Tax Guide for Americans in Singapore
Balancing obligations from both the U.S. and Singapore can be challenging. This guide simplifies the tax intricacies for American expats, offering clear insights into Singapore's tax system and strategies for efficient tax management.
Whether you're new to Singapore or have been residing for years, this guide provides the essentials to navigate your tax responsibilities effectively.
Dive in for a streamlined approach to your financial obligations.
Table of contents
- Resident vs. non-resident of Singapore
- Who can be considered a resident of Singapore
- Types of taxes and rates in Singapore
- Taxable vs non-taxable income in Singapore
- Social security in Singapore
- Singapore's pension system
- Tax deductions and credits for expats in Singapore
- The tax treaty between the US and Singapore
- Most popular tax forms for US expats
- When are Singapore's taxes due?
- Singapore tax forms for US expats
Resident vs. non-resident of Singapore
When it comes to taxation, the distinction between being a resident or nonresident in Singapore is crucial.
Residents are subject to progressive tax rates ranging from 0% to 22%, while non-residents are taxed at a flat rate of 22%. Residents are also entitled to various personal reliefs and deductions, which can significantly reduce their tax liability.
On the other hand, non-residents are not eligible for these benefits. Therefore, becoming a tax resident could be more advantageous for most expats.
Who can be considered a resident of Singapore
Determining your Singapore residency status is the first step in understanding your tax obligations. In this section, we look at the three main options for becoming a Singapore tax resident.
Option 1: Singapore Employment Pass
The Singapore Employment Pass is designed for foreign professionals, managers, and executives who have a job offer in Singapore.
To qualify, you must have a fixed monthly salary of at least 4,500 SGD (higher for older and more experienced candidates) and recognized qualifications. Holders of an Employment Pass are considered tax residents if they have been staying in Singapore for at least 183 days in a calendar year.
This status allows them to benefit from progressive tax rates and tax reliefs.
Option 2: Global Investor Program (GIP)
The "Global Investor Program" is aimed at high-net-worth individuals who are willing to invest a significant amount in Singapore's economy.
Investments can be made in various sectors, including manufacturing, financial services, and healthcare. GIP participants are granted permanent resident status, making them tax residents as well.
This program is particularly beneficial for those who plan to make long-term investments in Singapore, as it offers tax advantages and easier access to various forms of credit and business opportunities.
Option 3: Singapore EntrePass
The EntrePass is designed for foreign entrepreneurs who wish to start and operate a new business in Singapore.
The business must be in a qualifying sector, such as technology or healthcare. Like Employment Pass holders, EntrePass holders are considered tax residents if they meet the 183-day criterion.
Types of taxes and rates in Singapore
Singapore's tax system is known for its simplicity and competitiveness. The city-state offers a range of tax types, each designed to cater to different segments of the population and business community.
This section will delve into the primary taxes that individuals might encounter.
Resident income tax
Residents in Singapore are subject to progressive tax rates ranging from 0% to 24%. The tax rates are structured in brackets, with lower-income earners paying little to no tax, while higher-income earners are taxed at higher rates.
This system ensures that the tax burden is equitably distributed.
Current rates for the years of assessment 2023 and 2024 (income years 2022 and 2023) are shown below.
|Taxable income (SGD*)||Percentage on excess (%)|
|1,000,000 and above||24|
* Singapore dollars
Non-resident income tax
Non-residents are taxed at a flat rate of 22% on their Singapore-sourced income. This means that regardless of the amount they earn, they will be taxed at this rate.
However, it's essential to note that non-residents are not entitled to personal reliefs and deductions that residents can claim.
This flat rate system simplifies tax calculations for non-residents but can be higher than the rates some residents pay, especially those in the lower income brackets.
Capital gains taxes
Singapore does not impose a capital gains tax. This means that profits from the sale of assets, such as property, stocks, or bonds, are not taxed.
This absence of capital gains tax is one of the features that makes Singapore an attractive destination for investors.
It encourages both individuals and businesses to invest and grow their wealth without the worry of hefty taxes on their profits.
