all your business cards, invoices, cheques, and letterhead have only your name on them, I suppose it would work for you as well.

I can't see that this makes any difference with MOM and work permit authorization, though. You still have to file income taxes with IRAS as a sole proprietorship and MOM will treat you the same way... you are just an unregistered SP and still subject to the same rules they have in place for a LOC or EP for an SP that is registered. How would not filing for a business name with ACRA change any of this, in your mind?

In fact, I'd bet money that you'd further hurt your chances of being authorized to work if you didn't at least have a registered business. If you've read my posts, you'll know I'm a firm believer that "gravitas" is important in getting an EP or LOC approved, that creating a "real" business is necessary to get approval. Anybody can say, "I'm a John Doe professional and I don't need to register", and what will MoM say? Maybe: One more person who doesn't know what they are doing, trying to slide a hobby in as a real job. Contrast this with a named company, a biz plan, an experienced individual, some pro formas, and you get my drift.

And for sure, you can't just announce that you are now in business and proceed to freelance without a work permit... just think of the thousands of moms, dads, sons, daughters on DP, especially from the subcontinent, who would suddenly be able to start working as a "liberal professional" with no registration whatsoever. MOM absolutely has to OK and issue work permits for any and every foreigner doing any work or the whole thing goes out the window.

MOM and the gahmen don't actually care if you want to "keep a freelance job for little over a year." They don't want you doing work Singaporeans could be hired for. They don't want you doing the menial work that any muppet could do. Since LOC's are associated with DP's and DP's are associated with EP's, I judge the thinking was that a trailing spouse could find professional work in her/his fields more easily with a Singaporean employer.

This phenomenon of freelancing was not expected... and just like the abuse of the Entrepass brought much harsher rules, I agree with SMS... MOM has been cracking down on LOC's because of the abuse factor. Consider that when issuing a LOC or EP for a Singapore business MoM can easily check history... with your startup freelance, what are they supposed to use as criteria?

Thus, I judge that the aforementioned clauses you referenced make absolutely zero, zilch, nada difference in the process you must follow in order to work freelance.

[Varcelos]

How would not filing for a business name with ACRA change any of this, in your mind?

Absolutely zero, zilch, nada difference.

I was pointing out that according to SG law, you do not have to go through ACRA to have a legal profession in SG – whether you are a foreigner or even a resident. That would circumvent the need for an EntrePass, but as you explained, that need is apparently not real.

And if the LOC is being shut down at MOM this doesn’t make much difference to DP holders trying to employ themselves.

It's really for somebody like the karung guni man.

Yes, but also others. If you are an accountant or an architect, and a firm would like to hire your personal services for one single project, you could invoice them directly in your name. You would still have to register with MOM and file taxes with IRAS, but you wouldn’t have to present a business plan to ACRA and make up a company name and a logo and pay the fees to ACRA. It’s just a less bureaucratic process and makes perfect sense.

MOM and the gahmen don't actually care if you want to "keep a freelance job for little over a year." They don't want you doing work Singaporeans could be hired for.

If this is what they want and if they are able to use their system to achieve it, then that’s that.

However, it does frustrate me because it’s not my case, and it’s not the case of many other DP holders, including some on this very same thread. I am going to relocate to SG on a DP pass, but I’m not leaving my company or my clients in my home country. Nowadays it’s relatively easy to work remotely for them, just not on a normal payroll – I would have to work as a freelancer for them.

And of course I could register as a one-person company or a liberal professional (equivalent to an ACRA / non-ACRA registration) in my home country and invoice them this way. But what if there is some complication with my Social Security? What if the tax offices demand a payment of some sum that I do not agree with? I am half a world away (communication with the public offices by phone and email does not work well in my country) and nevermind the wonders of double-taxation. It would just be easier to use my DP pass to be able to base my job in SG, get paid in SGD and file my taxes where I am actually located. And I would not be stealing any SG jobs.

I guess I wish there was a box I could tick that said “I hereby declare that all my invoicing will be in SGD and will only be to companies outside SG”. However, I have a feeling this doesn't matter either.

[Strong Eagle]

I guess I wish there was a box I could tick that said “I hereby declare that all my invoicing will be in SGD and will only be to companies outside SG”. However, I have a feeling this doesn't matter either.

You didn't mention that your clients are all outside Singapore. That could make a difference. This is a circumstance for which I have not queried MoM. I will do some more checking on this particular situation.

I do know that if you are employed by a foreign company, you need to pay Singapore taxes but don't need a work permit. An email from MoM, below. I reckon you could create a foreign company anywhere and you'd be good to go.

Thank you for your email on 08 April 2015.

Dependent Pass holder is not required to hold a work passes if he/she does not represent their overseas employer for any work related purposes while in Singapore. The foreigner may also perform work for the overseas employer via electronic or telecommunication from their home.

Note that Singapore, like most other jurisdictions, bases income tax on a physical presence test... you're doing the work in Singapore, you pay tax in Singapore and not anywhere else, except for the USA, subject to the foreign earned income exclusion.

I see that your circumstance is very similar, except for whom is actually employing you. Worth a look.

[Varcelos]

You know, I wasn’t sold on this idea, but it might actually be an elegant solution.

I create a single ownership company in my home country, with my home as a fiscal address (simple enough), and then invoice my foreign clients through it while staying in Singapore. Although I would be employing myself, legally, I will have a DP and work for a foreign company, with a proper name and logo.

I was looking into the income tax based on a physical presence test, and it won’t hold up: I, the employer, will be in SG, but my company will operate based in a foreign country. So I guess article 14 of the Agreement for Double Taxation between SG and my home country applies:

Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other activities of an independent character shall be taxable only in that State, except in the following circumstances when such income may also be taxed in the other Contracting State:
(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other Contracting State; or
(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days within any twelve-month period; in that case, only so much of the income as is derived from his activities performed in that other Contracting State may be taxed in that other Contracting State.

(a) applies, I will keep a fixed base regularly available to me in my home country, as the fiscal base of the company.

Last time I checked with our accountant he did mention I was liable for double-taxation if I used this method. I will have to pay full taxes on my home country, which I was trying to avoid, but what is fair is fair. As for the double taxation, I have been using some tax simulators, and at the end of the day, the added tax from SG is more than bearable.

Thanks a lot Strong Eagle! This has been really useful.
I will take this to MOM before any final decisions. If they do not approve, I will probably just create a more complex company entity with my brother.

[Strong Eagle]

It will be worthwhile to check with MoM if you need a work permit if all your clients are exclusively outside of Singapore. The whole point of work permits is to assess the need for foreign talent because presumably local talent is being displaced in local jobs unless the FT has skills that cannot be sourced in Singapore.

But your activities steal no Singapore jobs, no Singaporean would be taking on the business since they are your clients and I would not be too surprised to see MoM render a decision that a work permit is not necessary for you.

With respect to taxation, and assuming you meet the 183 day rule, and understanding that it has been a long time since I've looked at tax treaties, I just don't see how you'll pay income tax anywhere but Singapore. If you're not in your home country, no income will be attributable to your "fixed base".

Over the years, we've had a number of discussions regarding personal taxation and physical location. Almost always, it's your physical residence that matters.

[Ali2016]

Has anyone been successful in getting a LOC for SP since they changed the policy in June this year?