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Fixed Monthly Salary and Taxes

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CAtoSing
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Fixed Monthly Salary and Taxes

Postby CAtoSing » Thu, 13 Nov 2014 9:20 am

Hello everyone

I am looking for some assistance in determining my future personal tax liability once I relocate to Singapore.

I will be relocating from the US with my family at the end of this year and will start working full time there as of January 2, 2015. We have a newly opened Branch Office and I will be the sole employee, helping oversee our business in the region.

My gross salary will be USD 130,000/year. My company will help me financially in these areas ("Up To" are the operative words here):
- Up to USD 5,000/month for housing
- Up to USD 37,000/year for school for our kids

I need to figure out my "Fixed Monthly Salary" and if my interpretation from the MOM site is correct (http://www.mom.gov.sg/foreign-manpower/ ... alary.aspx) I will NOT need to add either the housing or the school funds to figure out my total income when tax time comes around. My conclusion is that, given my company will not just simply give me the USD 5,000 + USD 19,000 every month, then these amounts do NOT qualify as "Fixed Monthly Allowances". What they will do is, in fact, reimburse me on a regular basis (say, every 2-3 months) for whatever I have spent on housing + school. So these aren't technically "allowances" because they can/will vary from month to month and are actually reimbursements.

Does this seem right? Or is it just wishful thinking on my part? I want to play by the rules and pay whatever taxes I owe properly, but I also don't want to have to pay more than what I absolutely have to. It's a big difference if I get taxed on just my earned income (USD 130,000) versus being taxed on everything (USD 130,000 + USD 5,000*12 + USD 37,000).

Thanks in advance for any help!

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Re: Fixed Monthly Salary and Taxes

Postby zzm9980 » Thu, 13 Nov 2014 10:42 am

CAtoSing wrote:Hello everyone

I am looking for some assistance in determining my future personal tax liability once I relocate to Singapore.

I will be relocating from the US with my family at the end of this year and will start working full time there as of January 2, 2015. We have a newly opened Branch Office and I will be the sole employee, helping oversee our business in the region.

My gross salary will be USD 130,000/year. My company will help me financially in these areas ("Up To" are the operative words here):
- Up to USD 5,000/month for housing
- Up to USD 37,000/year for school for our kids

I need to figure out my "Fixed Monthly Salary" and if my interpretation from the MOM site is correct (http://www.mom.gov.sg/foreign-manpower/ ... alary.aspx) I will NOT need to add either the housing or the school funds to figure out my total income when tax time comes around. My conclusion is that, given my company will not just simply give me the USD 5,000 + USD 19,000 every month, then these amounts do NOT qualify as "Fixed Monthly Allowances". What they will do is, in fact, reimburse me on a regular basis (say, every 2-3 months) for whatever I have spent on housing + school. So these aren't technically "allowances" because they can/will vary from month to month and are actually reimbursements.

Does this seem right? Or is it just wishful thinking on my part? I want to play by the rules and pay whatever taxes I owe properly, but I also don't want to have to pay more than what I absolutely have to. It's a big difference if I get taxed on just my earned income (USD 130,000) versus being taxed on everything (USD 130,000 + USD 5,000*12 + USD 37,000).

Thanks in advance for any help!


You should be looking at the IRAS website, not MOM.

MOM's definition of "Fixed Monthly Salary" is to be used to meet various requirements for passes and benefits given to foreigners; some things (such as PEP, DPs for parents, etc) require you to meet certain salary requirements.

IRAS covers tax. Read this FAQ, it should cover a lot:
http://www.iras.gov.sg/irashome/page.aspx?id=2890

Tl;dr, you'll pay money on this like it is income.

Also note as an American you'll have to pay income tax on the total amount also, minus your Earned Income Exclusion. Google for "IRS Form 2555" and "Instructions for form 2555" for more details.



http://www.iras.gov.sg/irashome/page.aspx?id=2890

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Re: Fixed Monthly Salary and Taxes

Postby sundaymorningstaple » Thu, 13 Nov 2014 11:39 am

CAtoSing wrote:What they will do is, in fact, reimburse me on a regular basis (say, every 2-3 months) for whatever I have spent on housing + school. So these aren't technically "allowances" because they can/will vary from month to month and are actually reimbursements.


Technically, these are NOT reimbursements because reimbursements are for money spent on behalf of the company. These "reimbursements" are for personal expenses and therefore are taxable in full, whether or not they vary. Even if the company were to rent the house themselves and put you in it, it will still be income to you (in kind) as you would have had to otherwise taken the money out of your own pocket. Therefore it is additional income. Sorry.