Goods and Services Tax (GST)
In Singapore, GST is currently set at 8%, but there are plans to increase it to 9% on 1 January 2024.
This tax is similar to the Value Added Tax (VAT) in many other countries. While businesses collect GST from their customers, they also claim credits for the GST they've paid on their business purchases.
This ensures that the tax is borne by the final consumer of the goods or services.
In Singapore, property owners are subject to an annual property tax that is determined based on the value of their assets, be it buildings, houses, land, or tenements.
- Owner-Occupied Residential Property: For those who reside in their own homes, the property tax rates are progressive. They start at a minimal 0% and can go up to a maximum of 16%, depending on the property's annual value.
- Non-Owner Occupied Residential Property: Properties that are rented out or left vacant fall under this category. The tax rates for such properties are slightly higher, ranging from 10% to 20%. This reflects the potential rental income these properties can generate.
- Land and Non-Residential Properties: Whether it's a piece of land or a commercial space, such properties are taxed at a flat rate of 10%. This ensures simplicity and clarity for property owners in the commercial sector.
Stamp duties are taxes paid on documents relating to the transfer of certain types of properties or rights.
When buying or selling real estate in Singapore, stamp duty is typically required. The rate depends on the property's value and the buyer's profile (e.g., first-time buyer, foreigner).
Additional Buyer's Stamp Duty (ABSD) might also apply, especially for foreigners or those owning multiple properties.
Stamp duties are also applicable to lease agreements. Whether you're renting a residential or commercial property, stamp duty is payable on the lease agreement, based on the rental amount and the lease period.
- For lease agreements that cover a period of up to four years, the stamp duty rate is set at 0.4% of the total rent for the entire lease duration.
- For lease agreements that extend beyond four years, the stamp duty is calculated differently.
Instead of basing it on the total rent for the entire lease period, the tax rate is 0.4% four times the average annual rent for the lease duration.
Renters are exempt from stamp duty if their lease agreement stipulates an average monthly rent that is less than 1,000 SGD.
Stocks and shares
Transactions involving the transfer of shares and interests are also subject to stamp duty at 0.2% of the purchase price or market value of the shares or interests, whichever is higher.
Foreign Worker Levy (FWL)
In Singapore, businesses that employ foreign workers under the Work Permit and S Pass categories are required to pay the FWL.
The levy amount varies based on the sector in which the company operates and the worker's qualifications. The primary objective of the FWL is to ensure that businesses consider hiring locals before turning to foreign labor.
By adjusting the levy rates and quotas, the government can manage the foreign workforce's size and composition, ensuring that industries remain competitive while providing job opportunities for locals.
Skills Development Levy (SDL)
All employers in Singapore are required to contribute to the SDL for all employees up to the first 4,500 SGD of gross monthly remuneration at a rate of 0.25% or 2 SGD, whichever is higher.
The funds collected are channeled to the Skills Development Fund, which finances various training and development programs.
These programs help the workforce stay relevant and competitive in the ever-evolving global market.
Singapore boasts one of the most competitive corporate tax rates globally. The headline corporate tax rate is 17%, but various schemes and incentives can effectively reduce this rate for many businesses.
The city-state adopts a territorial basis of taxation, meaning companies are taxed on the income earned in Singapore and specific types of foreign-sourced income brought into the country.
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Taxable vs non-taxable income in Singapore
In Singapore, the income of an individual encompasses various sources, each with its own set of rules and guidelines for determination.
Whether you're an employee, an entrepreneur, or an investor, understanding how your income is assessed can help in effective financial planning and tax optimization.
1. Employment income
In Singapore, employment income includes not only basic salaries and wages but also bonuses, commissions, and allowances. Additionally, benefits-in-kind provided by the employer, such as housing and car benefits, are also considered taxable employment income.
Employment income is taxable in Singapore if the employment is exercised in the country, regardless of where the remuneration is paid or where the employer is based.
2. Equity compensation
Equity compensation refers to non-cash pay that represents ownership in a company and is often used to attract and retain top talent.
In Singapore, gains from equity compensation, such as stock options and shares awarded under employee share schemes, are considered taxable income.
