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Salary Package - Is tax advice worth the money on packaging

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ShadowPaladin
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Salary Package - Is tax advice worth the money on packaging

Postby ShadowPaladin » Tue, 26 Jan 2010 2:00 pm

May have an opportunity to change the splits between my salary, car and housing allowance and was wondering whether it is worth while getting tax advice. Work obviously will not pay for this, so I am considering this personally. Is it worth it? I understand what the house and car allowances maybe taxed differently than my gross salary, assuming that I will be a resident for tax purposes.

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Postby sundaymorningstaple » Tue, 26 Jan 2010 2:40 pm

I reckon you already know the answer to that yourself. If your income and perks are at such a level where it might make a significant difference, then obviously it would be worth it to seek tax advice. If you don't know, then you probably aren't in that tax strata anyway. A lot would also depend on whether you are also subject to dual taxation. Singapore's Tax rates are miniscule by western standards so the savings probably wouldn't pay for the tax advice unless you are on 250K/up plus perks

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Postby ShadowPaladin » Tue, 26 Jan 2010 4:09 pm

ok, so I guess tax advice is a good idea then... Any good local firms I can contact? I would rather get a good Singapore based firm than a local one. Any recommendations?

Also if I move over post June then I'm technically not a resident am I and therefore hit with a higher tax rate. Does that sound right?

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Postby sundaymorningstaple » Tue, 26 Jan 2010 4:36 pm

Yep, you are correct, but now the tax relief qualification period can straddle 2 years so meeting the 183 days, if you are here for a longer haul, will easily be met the following year.

Unfortunately though, you will have to pay the straight 15% "non-resident" tax first for the period of time in the initial calendar year! Then once you have passed 183 days here you file an amended return and they will refund you the difference.

If you set up a giro account they will directly deposit the amount into your account. It's just a potential cash flow PITA! Especially so if you have arrived in July and are look at 5+ months of income.

If it's going to be that close though you might think about arriving in June as it doesn't matter when you start working, the time starts when you "arrive" for tax purposes here. Once you pass 183 days you have qualified for "resident" tax rates.

Singapore does not have a PAYE systems set up so you are going to have to remember to do your own withholding in order to CTA for that first wallop, but, like the US you have until April 15th in order to file. So you could be filing and amending the return at the same time theoretically. Not sure if a written statement verifying that you have already passed the 183 days at the time of filing and attached to the return would give them the ability to just tax you a resident rates from the git-go. I wouldn't hold your breath on that one, bureaucracies being what they are and civil servants aren't always known to be able to think standing up.

sms
Last edited by sundaymorningstaple on Tue, 26 Jan 2010 4:40 pm, edited 1 time in total.

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Postby sundaymorningstaple » Tue, 26 Jan 2010 4:38 pm

This is about the size of it for US/Local expertise. I'm sure there are others but nobody seems to know who they are so I figure that they can't be that good. I believe Strong Eagle uses a US based Tax Accountant based in Houston, but I don't know about his local return (actually he owns a business here so his accountant probably takes care of both).

http://singapore.usembassy.gov/tax_acco ... apore.html

sms

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Postby ShadowPaladin » Tue, 26 Jan 2010 4:59 pm

sms,

thanks for your help much appreciated.

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Postby sierra2469alpha » Tue, 26 Jan 2010 5:01 pm

Shadow - can you confirm if you are coming from the US or another country? I can pass on some info if you are coming from Australia otherwise I'll stay out of the discussion!!!

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Postby ShadowPaladin » Tue, 26 Jan 2010 5:02 pm

coming from Australia..

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Postby sierra2469alpha » Tue, 26 Jan 2010 5:19 pm

Shadow - ah, many implications then. Plenty of posts here over the past couple of years about tax, tax "residency" etc. In terms of tax advice for structuring your local package, here's what our people have told us (I've adjusted the figures to make the math a little simpler).

I might ask SMS and SE to step in here on the "local" side of the Singapore laws.

1. Anything you get paid here, albeit a housing allowance, housing benefit, medical allowance, etc., is basically all rolled into one, and you are taxed on that. Say you get paid a housing allowance of $1000 per month, then that is added to your salary of $8000 per month, then you should be paying tax on the total - namely $9000. I believe SE had a post about that recently. Likewise, car allowance etc.

2. Having said 1) affairs can be structured such that if the housing allowance is in the company name, then personal tax liability ceases to be an issue (please correct if I am wrong) assuming you have an agreement with the employer that they will pay the tax for you on the value of the allowance.

3) Watch your superannuation. Are you contributing back in Australia? Which entity is paying you - a Singapore based company or the Australia company. There are massive implications tax wise for that depending on how/if you elect for a split salary.

4) Likewise, the tax residency requirements are as SMS says, and very similar to Australia. In essence, if you are not on a temporary assignment, it is much better for you to be non-resident for tax purposes in Australia (183 day rule plus others), and maintain a very basic arms-length financial relationship with Australia.

5) By far the biggest starting point is establishing where you will be tax resident.

6) I would certainly seek advice prior to signing any contract of employment. We've seen some disastrous contract for employment whereby the onus is upon the employee to indemnify the company of just about everything. Also, I can recommend our tax advisors in Australia (can PM you the details) as a starting point. There is also a group up here who follow these matters very closely.

