Legalmondo & Internacionalize
The Internationalize portal, alongside Legalmondo, launches the Brazilians around the world series, which will address the main legal aspects of each country, analyzed from the points of view: immigration, tax, succession and business. This edition covers Singapore.
Immigration Law
1. The main work visas in Singapore
In Singapore, there is a variety of so-called “work passes”, but the most common work visa is that given by the “Employment Pass” (“EP”), which, in the words of the Ministry of Manpower, “allows foreign professionals, managers and executives to work in Singapore. Candidates need to earn at least S$4,500 a month and have acceptable qualifications. Employers must also demonstrate that they have fairly considered all jobseekers”. The last sentence is of particular importance especially in the wake of Covid-19, as the Singaporean government is trying hard to fight local unemployment.
Lower income earners, as well as skilled and semi-skilled workers should consider the “S-Pass”.
Higher income earners may consider the “Personalised Employment Pass” (“PEP”), which allows greater flexibility, whilst entrepreneurs wanting to start and operate a new business in Singapore should opt for the “EntrePass”.
The EP is issued the first time for up to two years and is renewed for up to three years each time.
The EP allows, like all the other work passes, to stay in Singapore or enter Singapore multiple times throughout its validity and grants the right to work in Singapore. Without a work pass, one cannot work in Singapore: even trainees need a valid Trainee Pass and even students and graduates aged 18 to 25 who want to work and holiday in Singapore for 6 months need a so-called “Work Holiday Pass”. Without these passes, a person can only enter Singapore as a tourist, or as family member (e.g. spouse of an EP holder, under certain conditions), or for medical and other exceptional reasons.
Since the EP and most other work passes are given to employees, an EP holder is granted the rights attached to his or her labour contract and labour legislation. Termination of the employment contract entails terminating the work pass, if one does not find another job in Singapore within a specific deadline.
Several business owners who do not qualify for other programmes therefore employ themselves in order to be able to work and live in Singapore. Naturally, their own employment and EP (or other work pass) application is vetted by the Ministry of Manpower, so opening a Singaporean company to employ oneself is not exactly a straightforward procedure.
Upon obtainment of the EP, one can apply to become a Permanent Resident (“PR”), which evidently grants more rights.
2. Investment-related visas in Singapore
The general principle in Singapore is that any foreigner that wishes to take up residency in the city State must contribute to the economy and to society. In other words, an UHNWI cannot simply “buy” a “golden visa” and become a resident.
Evidently, Singapore does attract a very large number of HNWIs and UHNWIs, so a special programme which is essence provides a fast-track towards the obtainment of the PR has been created. This programme is the Global Investment Programme. In the words of the Singapore Economic Development Board “The Global Investor Programme (GIP) accords Singapore Permanent Resident status (PR) to eligible global investors who intend to drive their businesses and investment growth from Singapore. You will need to have a substantial business track record and successful entrepreneurial background to qualify”.
Upon meeting the requirements set by the GIP, the investor takes up Singapore’s PR status, by investing at least S$2.5 in a new business in certain industries. This investment is however limited to:
• a traditional owner of a business that has made at least S$200million for at least three years;
• a new generation owner that owns at least 30% of shares and an executive role in a S$500million business;
• the founder of a S$500million business invested by renowned funds;
• a person with a five-year minimum track record as investor or entrepreneur and at least S$200million bankable assets that sets up a Singapore for the entire S$200million (of which at least S$50million must be kept in Singapore).
Similarly, through a less expensive arrangement that involves nonetheless the set-up of a family office “Single Family Office (“SFO”)” and minimum annual operating expenses of S$200,000.00 the investor upon meeting various requirement, can obtain the above-mentioned EP. While not expressly defined by law, SFOs enjoy a number of regulation exemptions as opposed to entities managing third-parties' assets, and can benefit from a special taxation exemption even if the core or sole business is, indeed, fund and asset management. While they can be structured in different ways, the most common are either using a set of local Fund/Fund Management Company (see addition below) - from which the natural person beneficial owner could also obtain a residency permit (“EP”) - or a locally administered Trust. In both cases the setup is relatively fast and straightforward, compliant and tax efficient - that being said due to a series of minimum fixed costs these are solutions targeted for a minimum AUM of 2 to 10 million SGD, with the most statistically relevant AUMs so far 100 million SGD and above.
3. Special types of visa in Singapore
There are no special types of visas in Singapore, please see the Global Investor Programme and the Single Family Office note above.
4. How to obtain a Singapore citizenship
Among other requirements, an immigrant must first be a PR for at least two years and be aged 21 and above. It is worth noting that Singapore does not allow dual citizenship, so, upon obtainment of Singapore citizenship, the applicant must surrender all of his / her other passports.
