While no Asian countries function as a pure tax havens, various locations in Asia have governmental structures, banking, and finance laws beneficial both for individuals and for businesses concerned about reducing their taxes, protecting their assets, expanding their investment strategies, and having confidentiality in their banking and financial transactions. We will survey some of the benefits of doing business and handling finances in Hong Kong, Malaysia (Kuala Lumpur), the Philippines (Manila), Singapore, and Thailand (Bangkok). When it comes to simplicity and real tax advantages for individuals, however, there’s no question that the pure tax havens in various Caribbean locales are the world’s best.
[NOTE: This article is a chapter in our
Comprehensive Guide to Tax Havens.]
Table of Contents
Hong Kong, or since 1997, the Hong Kong Special Administrative Region (SAR) of the People’s Republic of China, is a 426 square-mile territory on the Pearl River estuary, where the Pearl River flows into the South China Sea. With over 7.5 million people of various nationalities, it is one of the most densely populated areas in the world. It has long been a world financial center and, at least until mainland China’s political clamp-downs really have an inhibitory effect, a sterling example of the prosperity that the entrepreneurial spirit of capitalism can produce.
Where taxation is concerned, Hong Kong has a territorial tax system, so only income generated in or derived from Hong Kong is taxed. Individuals are taxed on their total Hong Kong income from employment, minus deductible expenses, charitable donations, educational expenses, and other allowances. The marginal tax rates range from 2% to 17% and anyone living in Hong Kong for more than 60 days is subject to this tax. You will be taxed at 2% if you make less than 50,000 HKD, at 17% if you make over $200,000 HKD, and progressively at 6%, 10%, and 14% at various income levels in between.
Hong Kong has no capital gains tax, no withholding tax, no estate tax, no dividend tax, no sales tax or value-added tax, no tax on interest, and no controls on foreign exchange. The inheritance tax, or estate duty, was abolished in February 2006. If property or land is owned, tax is paid by the owners at a standard rate of 15% on the net assessable value of the property for the year of assessment. On the whole, then, Hong Kong offers a relatively attractive tax regime for individuals.
Keep in mind that while Hong Kong has double-taxation agreements (DTAs) with a variety of countries, it does not have one with the United States, so there is the danger of being taxed twice on Hong Kong-sourced income. Furthermore, Hong Kong has signed an inter-governmental agreement with the U.S. Treasury under FATCA legislation, so the balances and activity in any accounts held in Hong Kong by Americans or permanent U.S. residents will be reported to the IRS.
For corporate tax, the ceiling is 16.5%, but since Hong Kong aims to reduce the tax burden for small and medium-sized businesses, the corporate tax rate is only 8.25% for the first HK $2 million of assessable corporate profits. If a business is not incorporated, the rates drop to 7.5% on the first HK $2 million, and 15% above that.
To incentivize high-value manufacturing, there is a 100% write-off for new expenditures on plant and machinery related to manufacturing and for computer hardware and software used in business. There is a 100% deduction for environmental protection machinery, including environment-friendly vehicles for all businesses, as well as a 5-year write-off period for capital expenditure on the renovation or refurbishment of business premises. Capital expenditure for the purchase of intellectual property rights is also fully deductible.
Mutual funds and trusts set up in Hong Kong get special tax concessions, and there is a tax exemption for interest derived from any deposits in authorized institutions located in Hong Kong, as long as the interest does not accrue to a financial institution. All funds operating in Hong Kong, regardless of their structure or the location of their central management, are exempt from tax on profits from transactions in specified assets under certain conditions. Funds are also exempt from taxes on their investment profits overseas and when invested in private companies located in Hong Kong.
Because of fraud and corruption linked to shell companies across Asia, but especially those in Hong Kong, there has been a crackdown on the formation of Asian shell companies in general, but establishing a holding company in Hong Kong is still achievable and can still be a reasonable thing to do. While the climate in Hong Kong is becoming increasingly difficult for foreign investors due to interference from mainland China and the tightening of international financial regulation, Hong Kong remains one of the best places for establishing holding companies for managing finances denominated in Chinese RMBs for Wholly Foreign Owned Enterprises (WFOEs) based in China.
These holding companies can function to manage receipts from dividends and commissions and other profits of WFOEs in China, serving a cash pooling function. A foreign investor can also establish a Foreign Invested Enterprise (FIE) where funds can be transferred and stored where they are subject to lower taxation than in their home country.
This much said, it’s important to consult with financial advisors to make sure that all of the regulations are being followed, especially with recent efforts by the Base Erosion and Profit Shifting (BEPS) program of the Organization for Economic Cooperation and Development (OECD) to limit the ability of international business enterprises to use gaps and mismatches in the tax regulations of different countries to minimize their tax burden. These efforts are directed especially at shell and shelf companies that lack business substance and exist primarily for tax benefit. China, for instance, has instituted stringent anti-circumvention laws with Hong Kong on the indirect transfer of taxable assets to make sure they get what they proclaim as their due.
In order to claim Hong Kong tax benefits under double taxation arrangements (DTAs), a Certificate of Resident Status (CRS) is needed. To apply for a CRS, an individual must either ordinarily reside in Hong Kong, stay in Hong Kong more than 180 days during the assessment year or more than 300 days in two consecutive years, be part of a company or partnership or trust either incorporated in Hong Kong or constituted outside Hong Kong but managed or controlled from Hong Kong.
