Post on 14-Jun-2015
description
Starting a Business in Singapore
(With specific commentary for US Persons)
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Who are we?Derren Joseph
Derren Joseph, is an EA (Enrolled Agent - license # 00100858-EA) who has been admitted to practice before the IRS and is an associatemember of the American Institute of CPAs (#7920958). He has a Masters in Economics from the University of Aberdeen (Scotland), aMasters in Development Studies from Middlesex University (London), a first degree in Business and holds a Certified Diploma from ACCA(Association of Chartered Certified Accountants in the UK).
Derren has done work for large, listed companies as well as Small and Medium-sized Enterprises (SMEs). He also has over 15 years’experience in financial and econometric modelling with British, American, & Caribbean companies. Derren’s experience includes Senior orDirector-level roles, at companies such as British Airways, Expedia, H T Joseph CPA and Caribbean Airlines.
Since 2007, Derren has been working with Americans in the Caribbean, the U.K., and Miami, FL. His specialty is working with expats withequity stakes in SMEs. Derren moved to Singapore in October 2013 to take up the role of General Manager at AETS and has had his viewspublished by the Singapore Business Review, the International Business Structuring Association, Compliance Alert, Caribbean 360, theGuardian, and the Jamaican Observer among others.derren@expattaxUSA.com
Who are we?
Michael Seet, B.Bus (Acct), CA (Singapore), CA (Aust)
Michael Seet, Director and Shareholder of SYApac, a firm of Chartered Accountants, registered with ACRA. SYApac Provide services in Auditing, Taxation andTax Planning (Singapore), Accounting services, Business Consultancy, Due Diligence, Project Feasibility Studies, Corporate Secretarial Services, System studiesand implementation.
Michael Seet is a Practicing Member of the Institute of Singapore Chartered Accountants(ISCA) as well as a Member of the Institute of CharteredAccountants in Australia (ICAA), He has been in Public Practice since 1989, and has extensive experience in Auditing , Taxation, Business Consultancy, ProjectBrokering, Due Diligence, Share Valuation.
Michael Seet gained his Degree in Accounting in Australia, and after having worked with Touche Ross & Co (Now Deloittes) for about 5 years, and havingsuccessfully completed his Professional Year with ICAA, he was then admitted as a Chartered Accountant. In 1982, he returned to Singapore and joined aPublic Practice for about 4 year. He then joined a manufacturing company as their Chief Accountant/Company Secretary.
In 1989, He established an Accounting firm, Seet Yong & Associates and since then has been in Practice till Present. SYApac was established last year to takeover the practice of Seet Yong & Associates.
Over his over 30 years in Public Practice, Michael has been providing assistance to his clients in terms of Business Advisory, Taxation Planning, StrategicPlanning, and Consultancy in M & A.
myseet@sya.com.sg
Circular 230
This document or presentation is not intended or written to be used, and may not be used, for the purpose of avoiding penalties that may be
imposed on the taxpayer.
Treasury Department Cir. No. 230
Contents• Interesting Trends
• Population Growth• Non resident or foreign workforce• Too business friendly?
• Available structures• Comparison of the forms of Business Organizations• Government incentives
• Implications for US Persons• Definition of a US Person• Sole Trader / Sole Proprietor• Partnership• Limited liability company
Singapore population growth slowest in 9 years
Source: http://www.straitstimes.com/the-big-story/asia-report/singapore/story/singapore-population-growth-slowest-9-years-20130927-0
• SINGAPORE'S population grew to 5.4 millionas of June 2013, a 1.6 per cent annualincrease that is the slowest in nine years.
• One in 10 now 65 and above
• Main reason for the population slowdown isthe slower pace of growth in the foreignworkforce.
• The bulk of the growth came from theconstruction sector, where foreigners arehired for key infrastructure projects such ashousing and transport.
SG’s Foreign Workforce
Source: http://www.mom.gov.sg/statistics-publications/others/statistics/Pages/ForeignWorkforceNumbers.aspx
Too Business Friendly?
• Local Businessmen complain –• Low barriers to entry. Unlike other Asian countries, the widespread use of the
English language, the rule of law, and the open and transparent system level the playing field for all, give local companies no advantage over foreign ones.
• Singapore is too small, with no domestic market for its local companies tolean on.
• Economy dominated by government-linked companies (GLCs) and foreigncompanies, both of which have the resources and wherewithal to competeagainst the best.
Source: Article published in The Sunday Times Think Section Page 39 on March 30, 2014.http://www.singapolitics.sg/views/singapore-too-business-friendly-local-firms
Contents• Interesting Trends
• Population Growth• Non resident or foreign workforce• Too business friendly?
