A hitchhiker’s guide to immigration in Singapore

Jul 12

A hitchhiker’s guide to immigration in Singapore

With the latest policy restrictions on foreign manpower, many people have doubts about Singapore’s current immigration policies.

We outline some case studies as examples of some common situations and the rules that apply under those circumstances:

  1. Working outside Singapore for a Singapore registered company
  2. Working in Singapore on a short-term basis
  3. Working in Singapore for a foreign company on a long-term basis

1. Working outside Singapore for a Singapore registered company

Is it even possible, to work for a Singapore company but not to need a work visa or to pay personal taxes in Singapore? In one word, Yes! The clue to the answer lies in the term “Territorial System”. Singapore follows a consistent approach in its immigration and taxation policy; both of which only come into play when it concerns the territory of this nation.


Case 1
A Singapore-registered company hires foreign workers/locals to carry out work outside the territory of Singapore.

  There is no requirement to apply for a work visa in Singapore for foreign employees if they are working exclusively outside of the territory of Singapore.
  Also, in this scenario, the foreign employee is not subject to personal tax in Singapore, since the work is carried out outside of the territory of Singapore.
  Furthermore, the foreign employee in this scenario is not subject to any of the provident fund levy requirements of Singapore.


Example


A Singapore-registered company that specializes in content creation and provision hires a team of 30 employees who work exclusively in Thailand.

futurebooks switch on  The employees in this example do not require a work pass in Singapore and are not subject to personal tax in Singapore.
futurebooks switch on  There is no requirement to issue these employees with an Annual Statement of Income (Form IR8A) at the end of the year, as their tax jurisdiction is not Singapore.
futurebooks switch on  The employees do not need to contribute to the Central Provident Fund (CPF), Skills Development Levy (SDL) or any of the race-based levies prevalent in Singapore.

Note: The possibility of a permanent establishment being created in the location where the employee is based is a matter for the consideration of the respective companies.

2. Working in Singapore on a short-term basis

There are certain exemptions available for those who come to Singapore to work on a short-term basis only.


Case 1

A foreigner, including even the director of a Singapore-registered company, enters Singapore to attend e.g. a company meeting, conference, training course, workshop, exhibition, etc.

  There is no requirement for any approval or work pass.
  The above activities should not involve a contract of service or a contract for service with an employer in Singapore.
  Foreign nationals who need an entry visa into Singapore must apply for a business visa from the Immigration and Checkpoint Authority (ICA).


Case 2

A foreigner enters Singapore to conduct performances, do activities relating to journalism, sports, fashion shows, tour facilitation or to provide specialised skills not available in Singapore.

  Such foreigners can apply for a Work Pass Exemption from the Ministry of Manpower (MOM), which is issued for a period of up to 60 days.
  The above activities may be performed for the duration of the short-term visit pass, subject to the cap of 60 days.


Example


A Singapore-registered IT services company brings in certified professionals from its Indian subsidiary to perform troubleshooting on their clients’ systems. The length of each visit is under 60 days.

futurebooks switch on  The employees are required to apply for a Work Pass Exemption in advance.
futurebooks switch on  The remuneration given to the employees for the time spent in Singapore is subject to a withholding tax in Singapore. This is regardless of where the actual payment is made and by whom. A percentage of the total employment income will be deemed as payment for the time and activity in Singapore.
futurebooks switch on  It is the responsibility of the company paying the remuneration to withhold tax on such payments to non-residents for work performed in Singapore. In this particular example, since India has a tax treaty with Singapore, a specific withholding tax exemption can be claimed by filing forms IR586 and IR37C with IRAS.

Note: Any billing involving related parties, i.e. the Singapore parent company and the Indian subsidiary in this example, must be in accordance with the agreements in place between the two entities. This should be in line with the principles of transfer pricing.


Case 3

A foreigner; foreign student or trainee from a foreign office or subsidiary enters Singapore for employment purposes as part of their training.

  The company can apply for a Training Employment Pass (TEP) from MOM in such cases.
  TEP approval is subject to the eligibility criteria mentioned by MOM and is generally valid for up to three months and is non-renewable.

