Am I doing something wrong?

[CAtoSing]

Hi All

So I keep hearing how Singapore is a "low tax" place. My experience hasn't been like this so far at all! I talk to different people and I get different responses, so wanted to check the wisdom of the masses. Here's my situation:

Family: 2 adults, 2 children under 10 y.o.
Gross Salary USD 125,000
Company paid housing (I pay, they reimburse): USD 3500
Company paid school (I pay, they reimburse): USD 18,500/child/year
Company paid Health Insurance (I pay, they reimburse): USD 9,000/year (entire family)

I am on EP. Rest of family on DP. My company is based in Europe and locally (SG) we have just a Representative Office for now, though we will soon be going to switch to a subsidiary. I am US citizen, sole Singapore-based employee (for now). We've been in Singapore for about 6 months now, and we love it here and would like to stay!

Earlier this year, got a letter from IRAS saying I had to pay estimated taxes for 2015 of SGD 36,000! OK, so I did some research and it's correct. So I wrote the check and gave it to IRAS, with the hope that, once I actually file early next year I'll get some of it back.

So my question is: is this going to be the case every year???? Is there anything I can do to lower this tax bill???? Once the local entity becomes a subsidiary, will that matter? If I could magically become a PR overnight, would that matter? SGD 36,000 is a lot more than what I was paying in the US, and I'm coming from California!

Thank you in advance for any insights!

[sundaymorningstaple]

Because you are a representative office, they are probably requiring you to pay estimated taxes for the current year's tax bill based on the figures you gave. Give us a little bit more data and maybe it will look different. If you are converted to a local entity, that will probably change. But normally, you can pay your current tax bill via GIRO over the period of 12 months after you receive your tax bill (but if you are not a local entity, that might not be the case).

[CAtoSing]

Thanks.

Having to pay it all at once wasn't my biggest concern (although that sucked), rather it was the total sum of SGD 36K. Before I came here, I hired a tax adviser in the US to run the expected numbers and SGD 36K was about what she came up with (although I was hoping she was wrong). So I don't think I got screwed this time around, I'm more concerned with rather this will be an annual thing, because if so, then that changes my situation considerably.

What other details may I provide that will help you?

In Feb. I got a letter from IRAS saying: "As you are employed by a foreign employer: 1) Your income earned for services rendered on behalf of your foreign employer is taxable in SG. Taxable income includes your salaries, bonus, allowances and value of housing provided to you; 2) You are required to provide a letter of guarantee for SGD 36K from a local bank to cover your estimated tax for YA 2016." Since I couldn't come up with the letter of guarantee (thanks Citibank--see below), I wrote a big fat check to IRAS.

Re. the lump sum payment, that was a different story. I bank with Citibank and I'm starting to think that was a poor decision. Because Citibank is not a local bank, I can't do GIRO with IRAS. I'm likely going to switch to DBS soon. I chose Citibank to make it easier to transfer funds from the US (where my pay gets deposited) to SG, but it turns out that they limit you to USD 1000/day max, which makes it a pain. Trust me, I've already spoken with enough people at Citibank to get this sorted out without success. Sucks, especially as it is not what they're website says.

[ecureilx]

.. Because Citibank is not a local bank, I can't do GIRO with IRAS. .

From the bit I know.

Citi has two operations in Singapore, one is a full service bank, equivalent to any local bank, the other with limited services, one was Citibank NA and the other Citibank SG (I think... )

You need to open an account with Citi SG and that allows you to use GIRO, local bill payments etc. Citibank NA is primarily a US $ account. You can issue a standing order to transfer to The SGD account from the USD account.

That's how it was before. Unlikely for Citi to have lost their Full Service Bank status for the Citibank (SG)

[bgd]

Confirmed. I bank with Citi and IRAS uses GIRO to empty my account. In fact it will be happening any day. I'm referring to the single payment which they extract via GIRO, 2014 is due now.

[MikeJones]

Assuming all of the numbers you have given are treated as income by IRAS then you have a total income of around SG$287,000 (US$213,000) which does work out as around 36000 tax payable, using the IRAS tax calculator. I don't know much about the US tax system but using an online US tax calculator says that a taxable income of US$213,000 will result in US$38,000 in federal income tax so maybe the housing, schooling, health insurance reimbursements aren't treated the same way in the US?

Mike

[CAtoSing]

I'm referring to the single payment which they extract via GIRO

Right. I can do that. What I wanted to do was the monthly withdrawal.
I have two accounts. One with Citi SG. One with Citi NA. I can transfer between the two easily, but only up to USD 1000/day.

[CAtoSing]

which does work out as around 36000 tax payable, using the IRAS tax calculator

Thanks for confirming. I just hope that the change from RO to subsidiary will help me out. Will it?

[MikeJones]

In terms of the amount payable, I doubt it, that is the tax payable for tax residents on the income figures you've provided. There are some allowances you may be able to deduct (google IRAS tax calculator and download the spreadsheet to calculate for yourself) which may bring it down some but that will depend on your exact circumstances. Frankly 36,000 on income of 287,000 is an effective rate of around 12%, which I would consider low by most global standards. Using google and wikipedia it would appear that the effective US Federal income tax rate would be around 20% so I can only assume that you could make more deductions and had a good tax accountant in the US.

Mike

[ecureilx]

Confirmed. I bank with Citi and IRAS uses GIRO to empty my account. In fact it will be happening any day. I'm referring to the single payment which they extract via GIRO, 2014 is due now.

You didn't opt for an installment plan with IRAS ? :

[bgd]

Confirmed. I bank with Citi and IRAS uses GIRO to empty my account. In fact it will be happening any day. I'm referring to the single payment which they extract via GIRO, 2014 is due now.

You didn't opt for an installment plan with IRAS ? :

Nope, prefer to have the single payment. It does seem to range between July (this year) and October in the past. At least now they also communicate via text to let you know when funds are expected. One year the letter never turned up so it caught me by surprise.

[Brah]

Confirmed. I bank with Citi and IRAS uses GIRO to empty my account. In fact it will be happening any day. I'm referring to the single payment which they extract via GIRO, 2014 is due now.

I used to do that, it was painful, now I do the monthly thing which is more manageable for me.

[curiousgeorge]

I'm referring to the single payment which they extract via GIRO

Right. I can do that. What I wanted to do was the monthly withdrawal.
I have two accounts. One with Citi SG. One with Citi NA. I can transfer between the two easily, but only up to USD 1000/day.

I have a local Citi account and pay IRAS monthly via Giro. Who is saying that you can't? I just filled out the Giro form from IRAS for monthly payments and they did the rest.

[sendok]

Have you stay less than 183 days in SG? From the look of it, you are paying at 20% non-resident directors rate instead of the progresive tax rate for residents.

The good news is, after you stay for 3 continous years, you will be considered as a tax resident for all 3 years and can request for a re-assesment for this YA using resident rate which should be lower than 20%.

They will then return the different between what you have paid and the new assesment

Sent from my SM-G900F using Tapatalk

[livingontheedge]

Yes, similar to sendok, it appears you are paying non-resident tax rates because you are considered a non-resident by IRAS. Typically if you continue staying in Singapore, IRAS will go back to re-assess that year of tax assessment and revise it to resident tax rate and thus refund you the difference.

Going forward you will pay resident tax rate, which should approx to $20K. You can consider setting up a GIRO account with DBS for monthly tax deductions to IRAS to manage your cash flow, and consider becoming a Singapore PR so you pay CPF and avoid paying tax on 1,900 of your monthly CPF.