Singapore company structure for offshore taxation

[Xshore]

Not exactly. The general rule is that you only pay tax in Singapore if the you are doing business in Singapore (accruing in), have Singapore customers (derived from) or if you remit the money to a Singapore (received in). For the case of goods, it is simple, you cannot have suppliers nor customers in Singapore. For services, the rule is that you can perform them anywhere on the planet, except Singapore. (For the case of big companies, you can have an office in Singapore, but then, you need to have an office elsewhere. It is obvious that if you have an office in Singapore, you cannot really claim that they are just your secretary while you are actually a nomad traveller doing the work in the airplane. That's why then you need an office elsewhere to even claim that the business is not done in Singapore.)



You can read the easy version here:

Singapore Tax Policy On Foreign-Sourced Income

What does it mean by foreign-sourced income and how does it affect taxation for your Singapore company? Get a deeper understanding on what constitutes foreign-sourced income and why they are taxable or not.

www.guidemesingapore.com

The relevant law is here

https://sso.agc.gov.sg/Act/ITA1947?ProvIds=P13-#pr10-

10.—(1) Income tax is, subject to the provisions of this Act, payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of —

(25) To avoid doubt, it is declared that the amounts described in the following paragraphs are income received in Singapore from outside Singapore whether or not the source from which the income is derived has ceased:

(a)	any amount from any income derived from outside Singapore which is remitted to, transmitted or brought into, Singapore;
(b)	any amount from any income derived from outside Singapore which is applied in or towards satisfaction of any debt incurred in respect of a trade or business carried on in Singapore; and
(c)	any amount from any income derived from outside Singapore which is applied to purchase any movable property which is brought into Singapore.

In addition to this then it's the matter of if the company is SG tax resident. And it appears it can be difficult to get the company to be SG tax resident, if managed from outside SG. As a SG tax resident company has many benefit that doesn't extend to non tax resident companies.
Is a SG non tax resident company taxed on (foreign source) income that is remitted to singapore?

 

[daniels27]

In addition to this then it's the matter of if the company is SG tax resident. And it appears it can be difficult to get the company to be SG tax resident, if managed from outside SG. As a SG tax resident company has many benefit that doesn't extend to non tax resident companies.
Is a SG non tax resident company taxed on (foreign source) income that is remitted to singapore?

If you do offshore, you won't be tax resident. You can only chose one.

As mentioned above the following is always taxed for non tax resident transactional companies:
- Income remitted to Singapore
- Income from Singapore
- Income accrued in Singapore

For non-transactional income, there is a FSIE in place. Hence, you could remit dividends, interest, royalties, etc. to Singapore tax free as tax resident.

 

[Xshore]

If you do offshore, you won't be tax resident. You can only chose one.

As mentioned above the following is always taxed for non tax resident transactional companies:
- Income remitted to Singapore
- Income from Singapore
- Income accrued in Singapore

For non-transactional income, there is a FSIE in place. Hence, you could remit dividends, interest, royalties, etc. to Singapore tax free as tax resident.

But I don't think you can chose if you're tax resident or not, that depends on the facts.
And I don't think income from Singapore (customers) is taxed for all non tax resident companies, especially for non Singapore incorporated companies?

 

[daniels27]

But I don't think you can chose if you're tax resident or not, that depends on the facts.
And I don't think income from Singapore (customers) is taxed for all non tax resident companies, especially for non Singapore incorporated companies?

The topic here is "Singapore company for offshore". We are not discussing local companies of residents nor are we discussing foreign companies incorporated elsewhere. Please keep that in mind.

You can almost always in any jurisdiction to chose to be tax resident. This opens you the way to access all DTAs. It also works in Singapore. (Yes, if you are resident in Singapore, you cannot chose. But this is not covered by this topic here.)

Income from Singapore is taxed for all Singaporean companies. (If you are not a Singaporean company and without PE, you won't pay tax in Singapore. But this is not covered by this topic here.)

 

[Xshore]

The topic here is "Singapore company for offshore". We are not discussing local companies of residents nor are we discussing foreign companies incorporated elsewhere. Please keep that in mind.

You can almost always in any jurisdiction to chose to be tax resident. This opens you the way to access all DTAs. It also works in Singapore. (Yes, if you are resident in Singapore, you cannot chose. But this is not covered by this topic here.)