The taxable amount is typically the difference between the open market value of the shares at the time of exercise or award and the price paid by the employee.
Such compensation is taxed at the time of exercise for stock options or when the shares are vested for share awards.
3. Business income
Business income in Singapore includes profits from any trade, business, profession, or vocation.
This encompasses earnings from the sale of goods or services, royalties, and rental income from business properties. Deductions are allowed for business expenses incurred in earning the income, ensuring that only the net profit is taxed.
Capital allowances can also be claimed for fixed assets used in the business, further reducing the taxable income.
4. Rental income
In Singapore, rental income is taxable after deducting allowable expenses related to the property. These expenses can include property tax, mortgage interest, repairs, and maintenance.
By offsetting these costs against the gross rental income, only the net amount is subjected to tax. Property owners should maintain detailed records of their rental-related expenses to claim these deductions accurately.
While Singapore has a comprehensive taxation system, certain types of income are exempted from taxation. These exemptions are designed to provide relief in specific situations or to encourage certain economic activities.
1. Retrenchment Benefits
Payments made by employers to compensate employees for the loss of employment, as well as payments for restrictive covenants, are not taxable. These benefits are considered capital in nature.
2. Foreign-sourced Income
Generally, income sourced from foreign countries and received in Singapore is not taxable. However, there's an exception if such income is received by a resident individual through a partnership in Singapore.
Annuities, which are continuous yearly payments arising from various sources such as an annuity policy from an insurance company, a gift, inheritance, or the sale of an asset, are not taxable in Singapore.
There are exceptions, though, such as when the annuity is received from a partnership, Supplementary Retirement Scheme (SRS), or if the annuity policy was purchased by an employer as a substitute for pension or other employment benefits.
4. Alimony/Maintenance Payments
Income derived from alimony and maintenance payments is exempt from taxation.
Winnings from betting and other games of chance are not considered income and are therefore not taxable. They are treated as windfalls.
6. Dividend income
In Singapore, dividends paid by local companies are typically tax-exempt for the recipient, thanks to the one-tier corporate tax system.
This system ensures that the company's profits are taxed at the corporate level, and when these profits are distributed as dividends, they are not subjected to further taxation in the hands of shareholders.
Therefore, individuals receiving dividends from Singaporean companies can enjoy these payouts without additional tax burdens.
7. Interest income
For Singapore tax residents, interest earned from approved banks or finance companies in Singapore is exempt from tax.
However, interest derived from other sources, such as personal loans or overseas bank deposits, may be taxable.
It's essential to differentiate between tax-exempt and taxable interest sources to ensure accurate tax reporting.
Social security in Singapore
Singapore's approach to social security is distinct and is primarily managed through the Central Provident Fund (CPF).
Foreigners living in Singapore are generally not required to contribute to the CPF unless they obtain permanent residency status.
Once they become permanent residents, they will have to start contributing to the CPF.
The CPF tax rates are:
- 20% for employees
- 17% for employers
Additionally, self-employed permanent residents who earn at least 6,000 SGD annually are mandated to contribute between 6% to 8% of their monthly income to their CPF MediSave Account, capped at 5,760 SGD.
Singapore's pension system
Beyond the CPF, Singapore has taken steps to ensure that its aging population has adequate support in their golden years.
The primary pillar of Singapore's pension system is the CPF Life scheme, an annuity that provides lifelong monthly payouts during retirement.
CPF members are automatically enrolled in CPF Life if they have a minimum amount in their Retirement Account when they reach the scheme's eligibility age. The payouts vary based on the plan chosen and the amount of savings.
Additionally, the Silver Support Scheme provides an extra layer of financial support for the bottom 20% of Singaporean seniors, ensuring that even the most vulnerable have a safety net.
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Tax deductions and credits for expats in Singapore
Expatriates in Singapore can benefit from a range of tax deductions and credits, which can significantly reduce their taxable income. These deductions are designed to alleviate the tax burden and provide relief for specific expenses.
Expatriates can deduct employment-related expenses that are not reimbursed by their employers. This includes costs like travel between home and workplace, entertainment expenses for clients, and subscriptions to professional bodies.
