Tax Guide for US Expats Living and Working in Singapore
Who Is Liable For Income Taxes in Singapore
A person is subject to tax on employment income for services performed in Singapore, regardless of whether the remuneration is paid in or outside Singapore. Resident individuals who derive income from sources outside Singapore are not subject to tax on such income. This exemption does not apply if the foreign-source income is received through a partnership in Singapore. Foreign-source dividend income, foreign branch profits and foreign-source service income received by any individual resident in Singapore through partnerships may be exempted from Singapore tax if certain prescribed conditions are met. Individuals who carry on a trade, business, profession or vocation in Singapore are taxed on their profits. Whether an individual is carrying on a trade is determined based on the circumstances of each case. Foreign-source income received in Singapore by a nonresident is specifically exempt from tax.
Individuals are resident for tax purposes if, in the year preceding the assessment year, they reside in Singapore except for such temporary absences from Singapore as may be reasonable and not inconsistent with a claim by such persons to be resident in Singapore. This also includes persons who are physically present or who exercise employment (other than as a director of a company) in Singapore for at least 183 days during the year preceding the assessment year. By concession, an individual whose employment extends into three or more consecutive assessment years is considered resident for all three or more years, even if fewer than 183 days were spent in Singapore in the first and last years of the stay. This is commonly known as the “three-year administrative concession.” A “two-year administrative concession” is also available for foreign employees whose employment period straddles two calendar years. Under this concession, the individual is considered resident for both years if he or she stays or works in Singapore for a continuous period of at least 183 days straddling the two years. However, this concession applies only to foreign employees who entered Singapore after 1 January 2007.
Under the Not Ordinarily Resident (NOR) scheme, a qualifying individual may enjoy tax concessions for five consecutive assessment years, including time apportionment of Singapore employment income, if certain conditions are satisfied.
Income subject to tax. The taxation of various types of income is described below. For a table outlining the taxability of income items.
Employment income. Taxable employment income includes cash remuneration, wages, salary, leave pay, directors’ fees, commissions, bonuses, gratuities, perquisites, gains received from employee share plans and allowances received as compensation for services. Benefits-in-kind derived from employment, including home-leave passage, employer-provided housing, employer-provided automobiles and children’s school fees, are also taxable. Certain of these benefits receive special tax treatment.
Compulsory statutory contributions made by employers to the Central Provident Fund (CPF; see Section C) on behalf of individuals performing services in Singapore does not constitute taxable income. Contributions made by an employer to any provident or pension fund located outside Singapore are taxable as income when the contributions are paid, unless exempted by concession.
Not Ordinarily Resident scheme. Under the Not Ordinarily Resident (NOR) scheme, a resident employee whose resident status is not accorded under the two-year or three-year administrative concessions (see Who is liable) may benefit from the following concessions for five consecutive assessment years:
- Time apportionment of employment income
- Tax exemption for the employer’s contributions to non-mandatory overseas pension funds or social security schemes, subject to the Central Provident Fund (CPF) maximum contribution limits for “ordinary” and “additional” wages (see Section C)
To qualify for the NOR scheme, an employee must meet the following conditions:
- He or she must be a resident for tax purposes in the assessment year in which he or she wishes to apply.
- He or she must not have been a resident for tax purposes in the three assessment years immediately preceding the assessment year in which he or she wishes to apply.
To benefit from the time apportionment of employment income, the employee must meet the following additional conditions:
- He or she must spend at least 90 business days in the calendar year outside Singapore with respect to his or her Singapore employment.
- The employment income of the individual must be at least S$160,000.
- The tax on the apportioned income must be at least 10% of the total Singapore employment income.
Effective from the 2009 assessment year, the time apportionment concession applies to both cash compensation and benefits-in-kind, other than directors’ fees and Singapore tax paid by employers.
Self-employment and business income. Self-employment income subject to tax is based on financial accounts prepared under generally accepted accounting principles. Adjustments are made to the profits or losses according to tax law. Business income is aggregated with other types of income to determine taxable income, which is taxed at the rates described in Rates.
