Expat Tax for Americans in Singapore – What You Need To Know

Expat Tax In Singapore – Expat Living In Singapore

The Republic of Singapore is one of the top five financial centers of the world. It is an island country off the Malay Peninsula south of Thailand in Southeast Asia. Over sixty smaller islands surround the mainland. The island is a popular destination for US expats. However, currency inflation issues in recent years are affecting the cost of living in this sovereign state. Read on to discover important tips on US Expat Tax In Singapore.

Singapore nevertheless ranks with other expat “hotspots”, like Germany.

Below is our top 6 list of areas to live in Singapore for expats (in no particular order):

• China Town
• East Coast
• Little India
• Orchard Road
• Sentosa Island
• Marina Bay

About Singapore

Singapore, an island country in Southeast Asia, is located off the southern edge of the Malay Peninsula, between Malaysia and Indonesia. Its official languages are English, Malay, Chinese, and Tamil, and the currency is the Singapore dollar.

These six Singaporean areas above have a dense population with a mixture of Malays, Indians, and Chinese to name a few of the key cultures. The island country boasts a unique mix of Chinese and Malay flavors in its Peranakan (or Nonya) cuisine. As well as four distinct languages among its people: English, Malay, Mandarin, and Tamil.

Singapore is also one of the world’s most prosperous countries, with strong international trading links and GDP levels equal to or exceeding that of many nations in Western Europe.

The weather is humid and categorized as a tropical rainforest with no real change in seasons. The legal system follows English common law and receives, along with Hong Kong, world-wide praise for its judicial quality.

There is a car restriction on the island out of concern about congestion and pollution. If you are fortunate enough to slide behind the steering wheel of an automobile, remember you drive on the left side of the street!

Guide To U.S. Expat Tax In Singapore

The Tax Samaritan country guide to U.S. expat tax in Singapore provides a general review of the tax environment of Singapore and how that will impact your U.S. expatriate tax return as a U.S. Expat In Singapore.

As a U.S. taxpayer, all worldwide income is subject to taxation and reporting. For most expatriates you have a requirement to file a U.S. tax return on an annual basis due on April 15 each year (June 15 if you are residing overseas on the April 15 deadline). The tax treatment for different classes of income can vary greatly from Singapore and the U.S.

For example, certain benefits are tax free in Singapore. But, in the U.S. these benefits are likely to be benefits that are subject to inclusion as taxable income in U.S. As such, there are a number of considerations related to US expat tax in Singapore. This brief article will address a few of those considerations.

Singapore Expat Income Taxes

Who Is Liable For Income Taxes In Singapore

Income for services performed in Singapore is subject to taxation. Singapore-source income from a trade, profession, business, or vocation is subject to taxation on profits. A person is considered a Singapore tax resident for a specific “Year of Assessment” or YA if they either (1) permanently reside on the island, (2) are a Singapore Permanent Resident (SPR) with the establishment of a home, or (3) are a foreign national who is on the island for 183 or more days in the preceding YA. A “Director of a company” is excluded from this definition and is considered a non-resident for tax purposes. Residents who receive income from sources outside the country are not subject to income tax. Foreign-source income received by non-residents are exempt from Singapore income tax. There may also be tax exemptions for foreign-source income such as dividends, foreign branch profits, and service-related income.

Tax Year In Singapore And Tax Filing And Payment Rules

A source-based, progressive tax system is levied on both Singapore-source personal and business income as well as on property. Non-Singapore source income received by individuals is tax exempt. The tax code is relatively simple. There is no capital gains tax or only a single tax rate imposed by one level of government; there are no separate local taxes. This tax structure is to encourage capital investment and incentivize tax return filing.

People who work on the island for less than 60 days are exempt from personal income tax. Similarly, foreign professionals who reside in the country for less than 183 days are non-residents. Those individuals who work for a period between 61 days and 183 days are subject to taxation at the greater of 15% or the “resident” tax rate. There is an encouragement for property ownership with taxes no greater than 6%. The government also has a Stamp Duty tax. This relates to immovable property and intangibles like documents, mortgages, and stock shares), a casino tax, and a variety of other specialized duties (estates, private lotteries, etc.).

The tax year in Singapore is the assessment year, and tax is levied on a preceding-year basis. For example, in the 2021 assessment year, tax is levied on income from the 2020 calendar year. Resi-dent and nonresident individuals must file returns by 15 April of the assessment year. 

Singapore Tax Relief

Various forms of “tax reliefs” such as a personal and spousal deductions are available only to “resident” tax payers. Singapore also has a 7% consumption or value added tax (VAT) on goods and services made in or imported into Singapore called the Goods and Services Tax (GST).

Singapore non-resident income is subject to taxation at the greater of 15% or the “resident” rate. Consulting and Director fees as well as other non-resident income have taxation at a flat rate of 20%. The Inland Revenue Authority of Singapore website provides income tax tables, contact numbers, and other resources. An online “myTaxPortal” is available for reviewing the annual personal assessment.

The Year of Assessment (YA) or Singapore tax year is typically a calendar year from January 1 thru December 31. If a person resides in Singapore in the year preceding the YA, they have an income tax assessment. There are various residency exceptions that include temporary absences and administrative concessions. These exclusions and exemptions need careful review before filing an expat tax return.

