Guide to US Taxes for Expats Living in Singapore
Prized for its beauty, culture, and economic growth, Singapore is sometimes referred to as “the Switzerland of Asia.” Like Switzerland, Singapore’s status as a tax haven also makes it an attractive target for criminal investigations mounted by the IRS in conjunction with the Department of Justice. As a U.S. expatriate living in Singapore, you must comply with tax reporting requirements mandated by the federal government — or risk the potential for debilitating civil penalties and even criminal prosecution.
American citizens residing in foreign countries, including Singapore, must report their worldwide income to the IRS annually unless they are covered expatriates. In addition to this, you must also file IRS Form 8938 and a Report of Foreign Bank and Financial Accounts, depending on your assets and holdings in foreign financial accounts. While the filing deadline for applicable tax forms is Tax Day, expats can receive an automatic two-month filing extension. Expats living in Singapore are also eligible for certain perks, like the foreign earned income exclusion (FEIE) and the foreign tax credit (FTC). If you do not submit the necessary tax forms to the IRS as an expat, you might be penalized, both civilly and criminally.
To learn more about your tax liability while living in Singapore, call the tax CPAs for American expatriates at US Tax Help at (541) 362-9127.
Expatriation Tax: Am I A Covered Expatriate?
Pursuant to Sections 877 and 877A of the IRC or Internal Revenue Code, expatriation tax applies to “U.S. citizens who have renounced their citizenship and long-term residents… who have ended their U.S. resident status for federal tax purposes.” However, expatriation tax is not a one-size-fits-all arrangement. On the contrary, the applicable filing requirements can vary dramatically depending on the date the taxpayer expatriated to Singapore.
Expatriation on or Before June 3, 2004
For example, if you expatriated from the U.S. to Singapore on or before June 3, 2004, you must file Form 8854 (Initial and Annual Expatriation Statement). Failure to do so constitutes a violation of IRC Section 877 and IRC Section 6039G, and can result in a fine of $10,000.
Expatriation After June 3, 2004
If you expatriated from the U.S. to Singapore after June 3, 2004, but before June 16, 2008, you must file Form 8854 or risk the $10,000 penalty. You must also formally certify with the IRS your compliance with all reporting requirements during the five years leading up to the date of your expatriation. This certification will be closely checked. You are also subject to U.S. tax on worldwide income for up to 10 years after expatriating. You will be treated as a U.S. citizen for tax purposes until you file Form 8854.
Expatriation on or After June 16, 2008
If you expatriated from the U.S. to Singapore on or after June 16, 2008, you are what’s called a “covered expatriate” if you had a net worth of $2,000,000 or more when you expatriated to Singapore, you were unable to certify tax compliance with the IRS (dating back five years before expatriating), or your average yearly income tax for the five years before you expatriated is more than the specified amounts, which are adjusted for inflation. For the past few years, the yearly income thresholds are as follows: $162,000 for 2017, $165,000 for 2018, $168,000 for 2019, and $171,000 for 2020.
As a covered expatriate, you must comply with the regulations contained within IRC Section 877A. Additionally, any gifts you make to U.S. citizens, as well as any bequests (i.e. inheritance) are subject to taxation.
FBAR and FATCA Reporting Requirements for US Expats Living in Singapore
Even if you are working or living overseas, the federal government of the United States still requires you to disclose your global income. If you fail to report accounts or assets that you hold in countries outside the U.S., including Singapore, you may be investigated and even criminally prosecuted for tax violations. You may consequently be subject to tens or even hundreds of thousands of dollars in fines and years of incarceration, in addition to being burdened with a criminal record. In order to avoid or mitigate these penalties, it is very important to report all income as and when required to do so.
FBAR
All too many taxpayers make the mistake of assuming the IRS will pass them over for criminal prosecution because there are “bigger fish to fry.” Unfortunately for taxpayers with this mindset, the IRS has become increasingly vigilant and proactive in its investigations of suspected tax evasion, tax fraud, and other acts of non-compliance. In particular, in recent years, the IRS has increased its efforts to investigate American expatriates and other U.S. taxpayers holding undisclosed offshore accounts with foreign financial institutions, or FFIs.
You must file an FBAR (Report of Foreign Bank and Financial Accounts) if you are a U.S. person — including U.S. residents and U.S. citizens, as well as various business structures — who had signature authority over or financial interest in one or more foreign bank accounts, provided the aggregate account values surpassed $10,000 at any time during the reporting year.
