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the 183 day rule for taxes

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Techie2016
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the 183 day rule for taxes

Postby Techie2016 » Wed, 11 May 2016 8:03 am

Apologies that this has been covered in the forums but my mind is spinning. I have an offer for a short term assignment working in singapore. I have a few questions - mainly wondering how do I work this to the best of my advantage financially?

Offer start date - July 1 2016
Length - up to 183 days
days left in the year as of July 1 - 183 days
Company provided housing
I'm a u.s. resident
estimated earnings in those 6 months - $50k USD
Returning to the U.S. sometime between Christmas and beginning of Jan.


Is it advantageous for me to be in singapore less than 183 days and pay the 15% tax rate for non-residents but over 60 days, or should I stay through 183 days to get resident status? I'm assuming I'll be paying U.S. Taxes and the 15% singapore tax while I'm there. If I stay for example 180 days and next year file my U.S. Taxes, can i deduct that 15% tax I paid in Singapore?
Does the company housing provided for me in Singapore get counted as taxable income?
If I'm in SG for 183 days and pay the 15% but then get resident classification, do i get that money back?

Thanks for all of your help here.

BBCWatcher
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Re: the 183 day rule for taxes

Postby BBCWatcher » Wed, 11 May 2016 4:54 pm

Techie2016 wrote:Is it advantageous for me to be in singapore less than 183 days and pay the 15% tax rate for non-residents but over 60 days, or should I stay through 183 days to get resident status?

It shouldn't matter in terms of income tax. Your effective U.S. tax rate should be higher, so the only difference would be how much tax ends up paid to Singapore versus the U.S. The Foreign Tax Credit on your U.S. tax return will account for that.

It will matter in terms of U.S. Social Security and Medicare payroll taxes. If you're working for a Singapore-based employer then you probably won't owe U.S. payroll tax. The disadvantage of course is that you're not accumulating work history credits in the U.S. either, so your future U.S. Social Security retirement benefits will be correspondingly lower and/or it will take longer (in calendar time) to qualify. However, you won't see much impact since your work history credits are based on calendar years in the U.S. You'll still presumably have non-trivial contributions in both calendar year 2016 (already underway) and 2017. So you should have no problem qualifying for Medicare and only a modest reduction in Social Security retirement benefits. Just make sure to boost your savings a bit, though, to account for that retirement benefit difference.

If you can live in Singapore for 330 days or more (and work), and not step foot in the United States, then you would qualify for the Foreign Earned Income Exclusion. That would then provide a U.S. income tax benefit and, thus, an overall tax benefit. But to stay away from the United States that long, assuming you are not a U.S. citizen but rather a permanent resident (green card holder), you should first obtain advance parole. Use USCIS Form I-131 to get a reentry permit. That permit gives you a maximum of two years, i.e. you must return within two years (before two years) of departure. The concerns about Social Security and Medicare magnify a bit, but again if you can work about 6 months in 2016 (first half of 2016) and about 6 months in 2017 (second half of 2017) in the U.S., that should work very well indeed.

Don't forget to max out your 401(k), if applicable, for the year before you go if you're in a position to do, and after you return. I think you're allowed up to $17,500 per calendar year in 401(k) contributions. So if you have to raise your contribution percentage to hit that maximum before you go, and if you can afford to do that, that's a good idea.

Does the company housing provided for me in Singapore get counted as taxable income?

In Singapore, yes, fully. If you can qualify for the FEIE as mentioned above then part of that company-provided housing will be U.S. tax exempt, so you can pick up some tax savings there. But you have to hit 330 days in Singapore to make that happen.

A ~350 day stint working in Singapore can be quite attractive particularly if that stint is split more or less equally across calendar years. So if you can leave July 1, work in Singapore for 11 or 12 months, then resume work in the U.S. on July 1, 2017, that'd be wonderful all around.

Oh, one more thing: if you're aiming to naturalize as a U.S. citizen just make sure you understand any impact(s) on your residence time in the U.S. to qualify.

