TAX IF WORK OUTSIDE SINGAPORE

[martincymru]

Am I correct to say that if you have an EP here in Singapore and your Employer sends you to work (say in Indonesia) for 7 months then you are liable for Indo tax not Sg tax?

I am going to IRAS later in the week to query this but appreciate your advice also.

[beppi]

I had the exact same situation, but many years ago so this might or might not have changed:
When you are working abroad full-time (e.g. on secondment by a Singapore company), your salary is not taxable in Singapore. The company gave me a letter saying so, which I submitted to IRAS and everything was o.k.
I kept my EP during that time, but am not sure if that is still o.k. nowadays.

[sundaymorningstaple]

From what I know, it's still the same as long as you are being paid by the Singapore company and kept on the EP.

[martincymru]

Ok, so that solves (maybe ) the Singapore end of things. So what do you state on the Sg " end of year Tax Return Form " (normally done online) ? ( maybe your Employer reports directly to IRAS, but ignore that scenario for the sake of this discussion ).

But (7 years ago) I heard of:-

" you have been in Indonesia for xyz months and paid no tax. In prison till you pay us 50k US dollars!"

Obviously a tax consultant is required but nontheless I am interested in 1st hand experience.

Question: Is it possible, practical and legally compliant to live in Singapore (say only 6 weeks per year on an EP), work overseas and pay tax in that work residence/tax resident country (in this case Indonesia) ? That's the important question I am asking.

[beppi]

Yes, that's exactly what I did for 1.5 years (many years ago): I worked in Indonesia (Batam) Mon. - Fri. and lived in Singapore on off-days.
Indonesian tax is higher than Singapore's!

[sundaymorningstaple]

The rational from IRAS in Singapore is that you will pay the taxes the country you are physically working in. This is why it's rather dicey about being a freelance, working from home for a foreign employer as trailing spouses are wont to do. While they do not need an employment pass, technically they are still liable to IRAS for income taxes for income earned while in Singapore. So, you are in the clear but you will have to pay Indonesian income taxes (don't know it that's a curse or blessing though).

[Strong Eagle]

While I generally agree with beppi that tax should be paid in the country where you are working long term, there are a couple of issues to consider.

a) In order to legally work (and thus, pay taxes), you must have a legal work permit in the country you are working in. These can be very hard to get in Indonesia. Make sure that your company has a work permit for you. This also assumes you are paid in the country you are working.

b) Right or wrong, many people simply fly under the radar because of the cost and hassle of getting a work permit, especially if it is for a relatively limited time frame. They fly out and back in, simply noting that they are on a business trip.

In a) above you would qualify for the foreign income tax exclusion for Singapore. For b) you would still pay taxes in Singapore as no legal working relationship exists.

[beppi]

a) In order to legally work (and thus, pay taxes), you must have a legal work permit in the country you are working in. These can be very hard to get in Indonesia. Make sure that your company has a work permit for you. This also assumes you are paid in the country you are working.

I had a valid work permit in Indonesia at the time - yes, it is a buerocratic nightmare to get it (and requires you to pay a high "fiscal fee" every time you leave Indonesia!).
My income was then taxable in Indonesia, but it did NOT require me to get paid in Indonesia. (I was paid in Singapore.)

b) Right or wrong, many people simply fly under the radar because of the cost and hassle of getting a work permit, especially if it is for a relatively limited time frame. They fly out and back in, simply noting that they are on a business trip.
For b) you would still pay taxes in Singapore as no legal working relationship exists.

This is not correct: Tax liability in Singapore does NOT depend on whether the income was or wasn't taxed elsewhere.
IRAS did not ask for the Indonesian tax documents or my Indonesian work permit, only for a letter from my employer.

[Strong Eagle]

beppi - my point is that if you fly under the radar and take you salary in Singapore, you better pay the tax in Singapore.

[beppi]

Why?!?
The rules are clear that you don't have to pay here - you'd have to pay there. So if you decide to cheat there, why needlessly donate it to the government here?

[Strong Eagle]

Why?!?
The rules are clear that you don't have to pay here - you'd have to pay there. So if you decide to cheat there, why needlessly donate it to the government here?

You have to pay there IF you have a work permit there. If you don't have a work permit there, you can't legally work "there" and any attempt to pay tax "there" would raise all sorts of problems.

And yes, I understand... you are saying that if money is flowing into an SG bank because you are working "there" under the radar, you might as well cheat all the way and not report here, either. I disagree.

I've had employees for whom I've obtained work permits in Thailand and Malaysia and they paid taxes in those countries. And, I've had employees that flew in and out in order to do their work, over a time period of 6 or 7 months, and they did not pay taxes in those countries. But, they did pay their taxes in Singapore because I filed IR8A's for them.

[martincymru]

Reading the posts, a further question:

The European Parent Company HQ Asia is Sg. They have a subsidiary wholly owned in Indonesia.

I will be on a Work Permit in Indonesia; Employment Contract is with the Indonesian subsidiary. I will be working in Indonesia 320 days per year.

I want to maintain my link/ties with Sg. So can I ask the Parent Company to obtain an EP for me?

I am effectively being seconded to the subsidiary (I am not sure I am strictly correct on this term, legally speaking). The subsidiary will pay all taxes due in Indonesia and pay me the net salary to any Bank / anywhere.

So where I get paid is irrelevant, where I am tax resident is the important issue?

I agree that working under the radar in Indonesia is not recommended.

[sundaymorningstaple]

Only if you are seconded to the Indonesian subsidiary and paid by the local Singapore company. e.g., you still have to be employed by the Singapore company. The fact that you need a work permit in Indonesia is not relevant because you still need a work permit in Indonesia and you are still not taxed in Singapore. But it does keep your ties to Singapore re:being employed by a Singapore company. Not really relevant now, but back in the day (1990s) EP holder DID have to contribute to CPF so as long as you were on the payroll of the Singapore company they & you would have to contribute. But that as well as the subsequent voluntary contributions (also discontinued) are no longer applicable.

[littlepuppet]

Hi Martin,

To introduce im an expatriate tax professional.

I knw a lot of company in spore, they hire foreigners, put them on ep, but later on straight away send them away for secondment.

Strictly speaking, when a foreigner ceases spore employment, EP needs to be cancelled and tax clearance return needs to be filed to the Iras to report income up to cessation date of sg enployment.

If the period of employment s less than 60 days u r exempt fr tax, however u or the company has to write to the Iras to report e exact days you work in spore and wait for their approval on tax exemption.

Iras identifies tax payers thry EP, therefore keeping an ep ll trigger tax filing obligation every year. If you want to to keep it, make sure every year before tax filing deadline you/ company liaises with the Iras to report e days you worked in spore (even 0) in a formal letter/email.

Failing to do so, the iras ll issue penalty and u have a bad records in spore government eyes. They ll keep u under radar n any SPR application... Ll be affected.

Hope this helps.
Cheers

[sundaymorningstaple]

So you have just repeated what everybody else as said....

Next time, please use the entire keyboard so as to make it easier for English Speakers and not locals. Thanks.