Bear in mind there are extremely significant criminal and or civil penalties for willful and even non-willful violations of all applicable FBAR filing requirements. For example, non-willful failure to file an FBAR can result in a fine of $10,000 per violation. For willful violations, the penalties increase to either $100,000, or up to 50% of the balance in the offending account.
FBARs are not submitted alongside annual tax returns and instead can be sent to the Financial Crimes Enforcement Network using its BSA E-Filing System.
FATCA
In March of 2010, Congress enacted a law known as FATCA (Foreign Account Tax Compliance Act), which was, as described by the IRS, designed to “target tax non-compliance by U.S. taxpayers with foreign accounts.” As a taxpayer living abroad, you must comply with FATCA by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets). If you are filing a return alone and the value of your asset(s) is either over $200,000 on the last day of the tax year or over $300,000 at any point in the year, you must submit IRS Form 8938. If you are filing a joint return, and the value of your asset(s) is either over $400,000 on the last day of the tax year or over $600,000 at any point in the year, you must also complete Form 8938.
Form 8938 is due on Tax Day, alongside all other necessary tax forms, like your annual tax return.
US Tax Filing Deadlines for Expats Living in Singapore
If you live in Singapore as an American expatriate, familiarizing yourself with the filing deadlines for reporting your income and other financial information to the IRS will be important.
Generally speaking, expats must submit all necessary tax forms to the IRS by Tax Day. While this day differs depending on the year, it generally falls in mid-April. That said, expats get the perk of having an automatic two-month filing extension, should they need it. You do not have to apply for this extension while living in Singapore. If you require even more time to file your U.S. taxes while living abroad, you can file Form 4868 by Tax Day to get an additional six months to submit the necessary information to the IRS, pushing your deadline to file back to mid-October.
Our tax CPAs for American expatriates can help you compile all the necessary information about your worldwide income and foreign financial assets so that you can easily meet the regular filing deadline for U.S. taxpayers, which is Tax Day.
On top of reporting your income to the United States, you might also have to file an annual tax return and submit it to the government in Singapore, as Singapore has a resident-based taxation system, unlike the U.S., which has a citizenship-based taxation system. This means that you will also have to be aware of the reporting deadlines in Singapore as well as in the United States.
Exclusions and Credits Available to US Expats Living in Singapore
By expatriating to Singapore, you can become eligible for various tax perks and exclusions that are only available to expats. These include the foreign earned income exclusion and the foreign tax credit.
To claim either credit, you must meet the bona fide residence test or the physical presence test. To pass the former test, you must be in Singapore for an uninterrupted period that covers an entire tax year. To pass the physical presence test, you must be physically present in Singapore for at least 330 full days out of a 365-day period.
Once you have established that you meet either test, you will be eligible for the FEIE. To claim the FEIE, our tax CPAs for American expatriates will submit IRS Form 2555 alongside your annual tax return. In 2024, the FEIE will allow expats living in Singapore to exclude up to $126,500 of their foreign-earned income from taxation by the IRS. Any additional income earned above the threshold will not be excluded from taxation. The FEIE also allows you to exclude income used to pay for housing expenses. Any income earned from a U.S. source will still be taxed by the IRS.
The foreign tax credit allows expats residing in Singapore to avoid double taxation. For every American dollar you pay towards eligible taxes in Singapore, your tax liability to the U.S. will be reduced. You can claim the FTC by filing Form 1116 with the IRS. Do this alongside your annual tax return and submit it by Tax Day.
What if You Don’t File Your US Taxes While Living in Singapore?
If you do not adhere to your tax reporting responsibilities while living abroad as an American expatriate, you will likely be penalized by the IRS. Your U.S. passport might even be revoked.
The IRS takes non-compliance seriously and assesses financial penalties against any American taxpayer who fails to submit their financial information to the agency by the applicable deadlines. Such penalties can add up to thousands of dollars, leading to financial stress for expats. In addition to being fined for not reporting your worldwide income or paying any necessary tax, you can also be penalized for not filing the proper information returns with the IRS, like Form 8938 or an FBAR.
Expats who remain unaware of their tax liabilities for some time might even face criminal consequences, which might entail additional fines and possibly jail time. American taxpayers living in Singapore who have fallen seriously delinquent on their taxes might see their U.S. passports revoked.