As far as obtaining Hong Kong citizenship is concerned, Hong Kong does not have its own citizenship, but it does have its own passports. Unfortunately, only citizens of the People’s Republic of China who are permanent residents of Hong Kong and have a permanent ID card can apply for a Hong Kong passport.
The best a foreign national can achieve is permanent residency. The first step in this direction for a foreign national is to obtain a temporary visa, which can be done if they are highly skilled and can enhance Hong Kong’s competitiveness in the world markets, even if they have not secured the offer of a job. A temporary visa will allow a foreign national to remain in Hong Kong for 24 months, but it is renewable on the condition that a job has been obtained or a business has been started. Once a temporary visa has been renewed the first time, it then must be renewed every 3 years. After foreign nationals has lived in Hong Kong continuously for 7 years and been paying taxes each year, they and their dependents are eligible to apply for permanent residency,
When all is considered, because of mainland China, caution is advised for investors and entrepreneurs where Hong Kong is concerned. China’s desire to take over Hong Kong has endangered its status as the financial capital of Asia. China has bypassed Hong Kong leadership and established is own national security laws over the territory, placing it in the middle of a growing conflict between the United States and China. A significant clash between these superpowers could severely jeopardize Hong Kong’s status as a bridge between the powerful engine of the Chinese economy and the rest of the world.
- Hong Kong: The CIA World Factbook
- International Tax Highlights: Hong Kong 2021 (Deloitte)
- International Tax Information Exchange in Hong Kong
- TIEA between the United States and Hong Kong
- TIEA between Canada and Hong Kong
- Tax Residency in Hong Kong
- Property Taxes in Hong Kong
- OECD BEPS program
- Hong Kong Private Company Incorporation Guide
- Starting a Holding Company in Hong Kong
- Inland Review Department (IRD) Certificate of Resident Status
- Hong Kong Passports are only Obtainable by Mainland Chinese Citizens
- The Shadow of China over Hong Kong’s Financial Future
Malaysia is in southeastern Asia and consists of the southern part of peninsula that has Thailand to the north, as well as the northern third of the island of Borneo, bordering Indonesia and Brunei and the South China Sea, just across the sea to the southeast of Vietnam. It is divided into 13 states and 3 federal territories, with Kula Lumpur as the national capital.
The population of 33.5 million is about 62% Malays and indigenous peoples, 21% Chinese, 6% Indian, 1% other ethnicities, and 10% non-citizens from other parts of the world. Many different languages are spoken., but Bahasa Malaysia is the official language. The official religion of Malaysia is Islam and Muslims constitute about 60% of the population, but there are significant Buddhist., Christian, and Hindu representations as well.
It has natural resources of oil, natural gas, bauxite, iron ore, copper, and timber. In the last fifty years or so, it has shifted from primarily being an exporter of commodities to being a strong base for multinational electronics companies, and its financial services, information and communications technology, and logistics sectors are growing. The Malaysian currency is the ringgit (MYR), with the current exchange rate being about 1 MYR = 0.24 USD.
Malaysia has a territorial taxation system, so both residents and non-residents are taxed on Malaysian-sourced income, but foreign-sourced income is not usually taxed, even for resident individuals and corporations. Malaysia has no capital gains tax except on property sold in Malaysia, no withholding tax on dividends (but a 15% withholding tax on interest payments to non-residents on Malaysian-sourced investments), no wealth tax, no inheritance tax, and no gift tax. It has a 6% service tax and a 10% sales tax (5% on foodstuffs, construction materials, and some other categories).
Personal income tax rates on Malaysian-sourced income are progressive, ranging from 0% to those making less than 5,000 MYR per year, and increasing through rates of 1%, 3%, 8%, 13%, 21%, and so on up to 30% on income over 2 million MYR. Corporations are taxed 24% of their Malaysian revenue. Foreign-source revenue for resident corporations is not taxed unless it arises from business in the banking, insurance, air transportation or shipping sectors.
Establishing a holding company in Malaysia that earns income from managing the assets and investments of LLCs or corporations operating outside of Malaysia can work as a reasonable tax reduction strategy. A Malaysian holding company with a nominee director can hold and perform management services for investments in stocks, options, deposits, loans, or real estate (including the renting of properties). While a holding company in Malaysia must report on its operations annually and pay any relevant taxes to the Malaysian government, a suitably structured and managed holding company will be exempt from capital gains tax on its profits and withholding taxes on dividends, reducing the tax burden in the home country of the managed LLCs or corporations.
As an individual, unless all of your income is derived from outside Malaysia, there is little tax benefit from establishing Malaysian residency, for they have an aggressive progressive territorial income tax. The standard of staying longer than 182 days during a twelve-month period to achieve tax residency applies, though if you spend 90 days in the current year, plus 90 days in three of the past four years in Malaysia, you also qualify for tax residency.
In either of these cases, you can verify your tax residency by applying, in person, to the tax authorities for a Certificate of Residence (COR). At the time of application, you must present your home-country passport and documentation of travel in and out of Malaysia over the relevant time period. If your application is accepted, your COR will be ready within three days and it then allows you to claim credits under the various double-taxation treaties held with Malaysia.