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Re: the 183 day rule for taxes

Postby BBCWatcher » Wed, 11 May 2016 5:10 pm

Some more points:

1. Stay away from anything even slightly investment-related in Singapore with the possible exception of direct purchase of Singapore Government Securities (government bonds). It's just not worth the tax complications, particularly when you're not spending much time in Singapore, relatively speaking. Just stick to one, simple, ordinary bank account (and then only if you need one, e.g. to receive salary in Singapore). Citibank Singapore's "Tap and Save" account is my favorite.

2. You will probably be required to fill out FinCEN Form 114 annually if you have a non-U.S. financial account. That may already be true, but it will very likely be true if you get a bank account in Singapore.

3. Sign up for a low cost U.S. credit and debit card if you don't have one, before you go. My current favorites right now are Citizens Bank's Cash Back Plus World MasterCard (with Capital One's Quicksilver -- the no annual fee version -- a close runner up) and Charles Schwab's debit/ATM card (either from the brokerage or from Charles Schwab Bank). These cards are very, very good for international travel, including a stint in Singapore when you might need a way to spend money when you first arrive. After your first paycheck your Tap and Save debit/ATM card can take over for local spending in Singapore. (I wouldn't use that card outside Singapore.)

4. You'll probably want to establish a reasonably low cost way to transmit Singapore dollars back to the U.S. as you start accumulating them. There are a few options, and it's worth spending a bit of time researching them.

5. Pay attention to any other employment-related benefits that matter to you: disability insurance, life insurance, medical insurance, employee stock purchase plan, etc. You may lose some or all of those benefits depending on the arrangements. "It depends."

6. You will very likely need to make estimated U.S. income tax payments during your stint in Singapore at least if you are not going to qualify for the FEIE.

7. If you're very cash flow sensitive -- if you're living paycheck-to-paycheck -- then this adventure will be hard. You're probably going to have a spike in spending (and perhaps also tax payments) then more income/less tax -- the cash flow might be "lumpy." Just be prepared for that if you can.

Good luck.

Techie2016
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Re: the 183 day rule for taxes

Postby Techie2016 » Fri, 13 May 2016 6:38 am

Wow you're a big help. I was just notified by my employer that "The assignee is not tax equalized".

I am a US citizen, and will work for a US company while living in Singapore for 6 months this year. Does me being not tax equalized affect me negatively?


BBCWatcher wrote:Some more points:

1. Stay away from anything even slightly investment-related in Singapore with the possible exception of direct purchase of Singapore Government Securities (government bonds). It's just not worth the tax complications, particularly when you're not spending much time in Singapore, relatively speaking. Just stick to one, simple, ordinary bank account (and then only if you need one, e.g. to receive salary in Singapore). Citibank Singapore's "Tap and Save" account is my favorite.

2. You will probably be required to fill out FinCEN Form 114 annually if you have a non-U.S. financial account. That may already be true, but it will very likely be true if you get a bank account in Singapore.

3. Sign up for a low cost U.S. credit and debit card if you don't have one, before you go. My current favorites right now are Citizens Bank's Cash Back Plus World MasterCard (with Capital One's Quicksilver -- the no annual fee version -- a close runner up) and Charles Schwab's debit/ATM card (either from the brokerage or from Charles Schwab Bank). These cards are very, very good for international travel, including a stint in Singapore when you might need a way to spend money when you first arrive. After your first paycheck your Tap and Save debit/ATM card can take over for local spending in Singapore. (I wouldn't use that card outside Singapore.)

4. You'll probably want to establish a reasonably low cost way to transmit Singapore dollars back to the U.S. as you start accumulating them. There are a few options, and it's worth spending a bit of time researching them.

5. Pay attention to any other employment-related benefits that matter to you: disability insurance, life insurance, medical insurance, employee stock purchase plan, etc. You may lose some or all of those benefits depending on the arrangements. "It depends."

6. You will very likely need to make estimated U.S. income tax payments during your stint in Singapore at least if you are not going to qualify for the FEIE.

