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Postby Singapal » Wed, 02 Jul 2014 1:55 pm

If that's the case SRS isn't that attractive to US citizens at all. Is it even worth the trouble and loss of present control of your cash, given the low SG tax rate?

I'm truly surprised that CPF deferral is not recognized for US tax purposes. Don't understand the logic, Americans living overseas don't have to worry about their retirement?

sundaymorningstaple wrote: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.

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Postby maneo » Wed, 02 Jul 2014 7:08 pm

GSM8 wrote: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.

The US is not the only major country in the world that taxes worldwide income.
China also taxes worldwide income of its citizens & PRs (those that have stayed in China more than 5 years).
Like the US, the tax is withheld by the employers, which is not done in Singapore.


Not sure what you mean by "double whammy" here in SG.
You should not have to pay taxes twice on SG earned income.

Assuming that SG has become your"bona fide" tax residence or that you pass the physical presence test, the US tax on the 1st $99,200 of foreign earned income should be excluded.
You should only be paying tax to SG on this 1st $99,200.

For income above $99,200, the tax you pay to SG can be claimed as a foreign tax credit against the US tax you owe, so again, you are effectively paying only the US tax you would owe, except that part of it goes to SG instead of the US.

Taking into account the total tax paid to both countries compared to what you would have to pay earning the same amount in the US, you could save ~$10K in taxes for a single wage earner. This is due to the difference in tax rates on the earned income exclusion amount.

The only income that should be taxed twice would be passive rental income.
Other passive income, such as interest, dividends and capital gains are not normally taxed for individuals residing in SG.

GSM8 wrote:Apart from the tax aspect it effectively restricts most of your other investment options as well (including retirement).

Actually, it is the zealous pursuit of potential tax income via FATCA that is resulting in restrictions on overseas investment options for US citizens.

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Postby maneo » Wed, 02 Jul 2014 7:25 pm

Singapal wrote:If that's the case SRS isn't that attractive to US citizens at all. Is it even worth the trouble and loss of present control of your cash, given the low SG tax rate?

I'm truly surprised that CPF deferral is not recognized for US tax purposes. Don't understand the logic, Americans living overseas don't have to worry about their retirement?

sundaymorningstaple wrote: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.


CPF & SRS are not considered qualified retirement plans by the IRS, so there is no deferral of taxes allowed on either the contributions or the interest, dividends & gains.

By the way, are you planning to do your own taxes?

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Postby Brah » Wed, 02 Jul 2014 7:43 pm

I've always used an accountant, but really need someone who can maximize my income and savings

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Postby GSM8 » Wed, 02 Jul 2014 8:37 pm

maneo wrote:
GSM8 wrote: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.

The US is not the only major country in the world that taxes worldwide income.
China also taxes worldwide income of its citizens & PRs (those that have stayed in China more than 5 years).
Like the US, the tax is withheld by the employers, which is not done in Singapore.


Yes, China taxes worldwide income of its citizens & PRs, but only if they are living in China, not if they are living and working in another country. A Chinese citizen living and working in Singapore does not file or pay tax to China. Neither does a Chinese citizen living and working in US. They would pay only Singapore or US tax respectively. Replace Chinese citizen with EU, UK, Australia, India, or any country in the world except Eritrea, and it still holds true, they would pay tax only in the country that they are resident. Such residence based taxation is fair and a "level playing field" (to use a favorite phrase of our lawmakers). American expats on the other hand are subject to US tax on their worldwide income regardless of where they live and work. This is the distinction I was trying to highlight.

Not sure what you mean by "double whammy" here in SG.
You should not have to pay taxes twice on SG earned income.

Assuming that SG has become your"bona fide" tax residence or that you pass the physical presence test, the US tax on the 1st $99,200 of foreign earned income should be excluded.
You should only be paying tax to SG on this 1st $99,200.

For income above $99,200, the tax you pay to SG can be claimed as a foreign tax credit against the US tax you owe, so again, you are effectively paying only the US tax you would owe, except that part of it goes to SG instead of the US.

Taking into account the total tax paid to both countries compared to what you would have to pay earning the same amount in the US, you could save ~$10K in taxes for a single wage earner. This is due to the difference in tax rates on the earned income exclusion amount.