• Available structures• Comparison of the forms of Business Organizations• Government incentives
• Implications for US Persons• Definition of a US Person• Sole Trader / Sole Proprietor• Partnership• Limited liability company
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Definition of Business Organisations in Singapore
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
A business owned by
one person
An association of two
or more persons
carrying on business in
common with a view to
profit
A partnership consisting
of two or more persons,
with at least one general
partner and one limited
partner
A partnership where
the individual partner’s
own liability is
generally limited
A business form which is
a legal entity separate
and distinct from its
shareholders and
directors
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Owned by
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
One person Generally between 2 and
20 partners. A
partnership of more than
20 partners must
incorporate as a company
under the Companies
Act, Chapter 50 (except
for professional
partnerships)
At least 2 partners; one
general partner and one
limited partner. No
maximum limit.
At least 2 partners, no
maximum limit.
Exempt Private
Company –20 members
or less and no
corporation holds
beneficial interest in the
company’s shares
Private Company – 50
members or less
Public Company – can
have more than 50
members
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Legal Status
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
Not a separate legal entity
Owner has unlimited liability
Not a separate legal entity
Partners have unlimited liability
Not a separate legal entity A separate legal entity from its
partners
A separate legal entity from its
members and directors
Can sue or be sued in
individual’s own name
Can sue or be sued in firm’s
name
General partner has unlimited
liability
Partners have limited liability Members have limited liability
Can also be sued in business
name
Cannot own property in firm’s
name
Limited partner has limited
liability
Can sue or be sued in LLP’s
name
Can sue or be sued in
company’s name
Can own property in
individual’s name
Partners personally liable for
partnership’s debts and losses
incurred by other partners
Can probably sue or be sued in
firm’s name
Can own property in LLP’s
name
Can own property in company’s
name
Owner personally liable for
debts and losses of business
Cannot own property in firm’s
name
Partners personally liable for
debts and losses resulting from
their own wrongful actions
Members not personally liable
for debts and losses of company
General partner personally liable
for debts and losses of the LP
Partners not personally liable
for debts and losses of LLP
incurred by other partners
Limited partner not personally
liable for the debts or obligations
of LP beyond amount of his
agreed contribution
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Registration Requirements
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
Age 18 years or above.
Singapore citizen/ Singapore
permanent resident/
Employment Pass/ Dependent
Pass holder.
Age 18 years or above.
Singapore citizen/ Singapore
permanent resident/
Employment Pass/ Dependent
Pass holder.
At least one general partner and
limited partner. Both can be
individuals (at least 18 years
old) or body corporate
(company or LLP).
At least two partners, who can
be individuals (at least 18 years
old) or body corporate
(company or LLP)
At least one shareholder
If owner not resident in
Singapore, he must appoint a
local manager who is ordinarily
resident in Singapore
If owners not resident in
Singapore, they must appoint a
local manager who is ordinarily
resident in Singapore
If all general partners are
ordinarily resident outside
Singapore, they must appoint a
local manager who is ordinarily
resident in Singapore
At least one manager ordinarily
resident in Singapore and at
least 18 years old
At least one director ordinarily
resident in Singapore, at least
18 years old
Self-employed persons must top
up their Medisave account with
the CPF Board before they
register a new business name,
become a registrant of an
existing business name, or
renew their business name
registration
Self-employed persons must top
up their Medisave account with
the CPF Board before they
register a new business name,
become a registrant of an
existing business name, or
renew their business name
registration
Self-employed persons must top
up their Medisave account with
the CPF Board before they
register as a partner of a new
LP, become a registered partner
of an existing LP, or renew their
LP registration
Undischarged bankrupts cannot
manage business without court
or Official Assignee’s approval
If a foreigner wishes to act as a
local director of the company,
he can apply for an EntrePass
from the Ministry of Manpower
Undischarged bankrupts cannot
manage business without court
or Official Assignee’s approval
Undischarged bankrupts cannot
manage business without court
or Official Assignee’s approval
Undischarged bankrupts cannot
manage business without court
or Official Assignee’s approval
Undischarged bankrupts cannot
be a director and cannot manage
a company without court or
Official Assignee’s approval
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Set-up Costs, Formalities and Statutory Expenses
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
$65 ($15 name application
fee and $50 registration fee)
$65 ($15 name application
fee and $50 registration fee)
$65 ($15 name application
fee and $50 registration fee)
$165 ($15 name application fee
and $150 registration fee)
$315 ($15 name application fee
and $300 incorporation fee)
Quick and easy to set up Quick and easy to set up Quick and easy to set up Quick and easy to set up More costly to set up and
maintain
Easy to administer and
manage
Easy to administer and
manage
Easy to administer and
manage
Fewer formalities and
procedures to comply with than
a company
More formalities and
procedures to comply with
Registration cost is minimal Registration cost is minimal Registration cost is minimal Registration cost is relatively
minimal and fewer regulatory
duties to adhere to than a
company
Must appoint a company
secretary within 6 months of
incorporation
Less administrative duties to
adhere to
Less administrative duties
to adhere to
Less administrative duties
to adhere to
No statutory requirement for
general meetings, directors,
company secretary, share
allotments, etc.
