SRS investment options

[PNGMK]

Don't forget that at 62 (or whatever your retirement age is) that you can move the SRS holdings to a CDP account rather than liquidating 10% per annum as per the SRS rules.

[malcontent]

Don't forget that at 62 (or whatever your retirement age is) that you can move the SRS holdings to a CDP account rather than liquidating 10% per annum as per the SRS rules.

Yes, once 10 years pass I intend to transfer to CDP then do a cross border transfer to the US where the same shares trade under SPY. Just have to keep enough cash in my SRS to pay the Singapore tax. Eventually I may be able to gift the appreciated shares to my nonresident alien spouse and sell them free of capital gains tax.

[PNGMK]

Have you opened a CDP acccount? I've tried multiple times online but the system seems broken.

[malcontent]

Have you opened a CDP acccount? I've tried multiple times online but the system seems broken.

The broker I use to trade shares for my SRS account requires that I open a CDP account before I could trade online (so that in case insufficient SRS funds, they fall back to cash).

I opened the CDP online. I do seem to recall there was some hassle, yes. Seems like only a certain browser would work. Once it worked, it was quick/easy.

[PNGMK]

Have you opened a CDP acccount? I've tried multiple times online but the system seems broken.

The broker I use to trade shares for my SRS account requires that I open a CDP account before I could trade online (so that in case insufficient SRS funds, they fall back to cash).

I opened the CDP online. I do seem to recall there was some hassle, yes. Seems like only a certain browser would work. Once it worked, it was quick/easy.

Ah - thanks for the hint. I'll try a different browser.

[singaporeflyer]

Don't forget that at 62 (or whatever your retirement age is) that you can move the SRS holdings to a CDP account rather than liquidating 10% per annum as per the SRS rules.

Yes, once 10 years pass I intend to transfer to CDP then do a cross border transfer to the US where the same shares trade under SPY. Just have to keep enough cash in my SRS to pay the Singapore tax. Eventually I may be able to gift the appreciated shares to my nonresident alien spouse and sell them free of capital gains tax.

Is this allowed? Cross border transfer from SG CDP to overseas? Will there be any tax implications in SG if we do this?

[malcontent]

Don't forget that at 62 (or whatever your retirement age is) that you can move the SRS holdings to a CDP account rather than liquidating 10% per annum as per the SRS rules.

Yes, once 10 years pass I intend to transfer to CDP then do a cross border transfer to the US where the same shares trade under SPY. Just have to keep enough cash in my SRS to pay the Singapore tax. Eventually I may be able to gift the appreciated shares to my nonresident alien spouse and sell them free of capital gains tax.

Is this allowed? Cross border transfer from SG CDP to overseas? Will there be any tax implications in SG if we do this?

https://www.sgx.com/securities/retail-i ... /cdp-forms

Scroll down the page and you’ll see the forms to do the cross border transfer. It is very straightforward — such a transfer has no tax implications, in and of itself.

Let’s say you have a TD Ameritrade Singapore account, which is a US broker, you will receive SPY shares into this account. These can then be sold with zero commissions, zero exchange rate loss, and you won’t suffer the wide buy/sell spread experienced on the SGX.

For myself as a US citizen, I will be liable to pay US capital gains taxes once I sell these shares, whether they are sold under S27 on SGX or SPY on NYSE. I need to do so in a planned and controlled manner to avoid a large tax bill.

[singaporeflyer]

Yes, once 10 years pass I intend to transfer to CDP then do a cross border transfer to the US where the same shares trade under SPY. Just have to keep enough cash in my SRS to pay the Singapore tax. Eventually I may be able to gift the appreciated shares to my nonresident alien spouse and sell them free of capital gains tax.

Is this allowed? Cross border transfer from SG CDP to overseas? Will there be any tax implications in SG if we do this?

https://www.sgx.com/securities/retail-i ... /cdp-forms

Scroll down the page and you’ll see the forms to do the cross border transfer. It is very straightforward — such a transfer has no tax implications, in and of itself.

Let’s say you have a TD Ameritrade Singapore account, which is a US broker, you will receive SPY shares into this account. These can then be sold with zero commissions, zero exchange rate loss, and you won’t suffer the wide buy/sell spread experienced on the SGX.

For myself as a US citizen, I will be liable to pay US capital gains taxes once I sell these shares, whether they are sold under S27 on SGX or SPY on NYSE. I need to do so in a planned and controlled manner to avoid a large tax bill.

But if you do like the above, does it mean bypassing the SRS withdrawal taxation? I thought you will be forced to withdraw all the amount within 10 years and may need to pay tax each year during withdrawal ?

