Singapore company structure for offshore taxation

[Xshore]

Are we sure about this?

There might be ways to get around it, but not easily without any tax:

IRAS | Tax for Non-Resident Directors

Common scenarios relating to the tax obligations for Non-Resident Directors

www.iras.gov.sg

 

[Jerry1911]

Xshore, keep in mind director's remuneration/fees might be treated differently compared to remuneration from regular employment. This is the case in Estonia as well for example.

 

[daniels27]

But have you checked the link I posted?

IRAS | Working Outside Singapore

Tax treatment of income from overseas employment.

www.iras.gov.sg

I do not see anything that would render the salary received to be taxable in Singapore. Can you please explain based on what it should be taxable in Singapore?

(Also keep in mind that there may be a DTA in force with your residence country. Almost all DTA will clearly mention that the salary is only taxable in the residence country and not in Singapore.)

 

[Xshore]

But have you checked the link I posted?

IRAS | Working Outside Singapore

Tax treatment of income from overseas employment.

www.iras.gov.sg

I do not see anything that would render the salary received to be taxable in Singapore. Can you please explain based on what it should be taxable in Singapore?

Did you see the link I posted? It shows that salary to directors are taxed in Singapore, at least some parts of it. Maybe it can be avoided if the salary is for a managing director. However that's something I would double and triple check with the accountants. But you're right, a regular salary to non residents seems not taxable. When I looked into this a few years ago I found that it was taxable so maybe they have clarified this since.

About dta, why would anyone run a Singapore company and take a salary if they are tax resident in another country? Then the company also likely becomes tax resident in that country.

 

[daniels27]

Yes the DTA does not make sense. Thanks.

You link is regarding tax resident companies in Singapore. It seems to me that it would not apply for offshore companies. What is your opinion?

Thanks for your effort. Do you have the same level of expertise for Jersey? It may be an alternative.

 

[Xshore]

Yes the DTA does not make sense. Thanks.

You link is regarding tax resident companies in Singapore. It seems to me that it would not apply for offshore companies. What is your opinion?

Thanks for your effort. Do you have the same level of expertise for Jersey? It may be an alternative.

I think it doesn't make sense that a non tax resident company is taxed in the same way as a tax resident company. All the source of the information regarding tax on foreign source income and remittance to Singapore comes from the guides to Singapore tax resident companies.
Here is a clear PDF that shows the tax treatment for SG tax resident companies on foreign source income.

https://www.iras.gov.sg/media/docs/default-source/e-tax/tax-exemption-for-foreign-sourced-income285e5d43d6af4001b3ce35da1e9005b5.pdf

However, now I also found this, that indicates a SG non tax resident company might be totally tax free in SG. But as this seems not so common (no accountants etc know about it/want to talk about it) it might be difficult to use in practice, unless you're ready to fight an uphill battle.

Look at FAQ point 8 in this link:

IRAS | Taxable & Non-Taxable Income

Determine the taxability of income earned by companies and the existence of trade, as well as the tax treatment of grants/payouts and digital tokens.

www.iras.gov.sg

1. My Singapore incorporated company is not a resident of Singapore. All its business operations are carried on outside Singapore except for a Singapore registered office required under the Singapore Companies Act 1967. Is foreign-sourced offshore income remitted into Singapore by my company considered received in Singapore and subject to tax?
   Whether your company is operating in or from Singapore is a question of fact.
   For a non-resident Singapore incorporated company with no business presence in Singapore, IRAS will examine the facts and circumstances (e.g. the reason/ purpose for incorporating the company in Singapore, nature of the company’s business activities, place of control and management of the business) to determine if the income is taxable.

I don't know Jersey, that's another jurisdiction that could be interesting, but it seems expensive. I'd prefer Gibraltar, I think wise and Paypal should be possible for Gibraltar companies.

 

[daniels27]

I think it doesn't make sense that a non tax resident company is taxed in the same way as a tax resident company. All the source of the information regarding tax on foreign source income and remittance to Singapore comes from the guides to Singapore tax resident companies.

It is the same as in Hong Kong. Most of the tax literature is about tax resident companies. Non tax resident companies pay no tax and the government has limited interest in setting rules when you have to pay (because you don't have to pay).

Here is a clear PDF that shows the tax treatment for SG tax resident companies on foreign source income.

https://www.iras.gov.sg/media/docs/default-source/e-tax/tax-exemption-for-foreign-sourced-income285e5d43d6af4001b3ce35da1e9005b5.pdf

This is FSIE. FSIE is in for passive income. The EU was putting Singapore and Hong Kong on a grey list as many EU companies used Singapore and Hong Kong shell companies without any substance in the country to move money out of EU companies through royalties, dividends and interests. Singapore and Hong Kong have may DTAs with EU countries with very preferential rates for passive income. It is not about active income which is being discussed here.

