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Comment by yummyfajitas | Hacker News Reader

It's worth noting that you can get similar benefits from Singapore.

Singapore doesn't have a cute "E-residency" program, but a foreigner can just pay a local agent and have a corporation opened. Corporate taxes are a clean 17% (lower for small businesses and startups), no dividend taxes, etc.

http://www.guidemesingapore.com/incorporation/company/singap...

http://www.guidemesingapore.com/taxation/corporate-tax/singa...

You also get a fairly stable and well established set of corporate law, which unfortunately Estonia doesn't offer (yet).

The real tricky bit for Americans is how Singapore's tax system (just corporate income tax!) would interact with the US's crazy one (e.g. dividends, capital gains, random other things).

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Estonia benefits from not taxing profits. So if you invest your profits into the company or just keep the cash in the company there is not tax. Distributed profits are taxed at 20%.

Depending on what you do this may benefit you and makes deferring taxation indefinitely trivial.

From my (limited, I Am Not A Lawyer, etc.) understanding:

First, it's expensive - you should count a good S$5k SGD/year if you go through an established player (e.g. Hawksford, who you are quoting), maybe a bit less otherwise. This ad infinitum, as you need a local director to keep the company open. And unlike in Hong Kong not so long ago, it has to be a real director - someone who theoretically can open bank accounts and hire people - so you're taking that risk too (the director will, conversely, be taking the risk that you might be a scammer or other criminal whose acts he'll have to answer for in court).

Then you have to put in S$50k in capital in order to be able to apply for a visa (EP) for yourself, should you want permission to work in Singapore (if not, you'll get taxed at home when repatriating profits); this visa will require, today, at least S$4-5k/month in "salary" (which will be taxed).

This also assumes that the Ministry of Manpower doesn't suddenly catch upon this very convenient way of getting yourself what is effectively an investor visa at a fraction of the investor visa cost (which they did two years ago with the EntrePass, which is today utterly useless for most foreign founders due to its requirement to have funding from a short list of approved VCs). Guessing what MoM wants and is going to do seems to be a bit of Kremlinology which HR directors love talking about as their special value add, but it is a bit opaque and the rules change with time, elections and special circumstances (like the famed riots last year, or the Ferrari and taxi incident).

The "plan" should you want to take advantage of Singapore's otherwise fantastic conditions for running a business is to get PR, which takes up to 3 years employed locally (depending on salary - someone on a high salary and from a "desirable" country might get it in 6 months). Singapore is fantastic... for local founders. Or if you're willing to pay.

The days where you could be in business for USD 1,500 and a flight to Hong Kong appear to be, unfortunately, over. I'd love to be proven wrong...

I was suggesting incorporation in Singapore as a possible alternative to Estonia. The goal is to have a good legal home for a business which is not location dependent, not to actually live there.

Could you comment on the current state of affairs in HK?

A few years ago, I opened and closed a company there with no problems. Did it again recently (post the various money laundering laws) and it was much more paperwork. When I flew to HK to get the bank account opened, they stressed I might not get it and that many foreigners could not get an account opened. 4 weeks later, HSBC denied me an account so the company lies empty until I decide to close it.

In a previous thread, someone said they managed to open an account so maybe it's on a case by case basis.

I don't believe corporations in the U.S. pay taxes on dividends they disburse. Generally the principle in the U.S. is that whenever you receive money you get taxed. There are lots of ways to reeive money hence lots of different taxes. It seems reasonable. If one form of income were not taxed then things would end up getting skewed in that direction.

>I don't believe corporations in the U.S. pay taxes on dividends they disburse. Generally the principle in the U.S. is that whenever you receive money you get taxed.

This is not true. While many countries do not do this, dividend payments are not tax deductible in the US. In fact, they are double-taxed (at both the corporate and individual level) which is one of the reasons/arguments for individual taxes on dividends being taxed lower than income tax rates.

I believe the principle is that whenever you receive money you get taxed. There are some exceptions and money is taxed at different rates depending on the way you receive it. But for the most part the idea is that whenever you directly receive money there are tax implications. This seems reasonable to me.

In the case of corporations and dividends to shareholders you are correct. I don't know of any other such examples.

No, shareholders pay taxes on dividends. It's a more or less meaningless distinction - as a shareholder your business profits are taxed on the way in and again on the way out.

If one form of income were not taxed then things would end up getting skewed in that direction.

This is wrong. The problem is that different paths of money get taxed in different ways. If you buy stock, then sell it back during a stock buyback, you get taxed at one rate. If you receive dividends, you get a different rate. If instead of buying stock you loaned money, you'd be taxed at a third rate.

Plus, to minimize taxes, people now need to minimize the # of times money moves rather than making the most productive investment.

An additional cost of these various taxes result in the bizarre situation that you get more consumption if you consume today rather than in the future: http://www.themoneyillusion.com/?p=28842

Singapore (and Estonia) are doing it right, and the US is doing it wrong. The most economically efficient tax (besides properly calibrated pigouvian taxes) is a single tax on consumption by humans and the next best is a single tax on income by humans.

With regard to shareholders and corporate and dividend taxes you are correct. My statements on this were wrong.

The general principle I stated is the one employed in the U.S. Generally, when one receives money there are tax implications. There are some exceptions to this principle but this is the general idea. The different ways of receiving money have different tax rates and this causes a skewing of how "income" is begotten in the U.S. by the very wealthy. They prefer getting money via capital gains since the tax is less that route.

I don't think one can reasonably argue that not taxing one form of income would lead to people preferring to get income via that tax free route. The objection I had to your original post is that the U.S. tax principle is bad. It is reasonable to tax all income streams. I don't know the optimal for each stream but given that taxes in the U.S. are low relative to the past 70 years suggests the rates aren't burdensome.

Yeah, I wasn't disputing that this is how the US does it. I was disputing that absent this, things would be skewed.

The issue is not taxing personal income, the issue is taxing corporations. A nearly ideal situation would be to eliminate all corporate taxes and tax individuals at a fixed rate when corporate wealth is transferred to shareholders. The only better situation would be eliminating all income taxes and replacing them with consumption taxes.

Unfortunately, this is a political non-starter - it would eliminate the ability of politicians to pretend they aren't indirectly taxing people when corporate taxes are raised.

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