Skip to content 
VOICE-OVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
Okay, fantastic. Thank you for joining us this evening. My name is Derren Joseph and with me is a Boon Yip. And we going to talk about US/Singapore tax. Again, for those who are joining us for the first time, we do not give advice. We are qualified professionals. So of course, we’re just talking about general principles and general issues. If it is that you need advice that is that you want to take action on. You need to engage a professional who is duly qualified to give that advice. So to help you with your tax issues. So we having a general conversation about general principles.
Thank you for joining us, HTJ.tax, Moores Rowland and we do this every week. If you go to HTJ.tax/events, you can see what live streams are doing every week. And we also publish videos every day on over 20 various platforms. So wherever you get your podcasts, chances are we are there also. So, this is being recorded. So for those of you who are joining us on zoom, if you do not want your image to appear, it’s simple, you’re going to keep your cameras switched off. And whether you’re on zoom or one of the other platforms, if you want to ask a question, just type it in the box below for those on zoom, I would have emailed you before inviting you to submit questions. Five of you did. Thank you for that. For those who have not done so, it’s not too late, just type in the box below, and we will discuss them in the order in which they are received. So without further ado, I turn you over to Boon Yip. Boon Yip the floor is yours.
BOON YIP YEE:
Good evening, everyone. Maybe a morning for some of you but I’m in Singapore. So good evening. I just would like to share a bit about Singapore tax before I start just a brief introduction about myself. My name is Boon Yip, so I’m a SME Client Service Director at Moores Rowland in Singapore. I worked with Derren on cross border cases like US tax with Singapore exposure and vice versa. Right. So, okay. Give me a second. I’ll share my screen. All right.
So here are we, so today I was sharing a bit briefly about taxes in Singapore, both for individual and for companies. Of course. And just beginning, just to have a snapshot on Singapore. So if you look at some of the publications that we can find on the web consisting information is actually quite on top in terms of ease of doing business efficient governments and at least corrupt countries in the world.
So these are the recent one data that has been published. So Singapore, in terms of doing business ranked second ease of doing business is ranked second. So if you look at all these statistics, you can see rank quite efficient in terms of governments, the policies of governments are quite friendly to business and you encourage entrepreneurship startup in Singapore, and they provide supports for qualifying companies to accelerate their growth also from Singapore and out from Singapore.
So just basically on starting a business, talk about permanent establishment, it’s a fixed place where you start a business and where you have a management and a case where you have most of the business activities, right? So when you have a permanent establishment, you basically set up the residency of the tax. So if you have a key in Singapore, you will be a tax resident in Singapore and you have subject to a tax in Singapore.
So there are a few types of business structures. You have companies limited by shares, by guarantees partnerships, branch, sole proprietorship. The most common one would be companies limited by shares. So there are plenty of companies set up every month or even every day in Singapore that we can see that in this structure. And incorporating a business in Singapore, mainly comprises three sections. So pre-registration, what you need to consider is a decision on the structure. Where you have, if you have, if you are coming in from investing from a foreign foreign investment and you have to consider what structure you want to set it up.
You can consider a limited company buy shares, or even a branch. If you think that you are here just for a short period of time that model will work. And obviously there are a lot more to do compared to the past. I mean the past setting up company, it takes like a day or even a few hours. It’s a lot more compliance lately due to the need to comply off the money laundering And the terrorist counter-terrorist financing for business.
So that’s why a service provider like us has to be a little bit more in terms of heightened the risk on this aspect of the KYC. So registration of company actually talking about pre-registration, if things are done properly, it takes a few days, right. One or two days the company is up and running. And the next thing obviously is opening up a bank account. Unlike the past opening of bank account has become very much more difficult lately as what I said earlier, due to the need to comply with a lot of compliance, like in the AML compliance, CFP compliance, right?