But what if you could avoid criminal prosecution? You may be able to do exactly that by participating in an IRS program called the Streamlined Offshore Filing Procedure. In the IRS’ own description, this invaluable program “enables non-compliant taxpayers to resolve their tax liabilities and minimize their chance of criminal prosecution. When a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice.”
Do I Have to File Taxes in Singapore as a US Expat?
Expats from the United States are often still obligated to pay U.S. taxes, at least to a certain extent. However, what many people might not realize before moving is that they might also be obligated to pay taxes in Singapore. Whether or not you must pay taxes in Singapore depends on your specific situation and tax residency status.
Tax Residency Status
If you live and work in Singapore, there is a good chance you will have to pay income taxes. The rate at which you are taxed depends on whether you are considered a legal tax resident. Remember, a person does not need to be a citizen of Singapore to be considered a tax resident. Even though you might not have citizenship in Singapore, you should be aware of your potential tax liabilities.
As far as income tax in Singapore is concerned, both tax residents and non-residents must pay taxes on income earned in Singapore. People who are considered legal tax residents are taxed at what is referred to as a “progressive rate.” The progressive rate is adjusted based on your income. Higher-income earners tend to face higher tax rates.
Non-tax residents are still taxed on the income they earn in Singapore, but not necessarily at a progressive rate. Instead, non-residents may be taxed at a flat rate of 15% or the progressive rate, whichever is higher.
Other Taxes in Singapore
There are various other tax obligations you might bump against in Singapore, and you should speak to a CPA experienced with taxes for expats for help and guidance.
In Singapore, you might have to pay a goods and service tax, which is similar to a Value Added Tax (VAT) in other countries. You might have to pay these taxes if you operate a business in Singapore that sells consumer goods. If you are an employee rather than a business owner, you might not need to worry about it.
Many people move to Singapore to buy property. Perhaps you are establishing yourself there to start a new business or because you were transferred there as part of your current job. If you buy and sell property or other assets, you might be concerned about a capital gains tax. Part of what makes Singapore such a favorable tax destination for investors is that there is no capital gains tax. The profit you make from the sale of property or another asset is not taxed.
Stamp duties are like taxes that are paid on documentation of certain properties, assets, or transactions. For example, if you live in Singapore and own an apartment building, you would have to pay stamp duties on the leases you establish with tenants. Similarly, if you live in Singapore and transfer shares or interests, there is a stamp duty tax on the transaction.
If you own property in Singapore, you might also be subject to property taxes. An annual property tax is based on the property’s value, whether the property is occupied, and whether there is a building on the property or if it is just land.
Talk to a CPA about your income and business dealings in Singapore. The country is very attractive for people starting businesses or looking to invest because of its favorable taxes. If you buy property, open a business, or otherwise earn income in Singapore, you might be obligated to pay taxes there.
Tax Residency Through Employment in Singapore
Many expats in Singapore become tax residents through their employment status. While you might be working in Singapore, you might not be a tax resident, meaning you might not be taxed according to the more favorable progressive rate.
Employment Pass
The employment pass option may be available for working professionals who have job offers in Singapore. If you are a professional with a job offer in Singapore, your potential employer may apply for the pass on your behalf. To qualify, you need to earn at least $5,000 per month. As you age, this minimum limit may be increased. A pass may last for as long as 2 years before it must be renewed. Having the pass may help you take advantage of better tax rates.
EntrePass
Perhaps you are moving to Singapore to begin your own business rather than work for someone else. In that case, you can apply for an EntrePass. This pass is geared toward entrepreneurs and provides a tax incentive for them to start businesses in Singapore.
To qualify, you must have started or intend to start a business in Singapore that is registered with the Accounting and Corporate Regulatory Authority. Additionally, you must either raise funding for the business, find support from a government-recognized accelerator, establish a technology business, hold some intellectual property, or have a research collaboration in Singapore.
Global Investor Program
The Global Investor Program is aimed at potential business investors who wish to invest in Singapore’s economy. Generally, this program is open to people who intend to make substantial business investments. You need a significant background in investing with a track record of successful business ventures and investments.
Call Our Tax Accountants for Help Today
To learn more about filing your taxes while living overseas, call the tax CPAs for American expatriates at US Tax Help at (541) 362-9127.
