🐧 7 must-know tax benefits for Singapore & American expats

Supplemental Retirement Scheme, 0% cap gains, Foreign Earned Income Exclusion, & more tax benefits
July 30, 2023

Today in 10 minutes or less, you’ll learn:

  • 🇸🇬 4 tax benefits for expats in Singapore: Retirement Scheme, New Startup Company Scheme, tax reliefs, & more
  • 🇺🇸 3 tax benefits for American expats: Foreign Earned Income Exclusion, Foreign Housing Credit, & more

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🇸🇬 4 must-know tax benefits for expats in Singapore

🏖️ Supplemental Retirement Scheme

The Supplemental Retirement Scheme (SRS) is a voluntary, tax-advantaged account available to foreigners.

Why invest?

  • Tax deferral: You can deduct your contributions from your taxable income that year
  • Investments compound tax-free
  • Upon retirement, 50% of your withdrawals are tax-free

How much can you contribute?

  • Singaporeans/PRs: up to S$15,300 annually
  • Foreigners: up to S$35,700 annually

How much taxes can you save?

  • Take if you make a gross income of $120k/year
  • If you contribute the max, then you’d deduct $35.7k from taxable income
  • Assuming an 11.5% tax bracket, you’d save ~$4.1k on income taxes for the year
  • Later, you’ll pay income taxes on only half of your withdrawal

How to apply?

  1. Apply for an SRS at a local bank like DBS, OCBC, or UOB.
  2. After opening the SRS, you can also invest the funds through index funds or fintechs like Endowus or Stashaway.
  3. If you’re a foreigner, download the Declaration Form from the IRAS website and declare your foreigner status at your local bank branch to increase your max contribution.

Watch out for penalties

To avoid penalties, you must hit retirement age (63 in 2023) before withdrawing funds.

Expats can also withdraw early penalty-free if they:

  • make a full withdrawal
  • kept SRS account open for 10+ years
  • are not a citizen/PR for 10 years before withdrawal

Americans, watch out for taxes

While my Australian wife invests in the SRS, I do not due to tax concerns. For American citizens, you might be subject to additional taxes (PFIC) from the US tax man so consult with your tax accountant first.

🚀 Tax Exemption Scheme for New Startup Companies

When you start a new company in Singapore, your business can qualify for this tax exemption scheme designed to encourage local entrepreneurship.

How much taxes can you save?

After forming your company, it receives exemptions for its first three tax years:

  • 75% exemption on the first S$100k of normal chargeable income
  • 50% exemption on the next S$100k of normal chargeable income

If you earn the max exemption, that’s $125k each tax year or $375k over 3 years! 🤯

What businesses qualify?

All new start-up companies are eligible for the tax exemption scheme, if they are:

  • Incorporated in Singapore
  • Tax resident of Singapore
  • Have ≤20 shareholders in tax year where all shareholders are individuals and ≥1 owns 10% of ordinary shares

Exception is those focused primarily on investment holding and property development

How to claim?

Fill out your Singapore corporate tax filing. Specifically, Estimated Chargeable Income (ECI) and Form C.

Beware of gaming the system

Don’t get audited by IRAS. As of January 2021, >300 companies have been audited for possibly abusing the tax exemption scheme, resulting in taxes and penalties of >$25 million. Yikes.

Tread carefully with foreign-sourced income

Singapore is a territorial tax country that's relatively strict on providing tax benefits to foreign-sourced income. As a general rule of thumb, for foreign-source income to be not taxed in Singapore, it should be subject to taxes elsewhere.

👶 Various Tax Reliefs

As an expat, you’re eligible for a laundry list of various personal income tax deductions. Especially if you’re a working mother or parent.

How much taxes can you save?

*Cap of $50k per child for the Qualifying Child Relief scheme + Working Mother’s Child Relief

How to claim?

You can file a claim for this when filing your income tax. Several of these reliefs (eg your donations) will be automatically added to your tax report.

📊 0% Capital Gains

As an expat, you are eligible for 0% capital gains as long as you are a Singapore tax resident.

What gains/losses qualify?

  1. Property
  2. Shares or other financial instruments (including digital tokens)
  3. Insurance policies

Beware of flipping properties

If you’re trading properties, IRAS may still apply capital gains. It will look at criteria like frequency of buying and selling, purpose of the transaction, and holding period. For example, buying 5 properties and selling 3 in 1 year would be considered high frequency.

🇺🇸 3 must-know tax benefits for American expats abroad

💼 Foreign Earned Income Exclusion (FEIE)

This one is pure gold — and by far, the most common way expats reduce their US taxes.

How much taxes can you save?

  • Up to US$120k of foreign-earned income (tax year 2023)

Who qualifies?

Meet one of two tests:

  • Physical Presence Test: you are physically present inside a foreign country for 330+/365 days
  • Bona Fide Residence Test: you have lived overseas for 1+ calendar years and have no intention to move back to the US

How to claim?

  • It’s not automatic: Elect it by filing a Form 2555 and attaching it to your tax return

Watch out for limits

  • Applies only to your earned income, not passive/unearned income
  • Not possible to use FEIE with Foreign Tax Credit on same income

💳 Foreign Tax Credit

This benefit is most useful for when you move to a high-tax country.

How much taxes can you save?

You have two choices:

  • Deduct the taxes you’ve paid to your resident country on your Federal Tax Return
  • Take a dollar-for-dollar credit or reduction of any amount you owe to the US
  • What’s neat: If the credited amount is more than you owe, you can carry that amount over and apply it toward any taxes you may owe in the next decade.

How to qualify?

Meet all 4 criteria:

  • Paid a foreign tax liability
  • Must be assessed on income
  • Must be assesses individual
  • Must be the legal and actual foreign tax that needs to be paid

How to claim?

  • Elect it by filing a Form 1116 and attaching it to your tax return

🏡 Foreign Housing Exclusion

Lots of expats forget about this tax benefit, which allows housing expenses to be deducted from taxable income.

How much taxes can you save?

  • Standard amount: Up to 14% of your FEIE, which is equivalent to US$16.8k (tax year 2023)
  • High cost city amount: If you live in a high-cost city according to the IRS, you may be able to use a higher amount. Find the current list of cities in Form 2555. If your location is not listed, then use the standard amount.

How to qualify?

Meet one of two tests:

  • Physical Presence Test
  • Bona Fide Residece Test

ALSO your housing costs must be >16% of FEIE amount:

  • This includes: Rent, utilities, property insurance, and repairs
  • NOT your cable, phone, or domestic helper/servant costs

How to claim?

🌐 Beyond your borders

🇸🇬 China to resume 15-day visa-free entry for Singaporeans from July 26. We’re back to where we were 3 years ago!

🇬🇧 Britain tops the world’s top locations with the highest expatriate pay and benefits packages at US$440k annually. Can you guess who is #2 through #5? (hint: Japan, India, China, and HK are up there)

🇦🇪 Two thirds of Dubai’s expats are looking to buy rather than rent and these expats accounted for 40% of property purchases last year. What’s shocking to me: Dubai’s population grow by 50k expats in the last 6 months alone! 🤯 

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Dexter Zhuang

Dexter is the founder of Money Abroad, a website and newsletter on building wealth for global professionals. Over the last 10 years, he's been a product leader, product manager, consultant and coach at companies like Dropbox, Xendit, and growth-stage startups across the US, Asia Pacific, and Latin America. His work has been featured in global publications like Business Insider, CBS, US News & World Report, and Tech in Asia. He graduated from Dartmouth College.

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