Must appoint an auditor within
3 months after incorporation
unless the company is exempt
from audit requirements
Must renew registration
annually
Must renew registration
annually
Must renew registration
annually
Only an annual declaration of
solvency must be lodged by
one of the managers stating
whether the LLP is able or not
able to pay its debts during the
normal course of business
Annual Returns must be filed
Statutory requirements for
general meetings, directors,
company secretary, share
allotments, etc.
One time registration Professional fee incur annually
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Continuity in Law
Sole-Proprietorship Partnership Limited Partnership (LP) Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
Exists as long as the
owner is alive and
desires to continue the
business
Exists subject to
partnership agreement
Exists subject to partnership
agreement
The LLP has perpetual
succession until wound
up or struck off
A company has perpetual
succession until wound
up or struck off
If there is no limited partner,
the LP registration will be
suspended and general partners
are deemed registered under
the Business Registration Act .
Once a new limited partner is
appointed, the registration of
the LP will be restored to
“live” and general partners’
registration under the Business
Registration Act ceases
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Closing of the Business
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
By Owner – Cessation
of business
By the partners –
Cessation of business or
dissolution of
partnership
By general partner –
cessation of business or
dissolution of LP
Winding Up –
Voluntarily by members
or creditors,
compulsorily by the
High Court
Winding Up –
Voluntarily by members
or creditors,
compulsorily by the
High Court
or or or or or
Registrar can cancel
registration if not
renewed or where
Registrar is satisfied
business is defunct
Registrar can cancel
registration if not
renewed or where
Registrar is satisfied
business is defunct
Registrar can cancel
registration if not
renewed or where
Registrar is satisfied LP
is defunct
Striking off Striking off
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Taxation
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
Profits taxed at owner’s
personal income tax rates
Profits taxed at partners’
personal income tax rates
Profits taxed at partners'
personal income tax rates
(if individual)/ corporate
tax rate (if partner is
corporation)
Profits taxed at partners’
personal income tax rates
(if individual)/ corporate
tax rate (if partner is
corporation)
Profits taxed at corporate
tax rates
• Corporate tax rate currently @ 17% flat
• Personal tax rate for Singapore Tax Resident refer Appendix 1.
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Estimated Tax Payable for the Net Profit of
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
First $80,000 $3,350
For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
A newly incorporated
company that meets the
qualifying conditions can
claim for full tax exemption
on the first $100,000 of
normal chargeable income for
each of its first 3 consecutive
year of assessments.
Tax payable = NIL
Dividend declared out from
the profits to the shareholders
are tax exempt
Next $20,000 @
11.5% $2,300
Each partner shared $50,000
profit
Each partner shared $50,000
profit
Each partner shared $50,000
profit
Tax Payable $5,650
First $40,000 $550 First $40,000 $550 First $40,000 $550
Next $10,000 @
7%
$700 Next $10,000 @
7%
$700 Next $10,000 @
7%
$700
Tax payable each
partner$1,250
Tax payable each
partner$1,250
Tax payable each
partner$1,250
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Estimated Tax Payable for the Net Profit of
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
First $200,000$20,750
For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
First $100,000 tax exempted
Next $ -Each partner shared $100,000
profit
Each partner shared $100,000
profit
Each partner shared $100,000
profit
Next $100,000 @ 50% Tax
exempted
Tax Payable$20,750
First $80,000 $3,350 First $80,000 $3,350 First $80,000 $3,350 Net $50,000 @
17% =$8,500
Next $20,000 @
11.5%$2,300
Next $20,000 @
11.5%$2,300
Next $20,000 @
11.5%$2,300
Tax payable each
partner$5,650
Tax payable each
partner$5,650
Tax payable each
partner$5,650
Dividend declared out from
the profits to the shareholders
are tax exempt
COMPARISON OF THE FORMS OF BUSINESS ORGANISATIONS
Estimated Tax Payable for the Net Profit of
Sole-Proprietorship Partnership Limited Partnership
(LP)
Limited Liability
Partnership (LLP)
Private Limited
Company (Pte Ltd)
First $200,000 $20,750 For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
For Example - 2 partners @
50%/50%
First $100,000 tax exempted
Next $100,000 @
18%$18,000
Each partner shared $150,000
profit
Each partner shared $150,000
profit
Each partner shared $150,000
profit
Next $200,000 @ 50% Tax
exempted
Tax Payable $38,750
First $120,000 $7,950 First $120,000 $7,950 First $120,000 $7,950 Net $100,000 @
17% =$17,000
Next $30,000 @
15%$4,500
Next $30,000 @
15%$4,500
Next $30,000 @
15%$4,500
Tax payable each
partner$12,450
Tax payable each
partner$12,450
Tax payable each
partner$12,450
Dividend declared out from
the profits to the shareholders
are tax exempt
Government Incentives include -
• Resident companies enjoy additional benefits including protection from double taxation, taxexemption on foreign-sourced income and tax exemption for new start-up companies.
