Living as a US expatriate in Singapore presents a unique set of challenges, especially when it comes to understanding and navigating the tax system. The country’s tax-friendly environment for corporations, featuring a flat corporate tax rate, makes it particularly attractive for business owners and individuals engaging in business operations.
This guide aims to provide a comprehensive overview of the tax obligations for US expats living in Singapore, helping you to better understand your responsibilities and potentially avoid any tax pitfalls related to rental income, employment income, business profits, and more.
UNDERSTANDING TAX RESPONSIBILITIES FOR US EXPATS IN SINGAPORE
The US has a citizenship-based taxation system which means US expats must file a federal income tax return and report their worldwide income annually once their taxable income exceeds the filing threshold regardless of where they reside.
Singapore’s tax system, on the other hand, is territorial, meaning only income earned within the country is subject to tax. Tax obligations in Singapore are determined by one’s tax residency status. Non-resident individuals are only taxed on income earned within Singapore.
HERE’S A QUICK GLANCE AT SOME KEY FACTS:
An Individual Taxpayer Identification Number (ITIN) is a unique identification number assigned by the Internal Revenue Service (IRS) to individuals who are required to have a taxpayer identification number but do not have, or are not eligible to obtain, a Social Security Number (SSN). The ITIN is used for tax purposes and is required for certain tax-related transactions. However, ITINs are assigned for a specific period and need to be renewed periodically to maintain their validity.
If an ITIN is not used on a federal tax return at least once in the last three consecutive years, it will expire. Additionally, ITINs that have the middle digits of 78 or 79 will expire at the end of 2021. It’s important to renew the ITIN in a timely manner to avoid any delays or complications when filing taxes or carrying out other tax-related transactions.
This guide will walk you through the renewal application process of your ITIN. From determining if your ITIN needs to be renewed, to gathering the necessary documentation, and submitting the form and federal tax return. By following this guide, you can ensure that your ITIN renewal process is smooth and without any delays.
How to renew your ITIN?
To renew an ITIN (Individual Taxpayer Identification Number), individuals must complete and submit Form W-7 to the Internal Revenue Service (IRS), along with the necessary documentation and a federal income tax return. Here is a step-by-step guide on how to renew an ITIN:
Determine if your ITIN needs to be renewed: An ITIN is valid for a specific period of time. If it has not been used on a tax return for at least three consecutive years, it will expire.
Gather the necessary documentation: Depending on your citizenship and residency status, you may need to provide proof of identity and foreign status. Examples of accepted documents include a passport, birth certificate, or national identification card.
2021 is ending and 2022 is coming. Post-holiday is tax filing season and Americans living abroad need to file their taxes. Just like Americans living in the United States, federal tax returns are filed every year. However, applying from abroad is more complicated. Below is new information about the taxes collected abroad for 2022 that Americans file with the United States.
Some things stay the same
First, it might be helpful to look back at what’s not new for Americans overseas in 2022.
Americans living abroad must submit US tax documents and report that foreign accounts, assets, and businesses remain unchanged. This year there was hope that President Biden’s tax reform might be accompanied by some kind of exemption for Americans living abroad, but that has not materialized.
U.S. citizens and resident aliens who live abroad are taxed on their worldwide income. But such taxpayers may qualify for the foreign earned income exclusion, which allows certain taxpayers to exclude up to $112,000 (in 2022) of their foreign earnings from income, as well as to exclude or deduct certain foreign housing costs. Note, however, that not all U.S. expats qualify to take advantage of the foreign earned income exclusion. In addition, business owners may be subject to other complications and taxpayers residing in countries that have tax treaties with the United States may have certain tax planning opportunities.
The Foreign Earned Income Exclusion: The Basic Requirements
To qualify for the foreign earned income exclusion, the taxpayer must have (i) foreign earned income, (ii) a tax home in a foreign country (the “tax home” test), and (iii) the taxpayer must be one of the following:
The 2017 965 Transition Tax confiscated the pensions of a large numbers of Canadian residents. The ongoing GILTI rules have made it very difficult for small business corporations to be used for their intended purposes in Canada.
A U.S. citizen who renounces U.S. citizenship would be classified as either an expatriate or a covered expatriate. An expatriate is not subject to exit tax and would thereafter be treated the same way as any non-resident alien.
Who is a covered expatriate?
If you meet one of these three tests you would be a covered expatriate (there are some exceptions for people born with U.S. citizenship who remained a tax resident of the other country of citizenship, as well as for people who went out before the age of 18.5 years old):
- The asset test would apply if your net wealth is worth more than two million dollars on the day you renounce.
- The income tax test that would be if your tax liability was over 168 000 (as of 2019) over the prior five years. This only includes income tax (after foreign tax credits).
- The compliance test, meaning that you can certify that they’ve been compliant for the five year period prior to renouncing.
Prologue – The Only Certainties Are Death And Taxes
The above tweet references an article in the Globe and Mail on May 7, 2020. The article contains interesting perspectives, but much has changed since that time.
COVID-19 And The Role Of Government Assistance
Yesterday, we posted an article called The USA Of The 21st Century Is Like Britain In The 19th Century written by John Richardson of Citizenship Solutions in Canada. John is an internationally recognized expert on the subject of dual citizenship and accidental Americans. The post created a significant amount of reaction and response which I want to bring to your attention today. It is important to understand the impact of U.S. tax laws and how they are affecting Americans who moved long ago to another country, or may have just been born here but do not reside in the United States.
It is a great article and the commentary continues to highlight the issues faced by many. You can read the article and the comments at this link:
Your comments are welcome to continue enlightening the world.
Kat Jennings, CEO TaxConnections
Are you a citizen of the United States who lives abroad? You probably know that the U.S.A. is one of only two countries that applies citizenship based taxation in order to tax its own citizens on their worldwide income, irrespective of where they live or work anywhere in the world. If you’re thinking about becoming a digital nomad or expatriating to another country, do you know how to avoid having to pay tax on your income while abroad? There could be huge penalties or tax evasion charges if you don’t file correctly. Fortunately, these important questions have answers.
By combining the right strategies for citizenship, residency, banking, incorporation, and physical presence in other countries, most people who work overseas can legally lower their U.S. tax owing to $0. In U.S. Taxes for Worldly Americans, Certified Public Accountant, U.S. immigrant, expat, and perpetual traveler Olivier Wagner preaches the philosophy of being a worldly American. He uses his expertise to show you how to use 100% legal strategies (beyond traditionally maligned “tax havens”) to keep your income and assets safe from the IRS.