Singapore and Estonia, a good or a bad mix, let's dive in.

[DeepDrilling]

1) Transparent partnerships which are unincorporated and can be anonymous as well.
Such entities are treated as tax transparent.
In case you set up such a partnership that is managed by an Estonian company, then this Estonian company pays tax only when it distributes dividends (and not when it receives profits from partnership). The other partner can be a person or entity not exposed to tax, potentially limiting its (and overall) tax exposure to zero.

how would you set this up in an business invoicing customers, how can them money be distributed into such a setup ?

 

[Don]

how would you set this up in an business invoicing customers, how can them money be distributed into such a setup ?

There is no need to do anything special; you operate just like a regular company, but you keep internally separate accounting records to divide the partnership's activities from the other activities.
So it can be a matter of, e.g., using different invoice numbering prefixes, e.g., INV-AWESOME-x1, for the partnership

 

[inector]

I might be wrong, but I don't see how a partnership can solve the issue of reinvesting dividends tax-free here.

• Invest in start-ups or other private companies registered in the EU or in the UK (from January 2021) (either a convertible loan or equity), receiving a minority stake and no controlling rights (less than 20%)

Even if you set up an LP that is 20% Singaporean company and 80% Estonian company.

The Estonian OU still belongs to you 100%.

In the eyes of an auditor, you still own 100% of the Singaporean company.

To avoid this, you would need a different person as a shareholder. Which can be fine, but then he would need the controlling rights? Of at least 80% in the SG?

 

[Don]

I might be wrong, but I don't see how a partnership can solve the issue of reinvesting dividends tax-free here.

I think this was not even discussed here. Reinvesting dividends is a concept popular in the US. Dividends reinvested in tax-advantaged accounts like IRAs (Individual Retirement Accounts) or 401(k) plans are not taxed until withdrawals are made.

Even if you set up an LP that is 20% Singaporean company and 80% Estonian company.

The Estonian OU still belongs to you 100%.

In the eyes of an auditor, you still own 100% of the Singaporean company.

To avoid this, you would need a different person as a shareholder. Which can be fine, but then he would need the controlling rights? Of at least 80% in the SG?

This is quite a complex setup from the perspective of tax implications, as it could involve two companies from different jurisdictions, and the place of business could be in a third location.
Please note I did not mention LP (limited partnership) but a partnership, which is different.

 

[BerlusconiSchmidt]

Hello folks,

So I was thinking the other day about the possibility of combining a truly tax-free setup with both Singapore and Estonia.

1. Establishing an Estonian company first: Estonian law allows me to reinvest money into new businesses/startups.
2. Opening a Singapore company: By having the majority controls and key decisions outside Singapore and all directors (besides the nominee director) in Singapore, it's usually good enough to be granted a tax exemption. Auditing is required, but it typically costs around 1-2k SGD per report. According to the IRAS site (Tax Residency of a Company/ Certificate of Residence), there's no mention of restrictions on remitting money in and out of Singapore, so I don't think banking plays a big role here.

So, the plan would look like this:

1. Establish the Estonian company first.
2. Conduct business through this company initially.
3. When it's time to distribute profits, allocate about 30-40% to salaries, director fees (aka operational costs) Salaries will be paid to associates who will essentially pay back to me.
4. Keep about 10% to maintain the company or in the company bank account.
5. Reinvest the remaining 50%:
   • 20% will be invested in crypto (allowed as long as crypto investments are not the main business activity).
   • 30% will be reinvested into my other companies (in which I own no more than 20% in each).
6. Here’s where Singapore kicks in: Invest some of the 30% funds into my Singapore company. If confirmed that banking won't be an issue, open a real retail bank account in Singapore with DBS (I already have a couple but not with this kind of setup).

This setup would provide the best rates for PSPs using my EU company, the best banking within Singapore, and an overall 0% tax rate. Plus, it offers a good reputation and the ability to purchase other assets tax-free with any of these companies.


View attachment 6902

Let me know your thoughts!

I already spoke to a Singaporean accountant and Tax advisor, two actually, they said any money remitted in a Singapore bank account is going to be taxed. So it's not tax free like you say. So you'll have to rely on a offshore bank account, and virtually no banks will open a Singapore bank account overseas for you unless you have physical presence in that foreign country.

 

[inector]

I think this was not even discussed here. Reinvesting dividends is a concept popular in the US. Dividends reinvested in tax-advantaged accounts like IRAs (Individual Retirement Accounts) or 401(k) plans are not taxed until withdrawals are made.

I obviously made a typo, I was talking about *reinvesting profits tax-free into startup*, even made a quote on it.

Still happy to be proven wrong - the partnership setup would require that another *person* holds controlling stake in the SG entity. Otherwise, no matter how many different companies hold % in the SG company - it is still the same person behind it. At least in the eyes of the auditor.

I already spoke to a Singaporean accountant and Tax advisor, two actually, they said any money remitted in a Singapore bank account is going to be taxed

The tax-free aspect comes not from Singaporean laws on remittance of income, but from the fact that SG company has PE is in Estonia.

 

[Don]

I obviously made a typo, I was talking about *reinvesting profits tax-free into startup*, even made a quote on it.

thanks for clarifying

Still happy to be proven wrong - the partnership setup would require that another *person* holds controlling stake in the SG entity. Otherwise, no matter how many different companies hold % in the SG company - it is still the same person behind it. At least in the eyes of the auditor.

Yes, I believe what you are referring to here is a potential risk from transfer pricing, which can be relevant.

The tax-free aspect comes not from Singaporean laws on remittance of income, but from the fact that SG company has PE is in Estonia.

Foreign income refers to income derived from outside Singapore. You should be able to prove that the income was earned from outside Singapore. If you can, it is exempt from tax if not remitted to Singapore.

There are also tax reliefs available to Singapore tax residents to alleviate the double taxation suffered (applicable assuming your company can get the tax residence certificate), such as:

• Exemption or reduction in tax imposed on specified foreign income that is derived in a jurisdiction that has an Avoidance of Double Taxation Agreement with Singapore
• Tax exemption on specified foreign-sourced income such as foreign-sourced dividends, foreign branch profits and foreign-sourced service income under Section 13(8) of the Income Tax Act 1947
• Foreign tax credit for the taxes paid in the foreign jurisdiction against the Singapore tax payable on the same income