While Canada has an extensive double-taxation agreement (DTA) with Malaysia that avoids double-taxation, it is important for American citizens to note that the United States and Malaysia do not currently have a tax treaty in place. Without such an agreement, if an American expat establishes Malaysian tax residency, there is a real possibility of being taxed twice on the same income. What’s more, even though Malaysia and the U.S. lack a DTA, Malaysia has agreed in principle to FATCA, so it will provide information to the IRS on the status of and activity in the financial accounts that Americans hold in Malaysia.
Having tax residency status is not the same as having permanent residency status, however. There are five standard ways to achieve permanent residency: investment, expertise, employment through a Malaysian corporation, marriage, or an accumulation of points based on seven criteria. Let’s briefly outline these five approaches.
First, as is common in such situations, high net worth investors have an easy entrance. If you make a fixed deposit of $2 million U.S. in any Malaysian bank for an agreed period of five years, you will be awarded permanent residency if you can also find a Malaysian citizen in good standing to sponsor you. You may also bring your spouse and any children under 18 years of age. After five years living in the country, you can apply for permanent residency.
For those not quite so well off, but under the age of 50 with reasonable means, there is a less expensive investment option that will secure a renewable 10-year multiple entry visa for you, your spouse and your dependents. If you have liquid assets of at least 500,000 MYR (120,000 USD) and make a fixed deposit in a Malaysian bank of 300,000 MYR (72,000 USD), half of which may be withdrawn to purchase a house, and purchase health insurance and pay for your dependents education, you are eligible to apply for the visa if you have been sponsored by a Malaysian citizen in good standing, posted a bond of 2,000 MYR, passed a medical examination, and proven you have no criminal record in your country of origin.
Secondly, if you have expertise in medicine, industry and manufacturing, agriculture, transportation, higher education, science and technology, information and communication, banking and finance, investment and securities, or sports, and you obtain a recommendation from the relevant local Malaysian agency associated with those fields, then if you obtain a Certificate of Good Conduct from your country of origin and are sponsored by a Malaysian citizen in good standing, you will be given residency and may apply for permanent residency after a period of time.
Third, if you are hired by a reputable Malaysian corporation or work for the Malaysian government, your company or the government can recommend you for permanent residency. This path requires obtaining a statement from the Immigration Department of Malaysia that you are a professional with outstanding skills in your field, getting certification and recommendation from the relevant agencies associated with your employment, working for that private company or government agency for three years, then being sponsored by a Malaysian citizen in good standing.
Fourth, if you marry a Malaysian citizen, have already obtained a Long Term Visit Pass, stay in Malaysia continuously for a period of five years, and are sponsored by your spouse, you may apply for permanent residency.
Finally, you may be eligible for permanent residency if you have a score of at least 65 out of a possible 120 points across seven different criteria: age, academic or professional qualification, language proficiency, length of stay in Malaysia thus far, kinship ties, investment in Malaysia, and employment in Malaysia in accordance with your professional certification. Any record of criminal offences leads to automatic disqualification.
If you eventually wish to become a Malaysian citizen, you will have to renounce any other citizenship you hold because Malaysia does not allow dual citizenship. To apply for citizenship you must be over 21 years of age, have resided in Malaysia for at least ten of the last twelve years prior to the date of application, and demonstrate adequate knowledge of the Malay language.
Upon provision of the requisite documents (application form, identity card, birth certificate, entry permit, identity cards of two Malaysian sponsors, other family documentation), you are at the mercy of Malaysian bureaucracy. Many expats wait several years on their applications without an outcome and others are refused on the basis of vague and subjective requirements, like what constitutes adequate knowledge of the Malay language. Apart from the ability to vote in Malaysian elections, however, citizenship holds little advantage over permanent residency.
- Malaysia: The CIA World Factbook
- International Tax Highlights: Malaysia 2021 (Deloitte)
- Malaysia Commits to Automatic Exchange of Financial Account Information
- TIEA between Canada and Malaysia
- Income Tax in Malaysia
- Establishing a Holding Company in Malaysia
- Tax Residency in Malaysia
- Permanent Residency in Malaysia
- Citizenship by Investment: How to Get a Malaysian Passport
- How to Become a Malaysian Citizen
The Philippines is a country consisting of an archipelago of over 7600 islands located in southeast Asia in the far western Pacific Ocean, east of Vietnam between the South China Sea and the Philippine Sea. There are three main groupings of the islands from north to south: Luzon, Visayas, and Mindanao. The capital of the Philippines is Manila and its most populous city is Quezon City, both within the National Capital Region on Luzon.
The population of the Philippines is about 111,000,000 and consists of a number of ethnic groups, the largest of which are Tagalog (24%), Bisaya/Binisaya (11%), Cebuano (10%), Ilocano (9%), Hiligaynon/Ilonggo (8%), Bikol/Bicol (7%), and Waray (4%). The official languages of the Philippines are Tagalog and English, and there are eight major Philippine dialects. The country is predominantly Christian by religious affiliation, being 81% Roman Catholic, 8% Protestant, and 3% other Christian groupings, but has a 6% Muslim population, and a smattering of tribal and other religions.
