Taxation of housing allowance

[stillwater]

Hi, I am trying to find out how one deals with taxes on housing or tuition allowances that a company pays you, since that amount is calculated towards your total taxable income? Do companies provide some kind of adjustment or offset your tax liability?

I am trying to negotiate my package and want to make sure everything is considered. Thanks for our advise.

[JR8]

In my experience the tax element is included within the allowance


You also used to be able to negotiate a tax allowance when relo'ing to a high tax jurisdiction.

On a global scale SG is low tax.

[Strong Eagle]

Hi, I am trying to find out how one deals with taxes on housing or tuition allowances that a company pays you, since that amount is calculated towards your total taxable income? Do companies provide some kind of adjustment or offset your tax liability?

I am trying to negotiate my package and want to make sure everything is considered. Thanks for our advise.

For Singapore tax purposes, housing is dealt with separately, which I will deal with in a moment. For every other kind of assistance, the dollar value of the perk is simply treated as income. Tuition allowances, health insurance payments, everything... is income and taxed at regular rates. If your employer pays your taxes, that is taxable income as well. If you employer pays for your club membership that cost of the membership is a taxable benefit to you.

For housing the following applies. If you are simply given a housing allowance and you pay your own rent, then the entire amount is taxable at normal income tax rates. If however, the lease is held in the name of the company, and the company pays the rent to the landlord, then the tax is computed as follows: (1) The lower of a) 10% of your employment income, or b) the annual value of the premises. This amount is further reduced by any amount you actually contribute to the rent.

As an example, your company rents you a place at $5000 per month or $60,000 per year. You make $300,000 a year. Your taxable value for the housing provided is 10 percent of $300,000 or $30,000 since that is less than the actual value of the rental.

[x9200]

To add, some more examples (including co-payment of the rental) are here:
http://www.iras.gov.sg/irasHome/page04. ... 8#employee

[scarbowl]

BTW, the preferential treatment for the housing allowance is scheduled to disappear in a year or two.

[stillwater]

Thanks for your inputs. I have reviewed the information on the IRAS website which is similar to what strong eagle has outlined, but what I would like to understand is how do companies deal with such situations. If I have to go back to my company and ask them to compensate for the tax liability for these benefits, what is the right way?

They have a tax advisor that will be available to me once I agree on the package, but then it might be too late and also the tax advisor is going to act on behalf of the company, so not sure how biased he will be.

If they compensate the tax liability and add that to my base compensation, then it will just increase my taxes. So is there some way for them to pay for the taxes? Does anyone have experience with that?

[x9200]

Why to make it more complicated than it is worth? Just agree on the allowance/salary that will satisfy you expectation the extra taxes included. Going along the way you suggested you should ask the company to compensate you for a tax you need to pay for your salary

[Strong Eagle]

If they compensate the tax liability and add that to my base compensation, then it will just increase my taxes. So is there some way for them to pay for the taxes? Does anyone have experience with that?

http://www.iras.gov.sg/irasHome/uploade ... %20TOT.pdf.

What country are you coming from? If not the USA then most companies will not pick up your Singapore income tax as you won't be paying any income tax in your home country. Only if you are from the USA and earning in excess of the earned income exclusion will the company pick up the double taxation portion of it.

[stillwater]

I am moving from US to SG. And I will still have a property in US that I will be paying for, but all my income earned will be in SG (some in 2013, but 100% after that).

x9200, I have no issues paying taxed on my earned income, but do have an issue when I have to pay taxes for benefits that are provided by the company, which I consider as incentives for me to move from US to SG. So I would expect them to pay the taxes on those benefits to or compensate me for the taxes that I have to pay on those benefits.

[sundaymorningstaple]

With your thinking, then they should pay ALL of your taxes as your supposed uplifted salary is also an incentive for you to come to Singapore.

[Hidy Ho]

There is no right answer to your question. It depends on you, your company and negotiation.

In my case, I received a lump sum relocation bonus to cover this sort of expense and other misc. expenses.

In big scheme of thing, it's one time additional expense that is not that material (to me). I also only found out about this tax exposure after I arrived last year, even though I did fairly thorough research on the relocation, so I was initially PO'd. But now I've seen my tax paper, it's not that material.

Now I know what I owe SG for tax .... now waiting to hear back on what I owe to USA.

[stillwater]

Hi Hidy Ho, yes agree that in the grand scheme of things it could be adjusted and that is what i am trying to understand. I just don't want to be in a situation where I end up paying taxes from my pocket.

I agree with some comments that tax is levied on income and if I have income I have to pay taxes, but in case of allowances, it is a cost that I don't have today and want to make sure it is calculated somewhere.

Thanks for your comments.

[Hidy Ho]

I have to clarify that in my case, my housing was only temporary (first two months). And, that is why it's only one time expense and not a material sum.

Your case might differ if you get better deal than me.

When I have time, I'll look at my tax paper again and see if there are any additional information.

[Hannieroo]

Some companies do pay all tax. Although if you are US that is probably going to be seen as another benefit to be taxed there.

[zzm9980]

Hi Hidy Ho, yes agree that in the grand scheme of things it could be adjusted and that is what i am trying to understand. I just don't want to be in a situation where I end up paying taxes from my pocket.

I agree with some comments that tax is levied on income and if I have income I have to pay taxes, but in case of allowances, it is a cost that I don't have today and want to make sure it is calculated somewhere.

Thanks for your comments.

As Hidy mentioned, every company and every negotiation is different. As others have mentioned, just adjust your salary requirements upwards to cover the additional expected taxes on the ongoing allowances.

Since you own property in the US, be aware your company get tax benefits on the housing allowances they pay you for you to be located overseas. (They don't get this if you didn't own property in the US) I don't know the exact details on what they get, but keep it in mind for your negotiations. It isn't completely out of the kindness of their heart.

Your earned income outside of the US is excluded only for the first USD $97.6k of earned income you earn. If you're getting a housing allowance, I'm going to just assume your base salary is probably also over that amount (About SGD $10k/month). The company I work for has a pretty standard 'tax equalization' benefit they give to employees assigned overseas where the employee is only responsible for the value of taxes they would pay in the US where they live. I imagine it's rather complicated on the company's end to figure that all out.

Keep in mind if you will owe US tax, you're legally obliged to pre-pay estimated obligations quarterly. Also, you should review Form 2555. This is where you report your foreign income. You may find it amusing that there is just a few boxes (See box 19 on) to report everything you earn here. No W2s, 1099s, or any other detailed forms. Just fill a number in a box.