  • A foreigner who earns income in the course of the above three scenarios is subject to non-resident tax and is required to file an income tax return for non-residents.
  • Tax exemptions are given to non-professionals and non-public entertainers. The inclusion of “professionals’ effectively implies that a non-resident tax or withholding tax is applicable. However if the foreigner is from a country with which Singapore has a concluded tax treaty, they may obtain exemptions from the payment of taxes in two countries.


Example


A hotel chain with its headquarters in China wants to send three employees for training to their Singapore-registered subsidiary for a period of three months.

futurebooks switch on  The subsidiary company must apply for a TEP for all three employees in advance.
futurebooks switch on  The earnings in Singapore are subject to tax in Singapore at the relevant tax rates.

3. Working in Singapore for a foreign company on a long-term basis

Case 1

A foreigner employed in Singapore by a Singapore-registered subsidiary of a foreign company.

  A valid work pass (Employment Pass) must be applied for for the employee and an employment contract must be prepared.
  The remuneration paid to the employee will be subject to resident tax rates in Singapore.
  The company must contribute to the Skills Development Levy (SDL) for foreign employees. They do not attract CPF levies.


Case 2

A foreign company with no presence in Singapore employs a Singapore local to work in Singapore.

  There is no requirement to apply for approval from any Singapore government body for the employee.
  The remuneration paid to the employee will be subject to resident tax rates in Singapore.
  Both employee and employer should contribute monthly to the Central Provident Fund (CPF) in Singapore.


Case 3

A foreign company with no presence in Singapore employs a foreigner to work in Singapore.

  A valid work pass must be applied for for the employee and an employment contract must be prepared
  The remuneration paid to the employee will be subject to resident tax rates in Singapore.
  The employee must contribute to the Skills Development Levy (SDL) and other race-based levies prevalent in Singapore.

– In all the above scenarios, when an employee leaves the company, a mandatory tax clearance has to be done with IRAS, unless the employee is a Singapore citizen.


Example


A property development company based in India sets up a branch office in Singapore and hires two foreigners and one local employee to work in Singapore.

futurebooks switch on  The branch office needs to apply for a valid work pass (Employment Pass, Letter of Consent) for the foreign employees.
futurebooks switch on  The foreign employees must contribute to SDL; currently 0.25% of the gross monthly remuneration.
futurebooks switch on  The employer and the local employee must pay their respective monthly CPF contributions.
futurebooks switch on  There are restrictions on the number of work passes that can be applied for under the branch office.


Case 4

Working in Singapore for a Singapore-registered company on a long-term basis.

A foreigner employed in Singapore by a Singapore-registered company.

  A valid work pass must be applied for for the employee and an employment contract must be prepared.
  The remuneration paid to the employee will be subject to resident tax rates in Singapore.
  The employee must contribute to the Skills Development Levy (SDL) and other race-based levies prevalent in Singapore.

A local employed in Singapore by a Singapore-registered company.

  There is no requirement to apply for approval from any Singapore government body for the employee.
  The remuneration paid to the employee will be subject to resident tax rates in Singapore.
  The employer and the employee must contribute monthly to the CPF in Singapore.


Example


A firm of consultants, operating as a Singapore-registered company, hires three locals and four foreigners to work in their Singapore office.

futurebooks switch on  A valid work pass (Employment Pass, Letter of Consent) must be applied for by the company for the four foreign employees and employment contracts must be prepared for all seven employees.
futurebooks switch on  All the employees must pay resident income tax rates for remuneration received in Singapore.
futurebooks switch on  The four foreign employees must pay SDL.
futurebooks switch on  The company and the three local employees must contribute monthly towards the CPF.
futurebooks switch on  If an employee resigns, the company must file a mandatory tax clearance, unless the employee is a Singapore citizen.


As Singapore moves through a challenging period of balancing the manpower needs of an ever-growing economy amidst localisation demands, policy tightening is expected. Structuring employment policies have become an irrefutable point for all small and big industries.


Image courtesy – Person with Backpack and Grey Hoodie Hitchhiking on Road (Public Domain attribution)


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