Expat Tax Withholding

Withholdings are levied on non-resident individuals and companies with Singapore-source income, like royalties, interest, management fees, etc., at up to 15%.

Expats are neither subject to nor allowed to make voluntary contributions to the Central Provident Fund (CPF). Expat taxation is dependent upon residency status and existing tax treaties between Singapore and the foreign nationals home country.

These treaties (commonly known as Avoidance of Double Taxation Agreements or DTAs) have been written to protect expats from taxation of the same income by both Singapore and the expat’s home country. Even though Singapore has a limited tax treaty with the United States that pertains to mostly corporate taxes, most expat should have their US and Singapore-source income carefully reviewed by an international tax specialist like Tax Samaritan.

What You Need To Know About US Income Taxes

When dealing with US expat tax in Singapore, there are a number of preferential expat tax treatments that may benefit your U.S. expatriate tax return. In fact, for many U.S. expats, the Foreign Earned Income Exclusion (IRS Form 2555) and other deductions will reduce your U.S. taxes to zero.

Some of these preferential tax treatments or benefits for US expat tax in Singapore include:

• If you are a U.S. citizen or a resident alien of the United States and you live in Singapore, your US expat tax in Singapore is based on your worldwide income. As such you must file a U.S. return for all the years that you are residing in Singapore. However, as a U.S. expat you may qualify to reduce your U.S. taxable income up to an amount of your foreign earnings that has an annual adjustment for inflation ($107,600 for 2020). In addition, you can exclude or deduct certain foreign housing amounts. This is known as the Foreign Earned Income Exclusion and foreign housing exclusion.
• When it comes to your US expat tax in Singapore, most US expatriates worry about “double taxation”. Paying taxes to two different countries – the U.S. and Singapore. A U.S. taxpayer working overseas in Singapore may be able to reduce U.S. taxable income and “double taxation” by claiming the Foreign Tax Credit on Form 1116. Should any foreign income not be fully offset by the foreign earned income exclusion, housing exclusion or housing deduction, the foreign tax credit paid or accrued may be used as a deduction or credit on the U.S. tax return. Taxpayers can elect to either deduct the taxes as an itemized deduction. Or, claim a credit against tax. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

Don’t Make This Mistake

A common but dangerous mistake is the assumption that if there are zero taxes when claiming these tax benefits that there is not US expat tax filing requirement.

That is not true.

If you are working overseas, it is likely that you meet the filing requirements to file a tax return and must do so. It is important to note that the preferential tax treatments, such as the foreign earned income exclusion and foreign tax credit are not applicable to the outcome of your tax liability until a claim is made on a filed tax return.

When faced with US expat tax in Singapore there are many tax items to consider.

But the above are by far the most common preferential tax benefits.

With top-notch experience and knowledgeable expat tax preparation from Tax Samaritan, you can be assured that you are paying the minimal amount of U.S. taxes that you are legally obligated for.

Singapore Foreign Bank Account Reporting – The FBAR (FinCen Form 114)

Another important tax deadline that frequently applies to US expat tax in Singapore is in regards to the disclosure of foreign assets on the FBAR (Foreign Bank Account Report – Form 114).

The FBAR filing deadline is April 15th (or the preceding business day if April 15th falls on a weekend). Unfortunately, requesting an extension on your individual return does not extend the FBAR due date. There is no extension available for the FBAR deadline. Any reports filed after this date are considered a delinquent FBAR. However, in recent years, an automatic extension till October 15th is applicable.

The FBAR must be filed with the Treasury Department (it is not filed with your federal income tax return) whenever you meet the FBAR filing requirements, which in a nutshell is whenever a U.S. person has a financial interest in, or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust or other type of foreign financial account (including an insurance policy with a cash value such as a whole life insurance policy) maintained with a financial institution, with an aggregate value of over $10,000 at any time during the calendar year based on the highest value of each foreign account during the tax year.

If you have bank accounts at DBS Bank, OCBC Bank, Developmental Bank of Singapore, Standard Chartered Bank, United Overseas Bank Ltd or at another bank in Singapore or any other foreign country, you may meet the filing requirement to disclosure your foreign accounts on the FBAR.

Please don’t hesitate to contact Tax Samaritan to learn more about your filing requirements.

U.S. – Singapore Social Security Totalization Agreement

The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes.

These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country.

As of this time, Singapore has not entered into a Totalization Agreement with the United States.

Thus, there is no opportunity to avoid double taxation of social security income for US expat tax in Singapore.

U.S.- Singapore Tax Treaty And Tax Relief For U.S. Expat Tax In Singapore

The United States does not currently have a separate, comprehensive tax treaty with the Singapore. The US Internal Revenue Code offers tax credits against any Singapore income tax. See our Tax Samaritan Takeaways below for other valuable references.

Tax Samaritan Takeaways For U.S. Expats In Singapore

Please click on the hyperlinks below for additional takeaways for your expat tax in Singapore:

Tax Samaritan Expat Tax Services

IRS Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad

Major Banks in Singapore, Hawksford (for important contact numbers)

US Embassy in Singapore