So, basically you would take one to two months. And I mean, I’ve seen cases where it take up to six months depending on the structure. So what happened is in Singapore, we work with banks. So. our panel of major local banks that we refer that we get pre-qualified as a vendor. And our referral obviously we’ll have a better chance of getting it approved faster. So post registration, obviously you are talking about what passes, right?
If you were to set up structures, if you were to put head counts in Singapore, then you have to consider what passes for your directors or even for your key staff. And if you are in a specialized industry, like in the FNB or in the tourism sector, you may need licenses. So the last but not least is the application of GST. It may not be necessary. It can be voluntary depending on your input taxes. So business with a high input taxes, we advice to register for GST so that you can claim back from the inland revenue.
So what is taxable and what is non-taxable? Singapore taxes, I would say is not that complicated in terms of looking at this category. So if you talk about taxable income, obviously gains profits, anything to do with trade is tsaxable. So non-taxable obviously capital gains, right? Dividend income, Singapore has a E1 system. So all dividend income basically exempt from tax.
So, yes is also not taxable provided that we have suffered tax in the foreign country. And the very important question is when it’s taxable. So Singapore tax system is based on a accrued basis. So when a is accrued or when derived and you have subject to tax, it doesn’t matter whether you receive or not. And when it’s accrued or derived from Singapore, it has to be X. And the other aspect is when the income is remitted.
So what happened is if you have investment in overseas. Let’s say if you have interest from overseas, that you have not remitted into Singapore. You will not be taxable. Tax blenders, so, the effective tax rate. So if you look at the left hand side, these are the effective tax rate in Singapore. If you look at the first billion that you made, you are effectively paying about 14.88%. So it’s less than 15%. It’s actually one of the lowest tax regime, I will say Asia Pacific. You have Hong Kong that is come close at 16.5.
I think Hong Kong does have a tier system. First 2 million Hong Kong dollars is at 8.25%, but comparatively Singapore is still lowest. So if you consider setting up a regional headquarter or even a step foot into the fise, you may consider Singapore as the most favorable tax system. Right? So, tax calendar is quite simple to remember. So you have two tax calenda. One is for you to find the estimate, the chargeable income, which is due three months after the end of your financial year. And the other is every 30th of November.
That is your final submission of your corporate tax. So we are now in the individuals. Individuals, what is taxable and what is not. So obviously individual, we talk about trade business, your employment income, they are taxable. So if you have property and you receive a rental income is taxable, but not capital gain. So if you hold a property and eventually for a few years and you sell it and it’s not subject to tax, but obviously it’s not that simple.
You have to prove that these are capital in nature. There are ways to prove, obviously there are few factors that you have to look into it. So the other thing is other sources like royalty, right? They are taxable and what is non-taxable sorry. So, we went through earlier in the corporate tax. So for individuals are almost the same. When we recieved income, even if you don’t a declare, if you don’t a remit, if you remit is not taxable, right?
So you need not declare anything. Dividend income obviously is not taxable subject to corporate interest income received from banks. And from interest from that security and inheritance. So Singapore is not subject to inheritance tax. So there’s no inheritance tax at all. Individual rates, individual tax rate is based on their system. So I would think is not the lowest. So if you look at the highest is at 22%, right? So if you are, so there’s a bit of tax planning that you can do normally for those that are higher income individuals, probably they would consider taking a lower salary or even business owners.
They would consider taking a lower set salary scale, but most of getting dividend out from the company. So there’s not subject to tax. It could be a very difficult way of planning. Right? So tax calendar, 15th of every month. Unlike corporate individual tax hasa top of the line, 15th of every year, you have to file your dividual tax. So there are other taxes in Singapore, besides the income tax, so withholding taxes, indirect taxes dying director, royalty, if you have loan to a related corporation in elsewhere. And that is subject to tax. And royalty income, if you have intellectual property that is subject to tax. So payment of services. So we for impacts the very important element to look at it is where the services are performed. So briefly withholding tax so these are the withholding tax rates.