To claim these deductions, it's essential to maintain proper records and receipts as evidence of the expenditure.
Singapore's tax regime offers several personal deductions to reduce the taxable income of residents, including expatriates.
Such deductions include:
- Charitable Contributions: Donations made to approved charitable organizations in Singapore can be claimed as tax deductions.
Typically, the deduction is 2.5 times the donated amount, encouraging individuals to contribute to charitable causes.
- Mortgage Deduction: Interest paid on loans taken to purchase residential properties in Singapore can be deducted from the taxable income.
This deduction is especially beneficial for expatriates who have invested in Singapore's real estate market.
- Subscription Fees: Membership fees or annual subscriptions paid to professional bodies, which are essential for one's profession, can be claimed as a deduction.
- Medical Expenses: Medical expenses incurred for oneself or dependents can be claimed as deductions, but they are subject to specific limits.
This includes expenses for surgeries, hospital stays, and certain treatments.
- Spouses: If an expatriate's spouse does not have any income or has an income that does not exceed a specific threshold, a spouse relief can be claimed, reducing the taxable income.
Personal reliefs in Singapore are designed to provide tax breaks for specific life circumstances or responsibilities, ensuring that the tax system remains equitable.
Some of the notable personal reliefs include:
- Earned Income Relief: For individuals earning income through employment or trade.
- NSman Relief: For Singaporean men who have completed their National Service.
- Parent/Handicapped Parent Relief: For individuals supporting their parents or handicapped parents.
- Qualifying Child Relief (QCR) & Handicapped Child Relief (HCR): For parents supporting children or handicapped children.
These reliefs can be claimed based on eligibility criteria, and they directly reduce the individual's chargeable income.
Businesses in Singapore can deduct a wide range of expenses incurred in the production of income. This includes staff salaries, rental of business premises, utilities, and costs of goods sold.
Additionally, capital allowances can be claimed for fixed assets used in the business, such as machinery and equipment. By leveraging these deductions, businesses can significantly reduce their taxable profits.
If a business incurs a loss in a particular year, this loss can be carried forward indefinitely to offset against future profits, reducing future tax liabilities.
However, there are conditions to meet, such as the continuity of ownership and business activities.
For individuals, trade losses can also be offset against other sources of income, providing some relief during challenging financial periods.
Parenthood tax rebate
The Parenthood Tax Rebate is designed to support parents with the costs of raising children.
Parents can claim a rebate of up to 20,000 SGD per child, which can be shared between both parents.
This rebate can be used to offset the income tax payable and can be carried forward to subsequent years if it's not fully utilized.
The tax treaty between the US and Singapore
The tax treaty between the US and Singapore, in place since 2004, is a testament to the strong economic relationship between the two nations.
The primary objectives of this treaty are:
- Avoiding Double Taxation: The treaty ensures that income earned by residents of one country from sources within the other country isn't taxed twice.
It provides mechanisms to allocate taxing rights between the two countries, ensuring that taxpayers aren't unduly burdened.
- Preventing Tax Evasion: The treaty facilitates the exchange of tax-related information between the two countries, ensuring transparency and preventing tax evasion or avoidance.
- Reducing Withholding Taxes: The treaty provides for reduced rates or exemptions from withholding taxes on dividends, interest, and royalties. This fosters cross-border investments and trade.
Most popular tax forms for US expats
Most often our expats living in Singapore come to us to help with these forms:
- Form 1040: All U.S. citizens, including those residing abroad, must file the standard U.S. individual income tax return.
Form 2555: Foreign Earned Income Exclusion (FEIE): U.S. expats can exclude a certain amount of their foreign-earned income from U.S. taxation using this form.
This exclusion can significantly reduce the U.S. tax liability for many expatriates.
- Form 8938: Statement of Specified Foreign Financial Assets: U.S. citizens with significant financial assets in foreign accounts may need to report them using this form, depending on the total value of those assets.
- FBAR (FinCEN Form 114): If a U.S. citizen has foreign bank accounts with an aggregate value exceeding $10,000 at any point during the year, they must report these accounts using the FBAR.