Income from Singapore is taxed for all Singaporean companies. (If you are not a Singaporean company and without PE, you won't pay tax in Singapore. But this is not covered by this topic here.)

I don't think it's that easy to be a Singapore tax resident, as there are many benefits of being a SG tax resident. And because of that you might not qualify. If you research this you'll see that this is highlighted by many accountants.
My point was to highlight how a SG non tax resident company would different from other companies. It seems strange that you are non tax resident but still liable for taxes that other non tax resident companies are not.

Anyway, this all highlighted that it's not very straight forward in Singapore.

 

[daniels27]

It is very straight forward in Singapore with offshore. The issues you are talking about are not a problem here as nobody wants to use his Singapore company to receive dividends at a preferred rate. Please open another topic for this question if you want to discuss this.

 

[Xshore]

It is very straight forward in Singapore with offshore. The issues you are talking about are not a problem here as nobody wants to use his Singapore company to receive dividends at a preferred rate. Please open another topic for this question if you want to discuss this.

The iras link shows its not so straight forward to be a SG tax resident company.

Tax Residency of a Company/ Certificate of Residence

Your company is a tax resident of Singapore when its control and management is exercised in Singapore in the preceding calendar year.

www.iras.gov.sg

Which, can be beneficial if this helps to avoid tax of foreign source income. However it also means higher tax rates if the income is taxable. Until I find an accountant (preferably several) that knows how to deal with this in Singapore than I'm still sceptical. But very interested to hear if anyone has experiences, not only by avoiding to report the offshore income, but confirmation that iras or local accountants has said that the income is not taxable.

 

[daniels27]

We are talking about two things. One is taxation. This is the topic here. The other is how to get the certificate for a DTA, which is a different story. You can check Hong Kong where it used to be much more difficult to get the certificate than just paying taxes. Since June, the issue changed, now you can get the certificate if you do not claim offshore.

What are you actually trying to do here? OP had a question and since then, you are trying to discuss all other things.

 

[Xshore]

We are talking about two things. One is taxation. This is the topic here. The other is how to get the certificate for a DTA, which is a different story. You can check Hong Kong where it used to be much more difficult to get the certificate than just paying taxes. Since June, the issue changed, now you can get the certificate if you do not claim offshore.

What are you actually trying to do here? OP had a question and since then, you are trying to discuss all other things.

I, like OP would like to know 100 % that a Singapore company owned by a foreigner run from outside Singapore is not taxable in Singapore. Thanks for your input. I'll consider it together with all the other info that says the income is taxable in Singapore. I understand it might work with iras is not digging into it, but we are after a solution that is sustainable and can withstand an audit from them.

 

[daniels27]

Yes, but look we are having a facts-based discussion here. You so far only quote some people that you believe they once said something and you cannot recall their name nor company. I do not think this is a ground to have such a discussion here and I also believe your posts should not have been made in the first place without proper due diligence.

Besides that you are constantly mixing up taxation and DTA certificates which are a completely different animal in terms of what is needed to get them.

Could you hence maybe go back and do your due diligence and come back to us with references or something?

 

[Xshore]

Yes, but look we are having a facts-based discussion here. You so far only quote some people that you believe they once said something and you cannot recall their name nor company. I do not think this is a ground to have such a discussion here and I also believe your posts should not have been made in the first place without proper due diligence.

Besides that you are constantly mixing up taxation and DTA certificates which are a completely different animal in terms of what is needed to get them.

Could you hence maybe go back and do your due diligence and come back to us with references or something?

It's kind of important as a small company to be able to find an accountant or service provider that you can work with that knows about these potential tax free rules. Also, as you need a nominee director in Singapore, the service providers often have some requirements to reduce their potential liability. Some I talked to required you to bank in Singapore.

I'd welcome anyone that is running a SG company for some time to share their experiences.