In essence, be careful, do your homework, and plan. It takes a little time and effort but ensuring you do your homework you'll be fine.

Also, there was this posting which provided a useful link if you were worried about the recent "changes", which do not affect the majority of expats from Australia unless you are employed by an Australian domiciled (read tax resident) company, and not a subsidiary.

http://forum.singaporeexpats.com/ftopic66980.html&highlight=


HTH

[Edit: Added URL - crosspost] / 2. Modded item 2 for clarity
Last edited by sierra2469alpha on Wed, 27 Jan 2010 9:58 am, edited 1 time in total.

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Postby carteki » Tue, 26 Jan 2010 6:07 pm

sierra2469alpha wrote:Also, I can recommend our tax advisors in Australia (can PM you the details) as a starting point. There is also a group up here who follow these matters very closely.


Is this the individual who has the bazooka / military weaponry interest?

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Postby ShadowPaladin » Tue, 26 Jan 2010 6:21 pm

sierra,

thanks for the info, yes PM the contacts thanks...

Basically I am aiming to be in Singapore before June 09 so I will be a tax resident, but my employer will be unwilling to put the house in their names though.

If they pay their portion of the housing allowance directly to the landlord will this be enough for a tax concession?

Also they are paying my super but via Singapore so I am going to be hit with tax on this also.

I guess everything is at the marginal rate then, salary, house, car and super?

Any tips on tax deductions that expats are entitled to?

Thanks

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Postby sierra2469alpha » Tue, 26 Jan 2010 8:06 pm

ShadowPaladin - housing: no I don't believe it works that way (Aus company paying Singapore landlord will not get you out of the fact it's part of your total package). This is because the landlord has to tell IRAS who they get paid by, and you have to state anything in your personal name anyway.

Some other people may have other ideas. But then again, everyone's an expert on forums!

Tax tips? Well, it's not so much about minimising tax but taking care of your financial position. I don't invest solely so I can get a tax deduction - for a forest that can burn down! Might give 150% deduction, up front, but I still have no trees, right! This is why I suggested that indeed, you SHOULD get some advice on your package BEFORE you sign ANYTHING.

I'll pm you our email now - email me back on that and I shall provide the details you've asked for.

@Carteki - too funny - nice to be back on the boards with you! Now, aren't you supposed to be relegated to District 9!!! Great to see you on again :)

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Postby sundaymorningstaple » Tue, 26 Jan 2010 9:18 pm

sierra2469alpha wrote:2. Having said 1) affairs can be structured such that if the housing allowance is in the company name, then personal tax liability ceases to be an issue (please correct if I am wrong).


Pete, I'm not sure if your point above was in regards to Singapore Tax liability or Australian liability (I took it to be Singapore liability). If it is, then even if the employer furnishes the place to the employee, either holding the lease and paying it themselves or even owning the property and furnishing it to the employee, the value to be deemed as income and taxed is calculated at 10% of your total employment income or the Annual Value of the place of residence whichever is lower. On the other hand if you are given an allowance, regardless of how much you actually spend on your rent (+/-) is immaterial and the cash allowance is taxed as income.

http://www.iras.gov.sg/irasHome/page.aspx?id=9922

sms

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Postby sierra2469alpha » Wed, 27 Jan 2010 10:00 am

sundaymorningstaple wrote:
Pete, I'm not sure if your point above was in regards to Singapore Tax liability or Australian liability (I took it to be Singapore liability). If it is, then even if the employer furnishes the place to the employee, either holding the lease and paying it themselves or even owning the property and furnishing it to the employee, the value to be deemed as income and taxed is calculated at 10% of your total employment income or the Annual Value of the place of residence whichever is lower. On the other hand if you are given an allowance, regardless of how much you actually spend on your rent (+/-) is immaterial and the cash allowance is taxed as income.

http://www.iras.gov.sg/irasHome/page.aspx?id=9922

sms


SMS - correct - I have modified my post for clarity - it's only if your employer agrees to pay the tax on allowances for you that this applies. Thanks for helping with the clarification.

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Postby sundaymorningstaple » Wed, 27 Jan 2010 10:23 am

sierra2469alpha wrote:
sundaymorningstaple wrote:
Pete, I'm not sure if your point above was in regards to Singapore Tax liability or Australian liability (I took it to be Singapore liability). If it is, then even if the employer furnishes the place to the employee, either holding the lease and paying it themselves or even owning the property and furnishing it to the employee, the value to be deemed as income and taxed is calculated at 10% of your total employment income or the Annual Value of the place of residence whichever is lower. On the other hand if you are given an allowance, regardless of how much you actually spend on your rent (+/-) is immaterial and the cash allowance is taxed as income.

http://www.iras.gov.sg/irasHome/page.aspx?id=9922

sms



SMS - correct - I have modified my post for clarity - it's only if your employer agrees to pay the tax on allowances for you that this applies. Thanks for helping with the clarification.


Also, be sure to note, when an employer pay all or part of your taxes, then IRAS has to be notified and they will compute a tax on tax. In the US we call it a circular tax computation (diminishing tax/income/tax until the final is less that $.50 then rounded down to zero.) I'm not sure if the Singapore government does the computation the same way.

http://www.iras.gov.sg/irasHome/page03_ektid1840.aspx


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