The natural resources most prevalent in the Philippines are petroleum, cobalt, nickel, copper, silver, gold, salt, and timber. The Philippines are considered a newly industrialized nation, with a transitional economy moving away from an emphasis on agriculture to service and manufacturing industries. Its primary exports include semiconductors and electronics, transport equipment, garments, copper and petroleum products, coconut oil and fruit. The Filipino currency is the peso (₱), with 1 PHP = $0.02 USD.
The Philippines has a territorial tax system for foreign nationals, foreign corporations, and non-resident citizens in which only Philippine-sourced income is taxed, but corporations incorporated under Philippine law and resident citizens are taxed on their worldwide income. The Philippines also has no capital gains tax on profits from foreign investments (but does have a 6% tax on profits from shares of stock in domestic corporations or from domestic sale of real property) and no wealth tax, though it does have a variety of other taxes, including estate/inheritance taxes, withholding taxes, value added taxes and sales taxes. And, of course, it has individual and corporate income taxes.
The Philippines taxes its resident citizens on their worldwide income, but only taxes foreign nationals and foreign corporations on income generated domestically. Domestic income tax for individuals is progressive, starting at 20% on income over 250,000 PHP (5,000 USD) and rising to 35% for income in excess of 8 million PHP (160,000 USD). Philippine corporations are taxed at a flat rate of 25% unless their net taxable income does not exceed 5 million PHP (100,000 USD) and their total assets do not exceed 100 million PHP (2 million USD), in which case they are taxed at 20%. Branch offices of foreign corporations are taxed at 25%, plus 15% on any after-tax profits remitted to the foreign head office.
While the Philippines has tax treaties with a wide variety of countries that prevent double taxation, including the United States and Canada, in terms of tax information exchange agreements, the Philippines has not yet committed to the automatic exchange of financial information coordinated by the OECD and is not scheduled to do so. It has, however, signed on to FATCA, and will report to the IRS on the Philippine-held finances of American citizens.
The Philippines is not a holding company regime, so only multinational corporations can form holding companies there. There are, however, other ways for individuals or small businesses to start a company in the Philippines. The Philippines did not used to have legal provision for anything like an LLC or sole proprietorship company, but since the passage of Republic Act 11232 in February 2019, provision now exists for Domestic Corporations and One Person Corporations (OPCs), which function as limited liability companies.
Depending on the industry, domestic corporations can be fully foreign-owned, making them the most popular legal entity type among foreign investors in the Philippines. Shareholders of a domestic corporation can be a person, a partnership, an association, or another corporation.
A one person corporation (OPC) has only one shareholder that can be a natural person, a trust, or an estate. If the incorporator is a natural person, he or she must be of legal age and neither a licensed lawyer nor a licensed accountant. The owner of an OPC must name a nominee and an alternative nominee who will manage the company if the owner is incapacitated, though the term of existence of an OPC is indefinite or as defined in its Articles of Association. If the single shareholder is a trust or an estate, the existence of the OPC ends of the trust or the estate is dissolved.
The process of incorporation for an OPC requires securing a variety of documents to be submitted to different governmental agencies. A Certificate of Registration must be filed with the Philippine Securities and Exchange Commission. A Mayor’s Permit must be secured from the relevant local government, and a Certificate of Registration must be filed with the Bureau of Internal Revenue (BIR). All employees of the company must also be registered with the Social Security System, the national health insurance system, and the Home Development Fund. Even without other employees, an OPC will still require a Corporate Secretary and a Treasurer subject to the requirements discussed below. With help from a local facilitator, this process can be completed in 4-6 weeks, otherwise it can take 4-6 months.
Don’t despair, however. While establishing a business in the Philippines can be a pain, this process may be able to be expedited through the purchase of a ready-made shelf company that has already been incorporated, but has not yet conducted any business activities. There are corporate consulting services who have shelf companies in the Philippines available for this purpose, so if you’re in a hurry or just want to reduce the amount of governmental red tape you have to deal with, this is an option you should consider.
A nominee and alternate nominee to manage the OPC in the event of the owner’s incapacitation must be indicated in the Articles of Incorporation, Nominees can be changed at any time. Unfortunately, Philippine law also requires the appointment of corporate officers for the OPC: a President, a Corporate Secretary, and a Treasurer.
The President is the company’s director and signatory and this position is held by the OPC’s single shareholder, who can be a foreigner. The Corporate Secretary, who handles the administrative and informative work and is responsible for the keeping and preserving all company documents and the minutes of all meetings, must be a Filipino citizen. The Treasurer, who is responsible for the financial affairs of the business and filing annual statements and financial reports, doesn’t have to be a Filipino citizen, but must be a resident of the Philippines. If the President of the company is a resident of the Philippines, he or she may also function as the company’s Treasurer, though a surety bond, subject to renewal every two years for as long as the President functions as Treasurer, must be posted based on the OPC’s authorized capital stock in such case.
There are also minimum capital requirement of 10 million PHP (200,000 USD) for setting up a foreign-owned OPC. This minimum capital requirement can be reduced to 5 million PHP (100,000 USD) if the OPC employs 50 Filipino citizens or uses advanced technology, and it can be reduced to 5,000 PHP (100 USD) if the OPC exports 70% of the products it produces.