So if you look at it, the nature of the income and the tax rates. So if you are in a shipping industry, basically you don’t subject to any withholding tax. Technical assistant is something very different. So is at the prevailing corporate income tax rates. All right. Okay. Directors professional and public entertainers and so what happened is you are foreign director, so you are subject to tax at 22%, its the highest.
So if you look at the individual income tax, the highest rate highest year is that 22%. So do foreign director as in non tax resident director. So is subject to a 22% tax for payment of director fee. Okay. So these a few excess,so, okay, I mean, Singapore is one of the highly incentivized country in terms of taxes. So they are actually a lot of incentives available for qualifying companies.
Okay. So one of the most popular is the RHQ or the Regional Headquarter RHQ. Okay. You can actually have concession tax. Subject to approval from the tax authority. Obviously there are criteria to meet, right? So the lowest you can get to is 5% tax. So it’s relatively low. Right? Global trader program is one of the very popular incentives that a company would like to apply. So what happened is, if you are in commodity business, qualifying business, obviously, including a commodity go like go all sorts of trading, you can qualify for GDP where you, you can enjoy concession or 5%, right?
So others are merger and acquisition up to 40 million of the value of acquisition and title for tax relief. And now obviously R and D is among the more popular one, but it’s not so easy to meet the criteria for R and D. So lots company may have different definition of R and D, but it’s up to the company to prove. And so you have this fund management incentive. Obviously this has something to do with family offices, which the government have been able to get lately that a lot of publication about setting up family offices in Singapore.
So these are the incentives the company provide. So, okay. I have another slide later, perhaps I’ll get more into detail later. So GIP is another program incentive to basically attract those high net worth individual. So what happened? I recently dealt with a case is a Chinese national. So he has a company in the Nasdaq and basically put all the money into a trust, I think, from black rock or what.
So immediately qualifies. The minimum requirement is a hundred million. So you get what happened is you get pre-qualified so that he can, he will get a resident status in Singapore. So it will bring his family down and for the purpose of a second generation to live and stay in Singapore. This is one of the more difficult one to prove, because you need a lot of wealth. So these are more towards the high net individual. Okay. So this is the family office that I’m talking earlier.
There are basically three sections. So if you look at the NCA, is there isn’t any quiet criteria? So basically it’s more of a private trial family office. You can do investments, you can set up structures that not even a company, it can be individual. So it’s quite easy. It’s a startup or family office. Normally, a lot of people would go for it. Okay, you have texts, you are incentivized, but you need the prior approval and are criteria to meet.
But NCA are those that they want to try out. And later on, they will upgrade to 13R or 13X even. Obviously, 13X are those a lot more wealth. You’re talking about standard management of 15 million right? So typically FO structure will be this way to trust involving a holding company, a family holding under a trust, if a holding company, and you run a family office running by my investment team, and you have less PV and investment portfolio, right.
Of course, there a lot more structures that can be done. So just following through these other work passes, I’m not going to go through very detailed, but if you look at that, so basically there are quite a number of passes for professionals. You have three levels of passes and skills and miscue. These are more to US, the foreign workers coming into Singapore. Even for training students, you are entitled passes. So those intern, like if you are MNC, PNG, distend intern from overseas, yes it can be done right.
Family members, obviously it depends on the principal. So if you hold an employment pass, your spouse was subject can apply for dependent pass or even long-term visit pass. So a dependent pass allows you to work, but not long-term visit pass. So each pass has different criteria to meet, right? These are again, a different type of pass. So a bit about Moores Rowland, so our presence in Asia, Pacific 14 countries. So we are full pledge service firm. These are the services that we provide. And also US tech specialists. If we look at it with Derren and the snapshot of what we do. And these, our context I’ve come to the end of my presentation.