That was the point I was trying to make above. Regardless of where an American citizen lives, they pay they US tax rate. Deduct taxes paid to the jurisdiction of bonafide residence, but pay the remaining up to US tax rate to IRS. If one lives in a high tax rate country live France, no tax is due to IRS. But in a lower tax rate country (albeit by no means tax haven) like Singapore or HK, and US tax is due (whereas no US services reflective of such tax are provided or availed of). Plus in either case there is complicated tax filing and reporting like FATCA. Again my emphasis was that no other country in the word other than Eritrea practices such citizenship based taxation. (Wikipedia article on "International Taxation" has the complete list; Googling for "citizenship based taxation" and " residence based taxation" gives more information; A separate thread on this message board I referenced earlier has other viewpoints too).

Local salaries, costs and government provided services reflect local tax rates, which is why paying a blanket US tax rate can put American expats at a disadvantage compared to other expats or locals. For instance, cars can cost 8 times as much as the US in Singapore, a Honda Civic is nearly S$140K. Housing and other costs including children's education can be higher too. So sure, the exclusion is a partial benefit (which btw may also be removed based on legislations that have been tabled from time to time) but its still not a "level playing field"

The only income that should be taxed twice would be passive rental income.
Other passive income, such as interest, dividends and capital gains are not normally taxed for individuals residing in SG.


GSM8 wrote:Apart from the tax aspect it effectively restricts most of your other investment options as well (including retirement).

Actually, it is the zealous pursuit of potential tax income via FATCA that is resulting in restrictions on overseas investment options for US citizens.


I think it may be more than just FATCA. I moved here only a few months ago so still learning a few things

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Postby GSM8 » Wed, 02 Jul 2014 8:51 pm

maneo wrote:
Singapal wrote:If that's the case SRS isn't that attractive to US citizens at all. Is it even worth the trouble and loss of present control of your cash, given the low SG tax rate?

I'm truly surprised that CPF deferral is not recognized for US tax purposes. Don't understand the logic, Americans living overseas don't have to worry about their retirement?

sundaymorningstaple wrote: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.


CPF & SRS are not considered qualified retirement plans by the IRS, so there is no deferral of taxes allowed on either the contributions or the interest, dividends & gains.

By the way, are you planning to do your own taxes?


Even if any Singapore tax was saved, it would just be paid to IRS instead, because the difference between Singapore and US tax is US tax liability

Also, it seems that any employer contributions exempt from Singapore tax are charged the full marginal US tax rate (which means its the full amount out of pocket, compared to other expats or locals). PFIC is an additional tax that can make foreign mutual fund investments unviable.

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Postby maneo » Fri, 04 Jul 2014 1:06 am

GSM8
Your rant about the perceived unfairness of US taxation belongs in other discussions.
It is not relevant to the OP's request for help on "US tax planning for [his] SG earnings."


Singapal
With regards to US tax planning for your SG earnings, a very important strategy is to become eligible for the Foreign Earned Income Exclusion (FEIE) as soon as possible. Initially this means satisfying the "physical presence test."

You need to have been in SG at least 330 "full days" during a period of 12 consecutive months by the time you file your taxes to meet this physical presence requirement.
You can apply for extensions to file in order to meet this requirement.
On a practical note, this means keep any US vacation to less than 5 weeks.

If planning any vacations in the US try not to cut it close.
If you do, then take care not to lose a day on your return.
The clock for "time in a foreign country" starts on your arrival in a foreign country, not your departure from the US.
You will lose a day when you cross the International Date Line if you return over the Pacific.
By the way, a "full day" is defined as starting at midnight.

This info comes from IRS publications and instructions.
The IRS provides these various publications and instructions on line.
Download Publication 54 and the instructions for Form 2555 and get the info direct from the source.

http://apps.irs.gov/app/picklist/list/publicationsNoticesPdf.html
http://www.irs.gov/instructions/i2555/ch02.html#d0e222

If your employer happens to be providing any tax preparation assistance, would also suggest you contact the tax preparer as soon as you can to get answers for your questions.
Don't wait until it's time to file.