Investment income. Under the one-tier system, dividends paid by Singapore tax-resident companies are exempt from income tax in the hands of shareholders, regardless of whether the dividends are paid out of taxed income or tax-free gains.
Dividends, other than tax-exempt and one-tier dividends, are taxed at the rates.
Singapore-source investment income (that is, income that is not considered to be gains or profits from a trade, business or profession) derived directly by individuals from specified financial instruments, including standard savings, current and fixed deposits, is exempt from tax. Examples of such income include interest from debt securities, annuities and distributions from unit trusts.
Net rental income is aggregated with other types of income and taxed at the rates.
Taxation of employer-provided stock options and share ownership plans. Employer-provided stock options are taxed at the time of exercise, not at the time of grant. Share awards are taxable at the time of award or at the time of vesting, if a vesting period is imposed. The taxable amount is the open market value of the shares at the time of exercise, award or vesting, less the amount paid by the employee, if any. For stock options and share awards granted on or after 1 January 2003 on which a moratorium is imposed on the acquired shares, the gains are taxed only on the date the moratorium is lifted. The taxable amount is the open market value of the shares on the date the moratorium is lifted, less the amount paid by the employee.
Stock options and share awards granted during overseas employment are not subject to tax even if the gains derived are remitted into Singapore while the employee is a tax resident, because all foreign-source income received in Singapore (other than through partnerships) by resident individuals is exempt from tax. Stock options and share awards granted on or after 1 January 2003 while the employee is engaged in employment in Singapore are subject to tax, regardless of where the options are exercised or shares are vested. These options and awards are deemed exercised or vested at the time of cessation of employment (including being seconded outside Singapore for an assignment or leaving Singapore for a period more than three months) for a foreign national employee, and tax is due immediately on the deemed gains.
For employee stock options or shares granted under any employee share ownership plan on or after 1 January 2003, the employer may apply for a Tracking Option if certain qualifying conditions and requirements are met. If the employer has been granted approval to track and elects to do so, the stock options or shares granted are reportable and taxable at the time of exercise or vesting.
Various incentive schemes are available for an employee to either defer payment of tax on share plan income (subject to an interest charge) or to obtain partial tax exemption of the income, if certain criteria are met.
Any additional gain derived from the subsequent sale of the shares is normally capital in nature and is not taxable.
Capital gains. Singapore does not impose tax on capital gains. However, in certain circumstances, the tax authorities may treat gains derived from purchases and sales of real estate or shares as revenue subject to income tax if the taxpayer is in the business of dealing in real estate or shares.
The buyer of property must pay stamp duty on the value of the property purchased. The government has introduced a seller’s stamp duty on all residential properties and residential lands that are bought on or after 20 February 2010 and sold within a specified time frame.
Deductions
Deductible expenses. In principle, expenses incurred wholly and exclusively in the production of income qualify for deduction, but in practice, the deductions available against employment income are limited. The general view taken by the Inland Revenue authority is that an employer normally pays all necessary expenses incurred by an employee in the course of discharging the duties of office. Employees must be able to prove to the Inland Revenue that expenses claimed were necessarily incurred in performing their duties.
Personal deductions and allowances. Personal deductions are granted to individuals resident in Singapore. Some of the deductions for the 2011 assessment year (income earned in the 2010 calendar year) are summarized in the following table.
Working mother’s child relief and foreign maid levy deductions are available for married women working in Singapore. Parenthood tax rebates are available for parents, but are subject to certain conditions. Special deductions are available for military reservists and the spouse or parents of military reservists.
The following deductions for life insurance premiums or contributions to approved pension funds are granted:
- For an employee, the total of life insurance premiums and amounts contributed to approved pension funds other than the CPF may be deducted up to a maximum amount of S$5,000, provided that the total CPF contributions are less than S$5,000.
- For an individual carrying on a trade, business, profession or vocation, CPF contributions may be deducted up to an amount of S$26,393 (increased to S$26,775 for the 2011 assessment year and S$30,600 for the 2012 assessment year).
