Explaining the US Expat Taxes for American Citizens Living in Singapore
It is mandatory for every US citizen to file expat taxes if they are currently living outside the country. Well, around 30,000 Americans residing in Singapore pay expat taxes to the US government every year.
You see, most countries in the world exercise either territorial or residential taxation. However, in the United State’s Case, it is citizenship-based taxation.
In Territorial Taxation, jurisdictions like Singapore charge taxes only on the income earned inside the country. In Residential Taxation, local residents need to pay taxes on the money they make inside and outside the country. However, non-local residents only need to pay tax for the money they make inside the territory, just like a territorial tax.
Finally, in Citizenship-based Taxation, individuals holding citizenship need to pay taxes regardless of where they reside or make their income. In the case of the USA, residential taxation applies for green card holders as well.
Does Every US Citizen Need to Pay Expat Taxes?
Generally, yes. The United States charges an expat tax for the citizens who live outside the country, regardless of the jurisdiction where the people make their income.
However, some filing thresholds decide if a US citizen will be liable for the expat tax. This mainly depends on the nature of work, and the amount an individual makes.
These are the thresholds for different category of US citizens:
- For citizens filing as Single: $12,200
- For citizens filing as Married Filing Jointly: $24,400
- Citizens filing as Self-Employed: $400
- For citizens filing as Married Filing Separately: $5
- If your income doesn’t exceed the above threshold, you will not need to pay the US expat tax.
What Else Should You Do Along with Filing Your Expat Taxes?
Along with the tax, you will have to file an informational return on your assets in foreign bank accounts. You need to do that with Foreign Bank and Other Account Reporting (FBAR) Form 114. Furthermore, you will have to fill Form 8938 Statement of Specified Foreign Financial Assets.
Do the US Expat Taxes Have any Incentives?
Yes, there are some incentives. You can take help from a professional tax services provider who will make sure you avail from all the incentives and pay a minimum tax. Most of these incentives are to help prevent double taxations, which will be very beneficial given that surprisingly, Singapore and the USA haven’t signed a DTA agreement yet.
Foreign Earned Income Exclusion
If you get accepted for the Foreign Earned Income Exclusion, you won’t have to pay taxes for income up to USD 105,900 for the year 2019. However, this program doesn’t apply to US government employees.
You will have to meet one of these conditions to apply for the foreign earned income exclusion:
- Work full time in a foreign country for a calendar year.
- Work outside the US as an employee or as a business person for at least 330 days in any 365 days period.
Remember, there are various loopholes while applying for the incentive, so you should work with a tax protection services provider.
Foreign Tax Credit
In simple terms, the foreign tax credit is for US citizens who have made an income outside the US. If the tax rate of the foreign country where the US citizen made their income exceeds the tax rate in the USA, they will automatically receive the tax credit, which rids them of any taxes. Remember that this incentive is only applicable to income tax. Furthermore, you can’t claim for the foreign tax credit for this income:
- Foreign mineral income.
- Oil/ gas extraction income.
- Foreign Earned income exclusion and income from Puerto Rico and Possessions.
- Global boycott operations.
- Foreign corporations and partnerships controlled by US citizens that fail to file the necessary information return.
Foreign Housing Exclusion
The Foreign Housing Exclusion works together with the Foreign Earned Income Exclusion. It allows you to use your housing expenses in the last year to increase the amount of the foreign earned income exclusion which will decrease your income tax liability.
The foreign housing exclusion is to especially help the US citizens living in countries where the expenses are more than inside the States.
Remember, the foreign housing exclusion is only for essential costs like repairs, furniture rental, leasing fees, parking, rent, easing fees, utilities except for cable and telephone, etc. The amount of the exclusion is calculated every year, you may need to do some research depending on when you are reading this article.
What Are the Singapore Income Tax Rates?
Singapore Income Tax rates are comparatively lower than in the US.
Like said before, Singapore has a territorial tax system. You will need to pay taxes to the Singaporean government only for the income you make in the city-state.
The personal income tax rate starts from 0% and can go up to 22%. Here is a table:
|20,001 to 30,000||2%|
|30,001 to 40,000||3.5%|
|40,001 to 80,000||7%|
|80,001 to 120,000||11.5%|
|120,001 to 160,000||15%|
|160,001 to 200,000||18%|
|200,001 to 240,000||19%|
|240,001 to 280,000||19.5%|
|280,000 to 320,000||20%|
*All Amount in Singaporean Dollars (SGD)
Every Singaporean resident is liable for the personal income tax. For US citizens to be resident, they will need to reside in the city-state for at least 183 days in a tax year.
Remember, if you are not a resident, your tax will be either 15%, or the progressive tax as the above table, whichever is higher. There are no capital gains tax and taxes on dividends in Singapore. GST is 3%.
Note: If you reside in Singapore and gain profits from outside the city-state, you won’t have to pay taxes to the Singaporean government. Furthermore, as long as you are not a company director, you don’t need to pay taxes in Singapore if you have been in the city-state for less than 60 days.
When and Where Do You Need to Pay the Singaporean Income Tax?
You have to file income taxes in Singapore with the IRAS, which is the short form for the Inland Revenue Authority of Singapore.
You should pay the taxes in Singapore by April 15th each year. If you are a resident, you will need to file your returns via form B1. Similarly, For B is for self-employed individuals and non-resident taxpayers should go for form M. After filing, authorities will mail an assessment to you within September.
You need to pay the actual taxes within a month of receiving the assessment mail.
Do You Need to Pay Social Security Taxes?
Yes, US expat taxes also include the Social Security and Medicare taxes. Furthermore, if you had to pay social security taxes in the country you were employed in, you wouldn’t have to pay Social Security Taxes.
However, if you are working in Singapore, you will still need to pay social security taxes to the US, as Singapore’s CPF is only applicable to Singaporean Citizens and PRs.
Every American living in Singapore needs to pay US expat taxes. Moreover, despite these two countries not having a DTA, the amount that you need to pay can still be minimized by making the right use of the incentives.
3E Accounting Singapore is a leading tax services provider in Singapore. You can contact us, and we will make sure you and your business have to pay minimum taxes to the US and the Singaporean governments.