However, now I also found this, that indicates a SG non tax resident company might be totally tax free in SG. But as this seems not so common (no accountants etc know about it/want to talk about it) it might be difficult to use in practice, unless you're ready to fight an uphill battle.

Look at FAQ point 8 in this link:

IRAS | Taxable & Non-Taxable Income

Determine the taxability of income earned by companies and the existence of trade, as well as the tax treatment of grants/payouts and digital tokens.

www.iras.gov.sg

It is very common. Just not in this forum which was many UAE sponsors, dudes looking to set up in the UAE etc.

I don't know Jersey, that's another jurisdiction that could be interesting, but it seems expensive. I'd prefer Gibraltar, I think wise and Paypal should be possible for Gibraltar companies.

Gibraltar has audit and all incorporating agents want to do the accounting for you. I think it is much more expensive than Jersey with much less benefits.

 

[Jerry1911]

Gibraltar has audit

Yes but you failed to mentioned there is an exemption which would apply to probably 99% of users here.

For a non-resident Singapore incorporated company with no business presence in Singapore, IRAS will examine the facts and circumstances (e.g. the reason/ purpose for incorporating the company in Singapore, nature of the company’s business activities, place of control and management of the business) to determine if the income is taxable.

Ok so it is unclear and would probably require a tax ruling. Better to just set up a company in Estonia and pull out profits via salary or use a classic offshore company.

 

[daniels27]

Yes but you failed to mentioned there is an exemption which would apply to probably 99% of users here.

I think all companies with more than 1.5 M GBP are subject to audit. I think all trading companies would fall under the audit for any decent income.

Ok so it is unclear and would probably require a tax ruling. Better to just set up a company in Estonia and pull out profits via salary or use a classic offshore company.

No need for a ruling, there are enough companies in this business and the usual incorporation agents have enough experience and court cases at hand.

 

[Xshore]

This is FSIE. FSIE is in for passive income. The EU was putting Singapore and Hong Kong on a grey list as many EU companies used Singapore and Hong Kong shell companies without any substance in the country to move money out of EU companies through royalties, dividends and interests. Singapore and Hong Kong have may DTAs with EU countries with very preferential rates for passive income. It is not about active income which is being discussed here.

It doesn't say it's not for active income. It says foreign source service income.

It is very common. Just not in this forum which was many UAE sponsors, dudes looking to set up in the UAE etc.

Ok, so we're back to what we've been discussing the whole time . You claim it's very common, however there is no source of this anywhere online. Sovereign, quotes the rules for tax resident companies (income remitted to SG etc), no service provider that I've found online explains about non tax resident companies. Even you said earlier in this tread that the company should be tax resident, and only foreign source income not remitted to SG is not taxable.
But ok, if I was about to start a new company now I could give it a try.

 

[daniels27]

It doesn't say it's not for active income. It says foreign source service income.

You should just read it. It says

2.1 Under the FSIE scheme, foreign-sourced dividends, foreign branch profits
and foreign-sourced service income received by specified resident taxpayers
from 1 Jun 2003 are exempt from tax if the following qualifying conditions are
met:

Ok, so we're back to what we've been discussing the whole time . You claim it's very common, however there is no source of this anywhere online. Sovereign, quotes the rules for tax resident companies (income remitted to SG etc), no service provider that I've found online explains about non tax resident companies. Even you said earlier in this tread that the company should be tax resident, and only foreign source income not remitted to SG is not taxable.
But ok, if I was about to start a new company now I could give it a try.

Maybe, you just Google 5 incorporating agents with offices in more than just Singapore. Then you write them today you want to use their service. They will then propose a call. You talk to them and then report back to us.

It does not cost you a cent but gives you first hand information rather than questioning me. Just ask them if they have clients using their Singapore company tax free and if they had any issue with IRAS etc

 

[daniels27]

Have you called anybody?

 

[Xshore]

Have you called anybody?

I have not, maybe op will?

foreign-sourced service income

Doesn't this mean active income from services?

 

[daniels27]

Doesn't this mean active income from services?

Are you still talking about the FSIE? It is irrelevant to the discussion here because it pertains to something completely different. FSIE is meant for passive income from other countries that have already been taxed there. You can then remit those incomes to Singapore tax free. (And this is the clue, you can remit them.) As we are talking about offshore, the whole FSIE story becomes useless as we are not interested in remitting money into Singapore.

Let's say, you are based in Singapore (either as person or as company) and you have a permanent establishment in China. This establishment is providing consulting in China to Chinese with a Chinese office. It will be taxed 40% in China. Now, you after you made 1M and paid 400k in China, you can take 600k back to Singapore and keep you don't have to pay taxes in Singapore. It basically is passive income from a subsidiary in China. And also, this really has nothing to do with the original question.

The original question is for some anywhere that wants and offshore company for no taxes and invoice purposes. He won't remit the revenue to Singapore (what the FSIE is for).

Just for my interest: what do you actually want to do? Are you insterested in incorporating in Singapore for a good or service business?