Given that foreign-generated income for foreign nationals and foreign corporations is not taxed in the Philippines, there can be distinct advantages to acquiring permanent residence as a foreign national in the country. For Americans, Canadians, Australians, and Europeans, permanent Philippine residency offers various advantages over other locales: English is an official language, the population is predominantly Christian, the country is safe, the cost of living is low, skilled and inexpensive labor is plentiful, the people are friendly, you can privately own firearms without burdensome regulations, you can homeschool your children without a hassle, and all your foreign income is tax-free.
In regard to your foreign income, since money earned outside the Philippines is not subject to local taxes, you can transfer money into your accounts in the Philippines with no tax consequences. From this standpoint, it makes sense to manage your foreign business income and investments abroad electronically, then import the profits to your Philippine accounts. This makes even more sense, of course, if the foreign country in which your business and investments are located has no income or capital gains tax (in which case, it might be optimal to live in that locale instead). With these benefits and caveats in mind, let’s take a look at the Special Resident Retiree’s Visa (SRRV) and the Special Investor’s Resident Visa (SIRV) paths to permanent residency in the Philippines.
The SRRV is available to people over the age of 35 as “pensioners.” If you’re in your late 30s and can handle the stigma, then you can get a special permanent residence permit for retirees if you have a minimum monthly pension of 800 USD for individuals or 1,000 USD for married couples and can deposit 10,000 USD in a fixed-term account in an authorized Philippine bank. This money can be invested after a month in the purchase of a condominium, the long-term lease of a condominium, land with housing, or urban housing (only Filipinos can buy land or houses), or even used to purchase shares in a golf club or country club.
If you don’t have a pension, which is likely if you’re younger, then if you’re 35-49 you have to deposit 50,000 USD in the fixed-term account, or if you’re at least 50 years old, you can get away with depositing 20,000 USD. These deposits cover a spouse and one child. An additional deposit of 15,000 USD is required for every extra person. There is a program called the SRRV smile for those aged 35-49 who do not wish to buy a condominium that costs the same as those over 50 who do not have a pension, with the proviso that no condominium can be purchased and the deposit must remain in the chosen bank.
If you prefer the investment route, a Special Investor’s Resident Visa (SIRV) entitles the holder to reside in the Philippines for as long as the required qualifications and investments are maintained. If you are at least 21 years of age, medically certified to be in good health, haven’t been hospitalized for mental disorders, and have no criminal record, then as long as you can invest at least 75,000 USD in Filipino equities or local companies that fall within a dozen or more categories that the Philippine government wants to grow (services, construction, tourism, etc.), you are eligible to apply for a SIRV that includes your spouse and dependents under the same fee.
Resident Filipino citizens are taxed on their worldwide income, so little is to be gained financially from Filipino citizenship if you intend to remain in the Philippines. The territorial taxation system allows Filipino expats to avoid paying taxes on foreign-sourced income, however. Acquiring citizenship requires that you have lived in the Philippines for at least ten years, that you speak Tagalog, and that you can pass an examination on Filipino history and culture.
- Philippines: The CIA World Factbook
- International Tax Highlights: Philippines 2021 (Deloitte)
- The Philippines Have Not Set an OECD Date to Share Tax Information (as of 02/2021)
- Tax Treaty Agreements between the U.S. and the Philippines
- Tax Treaty Agreement between Canada and the Philippines
- Income Tax in the Philippines
- Business Entities in the Philippines
- Holding Companies in the Philippines
- Domestic Companies and One Person Companies (OPCs) in the Philippines
- Offshore Business Process Outsourcing (BPO) in the Philippines
- Tax Reduction through Tax Residency in the Philippines
- How to Get a Special Investor’s Resident Visa (SIRV)
- Application for SIRV in Philippines
- Investor’s Pathway to Filipino Citizenship
The country of Singapore is located in maritime Southeast Asia off the southern tip of the Malay Peninsula, and bordered by the South China Sea to the east, Indonesia to the south, and the Straits of Malacca to the west. It consists of one main island and 64 satellite islands and islets.
Singapore has the third greatest population density in the world (after Macau and Monaco, but ahead of Hong Kong) and is multicultural, with four official languages: English, Malay, Mandarin Chinese, and Tamil. Buddhism, at 31%, is the most widely practiced religion in Singapore, followed by irreligion at 20%, Christianity at 19%, Islam at 16%, Taoism at 9%, and Hinduism and other religions at 5%.
Singapore’s natural resources are very restricted, but it does have reserves of deep-water petroleum that are drilled and exported. Agriculture is almost non-existent, so almost all of its food must be imported. Its largest industries deal in electronics and Singapore is a key exporter of computer components and products. The Singapore dollar (SGD) is the official currency, with 1 SGD = 0.74 USD.
Singapore has a territorial tax system that, for all practical purposes, only taxes individuals and companies on Singapore-sourced income. There are no foreign exchange controls in Singapore, and neither capital gains, nor dividends are taxed. There is no estate or inheritance tax, but there are withholding taxes, sales taxes on goods and services, and property taxes.
As for income taxes, both resident and foreign branch corporate Singapore-sourced revenue is taxed at a flat rate of 17%, but the effective tax rate is usually much lower due to numerous incentives and tax breaks. Taxation on individual Singapore-sourced income is progressive, with no tax on the first 20,000 SGD, 2% on the next $10,000 SGD (up to 30,000 SGD), and so on, all the way up to 22% on amounts over 320,000 SGD.
