Question about Singapore Job Offer

[Singapal]

Folks,

I just registered here a few min ago so pardon me if my questions don't sound too bright. I currently work in the US but received an offer from the Singapore sub of a reputable US MNC. My base salary in the US is US$135k and my new annual salary stated on my offer letter is S$195k, which is an increase of US$20k and I thought it was pretty decent. Then I realized this "base" includes a guaranteed bonus of two months salary paid out in December each year.

So my question is, if I leave before December (not that I plan to do that), would I receive the bonus ratably or is it an all-or-nothing type of deal? What's the common practice in Singapore? If the latter I'd say my "real" annual salary isn't 195k.

Also, since I won't enjoy any of the fancy expat benefits, does it sound like a good offer at all?

Thanks!

[sundaymorningstaple]

Do you get two months annual bonus in the US as well?

Also you need to see how long you are going to be here. If you qualify for the IRS "Income earned abroad" tax exclusion, you may be able to deduct the first USD $97.6K or so. This might make it even more attractive once you factor out the taxes you will pay on that income here in Singapore (considerably less, I can tell you.

http://www.iras.gov.sg/irasHome/uploade ... 1_IRAS.xls

http://www.irs.gov/pub/irs-pdf/i2555ez.pdf
http://www.irs.gov/pub/irs-pdf/f2555ez.pdf

The taxes on 195K SGD will be around 20K SGD or less

You will have to estimate what your tax liability would be on your current salary in the US and then apply the Income Earned Abroad exclusion if applicable to compare the difference. As far as the year end bonus, it is part and parcel to your salary and is normal here. It was historically called a 13th month bonus (no longer used) but is now referred to as AWS - (Annual Wage Supplement). The bonus is generally one month minimum and depending on the company can be upwards of 3 to 5 months. This is normal but most companies who practice this will have a fixed bonus of one or two months and then a variable bonus (possibly) depending on the performance of the company. Companies like ST Engineering often have upwards of 5 months bonus. So you DO have to factor it in. Most don't prorate bonuses, however, as the bonus is an incentive to stay with the company. this is why recruitment slows down around around the 4th quarter of the year through January/February of the following year (depending on when the Lunar New Year falls) as a lot of companies don't pay out the bonus for the previous until the Chinese New Year. After they get their bonus, then they "move".

[zzm9980]

To answer OP's main question: No, those types of bonuses are generally not pro-rated.

If you qualify for the IRS "Income earned abroad" tax exclusion, you may be able to deduct the first USD $97.6K or so.

I need to add two important things to this. First, a correction. It's an 'exclusion', not a 'deduction'. This is a small but extremely important distinction. Every dollar you pay taxes on beyond the exclusion will be at the normal income bracket for that dollar amount. If it was a deduction, your income would be lowered (for tax purposes) by that amount. As an example, if you make USD$10k more than the excluded amount, you pay the full tax rate at that bracket on that $10k. This may be 30% (or whatever) percent. If it was deducted, it would look like your income was only $10k and you'd probably have almost no taxes.

Second (better news than the previous), if you're out of the US for 330 in a year, you qualify. Those 330 days do NOT have to be in the first partial tax year (as it would be impossible for most people who did not leave the US in January). You can instead file extensions on the first/partial year's tax until you've met the conditions for the exclusion (even if it spans multiple tax years) and then file to get the exclusion. Almost seems shady, but it is fully allowed.

SMS's most important point: Do you have a bonus in the US? What's your overall comp?

[sundaymorningstaple]

I thought I wrote exclusion! not once but twice. I believe I also said the fixed bonuses where not usually prorated as well. Crap, don't tell me the forum is correcting input like iPhones do! How you doin'. Seems like you've settled back in pretty good. Any chances of a swing through the region long enough to tip one or two back?

[zzm9980]

I thought I wrote exclusion! not once but twice. I believe I also said the fixed bonuses where not usually prorated as well. Crap, don't tell me the forum is correcting input like iPhones do! How you doin'. Seems like you've settled back in pretty good. Any chances of a swing through the region long enough to tip one or two back?

Eh, you said exclusion but then deduct in the same sentence. I understood it, but didn't when I first arrived so wanted to just be helpful and make sure OP was completely clear on it.

I'm OK. I need to swing by soon, I'll make sure you'll know when . Another round of astronomically priced drinks are in order I think!

[maneo]

There was a time when that exclusion worked like a deduction, but no more.

For someone that is employed, there will be considerable tax savings, between the exclusion, the comparative tax rates and the credits for taxes on income above the exclusion. Hopefully it will be enough to offset the higher cost of housing, transportation & consumer prices in general.
"Astronomically priced drinks" is no exaggeration.

One could save quite a bit by adapting to a more local lifestyle.

