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Running Pte Ltd, leaving SG, keeping EP?

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Running Pte Ltd, leaving SG, keeping EP?

Postby stiwi » Tue, 21 Jun 2011 9:09 am

Perhaps I won't be staying in Singapore forever, so I like to consider options I would have in case when I decide to leave.

My first question is in regards to company resident status:
1. Would the company itself be considered as a resident if I would become non resident? I know that Pte Ltd has to have at least one resident director, so I can appoint nominee director for this purpose. I just seek clarification on company residency matter as after reading IRAS definition I am uncertain.

2nd question is in terms of individual residency and tax matters:
2. I am employed as MD under EP at Pte Ltd that I am the only director of. Does it make sense to keep EP in place once I would decide to leave? If yes, what are the best, in terms of taxes, options to keep such EP?

a) Salaries would incur 15% tax.
b) Director's fees 20%.
c) I read about 60 day rule for each year. Does it mean I wouldn't have to pay any taxes when I wouldn't visit Singapore in such year or when I would spend there 60 days or less per calendar year?

IRAS explanation on 60 day rule: "Your short-term employment income is exempt from tax. This rule does not apply if you are a director of a company..." Does it mean MD on EP is excluded from this tax exemption?

3. It looks like the easiest would be to cancel EP, keep the company running, pay-out the dividends. As I understand, dividends paid to shareholders remain tax free regardless of the director residence status.

Any ideas would be appreciated.

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re

Postby Mr Tan » Wed, 22 Jun 2011 4:07 pm

crap , bill after one year for transportation charges . crazy . let them file small claims tribute. 50$ for 100$ claim

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Postby sundaymorningstaple » Wed, 22 Jun 2011 4:21 pm

Wrong thread I believe.......

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Re: Running Pte Ltd, leaving SG, keeping EP?

Postby Mad Scientist » Wed, 22 Jun 2011 5:07 pm

I throw my 2 cents here but I think a visit to IRAS is a must

stiwi wrote:Perhaps I won't be staying in Singapore forever, so I like to consider options I would have in case when I decide to leave.

My first question is in regards to company resident status:
1. Would the company itself be considered as a resident if I would become non resident? I know that Pte Ltd has to have at least one resident director, so I can appoint nominee director for this purpose. I just seek clarification on company residency matter as after reading IRAS definition I am uncertain.

I maybe wrong here but I think the company would still be a resident company if two directors whereby one is a local albeit company secretary and the other person is you whom is an FT

2nd question is in terms of individual residency and tax matters:
2. I am employed as MD under EP at Pte Ltd that I am the only director of. Does it make sense to keep EP in place once I would decide to leave? If yes, what are the best, in terms of taxes, options to keep such EP?

Since the company taxes here is lower, and if you are migrating to another country which has double taxation agreement with SG, then you will enjoy paying lower taxes. As long as you pay your taxes here, your EP is safe.

a) Salaries would incur 15% tax.

Not sure on this, I think you have to adhere to the 183 days rule. You might to need to check with IRAS on this. Others may be able to shed more light

b) Director's fees 20%.
Not sure on this. please check with IRAS. I cannot help on this

c) I read about 60 day rule for each year. Does it mean I wouldn't have to pay any taxes when I wouldn't visit Singapore in such year or when I would spend there 60 days or less per calendar year?

IRAS explanation on 60 day rule: "Your short-term employment income is exempt from tax. This rule does not apply if you are a director of a company..." Does it mean MD on EP is excluded from this tax exemption?

No , I think you got it wrong. When you are salaried and you hold an MD post you are tax since the company belongs to you. The above is meant for employees that is working for you

3. It looks like the easiest would be to cancel EP, keep the company running, pay-out the dividends. As I understand, dividends paid to shareholders remain tax free regardless of the director residence status.

Yes that is correct but be careful when you are transferring money to another country as it can be seen as an income and it will be tax

Any ideas would be appreciated.
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Postby stiwi » Thu, 23 Jun 2011 2:38 am

@Mad Scientist, thanks for your response.

I am almost sure that the company would remain resident based on what IRAS says:

"In Singapore, the tax residence status of a company depends on where the control and management of its business is exercised.

A company is tax resident in Singapore if the control and management of its business is exercised in Singapore.

Generally, a Singapore branch of a foreign company is not treated as a Singapore tax resident since the control and management is vested with an overseas parent company."


In terms of taxes, it doesn't matter if the company is resident or non-resident, but as a resident the company can take advantage of Double Taxation Agreements (DTA).

Since the company taxes here is lower, and if you are migrating to another country which has double taxation agreement with SG, then you will enjoy paying lower taxes. As long as you pay your taxes here, your EP is safe.


This is something I wouldn't be so sure about. DTA treaties usually allow you to pay a tax difference on your salaried income and not to not pay any taxes being a non-resident of Singapore.

It works usually better in terms of dividends payout. They are taxed too in foreign countries but usually much lower and at a fixed rate usually provided in DTA.

That's why perhaps it's best to cancel EP in such case and live off dividends. The good thing about keeping EP would be having a credit rating in case of any investments in Singapore.

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Postby Mad Scientist » Thu, 23 Jun 2011 4:04 am

Not sure on this.

