Taxes For US Citizens Living Singapore

Singapore is an island city-state with a tropical climate and multicultural population, low tax rate, low crime rate, cleanliness makes Singapore an attractive destination for expats. There are over 2 million expatriates residing in Singapore and if you are planning to make a move or one of the Expat living in Singapore then it is better to get educated about tax implications.

 The USA is one of the few governments that tax the international income of all its citizens and green card holder living abroad. They are required to report their worldwide income. However, the IRS has special provisions to avoid double taxation. 

1.      The Foreign Earned Income Exclusion– Qualifying expatriates may elect to exclude up to the first $105,900 of their foreign earned income on their 2019 US tax return by meeting the bonafide residence or physical presence test. 
2.      The Foreign Tax Credit– It is a non- refundable tax credit that the taxpayer can take on his US returns for the taxes paid to the foreign country. 
3.      The Foreign Housing Exclusion– This exclusion allows taxpayers to deduct some housing expenses from their US tax return, in excess of certain country-specific amounts.

The main goal is to minimize your US tax liability if it cannot be eliminated

To be certified for the Foreign Earned Income Exclusion, US expats living in Singapore must either meet the physical presence test or the bona fide resident test.

To meet the physical presence test, taxpayers living abroad must be physically in another country (or countries) for at least 330 full days during any period of consecutive 12 months.

Meeting the bona fide residence test is more subjective. There is no limit to the number of days you can spend in the US. However, you must prove that you called another country “home” for an entire calendar year.

Singapore is one of the most expensive housing markets for expats. Luckily, some of those expenses are deductible. The Foreign Housing Exclusion allows you to deduct certain housing expenses from your gross income on your US Tax Return. You can use the Foreign Housing Exclusion in combination with the Foreign Earned Income Exclusion or Foreign Tax Credit. 

Regardless of which exclusions or credits you use, you will most likely also need to report your bank account in Singapore (or other countries) and other financial assets. You are required to file the FBAR if you have financial interest or signature authority over any foreign bank accounts if the aggregate values of these foreign bank accounts are over $10,000.The  FBAR is due along with your returns and if an extension is filed for your federal returns it applies to your F BAR. No separate extension is needed for F BAR. 

If you are a permanent resident of Singapore, you need to pay into the Singaporean social security system. This program is known as the Central Provident Fund (CPF).

You can take a direct foreign tax credit on form 1116 of your US tax return for those mandatory social security contributions in Singapore. This is because these mandatory payments are based upon a % of income creditable even though the funds are transferred to private accounts. 

However, you must pay US tax on any employer contributions and all earnings of the CPF. The tax is due in the year contributions and earnings are made and cannot be deferred. Furthermore, the contributions and earnings are tax-free upon withdrawal.

Self-employed US expats in a foreign country are subject to self employment tax in the US as there is no totalization agreement between the US and Singapore. So quaterly payments must be paid to avoid any interest and penalties. The taxes are due by April 15th and there is no extension for paying taxes. 

Self-employed individuals operating a business in Singapore can choose to either report as a corporation or make an election to report the income on Schedule C of their US tax form 1040. They must pay social security and income taxes on the Schedule C income.

The self-employed taxpayer can then either claim the FEIE on the profits of the business or use a Foreign Tax Credit for the income tax paid in Singapore.

If the taxpayer chooses to file as a corporation (Controlled Foreign Corporation, CFC) when doing business in Singapore, the corporation must report the profits on form 5471 on its US tax return. The US tax reform imposed GILTI, a new tax, on the profits starting the year 2018. As a result form 5471 has become rather complex. 

In addition to filing a tax return in the US, American expats may also have to file and pay taxes in Singapore. Singapore considers someone a tax resident if they spend 183 days per year or more there.

Singapore tax residents must submit their tax forms before April 15 to the Inland Revenue Authority of Singapore (IRAS).

Even though you submit the tax forms in April, payment is not due until later in the year. Once your taxes are due, the Inland Revenue Authority will mail you a notice for payment. These notices typically go out in September. You then have one month from the mailing date of the notice to pay your taxes.

Furthermore, Singapore does not tax investment income such as interest, dividend, and capital gains but they are taxable in the US. Singapore uses a progressive tax system. When compared to other countries, taxes for individuals in Singapore are fairly low. Therefore, most expats likely benefit more from using the FEIE than the Foreign Tax Credit for income tax.