[malcontent]

Is this allowed? Cross border transfer from SG CDP to overseas? Will there be any tax implications in SG if we do this?

https://www.sgx.com/securities/retail-i ... /cdp-forms

Scroll down the page and you’ll see the forms to do the cross border transfer. It is very straightforward — such a transfer has no tax implications, in and of itself.

Let’s say you have a TD Ameritrade Singapore account, which is a US broker, you will receive SPY shares into this account. These can then be sold with zero commissions, zero exchange rate loss, and you won’t suffer the wide buy/sell spread experienced on the SGX.

For myself as a US citizen, I will be liable to pay US capital gains taxes once I sell these shares, whether they are sold under S27 on SGX or SPY on NYSE. I need to do so in a planned and controlled manner to avoid a large tax bill.

But if you do like the above, does it mean bypassing the SRS withdrawal taxation? I thought you will be forced to withdraw all the amount within 10 years and may need to pay tax each year during withdrawal ?

I’m not talking about incrementally withdrawing over 10 years, I’m talking about withdrawing the entire lump sum after 10 years (this is an option for non-PR/SC). That is why I mentioned my SRS account needs enough cash to cover that tax, which will probably be 7.5% of the total balance on the date of withdrawal and securities transfer.

If you are a PR/SC who intend to retire in SG and spread the withdrawals over 10 years, you would probably just sell a portion of the shares on the SGX. I believe doing a CDP transfer is an all or nothing proposition.

[smoulder]

I'm curious about the scenario wherein an SC transfers the shares to his CDP. Thereby avoiding paying the tax. What happens when he sells from the CDP? Is he charged the same amount of tax?

[malcontent]

I'm curious about the scenario wherein an SC transfers the shares to his CDP. Thereby avoiding paying the tax. What happens when he sells from the CDP? Is he charged the same amount of tax?

The amount subject to tax is the amount that is withdrawn from your SRS. If withdrawn as a transfer of shares to CDP, then the amount subject to tax is whatever the value of those shares when they were transferred. The point is to not force someone to sell an investment just because of the SRS withdrawal.

Avoiding tax is merely an unintended consequence for people like me who are US taxable, as US capital gains taxes are triggered upon the sale of a security held by a US person anywhere in the world.

[Wd40]

I'm curious about the scenario wherein an SC transfers the shares to his CDP. Thereby avoiding paying the tax. What happens when he sells from the CDP? Is he charged the same amount of tax?

I dont think they would leave such an obvious loop hole open. I beleive every broker/CDP/bank or any financial institution which is linked to the SRS, will be linked to an SRS savings account. So no matter where you transfer and how you sell, the proceeds will go to an SRS savings account only, with one of the 3 local banks.

It is like Hotel California, you can only go in, cannot come out of the SRS ecosystem, without getting hit with taxes.

As an EP holder, I would just skip SRS altogether. I just accept the 15% tax rate and treat it as my contribution for nation building

[malcontent]

^ That is correct. The SRS operator is actually required to withhold a certain amount of tax upon withdrawal (equal or more than the tax due, per the rules) and send it to IRAS. You then you have to request a refund for the difference. I believe this applies to both foreigners and PR. Citizens may be exempt.

Here is some good bedtime reading of you’d like to learn more…

https://www.mof.gov.sg/docs/default-sou ... x?sfvrsn=2

[smoulder]

Yea makes sense. Seemed unlikely that they would leave such a glaring "loophole" open.

[Wd40]

I would suggest running the numbers again. I ran the numbers over the weekend and the 4.5% savings you mention is exactly correct (assuming the tax savings are invested and earn exactly the same return as your contributed funds in SRS).

But…… just a 0.5% lower return (from higher expenses) by investments housed in an SRS can eat up almost the entire 4.5% savings after that 0.5% is compounded over 10 years! Please check my math, but the 4.5% ended up being only 0.7% savings in the end!

I just did this calculation again. I dont think the arbitrage is always 4.5%.
Lets take example where you contribute 10k and you are in the 15% tax bracket and after 10 years you are non resident and have to pay 15% tax on half the amount.

The arbitrage you make depends on the amount of appreciation.

Lets take example of 100% appreciation in 10years. So 10k becomes 20k. You initially save 1.5k in taxes, but after 10 years you pay 15% on half the amount of 20k, so you pay 1.5k. So net net no difference here.

But the initial amount you save 1.5k assuming you invest in the same way, you make 1.5k and this is your net gain.

Now lets take example of 500% appreciation in 10 years. 10k becomes 50k. You initially save 1.5k in taxes, but after 10 years you pay 15% on 25k, so you pay 3.75k in taxes. Subtracting the intially saved 1.5k, you lose net 2.25k

But the initial amount you save 1.5k also goes up 5X, so it becomes 7.5k. So net 6k gain. Subtracting what you lost in the tax arbitrage; 6-2.25 = 3.75k