[sundaymorningstaple]

I'm OK. I need to swing by soon, I'll make sure you'll know when . Another round of astronomically priced drinks are in order I think!

That'll work!

[Singapal]

Thank you all for the load of useful info. Now that we're talking tax, may I ask a follow up question? It's based on my random observation and uneducated guess.

On the one hand, like you pointed out there would be significant tax saving on the first 100k of income due to the exclusion; on the other I'm a little surprised by the lack of tax planning tools for regular American salarymen working in Singapore, at least those who do not intend to become SG citizens/PRs. Back in the U.S., the most common benefit is the 401(k), which is a good tax deferral tool even without a company match. Here in SG, non citizens won't even get the CPF deduction, so every penny I earn would be currently taxable and I can't think of any tax planning idea (except maybe contributing to an IRA back home, which is not much).

Any thoughts on this?

There was a time when that exclusion worked like a deduction, but no more.

For someone that is employed, there will be considerable tax savings, between the exclusion, the comparative tax rates and the credits for taxes on income above the exclusion. Hopefully it will be enough to offset the higher cost of housing, transportation & consumer prices in general.
"Astronomically priced drinks" is no exaggeration.

One could save quite a bit by adapting to a more local lifestyle.

[maneo]

Here in SG, non citizens won't even get the CPF deduction, so every penny I earn would be currently taxable and I can't think of any tax planning idea (except maybe contributing to an IRA back home, which is not much).

Any thoughts on this?

Yes, that's the way it is.

Just a reminder about any earned income exceeding the exclusion limit, the SG tax paid on this amount above the exclusion limit can be claimed as a Foreign Tax Credit (using Form 1116), offsetting any US tax that might be owed. These tax credits can be carried forward (up to 10 years) if you can't use it all immediately.

[GSM8]

Furthermore, its kind of a double whammy because US is the only developed country in the world that practices citizenship based taxation, which basically amounts to double taxation if you are an expat. Apart from the tax aspect it effectively restricts most of your other investment options as well (including retirement). Expat citizens of almost every other country are taxed only in the country that they reside in and work, in this case Singapore. This might be an oversimplification, but there is another thread "U.S. Expat Taxation" in the "Careers and Jobs in Singapore" message board on this forum that has more details if interested.

[zzm9980]

Foriegners can still get SRS accounts for (Singapore) tax benefits. Some companies will contribute to your SRS account on the same schedule as they would have your CPF if you were a SC or PR.

Americans generally won't be allowed to reinvest the SRS funds though, just let them sit there...

http://www.iras.gov.sg/irasHome/page03_ektid340.aspx

http://www.posb.com.sg/personal/investm ... fault.page

[Brah]

I've had an SRS account for years, and when companies match it, it is like free money.

At the very least, it's forced savings in order to lower one's Singapore taxes.

Not sure about the reinvesting point though, if you mean repatriating it.

In fact, I've wondered about sending the savings I have here and elsewhere back home, what kinds of financial penalties I would potentially face.

[zzm9980]

Not sure about the reinvesting point though, if you mean repatriating it.

Non-Americans can re-invest the money all kinds of ways for much greater gain. Kind of like your 401k would work, but generally with a lot greater flexibility. Every bank in Singapore that I talked to that offered SRS would only let Americans have the money sit and get the basic savings interest rate (same thing for all of their 'investments' really).

[Singapal]

Thanks for the info on SRS, it's great to know! I don't see SRS on my offer letter, so company match is out of the question.will I be able to open an account at a designated bank for myself?

Also I think US tax planning for my SG earnings would be more important than SG local planning. The local effective tax rate on S$200k is less than 10% anyway. But for earnings exceeding the exclusion amount - in my case roughly US$50k - would be subject to a second bite from Uncle Sam.

So another logical question: would I be able to reduce my US gross income by the amount of SRS contribution? To illustrate, say I made US$150k in SG, of which 100k would be excluded, and I maxed out my SRS contribution which is about 20k. Is my gross income subject to current US taxation 50k or 30k?

Foriegners can still get SRS accounts for (Singapore) tax benefits. Some companies will contribute to your SRS account on the same schedule as they would have your CPF if you were a SC or PR.

Americans generally won't be allowed to reinvest the SRS funds though, just let them sit there...

http://www.iras.gov.sg/irasHome/page03_ektid340.aspx

http://www.posb.com.sg/personal/investm ... fault.page

[sundaymorningstaple]

I would imagine it would still be taxable in the US just as are a PR's CPF contributions made by the Employee. As the EP holder and the PR are both still US citizens, I doubt that SRS would be treated with any less disdain than CPF contributions (but both would definitely need to be reported to FATCA). ergo, you original question, $50K.