DERREN JOSEPH:
Thank you very much Boon Yip. And to those who’ve been asking questions again, is not too late. If you have any questions or topics that you want us to sort of explore, feel free to just type in the box below. And we get to them in the order in which they are received. So, okay. First question. Hi there, I work for US-based company who, well, which has many overseas offices. Since we’re all remote, because of, I can see why it’s remote, because then we get sensitive on some platforms, but we know that there’s a health crisis. So I guess this is where the person referred to. Sorry, I can’t say the word. I asked to spend a few extra weeks in Singapore with my family. They rejected my request said it was a tax issue and they didn’t want to explain anymore. I don’t believe that they are correct. What is your guidance here?
So first of all, I don’t want to get into anything, any issues you may have with your superiors, right. That’s a corporate personnel, whatever issue from a tax perspective. I think there may be a point. And if you remember one of the first slides that Boon Yip had in his deck, he was talking about permanent establishment. I mean, I don’t know anything about you. I don’t know the name of your company. You didn’t mention it. So, I don’t know where you sit in the company, but from a tax perspective, if it is that your position is of a more senior nature. And for example, if you have the ability to let’s say conclude contracts, you being, you being in Singapore, while your companies in the us and you, an employee, it may trigger what boonies padded is. One of his earliest slides, something called permanent establishment. And as a result of that, permanent establishment, your company in the US your employer in the US may become taxable in Singapore.So again, I don’t know the nuances of the situation with your company, but just generally speaking, this could be what your boss was referring to by you spending extra time to be with your family in Singapore. And I know, it’s a special time of the year and everything, but perhaps that’s their concern. And so perhaps this is an opportunity to take this point to your boss, or perhaps someone in your finance or your tax team, and have a deeper dive into that and have more of an exploratory conversation with them and see what sort of arrangements can be made. But I get it, there’s so many people working remotely because of the health crisis that we all facing right now. But unfortunately there are tax implications to someone who may be of a senior level spending a lot of time in another jurisdiction. So, or even within the US has spending 10 in another state, there may be tax consequences so far less internationally. So I’m sorry that, it’s a difficult time, but hopefully you and your boss can work it out. Sorry.
Okay, next question. Someone is a US citizen, they are base in Hong Kong, and she wants to move to Singapore to work for a technology company. And she has the opportunity to work as an independent contractor for this Singapore based technology company. And she wants to know whether she can form an LLC in the US, for example, Delaware, and use that as the vehicle to invoice, I guess it would be a client because it’s not an employer-employee relationship, but an independent contractor service provider, a relationship. This is an interesting topic, a question or idea, because I’ve heard it more than once in the past few months. And you know, someone got quite upset with me when I gave them the answer. So I hope you don’t get upset with me too. So again, this ties back to what Boon Yip mentioned that one, that first slide Boon Yip put up, that’s perhaps one of the most important slides when it comes to doing business across borders. This idea of permanent establishment. So you may think that you’re in Singapore, you moved to Singapore from Hong-Kong and, you worked to, let’s say Delaware or Nevada, a Wyoming company that you set up, but you set up that company, right?
So you’re like the only person with this company. And you’re using this to invoice for work being done in Singapore. The point is that that company that you have set up in the US has what we call permanent establishment in Singapore. So as a result, that company by rights should be taxable to Singapore and inland revenue authority of Singapore has the right to tax that company because it has it, you know, it has what we call a substance. You have the key decision-makers or what we call management and control. So that that’s the two tests and, and Singapore’s tax legislation. It’s all about management and control. And when management and control is being exercised from Singapore, that’s a Singapore company, regardless of where it’s incorporated. So in your situation, again, I can’t, we can’t give advice because I don’t know the nuances of your situation inside out, but generally speaking, we would have a conversation with a client in a similar situation to yours, and we’d advise forming a Singapore company. And, you know, go ahead.
BOON YIP YEE:
Sorry. A little bit more. So looking at your context, if you were to provide your service in Singapore and the invoice goes to the US company, you could possibly be subject to withholding tax. So there are other aspect to look at, like what Derren was saying, that you have to look really at the context. It’s not something that is expected, but that could be a possibility.
