Singapore company structure for offshore taxation

[aidenaiden]

I plan to open Singapore company for offshore taxation purposes with following sturcture:
Owners (two foreigners, non-US citizens, not living is Singapore)
Director (local resident as a service)

Company will have 100% operation/revenue outside of Singapore, including revenue from US customers.

Is this company considered a tax resident of Singapore? or a tax resident of director who owns most shares?
Will profit withdrawal will be taxable for this company structure?

Last edited by a moderator: Jan 27, 2024

 

[Xshore]

It might be not considered SG tax resident if not managed from Singapore. However, the tax office says that the sames tax applies to resident and non resident companies, except residents has some more benefits and deductions.
I haven't been able to find any accountants or service providers that have experience with SG zero tax companies.

 

[daniels27]

All tax free. Be sure to stay under the limits for audit exemption.

I think all usual suspects like Sovereign are competent on this matter. Just contact them.

 

[Xshore]

daniels27 said:
All tax free. Be sure to stay under the limits for audit exemption.

I think all usual suspects like Sovereign are competent on this matter. Just contact them.
Click to expand...

Why stay under audit exemption? Do you mean that there is no tax if they don't find out only?
Sounds legit

 

[DomOCT]

In addition to Xshore's question, is it still required for all shareholders to be individuals in order to qualify for the audit exemption?

 

[daniels27]

I mean, Sovereign recommends opening a second Singapore company if you surpass the 10M SGD turnover/asset threshold as it is most likely cheaper than having to pay for the audit. The audit exemption has nothing to do with the taxes owned.

@DomOCT not anymore.
https://www.acra.gov.sg/legislation...-on-small-company-concept-for-audit-exemption

 

[Xshore]

daniels27 said:
I mean, Sovereign recommends opening a second Singapore company if you surpass the 10M SGD turnover/asset threshold as it is most likely cheaper than having to pay for the audit. The audit exemption has nothing to do with the taxes owned.

@DomOCT not anymore.
https://www.acra.gov.sg/legislation...-on-small-company-concept-for-audit-exemption
Click to expand...

They do say that services are taxed in Singapore while a trading company can be tax free. It's still doesn't seem straight forward for a trading company, maybe not very common. If it was indeed zero tax with no issues then it should be more common?

 

[aidenaiden]

daniels27 said:
I mean, Sovereign recommends opening a second Singapore company if you surpass the 10M SGD turnover/asset threshold as it is most likely cheaper than having to pay for the audit. The audit exemption has nothing to do with the taxes owned.

@DomOCT not anymore.
https://www.acra.gov.sg/legislation...-on-small-company-concept-for-audit-exemption
Click to expand...

Who is Sovereign?

 

[daniels27]

aidenaiden said:
Who is Sovereign?
Click to expand...

One of the big incorporation service companies.

Xshore said:
They do say that services are taxed in Singapore while a trading company can be tax free. It's still doesn't seem straight forward for a trading company, maybe not very common. If it was indeed zero tax with no issues then it should be more common?
Click to expand...

I would call it subjective perception. This forum heavily relies on the UAE sponsors, thus has a lot of posts about UAE, making it more prominent on Google for people looking for UAE. That's why many posts are around UAE here.

But if you look elsewhere, I think the UAE is rather the exception.

https://jaserodley.com/best-country-to-incorporate-an-online-business/https://www.offshore-protection.com/offshore-blog/start-online-business-offshore-companyhttps://freedomsurfer.com/register/https://bbcincorp.com/offshore/guide-and-tool/offshore-company-comparisonhttps://incorporations.io/
There are many people doing Singapore.

I think also services are exempt, as long as you do not perform them in Singapore.
https://taxsummaries.pwc.com/singapore/corporate/taxes-on-corporate-income

Last edited: Jan 29, 2024

 

[daniels27]

Xshore said:
They do say that services are taxed in Singapore while a trading company can be tax free. It's still doesn't seem straight forward for a trading company, maybe not very common. If it was indeed zero tax with no issues then it should be more common?
Click to expand...

