Singapore is an attractive city for its quality lifestyle, cleanliness and global culture. Currently, 1.31 million expatriates are residing in Singapore and if you are planning to join them, then you need to educate yourself about the tax implications of such a move and more specifically how US taxes will impact you?
Does moving to Singapore affect your US taxes?
As a citizen of the US, you are required to report your worldwide income to the US tax authorities (IRS) every year regardless of the country you are residing in. US citizens or US Expats living abroad have to file US tax and could also be required to file F BAR which is reporting of Foreign Financial Accounts on form 114 if the aggregate value of the accounts is $10,000 or more at any time during the year.
US government is among the few governments who requires US citizens to report their worldwide income irrespective if you are living in the US or abroad. However, it does have special provisions to help protect them from double taxation:
- Foreign earned income exclusion allows the individual to reduce their taxable income on US tax returns by $105,900(the limit for 2019) on income earned abroad.
- If the US citizen is a resident of another country prompts a tax liability in a foreign country, they are eligible to claim a credit for foreign income taxes paid on their US expat returns by using the foreign tax credit.
- Foreign housing exclusion allows taxpayers to exclude some housing expenses from their US expat taxes.
Singapore comparatively has low individual income tax rates and US expat may be considered as resident for tax purposes if he or she lived or worked in Singapore for at least 183 days. As a nonresident, your tax will be calculated at 15% of your employment rate or the progressive rate whichever is more. All other non-employment income is taxed at 20%. Singapore does not impose a tax on capital gain or inheritances but they do impose a 3% GST on all domestic consumption purchases.
Singapore equivalent of social security is called Central Provident Fund and an expatriate is not required to make payments to Singapore CPF but once you are approved for permanent residency status you are required to make the payment.
Singapore assesses tax on income earned within Singapore or by Singapore residents. An individual is considered a resident for tax purposes if they have lived or worked in Singapore for at least 183 days in the previous year. Americans living abroad will not be subject to Singapore tax for income earned outside the country and if any individual, who has lived or worked in Singapore for less than 60 days, none of their income will be subject to Singapore tax, unless the individual is director of the company.
There is no treaty between the US and Singapore but despite the lack of treaty, each country offers a tax credit designed to eliminate dual taxation. Americans can claim Foreign tax credit for the taxes paid in Singapore.
Self-employed individuals operating their business in Singapore are required to pay taxes on their net profits to Singapore and can claim Foreign Income Exclusion or Foreign Tax Credit, but due to lack of Totalization Agreement US citizens are subject to self- employment tax which goes towards medicare and social- security.
Have a question or not sure how to file your US taxes
Our team of expat-expert CPAs and IRS Enrolled Agents can help you understand the intricacies of US expat taxes while living abroad, so you’ll be prepared when tax season comes around. CONTACT US TODAY to learn more!