DERREN JOSEPH:
So there you go, it’s even more complicated. So I think if you want, you can contact us directly Boon Yip, put our contact details at the end on his last slide, but you can reach out to us and we can work with you more closely to come to a solution that, that makes sense. But definitely setting up this one person company in the US while you were working in Singapore for a client in Singapore, we don’t think that works, that isn’t really work. Okay. So again, sorry for the bad news, but it is what it is.
Next question. Right? How is CPF? So I guess someone is either a US citizen who is a PR in Singapore because they asking about CPF, or they may be Singaporean who who’s a US green card. They didn’t say, but I assume it’s one of the two CPF is a common subject area for us, because typically when you work with US-based tax professionals, they don’t understand what the Central Providence Fund is. They don’t understand what the CPF is. They don’t know whether it’s like a superannuation in Australia. They don’t know whether to treat it as a PFIC, a Passive Foreign Investment Company for US purposes. They don’t know whether to treat it as a trust for US purposes. And it gets really confusing. So being that we are a US tax team that is actually based in Singapore. That gives us a greater closeness to the nuances of working in Singapore. If you go to our website HTJ.tax, there is an article that I wrote about the CPF and in it, I was actually able to quote an opinion by the US Embassy in Singapore. Back in the days when the US embassy had a bit more budget, and there was actually an IRS team and internal revenue service team based in the US Embassy in Singapore, they will ask to consider the CPF and they gave a written opinion. So we have that on a website, but essentially, no, it’s not like the super in Australia. It’s not going to be a trust. It’s not going to be a perfect what it is, but at the same time, you can’t get the tax benefits that you would get from a Singapore tax perspective. Because from a Singapore task perspective, you, you get to reduce potentially your taxable income to the extent that you contribute to the CPR, but you don’t get that benefit from, from the US so it’s not treated like a qualified plan for my us qualified plan. Like, let’s say a 401k, what do you, what you need to do is you would the interest that you get from the CPF that will go on your Schedule B and the fact that you have a CPF means that you’re probably gonna want to check the box at the bottom of your Schedule B depending on the threshold of your other financial assets and may trigger Form 8938.
And it will probably trigger Form 114, which is your FBAR or Foreign Bank Account Report. So, one last thing that a lot of people forget, even teams that are based in Singapore, you know what the CPF, there’s also an employer contribution. So you’re an employee you can contributing, but there’s an opportunity for your employer to contribute as well. Your employer contribution is taxable to you or your us tax return. So I hope that helps have a look at the website. And if you have any further questions, feel free to reach out. And we’re happy to have that conversation with you or your advisor back in the US to help him or her understand how the CPF should be treated.
So that’s that moving on again, for those who just joined, feel free to type in the box below any questions or issues that you want us to explore, have a conversation about next one, okay. Someone is leaving Singapore, sorry to hear that. Leaving Singapore to move to the UK. Right? So in a situation like that, when you leaving Singapore, particularly to go to a higher tax jurisdiction like, like Europe, you know, you need to be prepared, right? Because you’ve been spoiled in Singapore being in a relatively low tax environment. So you’re going to be jumping into a fire from a tax perspective.So you go the UK, just like the rest of Europe. I know the UK is not part of Europe, but you know what I mean? It is a high tax jurisdiction. So some sort of planning is, is recommended. So you’d probably want to sit with an advisory team who understands both Singapore and the UK, if it is that you’re moving in the US because you US exposed as well. There are tax planning opportunities. From a UK perspective, you can elect the something called a split year treatment. Where part of, I don’t know when though, you didn’t mention when this year you’re going to be moving to the UK, but you do have an opportunity to exclude some of, depending on when you moved to the UK, the period, the, the part of the, the tax year, before you move, you can exercise the option to exclude that from UK taxes, rather than go with the default where the entire tax year it’s taxable to the UK.