• Business Angel Scheme (BAS) - If the start-up is able to obtain investment interest and commitment from anyof the business angel investors, SPRING SEEDS Capital could potentially match the intended amount (dollar-for-dollar) of up to a maximum of S$1.5 million. Both SPRING SEEDS Capital and the business angel investors will takeequity stakes in the company in proportion to their investments.
• Sector Specific Accelerator (SSA) Programme - As part of the Research, Innovation and Enterprise (RIE) 2015 plan,the government has approved the establishment of Sector Specific Accelerators (SSA) to identify, invest and growstart-ups in strategic but nascent sectors, such as medical and clean technology.
• Technology Enterprise Commercialisation Scheme (TECS) - aims to catalyse the formation and growth of suchstart-ups based on strong technology Intellectual Property and a scalable business model.
• Angel Investors Tax Deduction Scheme is a tax incentive which aims to stimulate business angel investments intoSingapore-based start-ups and encourage more angel investors to add value to these start-ups
• The $30 million Incubator Development Programme (IDP) provides Incubators and Venture Accelerators a grant toenhance capability development programmes for innovative startups.
Wealth of Information on MOM website
Wealth of Information on MOM website
Wealth of Information on MOM website
Wealth of Information on MOM website – but you can seek professional advice!
Contents• Interesting Trends
• Population Growth• Non resident or foreign workforce• Too business friendly?
• Available structures• Comparison of the forms of Business Organizations• Government incentives
• Implications for US Persons• Definition of a US Person• Sole Trader / Sole Proprietor• Partnership• Limited liability company
US Persons
• Passport holders
• Permanent residents
• Substantial presence
• Accidental Americans
• NRA spouses who make a Sec 6013g election
Implications for US Persons
Structure Compliance Tax considerations
Sole Prop Schedule C Approx 13% SE Tax
Partnership Form 8865 Extra compliance costs
LLC Form 5471 Extra compliance costs
Subpart F income
Dividends vs Salary
PFICs
Thank you for your attention
• This document was not intended or written to be used, and it cannot be used,for the purpose of avoiding tax penalties that may be imposed on the taxpayer.Treasury Department Cir. No. 230
• This document is provided for general guidance only, and is not to be construedas legal advice, accounting services, investment advice, or professionalconsultation of any kind. The information provided herein should not be used asa substitute for consultation with professional tax, accounting, legal, or othercompetent advisers. Before making any decisions or taking any action, youshould consult a professional advisor who has been provided with all pertinentfacts relevant to your particular situation. The information is provided ‘as is,’ withno assurance or guarantee of completeness, accuracy, or timeliness of theinformation, and without warranty of any kind, express or implied, including butnot limited to warranties of performance, merchantability, and fitness for aparticular purpose.
Q&A
Appendix 1 - Tax rates for resident individuals
Chargeable Income Rate (%) Gross Tax Payable ($)
First $20,000 0 0
Next $10,000 2 200
First $30,000 - 200
Next $10,000 3.5 350
First $40,000 - 550
Next $40,000 7 2 800
First $80,000 - 3 350
Next $40,000 11.5 4 600
First $120,000 - 7 950
Next $ 40,000 15 6 000
First $160,000 - 13 950
Next $ 40,000 17 6 800
First $200,000 - 20 750
Next $120,000 18 21 600
First $320,000 - 42 350
Above $320,000 20