To sum up the facts we know so far:
First, Sovereign, other service providers and also the tax article you shared all mentions the rules for remittence to Singapore and source of income. If you look at these rules they apply to SG tax resident companies. Ok, so the consensus seem to be that a foreign run company is tax resident in SG. If it was not SG tax resident it would seem like it should be easier to avoid SG tax, however IRAS also writes that tax resident companies and non tax resident companies are taxed in the same way, except for certain benefits for tax resident companies. So then this makes it appear that a SG non tax resident company is taxed differently in SG from say a UK ltd company, as a UK company clearly wouldn't owe tax in SG if it has customers or a bank account in SG.
So that a SG non tax resident company is taxed as a tax resident company seems non counter-intuitive, and I susepect this is not the whole truth.
Ok, but lets continue assuming that the company is SG tax resident and the facts we have. Sovereign says that services income is taxable in SG unless you have a PE in another country. So, services is taxable in SG for the typical one man company run from outside SG without any other registration.
And trading income remitted to SG is taxable. This means that you can't have an ecommerce company that use Stripe, Paypal etc as these require settlement to a SG bank account. Then we're left we invoiced trades like selling a container with stuff to another company somewhere, receiving payment to a bank account outside SG somewhere. This can of course be useful, but limited as most people would want to use the company for ecommerce or services income.

I believe it's can be possible achieve zero tax in SG other ways, for example by having the company as non tax resident. But there is no clear information on this anywhere.

 

[daniels27]

First, Sovereign, other service providers and also the tax article you shared all mentions the rules for remittence to Singapore and source of income. If you look at these rules they apply to SG tax resident companies.

Yes, correct.

Ok, so the consensus seem to be that a foreign run company is tax resident in SG. If it was not SG tax resident it would seem like it should be easier to avoid SG tax, however IRAS also writes that tax resident companies and non tax resident companies are taxed in the same way, except for certain benefits for tax resident companies. So then this makes it appear that a SG non tax resident company is taxed differently in SG from say a UK ltd company, as a UK company clearly wouldn't owe tax in SG if it has customers or a bank account in SG.

We are talking about tax resident and non-tax resident *only* for the purpose of paying taxes. (We are not discussing the act of getting a tax certificate. There are more checks for this and it is not part of the question.)

Of course the rules for SG and UK companies are different. A SG company naturally has liabilities in SG, however there are some ways to get around having to pay taxes.

So that a SG non tax resident company is taxed as a tax resident company seems non counter-intuitive, and I susepect this is not the whole truth.

All SG companies are taxed under the same rules. But SG companies are (under certain conditions) able to claim offshore status for some of their revenue.

Ok, but lets continue assuming that the company is SG tax resident and the facts we have. Sovereign says that services income is taxable in SG unless you have a PE in another country. So, services is taxable in SG for the typical one man company run from outside SG without any other registration.

No. If you have a PE in Singapore, you pay tax in Singapore unless you have a PE elsewhere as well. If you do not have a PE in Singapore, there is no question.

And trading income remitted to SG is taxable. This means that you can't have an ecommerce company that use Stripe, Paypal etc as these require settlement to a SG bank account. Then we're left we invoiced trades like selling a container with stuff to another company somewhere, receiving payment to a bank account outside SG somewhere. This can of course be useful, but limited as most people would want to use the company for ecommerce or services income.

You can use a PayPal account elsewhere and use a payment processor that allows you to get paid into an offshore bank account.

I believe it's can be possible achieve zero tax in SG other ways, for example by having the company as non tax resident. But there is no clear information on this anywhere.

Not for transactional income. If you remit it to SG, you have to pay.

 

[Jerry1911]

So have we managed to determine if a company registered in Singapore is subject to tax in SG if it's being run out of Singapore, e.g. by a PT? Assuming funds are not remitted to Singapore

 

[daniels27]

So have we managed to determine if a company registered in Singapore is subject to tax in SG if it's being run out of Singapore, e.g. by a PT? Assuming funds are not remitted to Singapore

Yes, you can read my answers long ago. It is not subject to tax if you don't buy from, don't sell to, don't live in, and don't remit money to Singapore.

 

[Jerry1911]

Yes, you can read my answers long ago. It is not subject to tax if you don't buy from, don't sell to, don't live in, and don't remit money to Singapore.

Perfect. So in the context of a perpetual traveller, a company in Singapore can be used the same way as an Estonian company where profits are paid out tax free to a non resident in the form of salary - except here we can pay out tax free dividends as well, we don't have to deal with an EU jurisdiction and we potentially have better access to banking. Plus in this case we get a nominee director by default which may or may not be useful.