- A deduction of up to S$7,000 may be claimed for cash contributions made to the taxpayer’s, the taxpayer’s parents’ or the taxpayer’s grandparents’ CPF retirement accounts, including contributions by taxpayers to nonworking spouses or siblings who earned no more than S$2,000 (increased to S$4,000, effective from the 2011 assessment year) in the preceding year (see below).
Two separate tax reliefs of up to S$7,000 are granted. The first relief is for top-ups by the taxpayer or his or her employer to the employee’s own CPF retirement account. The second relief is for top-ups to the taxpayer’s family members’ CPF retirement account. In addition, tax relief is allowed for voluntary contributions made by the taxpayer specifically to his or her CPF Medisave Account, which is intended for the taxpayer’s medical needs. Voluntary contributions made by an employer are taxable income to the employee.
Fees for approved courses may also be deducted, up to a maximum of S$3,500 (increased to S$5,500, effective from the 2011 assessment year).
Business deductions. Amounts incurred are deductible in determining taxable profits if they are expended wholly and exclusively in producing income, are revenue in nature and are not specifically prohibited under the Singapore tax law. Expenses specifically not deductible include personal expenses, income taxes paid in and outside Singapore, contributions to unapproved provident funds and automobile expenses. Book depreciation of fixed assets is not an allowable deduction; tax depreciation (capital allowances) is granted instead according to statutory rates.
Rates. A person who is a tax resident in Singapore is taxed on assessable income, less personal deductions.
Relief for losses. Losses incurred, and capital allowances granted, in the operation of a trade, business, profession or vocation may be offset against any other taxable income in the same assessment year. Any unabsorbed losses and capital allowances may be carried forward without any time limitation for offset against future income from all sources, subject to certain conditions. Relief for a qualifying loss is mandatory and may not be deferred.
Relief is also available for the carryback of current year unused capital allowances and trade losses, subject to the satisfaction of certain conditions.
B. Estate and gift taxes
Estate duty has been eliminated from the Singapore tax regime for deaths occurring on or after 15 February 2008. Singapore does not impose a gift tax.
C. Social security
The Central Provident Fund (CPF) is a statutory savings scheme to provide for employees’ old-age retirement in Singapore. Only Singapore citizens and permanent residents working in Singapore are required to contribute to the CPF. All foreigners (including Malaysians) are exempt from CPF contributions. Effective from 1 January 2003, foreigners may no longer make voluntary contributions to the CPF.
Both employees and employers must contribute to the fund. For individuals up to 50 years of age, the statutory rate of the employee’s contribution is 20% and the rate of the employer’s contribution is 15.5% (increased from 14.5% to 15% in September 2010 and then to 15.5% in March 2011). Under a 2011 budget proposal, the employer’s contribution rate will be increased by a further 0.5% to 16%, effective from September 2011. For individuals aged above 50 and up to 55, the employee’s contribution rate is 18%, and the employer’s contribution rate is 11.5% (increased from 10.5% to 11% in September 2010 and then to 11.5% in March 2011). The rate will be increased to 12%, effective from September 2011, in line with a 2011 budget proposal to increase the employer’s contribution rate by a further 0.5%. Lower contribution rates apply to individuals over 55 years of age. Special transitional contribution rates apply to foreigners who become Singapore permanent residents. For employees older than age 35 and earning total wages of S$1,500 or less per month, graduated rates of up to 15.5% (for the employer) and 20% (for the employee) apply. Under a 2011 budget proposal, the employer’s contribution rate will be increased by 0.5% to 16%, effective from September 2011.
Maximum contribution limits apply to both “ordinary” and “additional” wages. For “ordinary” wages, contributions for employees in the private sector are payable only on the part of the monthly wage that does not exceed S$4,500 (to be increased to S$5,000, effective from September 2011, under a 2011 budget proposal).