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Postby zzm9980 » Fri, 04 Jul 2014 12:59 pm

Singapal wrote:If that's the case SRS isn't that attractive to US citizens at all.


Probably only worth it for the employer march if yours does that. I can't speak for all tax situations though, but just wanted to share it as an option.

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Postby Brah » Fri, 04 Jul 2014 9:22 pm

zzm9980 wrote:
Singapal wrote:If that's the case SRS isn't that attractive to US citizens at all.


Probably only worth it for the employer march if yours does that. I can't speak for all tax situations though, but just wanted to share it as an option.

Not even if it lowers your overall Singapore taxes?

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Postby zzm9980 » Sat, 05 Jul 2014 12:24 am

Brah wrote:
zzm9980 wrote:
Singapal wrote:If that's the case SRS isn't that attractive to US citizens at all.


Probably only worth it for the employer march if yours does that. I can't speak for all tax situations though, but just wanted to share it as an option.

Not even if it lowers your overall Singapore taxes?


According to a poster above, anything you lower your Singapore taxes by is just then due to the IRS. So I guess it is up to your own individual tax situation.

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Postby scarbowl » Sun, 06 Jul 2014 6:23 am

GSM8 wrote: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.


Yes, this is an oversimplification. Yes, the USA is particularly strict about paying taxes on worldwide income but it is NOT the only country which does this. Also, as you can largely deduct taxes paid abroad from your US income taxes due then it is definitely NOT a double-wammy.

Even so, according to KPMG the USA is #55 in tax rates out of 114 surveyed countries. And that includes social security taxes which you do not pay when working abroad so the effective tax rate is even lower.

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Postby zzm9980 » Sun, 06 Jul 2014 11:39 am

scarbowl wrote:
GSM8 wrote: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.


Yes, this is an oversimplification. Yes, the USA is particularly strict about paying taxes on worldwide income but it is NOT the only country which does this. Also, as you can largely deduct taxes paid abroad from your US income taxes due then it is definitely NOT a double-wammy.

Even so, according to KPMG the USA is #55 in tax rates out of 114 surveyed countries. And that includes social security taxes which you do not pay when working abroad so the effective tax rate is even lower.


Or State tax; the state income tax rates in just California is generally higher than Singapore's. That's before we even get to everything else. It's still tax-beneficial to be abroad in a lower tax rate jurisdiction for an American, just not nearly as much as most others.

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Postby GSM8 » Sun, 06 Jul 2014 12:25 pm

maneo wrote:GSM8
Your rant about the perceived unfairness of US taxation belongs in other discussions.
It is not relevant to the OP's request for help on "US tax planning for [his] SG earnings."

OP requested information relevant to a move from US to Singapore as an American citizen, and what I wrote was an objective overview of tax considerations they may need to consider including how it might differ from that of colleagues here. Personally, beyond the onerous filing requirements, it doesn’t really affect me much after FEIE and housing exclusion, but just saying that others may need to consider it depending on their own tax situation.

Anyway, you’re probably right that this is coming across as a rant that it’s not intended to be. For anyone interested in knowing more, there are organizations (found on google) that have constructively taken up the cause of engaging with our lawmakers to try to make the case for moving away from such “citizenship based taxation”

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Postby GSM8 » Sun, 06 Jul 2014 1:14 pm

zzm9980 wrote:
scarbowl wrote:
GSM8 wrote: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.


Yes, this is an oversimplification. Yes, the USA is particularly strict about paying taxes on worldwide income but it is NOT the only country which does this. Also, as you can largely deduct taxes paid abroad from your US income taxes due then it is definitely NOT a double-wammy.

Even so, according to KPMG the USA is #55 in tax rates out of 114 surveyed countries. And that includes social security taxes which you do not pay when working abroad so the effective tax rate is even lower.


Or State tax; the state income tax rates in just California is generally higher than Singapore's. That's before we even get to everything else. It's still tax-beneficial to be abroad in a lower tax rate jurisdiction for an American, just not nearly as much as most others.

I agree that after exclusions Americans pay less tax in absolute terms in lower tax jurisdictions such as Singapore. So “double whammy”


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