7. If you're very cash flow sensitive -- if you're living paycheck-to-paycheck -- then this adventure will be hard. You're probably going to have a spike in spending (and perhaps also tax payments) then more income/less tax -- the cash flow might be "lumpy." Just be prepared for that if you can.

Good luck.

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Re: the 183 day rule for taxes

Postby Strong Eagle » Fri, 13 May 2016 7:13 am

Techie2016 wrote:Wow you're a big help. I was just notified by my employer that "The assignee is not tax equalized".

I am a US citizen, and will work for a US company while living in Singapore for 6 months this year. Does me being not tax equalized affect me negatively?


Maybe, probably not. To be tax equalized means that your employer will guarantee that you won't pay more tax in a foreign assignment than you would if you were in the USA.

However, for most kinds of taxes, and Singapore income tax certainly qualifies, you are able to take a foreign tax credit for the amount of foreign taxes paid. This reduces your USA income tax dollar for dollar for every dollar paid in foreign tax.

I say "probably" no effect because there are circumstances where you might not get the dollar for dollar credit... however, based upon what you have written it looks like you will.

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Re: the 183 day rule for taxes

Postby BBCWatcher » Fri, 13 May 2016 7:43 am

I assumed in my answer you are not tax equalized, but tax equalization likely wouldn't matter.

Will you continue to be paid in the United States, on U.S. payroll? Or is this a transfer to another, Singapore-based company (e.g. the foreign branch of the U.S. company), and you'll be on local Singapore payroll? Or something else?

On second edit: I'll summarize the two situations, fairly simply. If there's some other situation, please post a follow-up.

1. If you remain on U.S. payroll, nothing really changes. It's like an extended business trip. You don't open a bank account in Singapore, and you just tap your U.S. funds with those low cost cards I mentioned (or similar ones). From the point of view of U.S. Social Security at least you keep paying FICA taxes (and adding to your Social Security earnings record). Your 401(k), employee stock purchase, disability insurance, medical insurance, and other such deductions/benefits continue. If you're going to owe some Singapore income tax then you should probably adjust your U.S. income tax withholding, but you don't have to. (You'll still get that back in the form of a refund from the IRS.) You pay IRAS (Singapore's tax agency) whatever you owe them (if anything), then report that income tax via IRS Form 1116 (which your favorite tax preparation software should be able to handle) to get it properly reflected in your U.S. tax return. Easy, simple, clean -- but you keep paying FICA taxes.

2. If you do a "full" transfer and switch to the payroll of a Singapore-based employer, then you should start making estimated U.S. income tax payments to reflect the difference between your Singapore income tax rate (which might even be zero, but which will be lower) and your U.S. income tax rate (which could be zero if you hit 330+ days, as mentioned above). You don't need to make FICA payroll tax payments. Your 401(k), employee stock purchase, disability insurance, medical insurance, and other such deductions/benefits stop for that duration -- which could be a problem that requires attention. You'll need a Singapore bank account to receive your salary, and that bank account will be FinCEN Form 114 reportable if, together with any other foreign accounts you have, the total value equals at least US$10,000 at any point in time. [Citibank Singapore's "Tap and Save" account is also a great account for U.S. persons since Citibank Singapore is the only bank in Singapore, as far as I know, that will create an IRS Form 1099-INT for you. That makes it easier to report the small amount of interest income on IRS Form 1040 Schedule B.]

Those are the highlights. Any follow-up questions?

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Re: the 183 day rule for taxes

Postby gayan1991 » Sun, 15 May 2016 2:45 am

Hi, there are some companies allow you to claim extra tax that you pay for the government. Generally, the tax is 7 or 8 percent and for the first 6 months you ought to pay that high. After that period you might be able to get back that money. Other than that, if you are hoping to have an employment in Singapore, you need to grab whatever job you can to establish yourself in Singapore. But it's your choice sometimes Yiu might get a better offer, if you wait.


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Re: the 183 day rule for taxes

Postby sundaymorningstaple » Sun, 15 May 2016 4:49 pm

gayan1991, did you even bother to read the thread? :roll:


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