Correct?

 

[Xshore]

We are talking about tax resident and non-tax resident *only* for the purpose of paying taxes. (We are not discussing the act of getting a tax certificate. There are more checks for this and it is not part of the question.)

Just wondering, why do you want the company to be SG tax resident, if the tax treatment are the same for non tax resident companies?

No. If you have a PE in Singapore, you pay tax in Singapore unless you have a PE elsewhere as well. If you do not have a PE in Singapore, there is no question.

You mentioned Sovereign, and they write this:

However, care should be taken when services are not provided in Singapore. The Inland Revenue Authority of Singapore (IRAS) deems that income from the provision of services has its source in Singapore unless those services are provided through a permanent establishment (PE) outside Singapore.

Do you run a SG company? Did you manage to find a service provider and nominee director that are ok with claiming income as non taxable?
Do you make two sets of accounts, one for non taxable income and one for taxable income, and does the accounting firm charge extra for this?

Perfect. So in the context of a perpetual traveller, a company in Singapore can be used the same way as an Estonian company where profits are paid out tax free to a non resident in the form of salary - except here we can pay out tax free dividends as well, we don't have to deal with an EU jurisdiction and we potentially have better access to banking. Plus in this case we get a nominee director by default which may or may not be useful.

Salaries from a SG company to non residents are taxed in Singapore.
Why do you say potentially better access to banking? You can't bank in Singapore, and banking in Europe would be more difficult compared to a EE company. Stripe etc has much lower fees in Europe and support multi currency payouts, and you couldn't use it in Singapore anyway.

 

[Jerry1911]

Salaries from a SG company to non residents are taxed in Singapore.

Can someone else please confirm this too?

Why do you say potentially better access to banking? You can't bank in Singapore, and banking in Europe would be more difficult compared to a EE company.

That's true, but I think a "tax free" Singapore company should be compared to a Gibraltar company, not an Estonian company. In that case one would have better banking as Gibraltar companies are hard bank nowadays.

I would also avoid incorporating within the EU unless there is a specific need for it.

Stripe etc has much lower fees in Europe and support multi currency payouts, and you couldn't use it in Singapore anyway.

Stripe supports Singapore; the fees argument is valid but I don't need payment processing for what I do - just USD bank account details which Statrys/Airwallex/Wise provide.

I'm just not sure if receiving funds on Airwallex would count as remitting funds to Singapore as they onboard Singapore companies through their SG entity.

 

[Xshore]

Stripe supports Singapore; the fees argument is valid but I don't need payment processing for what I do - just USD bank account details which Statrys/Airwallex/Wise provide

Yes, but they require payouts to a SG bank account, so that would be taxable.

 

[Jerry1911]

Yes, but they require payouts to a SG bank account, so that would be taxable.

Good point, thanks

 

[daniels27]

Just wondering, why do you want the company to be SG tax resident, if the tax treatment are the same for non tax resident companies?

I don't. (This is only relevant if you want to use the SG company for holding purposes etc. to receive dividends at a preferential rate. It is not part of the discussion here.)

You mentioned Sovereign, and they write this:

Strange, on the phone they tell you otherwise. We would have to check in detail.

Do you run a SG company? Did you manage to find a service provider and nominee director that are ok with claiming income as non taxable?

You can use your friend or Sovereign etc.

Do you make two sets of accounts, one for non taxable income and one for taxable income, and does the accounting firm charge extra for this?

I would only use the company for nontaxable income.

Salaries from a SG company to non residents are taxed in Singapore.

Are we sure about this?

IRAS | Working Outside Singapore

Tax treatment of income from overseas employment.

www.iras.gov.sg

Why do you say potentially better access to banking? You can't bank in Singapore, and banking in Europe would be more difficult compared to a EE company. Stripe etc has much lower fees in Europe and support multi currency payouts, and you couldn't use it in Singapore anyway.

I would recommend to use:
- Statrys/Airwallex/Wise for banking
- PayPal for payments. I am not exactly sure about today, but it seems to me that all non-EU PayPal accounts once had the option of payout in USD to US. You can use this or a wholly US-based account.
- Any payment processor that pays out in USD to the US. You should be able to get that one. In the worst case with the addition of a US SM LLC, which is cheap.