So get elected, that put your treatment, provides a planning opportunity to extend that any big transactions you need to make, you can make in Singapore, especially capital gains, you know, stock options, whatever you can make in Singapore before moving to the US before, moving to the UK. I’m sorry. In addition to which you can elect to be what we call or what is commonly known as resonant dumb. So you can be tax resident in the UK, but without being taxed domiciled in the UK. And that gives you the opportunity to exclude your foreign income, your foreign source income from UK taxes. Everything is going to be taxable to the US obviously, but the UK is that tends to be a high tax jurisdiction than the US. So you tend, when you’re UK/US expose, you tend to plan to the UK rather than in Singapore. When you plan to the US because of the high tax jurisdiction. So, bottom line is I would recommend some sort of a tax optimization strategy session with a team. And, and we’re happy to provide that if, if you’re not already committed in another direction, we go through all your assets and all your income streams and help you, you know, help guide you as to what’s the most appropriate decision to you given this, the specs big step. You’re about to make hope that helps moving on to listen again, for those who’ve just joined, you can just type your questions in the box below, and we will get to them the order in which they are received.
Yes. What’s going on with the IRS. Complaints. No it’s not you. So someone is having problems with the IRS and delays in correspondence and processing, it’s not you, it’s because of the health crisis, the name of which we can’t mention, because then we got, you know, sanction in certain platforms, but because of the health crisis, there’s a backlog in terms of processing, there’s some returns for 2020, which was submitted in 2021, which have yet to be processed by the IRS. So, we know, we have clients that the paper file last year in a timely fashion and their returns have yet to be processed because of this backlog. You know, you can just do a quick search, or you can look at IRS, god.gov through litigious press release, but there are millions of unprocessed returns because of the crisis that was going on. So what does that mean? It means we recommend, and we work with our clients in the following way where possible we try to e-file because at least when it’s, e-filed, it’s a system, that technology is going to process that return. When you people file a return, then someone needs to scan that in. And what some of the agents have been doing because of the health crisis, when a package or mail is received, they don’t touch it for a couple of weeks because they want to give a time and then they open it. And then of course, there’s social distancing in the office. So they’re not at capacity. And you know, it just gets more complicated. And for those who trying to ring your rights, it’s been even harder than usual. I think it’s less than 10% of the cause of the IRS have actually been answered. So it’s not just you. So you try to file as much as possible. And I don’t know whether you sell filing or not. You, you didn’t mention, but when you sell file and you hand write on the return that increases the processing time as well. And that also opens it up to mathematical errors.
So try as much as possible to use software, if it is you’re self filer. One of the big changes last year, where the child tax credits, please look out for that form, that child tax credit form, that is super important because that information, the IRS is going to send you something in the mail and that form is necessary for your return. So please treat it very carefully. And that leads to another issue that people are having on the other side, which is delays in mail, arriving into Singapore from the U S and again, it’s not used the IRS. There’s a lot of delays. We have clients receiving letters from the IRS this week that were sent in November.
So, it is quite a delay and some, a little bit before, so please, please keep that in mind. They are also a lot of returns being flagged for identity checks because of identity theft. So even my, to be honest, my return was flagged for, you know, just random identity checks. So, you know, it, it happens to everybody. They just want to make sure that no one is being a victim of identity theft. So just again, use the software, try to file if it is that you expect to refund, provide you bank details. Don’t give don’t chat with box for paper chat, because that’s going to take a long time to be processed and then tend to Singapore. So hope that helps. It’s not just you, but there ways to that you can work with them. Okay. Yeah.
So someone is, okay, sorry. There’s a question. Let me jump to this one. Thank you, Armando. I’m an American citizen were permanent residents in Singapore. If I receive dividends distributions from a Singapore company, where I am a director and owner, would I need to pay tax on that dividend in Singapore? Well, Boon Yip for those who can’t see, because they’re not on zoom, Boon Yip do you want to give you your response? Cause Boon Yip typed an answer
BOON YIP YEE:
Just to answer a question from Armando. So the dividend you receive from a Singapore company is not taxable in Singapore, but if you are American citizen, I believe Derren can I advise is probably taxable in the state.