Singapore has a wide range of tax agreements with many countries, including Canada, Australia, and much of Europe, that prevent double-taxation on the same income, but as of yet, it lacks such an agreement with the United States, so Americans with Singapore-derived income should be careful. Singapore further has committed to the OECD’s program for the automatic exchange of tax information with over 70 other countries, and it has signed a FATCA-model exchange of financial information with the United States, so the balances and activity in financial accounts that Americans or permanent U.S. residents hold in Singapore will be reported to the IRS.
Singapore is amenable to the formation of holding companies, which can take the form of LLCs, limited partnerships, trusts, or foundations. The most widely used structure is an LLC. There are no limitations on where the assets of a Singapore holding company are located—they can either be in Singapore or abroad, so there is great flexibility in corporate structure.
If you have substantial wealth to protect, holding companies are useful because personal assets are held by the corporation, shielding the individual from debt liabilities, lawsuits, and other risks. The parent holding company can also be used for estate planning purposes, providing tax deferrals while ensuring the whole estate transfers smoothly as a single unit to the next generation. Singapore’s regulatory framework is very favorable for trust structures that include holding companies, allowing consistent rules for the governance of family wealth to be implemented, assets in multiple countries to be transferred as a single unit, management to be handled through a single point of delegation, and the legal integration of wills, foundations, residence jurisdiction selection, and lasting Powers of Attorney.
If you don’t have great wealth, you might still benefit from a shell company structure in Singapore. Shell companies do not have substantial assets or active operations, but can function as legal tools to reduce tax liability in business transactions, to store funds, to gain access to financing, and to maintain anonymity. Establishing an offshore shell company as an LLC in Singapore could be useful for trading securities, holding investments and assets, and conducting various other personal financial transactions in a tax-sheltered manner.
In efforts to safeguard against money-laundering and other criminal activity, both holding companies and shell companies require Singaporean residents to function as directors, secretaries, and treasurers. Fortunately, there are a variety of professional service companies in Singapore that bundle services and can provide nominee directors, secretaries, and treasurers on request. Minimally, a local nominee director is needed, and if contracted through a professional service company, this will cost about 250 SGD (185 USD) per month.
While not a pure tax haven, Singapore has a relatively attractive tax regime and, depending on your financial or family concerns, it can make sense to seek tax residency or permanent residency there. If you are not part of the immediate family of Singaporean citizen, do not hold an employment pass, and are not a student studying in Singapore, the quickest route to residency is as a foreign investor.
Unfortunately, pursuing this route requires substantial wealth. Under the Global Investor Program, those interested in starting a business or investing in Singapore can acquire permanent residence status. There are three ways of doing this: (1) invest at least 2.5 million SGD (1.85 million USD) in a new business entity or expansion of an existing business operation; (2) create a business plan in Singapore and invest at least 2.5 million SGD in an approved fund that invests in Singapore-based companies; and (3) invest 2.5 million SGD to establish a single-family office in Singapore that has under its management assets of at least 200 million SGD (148 million USD) of which at least 50 million SGD (37 million USD) are invested in Singapore.
If you are able to meet these rather lofty financial criteria, you may apply for permanent residency under the Global Investor Program provided that you have at least three years of entrepreneurial experience, a successful business track record, own at least 30% equity in a company, and can produce audited financial statements for that company for the prior three years. The company’s yearly turnover also must average at least 200 million SGD for the last three years. There are other tracks available for next-generation business owners, founders of fast-growing companies, and family office investors, each of which have even more stringent financial and business experience requirements.
The spouse and children of an investor are also eligible to apply for permanent residence in Singapore under the investor’s application. It is important to note that male dependents incur the responsibility of National Service. All male Singapore citizens or permanent residents are required to serve up to 4o days of Operationally Ready National Service (ORNS) per year for the duration of their ORNS training cycle until the age of 50 years for officers, and 40 years for other ranks. It is important to note too that the parents of the investor, and any children over the age of 21, are not eligible to apply for permanent residence, but they may apply for a 5-year long-term visa to live in the country.
Once permanent residence is established, the investor will be issued a re-entry permit (REP) that is good for five years. Having one of these permits is necessary for travel in and out of Singapore and enables the investor to maintain permanent residency status while abroad. The REP is renewable after 5 years if the investor fulfills the conditions associated with their investment option for residency.
After two years of permanent residency in Singapore, it is possible to apply for citizenship. Singaporean citizenship has its advantages and disadvantages. On the advantageous side, having a Singaporean passport affords its holder visa-free or visa-on-arrival access to 190 destinations around the world, including every first world country. The primary disadvantage is that Singapore makes no provision for dual citizenship and you will have to renounce citizenship in every other country in order to be a citizen of Singapore.
- Singapore: The CIA World Factbook
- International Tax Highlights: Singapore 2021 (Deloitte)
- OECD Tax Information Exchange – Singapore
- The Tenuous Character of U.S. – Singapore Tax Agreements
- Tax Treaty Agreement between Canada and the Philippines
- Personal Income Tax in Singapore
- Corporate Tax in Singapore
- Setting Up a Holding Company in Singapore
- Setting Up an Offshore Company in Singapore
- Tax Residency in Singapore
- Becoming a Permanent Resident in Singapore
- Citizenship by Investment: How to Get a Singaporean Passport
- Singaporean Citizenship
Thailand, once known as Siam, is located in Southeast Asia in the center of the Indochinese Peninsula. Myanmar (Burma) and Laos border it to the north, Laos and Cambodia to the east, the Gulf of Thailand and Malaysia to the south, and the southern tip of Myanmar and the Andaman Sea to the west. It has a maritime border with Vietnam across the Gulf of Thailand, and also with India and Indonesia to the southwest in the Andaman Sea. It’s capital city is Bangkok.