According to Sovereign, also services are tax free in Singapore. Only issue is that if you have a permanent establishment in Singapore, you need to have one elsewhere for the services (otherwise, the Singapore government will deem the revenue to be coming from the Singapore permanent establishment).

 

[Jerry1911]

daniels27 said:
According to Sovereign, also services are tax free in Singapore. Only issue is that if you have a permanent establishment in Singapore, you need to have one elsewhere for the services (otherwise, the Singapore government will deem the revenue to be coming from the Singapore permanent establishment).
Click to expand...

So in layman's terms, the company is tax-free as long as one doesn't step foot into Singapore. Correct?

 

[Xshore]

Jerry1911 said:
So in layman's terms, the company is tax-free as long as one doesn't step foot into Singapore. Correct?
Click to expand...

If You have service income then the income must come from a PE in another country to be tax free. A PE probably means that the company is registered in another country as a branch or as a foreign company doing business there.

For å trading company sovereign say it can be tax free. I'm still not convinced, but it could be worth investigating if you're looking into setting up a new company. I researched this some years ago, and none of the accountants I reached out to said this income would be tax free.

 

[uplana]

Xshore said:
For å trading company sovereign say it can be tax free. I'm still not convinced, but it could be worth investigating if you're looking into setting up a new company. I researched this some years ago, and none of the accountants I reached out to said this income would be tax free.
Click to expand...

Can you perhaps remember who it was you consulted in connection with your question? When it comes to such complex corporate structures, one needs to get hold of some of the big local players in the market, they are the best at understanding the tax rules and corporate constructions required to optimize taxes.

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[Xshore]

uplana said:
Can you perhaps remember who it was you consulted in connection with your question? When it comes to such complex corporate structures, one needs to get hold of some of the big local players in the market, they are the best at understanding the tax rules and corporate constructions required to optimize taxes.
Click to expand...

I don't think it's very complex. Non resident /citizens owning and operating SG company outside sg. Tax or not (when not having also registered the company in another country or registered a subsidiary etc).

 

[banafinfodafuggiano]

Is the thresold for the audit $10M and each year it resets, or $10M in total?


I spoke to various Singapore company incorporation services and they told me the Singapore company won't be Tax exempt from foreign income. Maybe they were wrong?

 

[Roo]

@banafinfodafuggiano you will be taxed in Singapore for foreign income, it is tax exempt only if it has already been taxed in a different jurisdiction.
Here is the IRS explanation to it, their website it quite detailed Companies Receiving Foreign Income

 

[Xshore]

Roo said:
@banafinfodafuggiano you will be taxed in Singapore for foreign income, it is tax exempt only if it has already been taxed in a different jurisdiction.
Here is the IRS explanation to it, their website it quite detailed Companies Receiving Foreign Income
Click to expand...

It's still unclear because:
The company might not be Singapore tax resident
The income might not be reveived or remitted to Singapore.

 

[Roo]

@Xshore have you considered asking IRS directly to clarify? They have a chat on the website and probably other means of contact too.

 

[Xshore]

Roo said:
@Xshore have you considered asking IRS directly to clarify? They have a chat on the website and probably other means of contact too.
Click to expand...

No, as if the accountants in Singapore doesn't know about this, then I don't want to have to convince them by pasting from a chat I had on IRAS website.

 

[daniels27]

Jerry1911 said:
So in layman's terms, the company is tax-free as long as one doesn't step foot into Singapore. Correct?
Click to expand...

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.)

banafinfodafuggiano said:
Is the thresold for the audit $10M and each year it resets, or $10M in total?


I spoke to various Singapore company incorporation services and they told me the Singapore company won't be Tax exempt from foreign income. Maybe they were wrong?
Click to expand...

You can read the easy version here:
https://www.guidemesingapore.com/bu...ingapore-tax-policy-on-foreign-sourced-income
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.