Tax Law
1. Individual Income Tax in Singapore
Singapore only taxes locally sourced income. There are ten rates, from 0% to 22%, of personal income tax, based on the taxable income.
2. Wealth Taxation in Singapore
So far, there is generally no wealth or inheritance taxes in Singapore. There is however property tax, which is progressive and there are two differing tax rates for owner-occupied (up to 16%) and non-owner-occupied (up to 20%) residential properties. All other properties are taxed at 10% of their Annual Value.
Assets left behind by a deceased person may continue to produce income after their death. Estate income become part of the income of the heir and therefore taxed under the personal income tax scheme.
Similar rules apply to trust, although in certain cases the trustee is (also) taxed.
3. How Singapore views Tax Havens
Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting and, although not a member of the OECD, it does follow many of the Organization's directives.
4. Treaties to avoid double taxation in Singapore
Singapore generally does not use a limitation on benefits clause in its treaties to avoid double taxation, although (see above), Singapore is active against BEPS.
Singapore has concluded over 90 DTAs, Limited Treaties and EOI Arrangements which do involve income and other taxes.
Succession Law
1. Probate in Singapore
The probate procedure involves the entire estate. However, overseas immovable property remains subject to the laws of the jurisdiction it is located in.
2. Trusts and Foundations under the Singapore Law
Singapore recognizes trusts and private foundations. Foundations are also called charitable trusts and it is worth noting the existence of Company Limited by Guarantee (“CLG”), used to carry out non-profit making activities and quite interesting under a tax and transparency perspective.
3. Other relevant aspects
If the deceased did not leave a valid will behind before passing away, the Intestate Succession Act will determine how the estate is distributed to the survivors, who include, in this hierarchy: spouse, children, parents, grandparents, uncles and aunts. If there is no survivor, the Government inherits.
The Intestate Succession Act does not apply to Muslims, who instead follow the Shariah, according to the Administration of Muslim Law Act.
Business Law
1. Setting up and running a business entity in Singapore
Setting up an entity and starting to run a business in Singapore is extremely easy. Please refer to the Legalmondo “Q&A on how to set up and manage your company overseas”
Private limited liability companies.
2. Entity holders
Singapore allows a business entity to have a single partner or shareholder. The partner does not need to be a citizen or resident in Singapore.
At least one director must be a Singapore Citizen or a PR.
3. Opening a bank account in Singapore
To open a bank account for a newly-created entity in Singapore or for a foreign entity is relatively easy in both cases, as long as there is proper supporting documentation.
4. Funds and Fund Management Companies in Singapore
Generally two companies are created for this purpose: one will be the fund itself, the other the fund management company.
The fund can be onshore (incorporated in Singapore) or can be offshore (incorporated anywhere, most typical Cayman Islands, Bahamas, BVI etc.). The fund management company must be a Singapore incorporated entity. In both cases, the fund itself will then enjoy full taxation exemption on specified investments proceeds (there are exceptions, for instance if it is a REIT fund); the fund management company instead will enjoy under this scheme a very competitive (for a fully onshore and fully whitelisted jurisdiction) concessionary tax rate at fixed 10%.
If the fund is invested in by less than 30 accredited investors (of which less than 15 are other funds), with overall less than 250.000.000 SGD$ AUM, then the fund management company can apply for the very fast, relatively cheaper and simplified "Registered FMC" regime. In all other cases, it will have to apply for the more onerous "Capital Market Services licence" and become a "Licensed FMC".
There is also a new structure (launched in January 2020), called a "Variable Capital Company", created on purpose for investment funds, which:
· has a variable capital structure that provides flexibility in the issuance and redemption of its shares. It can also pay dividends out of capital, which gives fund managers flexibility to meet dividend payment obligations.
· can be set up as a single standalone fund or an umbrella fund with two or more sub-funds, each holding a portfolio of segregated assets and liabilities. For fund managers that structure their funds as umbrella VCCs, theremay be cost efficiencies from using common service providers across the umbrella and its sub-funds.
· can be used for both open-ended and closed-end fund strategies.
· must maintain a register of shareholders, which need not be made public. However, this register must be disclosed to public authorities upon request for regulatory, supervisory and law enforcement purposes.
· Most interestingly, is that fund managers may incorporate new VCCs or re-domicile their existing overseas investment funds with comparable structures by transferring their registration to Singapore as VCCs.
· VCC Funds also must have their local corresponding fund management company, however they are explicitly allowed to delegate the management function to another entity overseas (for example the client’s own FMC in the UK).
Prepared by Federico Vasoli.