The population of Thailand is close to 70 million people, with 86% consisting of four different Thai peoples, 3% Khmer, 2% Malay, and 9% consisting of 68 different minority ethnic groups. He official language of the country is Thai, but various dialects and other languages are spoken—Isan, Kam Mueang, Pak Tai, and Malay. The dominant religion in Thailand is Buddhism as 95%, followed by Islam at 4%, and Christianity at 1%. There are a negligible number of Hindus and irreligionists.
Thailand’s natural resources are coal, natural gas, gold, fluorite, lead, manganese, basalt, niobium, zinc, tin, tungsten, gypsum, and lignite. Tin was a major export for years. Thailand’s most important forestry product is hardwood. Agriculturally, the most significant crops are rice and rubber, but cassava, sugarcane, maize, soybeans, coffee, pineapple, coconut, and kenaf are also grown. Thailand is also the world’s third largest producer of palm oil. There are also significant dairy farming, insect ranching, and fishing industries in the country. As far as industry is concerned, the manufacturing sector is the largest. Thailand produces a healthy variety of manufactured goods from textiles, garments, and footwear, to plastics and cement, to automobiles and automobile parts, to electronics, integrated circuits, computers, and computer components. The currency of Thailand is the Baht (฿), with 1 Baht = 0.031 USD.
The taxation system for individuals in Thailand is territorial, with income generated outside the country not taxed as long as it is not transferred into Thailand within one year of its being earned. While Thailand has no wealth tax, without certain special circumstances, residents of Thailand will pay capital gains tax on Thai-sourced income, withholding taxes on dividends, value added taxes, payroll taxes, social security taxes, taxes on real property and its transfer, gift taxes, and inheritance/estate taxes on each beneficiary’s portion of the inheritance exceeding ฿100 million (3.1 million USD). Thailand also has exchange controls, though these were relaxed somewhat in late 2019 to stimulate capital outflow, achieve a better balance in capital flow, and lessen the appreciation pressure on the Thai Baht..
Resident corporations, that is companies incorporated in Thailand and registered with the Ministry of Commerce, are taxed on their worldwide income and pay tax on their net profits, which consist of business or trading income, passive income, and capital gains, with deductions permitted for expenses related specifically to generating profits and net operating losses, the latter of which can be carried forward for up to five accounting periods. The Thailand Board of Investment (BOI) has created special incentive and exemptions to bolster business in key sectors of the Thai economy, however. The advantages of forming a BOI company will be discussed below.
Where income taxes are concerned, rates for resident individuals on Thai-sourced income are progressive. If you make less than ฿300,000 (9,300 USD) each year, you are taxed at 5%, and this works it way up to a 35% tax rate if you make more than ฿5 million (155,000 USD). Capital gains are taxed at the relevant personal income tax rate. For corporations, the income tax rate is 20% whether the business is headquartered in Thailand or merely a branch, and the capital gains tax rate is the same.
Thailand currently has 61 double-taxation agreements, including agreements with the U.S. and Canada. It has committed to meet OECD standards for the automatic exchange of tax information by 2023. Thailand formally signed to provide financial information to the U.S. on American accounts in Thailand under FATCA in March 2016.
Opening a holding company in Thailand that holds controlling shares in other companies has some advantages and some complications. Let’s deal with the complications first. Thai legislation prohibits majority foreign ownership of holding companies, and forming a holding company with a Thai shareholder who functions in a nominee capacity, that is, who owns shares on behalf of someone else (a foreign investor) without having financed those shares himself, is illegal. Shares within a Thai holding company must have at least 51% Thai ownership. All Thai companies require at least 3 shareholders, so if you’re looking to go it alone, this isn’t the vehicle for you. If you lack connections in Thailand, finding a trustworthy and financially capable Thai partner to associate with in business can pose a problem, but there are various Thai law firms and business services that can help with the process.
Thai companies have distinct advantages over branch offices of foreign companies, most notably, they are eligible for the incentives and tax exemptions that the Thailand Board of Investment (BOI) has created to catalyze business in certain sectors of the economy. In particular, BOI certification is available for companies operating in eight different sectors: agriculture; mining, ceramics, and base metals; light industry; metal products, machinery, and transport equipment; electronics and electric appliances; chemicals, paper, and plastics; public utilities and services; and technology and innovation development.
The tax incentives and privileges accruing to BOI companies are considerable: (1) exemption from or reduction of import duties; (2) exemption from dividend and income tax for controlling interests; (3) double-deduction of operating expenses arising from water, electricity, and transportation; (4) an eight-year exemption from corporate income tax (CIT) for companies engaged in either (a) R&D and design aimed at improving Thailand’s industrial competitiveness, (b) Thailand’s infrastructure development, or (c) utilizing advanced technology to produce value-added services; (5) a five-year exemption from CIT for activities using advanced technology in the service of economic development in Thailand if the company already has some existing investments; and (6) a three-year CIT exemption for businesses not using advanced technology, but adding value to local supply-chain and resource development.
