need help, CPF, Tax, Sole Director, Home Loan

[davidtigersoft]

Hi Guys,

Saw a lot of helpful posts here before and that helped us (me and my wife) to setup our sole proprietorship when we were holding EP and DP.

Now we got PR in May. And we both quit the job and incorporated our own company. No revenue and no employee yet. We are very young and dont have a lot of money. So we thought we dont buy a HDB first until the company can make revenue. But recently parents strongly want us to buy HDB first.

So I dont know how to get home load at this situation. We dont pay ourself a salary and also no director fee. Maybe I shall start to pay a salary to myself to get home loan?

Another thing is, I saw the CPF board requires self-employed to pay Medisave account. Does company director like us need to pay Medisave?
Is it OK to pay nothing to CPF as long as I(my company) dont pay a salary to myself?

Thanks a lot.

David

[sundaymorningstaple]

Hi Guys,

Saw a lot of helpful posts here before and that helped us (me and my wife) to setup our sole proprietorship when we were holding EP and DP.

Now we got PR in May. And we both quit the job and incorporated our own company. No revenue and no employee yet. We are very young and dont have a lot of money. So we thought we dont buy a HDB first until the company can make revenue. But recently parents strongly want us to buy HDB first.

So I dont know how to get home load at this situation. We dont pay ourself a salary and also no director fee. Maybe I shall start to pay a salary to myself to get home loan?

Another thing is, I saw the CPF board requires self-employed to pay Medisave account. Does company director like us need to pay Medisave?
Is it OK to pay nothing to CPF as long as I(my company) dont pay a salary to myself?

Thanks a lot.

David

Read and digest. If you have any specifics after these two links, let us know. Possibly Strong Eagle will have an immediate answer at hand as he's a business owner with a number of years experience and is a PR as well.

http://mycpf.cpf.gov.sg/Employers/Gen-I ... ployer.htm

http://www.acra.gov.sg/Company/Know+Mor ... ompany.htm

[davidtigersoft]

I have read through the pages above. Thanks a lot.

CPF board says:

a. Company Directors
Directors of any company are considered employees if they are engaged under a contract of service and paid a salary on top of any fee received. CPF contributions are not payable on directors’ fees voted to them at General Meetings.


It also says an self-employed shall pay Medisave.

I am not sure as a sole director with no salary, am I classified to self-employed or not?

[Strong Eagle]

You want my general view? You are PR. You want gahmen to be happy that they gave you PR. Therefore:

As soon as you can pay yourself from your company, you will do so. You will do this as an employee so that your company pays not only Medisave but a full CPF contribution.

You will sparingly use directors fees to avoid CPF unless you have hit CPF limits (S$4500) in which case, it does not matter.

If you do this, good things happen. The gahmen sees you as compliant in CPF and tax and they like that. I, and my company, have always paid tax, even though I could have set things up to avoid corporate tax entirely. The benefit is that when the recession hit, I got tax credits like all firms that paid tax.

I know a fellow that managed to avoid all taxes by taking advantage of the first three years corporate tax breaks, and paying himself dividends... non taxable as personal income. Unfortunately when it came to PR renewal time, he was denied... seems like the gahmen didn't like his shenanigans.

So, set yourself up as an employee and pay into CPF.

[davidtigersoft]

Hi Eagle,

I got your point. Yes, CPF and tax are very important as the contribution to the community. I am not avoiding them on purpose.

Recently I need to apply for home loan to buy HDB. Banks require only one month payslip and CPF for salaried employee, but they require 2 years return or income tax notice of assessment for self-employed.

My company is very young and I cannot provide return or income tax notice.
I asked OCBC and Standard Chartered, Ocbc thinks I am salaried employee, however Standard Chartered thinks I am self employed and wants me to submit company documents.

So I want to know the definition of self-employed. Is shareholder or director of company self-employed?

I know sole-proprietor and partner are self-employed.

Thanks a lot.
David

[Strong Eagle]

A shareholder to a company is never "self employed". They are the owner and receive dividends, if any, but are not employed by the company.

For directors, Singapore recognizes two kinds... an external director who sits on the board but is otherwise not engaged in the day to day activities of the company... and an internal director... like the MD, who actively manages the company.

If you have a private limited you are not self employed. You can be an owner (shareholder), and you can be an actively engaged director. The very nature of a pte ltd means you are not self employed, even if the reality is you are the only shareholder and only employee/director.

Having said that, everybody is wise to the game of an incorporated individual so that, for example, if you want a loan from the bank for your company, they will also make you personally liable.

As for the rest of your questions... any lending institution would be a fool to loan money to someone with no assets and no income. I think you are completely unrealistic. Rent until you can show an income stream that will qualify you for a loan.

[Onetax]

Hi David,

You need advise on getting the 2 Years of Notice of Assessment from the tax authorities?

How long have you been working in Singapore?

To get the 2 years of Notice means you have to be working in Singapore since 2009 and you will need to furnish the tax authorities with this document call IR8A (or other income related documents), to show the director fees you are receiving for these periods.

If you need help, let me know. Because I used to work in the tax authority.

[davidtigersoft]

Thanks very much eagle, that solves my doubt. So I am not self-employed.
I can just submit my payslip and CPF statement.

I hope I can rent too. But lot of family pressure now. Parents want us to buy an HDB as soon as possible. It is a culture in China. Couples need to own apartment to get married.

Thanks again

[davidtigersoft]

Hi Onetax,

THanks for your kind help. Currently I dont need to submit 2 year income assessment. Thank you all the same.

David