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International Investment Company

Discussion in 'Accounting, Tax & Legal' started by Chris C, 25th Mar, 2014.

  1. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    I?d like some feedback on the following scenario:

    An individual has a job in Australia and a salary of $180,000 year (additional income is taxed at the top rate).

    They have $1,000,000 in investable savings which they invest in both Australian and international shares, bonds and cash which generates dividends and interest of $60,000 a year.

    Is there any issue with this individual opting to establish a company in Singapore which they are a non-resident director of and place their $1,000,000 into then have the company invest this money into Australian and international shares, bonds and cash.

    Would the $60,000 income earned each year be taxable at Singapore company tax rates? As capital gains taxed at the Singapore rate?

    Are there any tax or legal issues that should be considered before pursue something like this?
     
  2. tax guy

    tax guy Member

    Joined:
    9th Dec, 2010
    Posts:
    14
    Location:
    Sydnye, NSW
    Hi Chris,

    The structure doesn't really work. If you haven't set up a permanent establishment in Singapore (i.e. have a physical office and business operations) the income from this company will be deemed back to the shareholders. This would effectively mean that the income in the company would be attributed to you and should be disclosed in your tax return.

    The income will still be taxed in Singapore and you will receive a foreign tax credit to be attributed against this income.

    Other implications are:

    - Singapore company may not be entitled to franking credits.
    - You will need a local resident director, which is expensive.
    - Compliance may require your Singapore company to be audited.
    - No discount is available on capital gains.
    - Withholding tax may apply on dividends paid to the Singapore company.

    Unless you are going to live there, the structure does not reduce any tax (it actually increases it).

    You could have a family trust structure with a corporate beneficiary which may provide you with a better outcome especially where you have a spouse or kids on low marginal rates of tax.

    Brad