There are also some non-tax related benefits for BOI companies that are important, including the ease of obtaining labor permits for foreign workers, permits for land ownership, exemption from foreign exchange controls, and visas for foreign investors studying investment opportunities in Thailand.
Nonetheless, if you’re looking at Thailand as a foreign investor interested in tax avoidance, pursuing the holding company and/or BOI route from scratch is probably too complicated to be of interest. Since completely foreign-owned shell companies are essentially illegal, the best solution may be to buy a shelf company that can be adapted to take advantage of BOI incentives and exemptions. Any Thai shelf company available for purchase should have the following information readily available to the buyer: the age of the company; the company name, which will contain an abbreviation of its business type; the company address in Thailand; the amount of fully paid-up capital and the number of shares and their value; the tax status of the company (the possibility of being grandfathered in as a BOI exists here); and other details, which may include previous approvals from the relevant Thai departments. All of this information should be verified independently before the purchase is made.
For a foreign investor, the following changes will have to be made after the purchase of ready-made shelf company: a new director will have to be appointed, a new company name given, a new company seal created, a new list of shareholders developed (still subject to the 51% Thailand-resident ownership restriction), and a new company address secured. The actual cost of buying a shelf company will also involve transfer costs, government fees for the requisite changes. Older companies cost more than younger ones. Time is on the investor’s side, however, since there is no obligation to conduct business immediately.
Any person residing in Thailand for 180 or more days in a year is deemed a resident of Thailand for tax purposes, though it is possible to be a tax resident in less than 180 days if, for example, you are a foreign national who has come to Thailand to work, in which case you are deemed a tax resident from day one. The most helpful Thai-based tax avoidance strategy for individuals, however, is the Thailand Elite Residency Program.
The elite residency program allows investors and their families to have a long-term multiple-entry residency visa and to reside in Thailand throughout the period of the visa’s validity, though there are no minimum residency requirements. The extended visa gives investors and their families the right to live in Thailand for up to 20 years and to have access to various services and their benefits. Furthermore, elite residence visa holders are exempt from tax on their foreign-sourced income as long as they do not reside in Thailand more than 183 days each year.
There are four different options under the Elite Residency Program: (1) Easy Elite Access; (2) Elite Family Excursion; (3) Elite Superiority Extension; and (4) Real Estate Investment through the Thailand Elite Flexible One Program. The first option provides an individual five-year privileged entry visa for a one-time fee of 19,000 USD. The family option provides the same for a couple and their dependents at the rate of 25,000 USD for the couple and 10,000 USD for each dependent. These options can be upgraded to the superiority extension, allowing individuals a 20-year privileged entry visa with VIP services (government concierge and airport services) for 32,000 USD. Finally, if you are interested in acquiring real estate in Thailand, a minimum real estate investment of 320,000 USD through the Elite Flexible One Program will give you residence status for five years, with the option to upgrade after two years.
If you’re looking to go international as part of a tax avoidance strategy involving the territorial tax systems of various countries, Thailand can play a useful role for you, and it is worthy of consideration.
Thai citizenship is a lot of work to obtain, but it may make sense for you if you want to buy and own property in Thailand in your own name, avoid having to apply for work permits, dispense with the need to keep renewing your visa and applying for re-entry permits, and you want to own over 49% of the shares in a Thai company. Not all of these problems can be resolved through the Elite Residency Program.
You are eligible to apply for Thai citizenship if you satisfy the following requirements (with some exceptions noted below): (1) you are at least 18 years old; (2) with some exceptions, you have lived in Thailand for at least five years prior to your application; (3) you have maintained the same visa status for the years you have lived in Thailand; (4) you have no criminal record; (5) you have been employed in Thailand; (6) with some exceptions, you can understand, speak, and write the Thai language; (7) you can sing the Thai national anthem; an (8) you have at least 50 out of 1000 points on the points-based system for obtaining Thai citizenship.
There are exceptions to the second and sixth requirements if you are the spouse or child of a naturalized Thai citizen, the husband of a Thai wife, once held Thai citizenship, or have acted in some way the was of substantial benefit to Thailand (this is a rather ill-defined category and subject to the judgment of the relevant bureaucrats). In such cases you may be able to get Thai citizenship after three years of living on visa extensions without even having obtained permanent residency status. Maintaining citizenship in your country of origin is not a problem, as Thailand permits dual citizenship.
- Thailand: The CIA World Factbook
- International Tax Highlights: Thailand 2021 (Deloitte)
- Thailand Undertakes to Meet OECD Standards of Automatic Tax Information Exchange by 2023
- U.S. Tax Agreements with Thailand
- Tax Treaty Agreement between Canada and the Kingdom of Thailand
- Personal Income Tax in Thailand
- Corporate Tax in Thailand
- Setting Up a Holding Company in Thailand
- Buying a Shelf Company in Thailand
- Establishing Residency in Thailand for Tax Purposes
- Becoming a Permanent Resident in Thailand
- Residence by Investment in Thailand
- More on the Thailand Elite Residency Program
- Thai Citizenship
[NOTE: This article is a chapter in our
Comprehensive Guide to Tax Havens.]