- Form 3520: For U.S. citizens involved with foreign trusts or receiving large gifts from foreign individuals.
- Form 5471: For U.S. citizens who own a significant stake in foreign corporations.
- Form 8621: For U.S. citizens with investments in foreign mutual funds or similar passive foreign investment companies (PFICs).
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When are Singapore's taxes due?
In Singapore, the tax year is the same as the calendar year, running from 1 January to 31 December.
Tax Filing Deadline: The deadline for filing personal income tax returns is 15 April of the following year.
E-filing provides a slight extension, with a deadline of 18 April.
Payment Deadline: Once the Inland Revenue Authority of Singapore (IRAS) assesses the tax returns, they will send a Notice of Assessment (NOA) detailing the tax amount due.
The payment deadline is typically one month from the date of the NOA.
Estimated Chargeable Income (ECI): Companies are required to submit their ECI within three months from the end of their financial year.
Tax Filing Deadline: Companies must file their corporate tax returns by 30 November of the following year.
Singapore tax forms for US expats
- Form B1: This is the Income Tax Return for individuals who are employed in Singapore. Expatriates who are working and drawing a salary in Singapore will typically need to file this form.
- Form B: For individuals who have income from business, profession, or vocation in addition to employment income, Form B is the appropriate tax return.
This would apply to expatriates who might be running a side business or are self-employed.
- Form P: This form is for individuals who derive income from property, such as rental income.
Expatriates who own and rent out property in Singapore would need to file their rental income details using this form.
- Form M: Non-residents working in Singapore must file tax returns using this form.
This is specifically designed for individuals who are not residents of Singapore but have employment income from the city-state.
- Form IR8A: Employers provide this form to their employees. It summarizes all the earnings and benefits-in-kind provided to the employee during the year.
Expatriates should receive this form from their employers and use it as a reference when filing their personal tax returns.
- Form IR21: This is a crucial form for expatriates leaving Singapore. Employers are required to notify the Inland Revenue Authority of Singapore (IRAS) at least one month before an expatriate employee ceases employment or plans to leave Singapore for more than three months.
The form provides details of the employee's earnings and any tax due is typically withheld from their final salary payment.
Singapore Form IR8A
Gross Salary - Report the total amount of the annual Gross Salary in Earned Income section of our Tax Questionnaire. (Main>Earned Income>Foreign Sourced Income)
Bonus payment received during the tax year - should be reported in the Tax Questionnaire under the Main > Earned Income tab as a component of Gross Wages. For further detail, please click the corresponding help link (green question-mark) in the TQ.
Your director’s fee should be reported as self-employment income only if you are self-employed (answer Yes to the question Were you self-employed during the tax year (either abroad or in the US)? in Main > Earned Income section). If you are an appointed director in the corporation this income is added to wages.
If you own 10% or more shares in the corporation this income is still reported as wages. You also must file Form 5471. Ownership in the foreign corporation should be reported in the TQ under the Other Income tab. (Main>Other Income>CORPORATIONS & PARTNERSHIPS).
If your employer provided allowance on top of direct salary (car, education, home leave, etc.) please report this in the TQ under the Earned Income tab. (Main>Earned Income>Foreign Sourced Income)
Contributions made to a foreign employer pension plan - The IRS considers it as a part of the annual compensation - unless there is a country-specific Treaty Exemption (for example UK, Belgium and the Netherlands). Report these contributions in the TQ under the Earned Income tab (Main>Earned Income>Foreign Sourced Income).
If you participate in a company Employee Ownership Plan and are issued matching shares for your own contribution, these shares are considered as Stock-Based Compensation. They are reported separately from your regular income. Please report your employee stock ownership in the TQ (Main > Earned Income section).
Singapore Social Security - Expatriates are not mandated to pay into the CPF unless they gain permanent residency in Singapore. Contributions to the Social Security fund should be reported in the Tax Questionnaire under the Earned Income tab (Main>Earned Income>Taxes Paid).
The amount of income taxes you paid during the calendar year should be reported in the TQ under the Earned Income tab. (Main>Earned Income>Taxes Paid)