For expatriates working with Singapore-based companies, remote work is becoming increasingly common. Thus, it is important to gain an understanding of your Singapore-law-governed employment contract (EC), how it relates to your permissibility to live and work outside of the country, your tax liability under IRAS Singapore and possible obligations you may have to live and work overseas.
Working out-of-country while holding a Singapore-based EC
It is possible to work outside of Singapore as long as necessary while holding an Employment Pass (EP) and having a Singapore-law-governed EC, provided your Key Employment Terms (KET) explicitly permit such arrangements. Under Ministry of Manpower (MOM) guidelines, Item 6 of the KET, which outlines working arrangements, should be updated to reflect your overseas work setup.
Tax Liabilities under IRAS Singapore
Although you may be working outside of Singapore, you still hold a Singapore-law-governed employment pass and your income is derived from Singapore, and hence taxable. Your tax rate will therefore depend on whether you are classified as a tax resident or non-resident.
Tax Residents
You will qualify as a tax resident for a particular Year of Assessment if you have:
Tax Residents will be taxed on all income earned in Singapore and may claim deductions on expenses, donations and personal reliefs and will be taxed at progressive rates ranging from 0% – 24%.
Non-residents
Non-residents are individuals who do not qualify as tax residents of Singapore as per the requirements above. As a non-resident:
Obtaining Rights of Residency in Another Country
If you would like to live in another country long-term, you will likely require a visa. Companies often place the obligation on the employee to hold valid visas to live and work overseas. However, obtaining a long-term visa may be difficult if your employment contract is still governed by Singapore law. However, an option is to use an Employer on Records (EOR) arrangement in the country you wish to live in. An EOR is an entity that legally employs workers on behalf of another business. This will allow you to obtain a visa more easily in the country where you wish to work. However, setting up an EOR arrangement may require the involvement of your company.
Precautions
While the arrangement of obtaining a work pass in Singapore and living in another country under an EOR arrangement is theoretically possible, it is not without its challenges. One significant consideration is the risk of creating a Permanent Establishment (PE) in the country where you choose to work.
A Permanent Establishment arises when a business is deemed to have a fixed place of operations in another country, potentially subjecting the company to local corporate taxes in that jurisdiction.
By working in another country as an employee, your activities could unintentionally trigger PE risks for your employer, depending on the tax treaties and local laws in that jurisdiction. This risk can vary significantly from country to country, and certain factors—such as the type of work performed, duration of stay, and level of authority exercised by the employee—play a critical role in determining whether PE is established. However, there are ways to mitigate this risk, such as limiting the scope of activities conducted abroad or structuring employment arrangements to comply with local laws.
Conclusion
Singapore’s laws allow expatriates to be employed by a Singaporean-based company and receive income derived from Singapore and be subject to Singapore’s tax rates. However, understanding Singapore’s laws and regulations with regards to expatriates is crucial to your working arrangements.
Expatriates who need further guidance on this working arrangement, their employment contracts or securing an employment pass can reach out to our legal assistance portal for tailored advice. Let us help you ensure that you can have a smooth transition to this arrangement.