Contributions on “additional” wages, such as bonuses and other non-regular wages, are subject to limits if the employee’s total wages for the year exceed S$76,500 (to be increased to S$85,000, effective from 1 January 2012; a transitional rule applies to individuals employed as of 31 December 2011). In this event, the contributions on the “additional” wages are payable up to a limit of S$76,500 (to be increased to S$85,000 under a 2011 budget proposal), less the total “ordinary” wages subject to CPF contributions in the year.
Self-employed individuals who carry on a trade, business, profession or vocation may also participate in the CPF scheme.
On reaching 55 years of age, an employee is entitled to withdraw, tax-free, the accumulated contributions up to a certain limit, plus accrued interest. If the employee permanently leaves Singapore (and Malaysia) before reaching 55 years of age, the funds may also be withdrawn. The employee’s balance may also be withdrawn for certain specified purposes, including the acquisition of residential property, investment in shares and the payment of certain hospital expenses for anyone in the taxpayer’s family. A Supplementary Retirement Scheme (SRS) allows Singapore citizens and permanent residents to elect to contribute to private funds in addition to their CPF contributions. Foreigners working in Singapore may also participate in the scheme. Contributions are deductible but are subject to a cap. The rates of contribution are 15% for citizens and permanent residents and 35% for foreigners, subject to an absolute cap of 17 months of the prevailing CPF salary ceiling. The voluntary SRS contributions are paid only by employees; employers are not required to make SRS contributions. Effective from 1 January 2008, employers may directly contribute to the SRS on behalf of their employees, subject to the current contribution limits. Withdrawals made before the employee reaches the statutory retirement age are fully taxed and are generally subject to a 5% penalty. Withdrawals are only 50% taxable if they are made after the employee reaches the statutory retirement age in effect at the time of the first contribution, after the employee’s death, for medical reasons, or by a foreigner who has maintained the SRS account for at least 10 years from the date of the first contribution. Employees who reach the statutory retirement age or who meet the rules on medical grounds, may further reduce the tax payable by extending the withdrawals over a period of up to 10 years from the time they reach the statutory retirement age in effect at the time of withdrawal.
Double tax relief and tax treaties
Relief from double taxation is granted on income derived from professional, consultancy and other services rendered in countries that do not have double tax treaties with Singapore.
Double tax relief is also available for foreign taxes levied on income taxed in Singapore if Singapore has a tax treaty with the country concerned and if the individual is resident in Singapore for tax purposes. Singapore has entered into tax treaties with the following countries.
Australia
Ireland
Philippines
Austria
Israel
Poland
Bahrain
Italy
Portugal
Bangladesh
Japan
Qatar
Belgium
Kazakhstan
Romania
Brunei
Darussalam
Korea (South)
Russian Federation
Bulgaria
Kuwait
Canada
Latvia
Saudi Arabia
Chile (a)
Libya
Slovak Republic
China
Lithuania
Slovenia
Cyprus
Luxembourg
South Africa
Czech Republic
Malaysia
Sri Lanka
Denmark
Malta
Sweden
Egypt
Mauritius
Switzerland
Estonia
Mexico
Taiwan
Fiji
Mongolia
Thailand
Finland
Myanmar
Turkey
France
Netherlands
Ukraine
Georgia
New Zealand
United Arab Emirates
Germany
Norway
Hong Kong (b)
Oman
United Kingdom
Hungary
Pakistan
United States (b)
India
Papua New
Uzbekistan
Indonesia
Guinea
Vietnam
(a) Applies to income from international sea transport only.
(b) Applies to income from international sea and air transport only.
Individuals who receive employment income in Singapore and who are tax residents of countries that have concluded double tax treaties with Singapore may be exempt from Singapore income tax if their period of employment in Singapore does not exceed a certain number of days (usually 183) in a calendar year or within a 12-month period and if they satisfy certain additional criteria specified in the treaties.
To learn more about the history, culture, economy and other information about Singapore
We have been preparing US income tax returns for US Citizens and permanent residents living in Singapore for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Singapore and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Singapore.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
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