DERREN JOSEPH:
Boon Yip you’re absolutely correct. Your worldwide income is taxable to the US including the dividends. If you receive tax-free in Singapore, which leads to another dilemma that company owners like yourself, we have quite a few of our clients, company owners, US exposed company owners. And what they have is a bit of a dilemma. If you remember one of Boon Yip slides in his deck, and for those who missed it, this is being recorded. So you can go to YouTube or wherever, you know, YouTube, I guess, or to our website HTJ.tax. And you can actually look at the recording again. So if you miss Boon Yip, because he mentioned that dividends are tax-free to two business owners here in Singapore.
So therefore, from a Singapore tax perspective, you’re being incentivized to take as much as you can in dividends, but then you’re US exposed. So, Section 911 of the US tax code, which is perhaps one of the most generous provisions for those who US exposed and working internationally, where you get a chunk of your income, your salary free of US tax, and that amount moves with inflation. So I think it’s going to be like 112,000 for when you filing your return for last year. So the first hundred and 12,000 plus you deductions and whatever, plus your housing deduction and some utilities.
So let’s say $150,000 of income of earned income will be free of US tax. So therefore from a US tax perspective, you incentivized to take more a salary and less as dividends, right? You got me. Whereas in Singapore tax perspective, you’re being incentivized to take more as dividends and less a salary. So that’s where we work with clients to find that that Goldilocks level between how much should you really be taking thinking of the Singapore perspective salary, and then how much you should be taking as dividends to get the balance, right?
And unfortunately, there is no double tax treaty between Singapore and the US like there is with Indonesia to the US or Philippines to the US, Australia to the US. So those dividends that you’re going to get from you, Singapore company are going to be taxed at ordinary tax rates. So it could go up to 35% or whatever tax bracket you’re in. And then on top of that, sorry, you know, but we, we deal with this every day on top of that, because Singapore is in a low tax jurisdiction of so-called low cap, low tax jurisdiction, like Hong-Kong. You’re going to be subject to the profits that you have in the company. There’s a deemed distribution cause typically, or historically you would only be taxed from a us perspective, right? On the money that you pull out of that Singapore company in the form of salary, or some sort of bonus or consulting fees or whatever, plus the dividends. But now there’s a tax on the retained earnings. It’s called GILTY, Global Intangible Low Tax Income tax. And this is one of the provisions under president Trump tax cut and jobs act back in December 2017. So as a result of that tax, any retained earnings that you have on that company balance sheet, that even though it’s not distributed to, you will be taxable to you as the majority owner of a company. So again, some sort of planning would be helpful in terms of getting the tax optimization, right.
So yes, next question. Oh, okay. Someone else. So Lancaster falls into the same scenario as Armando. I hold dual nationality, US and UK. Yes, Boon Yip and I, our advice would be the same. So you’d need to do some planning because you’d be having to balance just like Armando between how much you going to take a salary versus someone you’re going to take as dividends bearing in mind, the lurking in the back is that deemed distribution, basically a tax on Phantom meanings called guilty global intangible, low tax income tax. So, yeah sorry.
Looking at other questions, I’m just going to go quickly over to some of the other platforms to see if people asking questions over there. Okay. Someone is asking about flag theory, this is unusual. I normally get this in other livestreams, not in the US Singapore one. So I’m aware that flag theory is the name of a legal entity in Singapore and in Malaysia, but it’s also the name of an actual theory. It was coined by a guy called Harry Schultz back in, I think in his 50’s or 60’s. He was politically minded libertarian. And he advocated what he called three flat theories, which was over time, I think by the eighties refined into fly five flags. So the, so the five flags would be well where you are a citizen for him. It will be United States would not be where his residencies resident outside of the US and he will bank in another jurisdiction. His company will be in another jurisdiction and he would entertain himself in another jurisdiction, five flags, some people who into crypto, the advocate, six or seven flags. But essentially, I don’t think it’s meant to be dogmatic or prescriptive. It’s the idea of having an international diverse, internationally diversified lifestyle. And, you know, some of our clients come from certain minority religious groups or ethnic groups that historically may have had a hard time in their country of origin or where their grandparents or their parents came from. So again, there’s this idea that you don’t have all your eggs in one basket, because if things go funny in the jurisdiction in which you have most of the wealth you’re completely exposed, right? So, it’s essentially the idea of having a diversified lifestyle.