This is what I did for my PR director who used to work for me years ago.
We once assigned him to setup overseas company for us
To keep his PR intact, we pay his dividends, salary here as such tax done over here. He only received allowances overseas.
Hence he did not pay any tax overseas as the amount after tax deductable here is almost negligible to be tax overseas as DTA is only tax after your tax at resident which is in SG has been deductable. Once that is done whatever balance that is there, you declare it overseas setup . A few countries that I have involved in some works tax the employee at source on it is deductable on every pay day. Unlike SG whereby it is calculated and tax every year.
There are good and bad on both system.
MHO, if you are able to keep your EP which I believe is P1, keep it as it is harder to get one. Then on apply PR where you will stand in good stead with IRAS. If you have done that later in life and wish to look for business opprtunities overseas, discuss with IRAS,. Trust me they are very accommodating when you inform them about your plan. PR kept intact, lower taxes here which means you can have the best of both world
Think about it
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Postby stiwi » Thu, 23 Jun 2011 5:20 am

@Mad Scientist, Taxes based on DTA treaties are deductible but if your income tax in SG is 15% and the overseas country (which you are a resident of) that SG has a DTA with 30%, you would have to pay this difference if you are a resident of the other country.

I am not sure how PR would be helpful in this case, considering some further liabilities kicks in such as CPF? Perhaps I would always be considered as a tax resident regardless of 183 day rule, so I could take an advantage of the lower income taxes. However DTA treaties would probably be still in force if I would be a resident of foreign country. DTA exclude possibility of being residents of two countries, despite such theoretical possibility (SPR + foreign country resident).

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Postby Mad Scientist » Thu, 23 Jun 2011 6:22 am

The DTA is more of big MNC from my understanding. All my life working overseas from Guadalajara, Sekesferhervar, Motala, Hamburg, Melbourne, Christchurch and many other places, I never pay tax on the foreign country. You have to take advantage of SG Tax System.
If you were to set up in foreign country , they too has a similar tax rule of 183 days approx.. Do you want to pay 30% company tax in Australia for example. Which will be better ? Of course the Tax department wants your money and pay the tax in their country, you have to understand how the system works and ride on the waves
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Re: Running Pte Ltd, leaving SG, keeping EP?

Postby aster » Thu, 23 Jun 2011 10:50 am

stiwi wrote:As I understand, dividends paid to shareholders remain tax free regardless of the director residence status.


There will be no Singapore tax due on those dividends as the company is under the one-tier tax system, but personal income tax will almost certainly be due in your country of residence (where you spend 183+ days a year) as very few countries apart from Singapore would allow for it to remain tax-free.

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Postby stiwi » Thu, 23 Jun 2011 4:03 pm

@Mad Scientist, I know what you are trying to say. Best way to declare income is by not declaring it :) Taking into consideration how strict the banking privacy is perhaps you are right. But if you want to invest those money in the country where you are a resident of, you should be better declaring them.

@aster, you are right except the fact that personal income from dividends is considered as income from shares and sometimes the maximum % of tax which can be charged is provided in such DTA treaty. Often it is 5% - 10%, where personal income tax in particular country is higher of course.

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Postby aster » Thu, 23 Jun 2011 7:34 pm

Keep in mind that there isn't anything to offset tax-wise on dividend income as there simply is no tax on it in Singapore, so I don't think there is any DTA benefit here (especially since you cannot deduct Singapore corporation tax against the personal income tax in your country of residence).

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Postby stiwi » Thu, 23 Jun 2011 8:17 pm

aster wrote:Keep in mind that there isn't anything to offset tax-wise on dividend income as there simply is no tax on it in Singapore, so I don't think there is any DTA benefit here (especially since you cannot deduct Singapore corporation tax against the personal income tax in your country of residence).


You are right aster. In most cases it seems that being a resident of other country, you would have to pay a full personal income tax on dividends paid from SG company.

However some DTA treaties define tax on dividends, for example DTA with New Zealand:

"2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company that owns directly at least 10 per cent of the voting power of the company paying the dividends;

(b) 15 per cent of the gross amount of the dividends in all other cases"


Similar 15% tax is with Australia.
But as you wrote, since you cannot deduct SG corporate tax against personal income in other country, you would end up paying tax twice...

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Postby aster » Thu, 23 Jun 2011 9:52 pm

stiwi wrote:since you cannot deduct SG corporate tax against personal income in other country, you would end up paying tax twice...


This is a tricky one. I would still say that you would "technically" only end up paying once because in general tax on dividends is paid on a personal level anyway. To end up being "hit" twice you would have to pay personal income tax on those dividends in two places, but as Singapore won't tax you then it'll only be once (let me rephrase that: a maximum of one time) no matter where you live.

Take the UK for instance. If you were resident there and owned a UK Ltd. company, it is normal that after the company has paid it's taxes on profit that you could pay out the rest in dividends - but those dividends would then be taxed on a personal level as well. And this is perfectly normal there.

Countries like Singapore are quite unique in their approach of not taxing such dividends on a personal level.

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Postby stiwi » Thu, 23 Jun 2011 10:06 pm

aster wrote:This is a tricky one. I would still say that you would "technically" only end up paying once because in general tax on dividends is paid on a personal level anyway. To end up being "hit" twice you would have to pay personal income tax on those dividends in two places, but as Singapore won't tax you then it'll only be once (let me rephrase that: a maximum of one time) no matter where you live.
[...]


You will be hit once as you say, as long as you don't declare such income from dividends in foreign country that you are a resident of and which wants to tax you on your worldwide income as most countries do nowadays.

Btw, check PM.

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Postby Mad Scientist » Fri, 24 Jun 2011 4:35 am

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