Also, as ZZM mentioned, it would be a good idea to download a copy of the IRS form 2555 "Income Earned Abroad Exclusion" instructions to familiarize yourself with the ways to minimize your US tax liability.

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Re: Fixed Monthly Salary and Taxes

Postby Strong Eagle » Thu, 13 Nov 2014 12:31 pm

sundaymorningstaple wrote:
CAtoSing wrote:What they will do is, in fact, reimburse me on a regular basis (say, every 2-3 months) for whatever I have spent on housing + school. So these aren't technically "allowances" because they can/will vary from month to month and are actually reimbursements.


Technically, these are NOT reimbursements because reimbursements are for money spent on behalf of the company. These "reimbursements" are for personal expenses and therefore are taxable in full, whether or not they vary. Even if the company were to rent the house themselves and put you in it, it will still be income to you (in kind) as you would have had to otherwise taken the money out of your own pocket. Therefore it is additional income. Sorry.

Also, as ZZM mentioned, it would be a good idea to download a copy of the IRS form 2555 "Income Earned Abroad Exclusion" instructions to familiarize yourself with the ways to minimize your US tax liability.


SMS is correct on schooling... it is income to you... you will be taxed... as you will be on virtually anything that your company provides... it's just income under a different guise.

Housing is a different matter. If your company holds the actual lease and allows you to stay in the house, then your personal income for the house drops substantially...

See this website. http://www.iras.gov.sg/irasHome/page04.aspx?id=1758

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Re: Fixed Monthly Salary and Taxes

Postby CAtoSing » Thu, 13 Nov 2014 12:47 pm

Thanks so much guys! I guess it is what it is :-)

I'm already looking over the US exclusion (IRS 2555) and seeing if there's anything I can do to keep the double taxation to a minimum.

For reference, my company is headquartered in Norway and I officially work for them. Once I relocate, I will continue to get paid in the US and move the money to Singapore from time to time as needed. I understand that one of the "benefits" of being American citizen is that I get taxed on EARNED income, regardless of where that's earned and where the funds get the deposited. Can you see anything in this setup that you think might work to my advantage?

What sort of documentation is required to show to IRAS the allowances amounts? Just receipts of the payments to the school and landlord?

And SE, the company doesn't hold the lease. We'll just be renting a regular apartment.

Thanks again!

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Re: Fixed Monthly Salary and Taxes

Postby zzm9980 » Thu, 13 Nov 2014 3:37 pm

Good question. Technically, your company normally prepares a statement of income and submits it to IRAS for you. (IR8). This would report all of that.

Since you're the only employee I guess you better start reading up :)

http://www.iras.gov.sg/irasHome/page04.aspx?id=2856

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Re: Fixed Monthly Salary and Taxes

Postby CAtoSing » Thu, 13 Nov 2014 4:22 pm

OK, so I have been diving head first into the IRAS website and have been able to figure out quite a bit (I must say that I wish the US IRS website was half as useful as the IRAS....). For reference, we will have a CPA assist with everything locally, but I'm trying to make sure I understand it all myself too.

As housing is going to be the biggest contributor to driving my income (and therefore taxes) up, I'm trying to tackle that first. In reading (http://www.iras.gov.sg/irasHome/page.aspx?id=9922) and (http://www.iras.gov.sg/irasHome/page04.aspx?id=2856) and the forms there, it seems to me that I would not have to add the housing given that the formula calls for the AV less the actual rent I will pay. If I'm interpreting it correctly, if I pay S$5.000/month rent on an apartment, then the AV is S$5.000 x 12 = S$60.000. But because the formula calls for subtracting the total rent paid, then this cancels out and I'm at S$0 add to my income.

The only way I can make sense of the above is if "accommodation provided to you by your employer" means that lease is actually between the landlord and the company, rather than landlord and I. Because if the lease is between the landlord and I, then I'm really in the "Housing Allowance" category shown on (http://www.iras.gov.sg/irasHome/page.aspx?id=9922) even thought it's a "reimbursement" situation, and therefore, screwed :-(

Am I correct in my thinking above?

Thanks again for the feedback guys!

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Re: Fixed Monthly Salary and Taxes

Postby sundaymorningstaple » Thu, 13 Nov 2014 6:12 pm

Finally, you have come full circle to my first post. If your employer reimburses your for your rental payments, then obviously you do not pay any net rent (e.g., the 6,000 in the example) to offset against the AV. You are just going to have to bite the bullet and suck it up that, unlike the US Tax Code, there is very little, if any, ambiguity in the IRAS Tax Code. It's not grey at all, but pure black and white. [-X


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