Now that has come to take a different shape now that we, in this new normal, this post health crisis reality, and with the, you know, the, the lockdowns and reopenings on whatever many people have found founded those who have the ability to work remotely or to manage their businesses from a remote location, they found it quite convenient. So for example, there are neighborhoods, you know, it was reported in the New York times. You know, there were neighborhoods in New York in when things really kicked off in the middle of 2020 some neighborhoods like 40% of the neighbors just moved out in some of the higher income neighborhoods. Why, because they had a plan B, they moved, you know, upstate or one of the neighboring states as far down as Florida or to Martha’s Vineyard, or one of the, you know, more rural settings where they’ll have more space and whatever, when things were getting pretty intense in New York. And, similarly in Singapore, we’ve seen some of our clients who have that plan be able to pick up. And we have clients that have moved to Bali to manage the situation in Singapore from Bali many have returned to the US some have moved to parts of Europe where, you know, they have more space and, and whatever the, the unique situation would be.
So it may be worth, you know, the original putting aside what the original prescription behind flack theory may have been. It may be worth considering having a plan B. And for those who need to travel for work, when borders were closed, of course it has become quite difficult in some instances, however, it is helpful if you are a resident of that jurisdiction. In some, in some cases, it won’t help some, in some cases, even citizens won’t let allow to travel in and out, but in some jurisdictions, it did help a nonessential travel was blocked, but essential travel, which would include returning to your home was being allowed.
So for those people who had to make business trips, it was helpful that they were illegal resident of a jurisdiction they’re trying to get into. So again, stepping back, I’d say it is in its original form. It may not be relevant today, but the, the principle or the spirit behind it, the idea of being diversified and having a plan B, I think it is quite important. And especially in this new normal, I think it’s worth having, different residencies just in case you may want to move to somewhere. That’s more comfortable because of cases increasing wherever you are.
So, yeah. Hope that helps.
Let’s see. There are any more questions I’m just going to go through a quick check of some of the other platforms again, to see whether anyone else has asked any questions. Okay. Fantastic. Okay. I think that’s it. I think we’ve answered all your questions. So thank you for joining us. And again, this is, this is being recorded and you can have a look at HTJ.tax and you can see all the, the podcast platforms and websites with this will be uploaded from, I think there’s going to be in Spotify, iTunes, SoundCloud, Google play Amazon, basically wherever you’re going to get your podcasts. You’re going to find this recording. We do this every week to find out what we going to talk about next week, just have a look at it. HTJ.tax and click on events. You’re free to join us anytime. If you have any further questions, please feel free to reach out to either Boon Yip or myself. We’ll be happy to work with you on any Singapore, US, or any international tax issue in general. So international tax in general, Singapore and US in particular. Thank you for joining us and we’ll see you next time. Bye-bye
VOICE-OVER:
Here are four ways we can help you.
1. We offer HOLISTIC strategies to help you live that international life. Tax + MIGRATION options.
2. We help you MODEL the tax impact of moving to a new jurisdiction
3. CONTACT us for tax optimization consults over Zoom
4. High Net Worth? We can QUOTE for doing your “US – International” tax returns
Our books and upcoming events are available at HTJ.tax. Please subscribe like, share and comment down below or email us at help@htj.tax to engage us to advice on international tax or business matters.
