u.s. expat tax guide – singapore
What should I expect when I own a foreign corporation in Singapore as an American?
You may have heard that setting up a foreign corporation can help you avoid US self-employment tax. While this strategy can save money, it also comes with important tax rules you need to know.
One key factor is how much of the company you own. If you own 50% or less and your Singaporean spouse owns the rest, you won’t have to pay GILTI tax (a tax on business profits that aren’t paid out).
But, you’ll still need to file complex paperwork with the IRS each year.
If you own more than 50%, things change. The IRS will tax your company’s profits even if you don’t take any money out.
To reduce this, some expats use a Section 962 election, which treats the business like a US company and allows certain tax credits to lower the bill.
Before 2017, many expats kept profits in their foreign companies to avoid paying US taxes. But after the Tax Cuts and Jobs Act (TCJA), the IRS now taxes those profits, even if they’re not withdrawn.
While setting up a foreign corporation can help lower taxes, it comes with its own reporting requirements and challenges.
What types of taxes do foreign corporations in Singapore pay?
- Corporate Tax Rate (17%)
- Singapore’s headline corporate tax is a flat 17%. Certain tax incentives or partial exemptions can lower this effective rate, especially for new startups.
- Goods and Services Tax (GST)
- A value-added tax on goods and services. If your business’s annual turnover is over US$1 million, you generally must register for GST and charge it to your customers. Currently, GST is 8%, and it may increase further in the future.
- Withholding Tax
- If your Singapore company pays a foreign (non-resident) entity for things like interest, royalties, or certain services, you may have to withhold part of that payment and send it to the Inland Revenue Authority of Singapore (IRAS).
- Stamp Duties and Other Levies
- Singapore imposes stamp duty on property transactions and, in some cases, share transfers. Excise taxes apply mostly to goods like alcohol or tobacco.
- Tax Incentives
- The government offers various reliefs or reduced rates for specific industries (such as high-tech sectors). Review these carefully to see if your business qualifies.
Since Singapore’s system is primarily territorial, you might not owe local tax on profits earned outside Singapore. However, the US still taxes you on global income, so you’ll need to consider how both systems overlap.
How can US expats avoid double taxation on their business in Singapore?
- Foreign Tax Credits (FTC)
- You can typically claim a Foreign Tax Credit on your US return for taxes your corporation pays in Singapore. This credit directly lowers your US tax due on the same income, preventing double taxation.
- Foreign Earned Income Exclusion (FEIE)
- If you pay yourself a salary from your Singapore corporation, you may exclude a certain portion of your foreign wages from US taxes if you meet the Physical Presence Test (330 days outside the US in 12 months) or the Bona Fide Residence Test (living abroad at least a full calendar year). This doesn’t cover dividends or capital gains—just earned income.
- Capital Gains Exemptions
- Singapore does not typically tax capital gains, which can be beneficial if you sell shares or assets at a profit. But the US may treat that profit as taxable, so plan accordingly.
- Tax Residency
- If your company is considered a Singapore tax resident (i.e., managed and controlled in Singapore), it may qualify for various local tax incentives. However, you still need to follow US rules on foreign corporations—such as additional reporting.
Own a foreign corporation in Singapore? Consult with a tax pro to ensure you’re meeting all IRS reporting requirements.
What are the steps to register a business in Singapore?
- Choose Your Company Structure
- Common structures include Private Limited Company (Pte. Ltd.), Limited Liability Partnership (LLP), or a Subsidiary of an existing overseas company. Each structure has different pros and cons for tax and liability.
- Register with ACRA (Accounting and Corporate Regulatory Authority)
- Use BizFile+, Singapore’s online portal, to incorporate your business. You’ll need to submit basic details like your Memorandum and Articles of Association (MAA) and select a Singapore Standard Industrial Classification (SSIC) Code that describes your business activity.
- Once registered, ACRA issues you a Unique Entity Number (UEN).
- Appoint Directors and Company Secretary
- You need at least one Resident Director, who can be a Singapore citizen, permanent resident, or valid work pass holder. If you don’t have a local partner, you might use a Nominee Director (through a service), but they’ll need to meet certain responsibilities.
- A Company Secretary must be appointed within six months of incorporation.
- Open a Corporate Bank Account
- Having a corporate bank account in Singapore makes it easier to pay local expenses and receive payments in Singapore dollars.
- Consider Additional Registrations
- GST Registration: Mandatory if annual taxable revenue is more than S$1 million.
- GoBusiness Licensing: For specific sectors like food, retail, or finance, you may need extra permits.
- IP Protections (IPOS): If you have trademarks, patents, or designs, register them with the Intellectual Property Office of Singapore.
After registration, comply with Singapore’s tax and accounting rules. You’ll typically file an Annual Return with ACRA and pay corporate taxes (if any) to IRAS once a year.
What business entity should I choose for my Singapore company?
Before choosing a structure, think about liability protection, how you plan to fund the business, and how it might affect your US reporting responsibilities.
- Private Limited Company (Pte. Ltd.)
- The most common and flexible option for foreign entrepreneurs. Owners’ liability is limited to what they invest. Shareholders can be individuals or corporations.
- For US taxes, owning a controlling stake in a Pte. Ltd. often triggers extra forms, like Form 5471, to report foreign corporate ownership.
- Limited Liability Partnership (LLP)
- Mixes elements of a partnership and a company. Partners have limited liability up to their contributions, but for US tax, profits might pass through to partners directly, complicating cross-border reporting.
- Subsidiary Company
- If you already have a US-based company, it can register a subsidiary in Singapore. This new entity is distinct from your US company under Singapore law, but you may still need to file extra forms in the US.
- Branch Office
- A branch is considered an extension of your existing US business, rather than a separate entity. It usually lacks the liability protection offered by a Pte. Ltd. or subsidiary.
- Representative Office
- For market research or liaison activities only; it cannot engage in profit-making business. It’s a temporary setup if you’re not yet ready for full operations in Singapore.
What are the corporate governance and compliance requirements?
Annual Compliance
You’ll need to hold an Annual General Meeting (AGM) in most cases (unless exempted) and file an Annual Return with the Accounting and Corporate Regulatory Authority (ACRA). This filing confirms your company’s financial statements and key data, helping maintain transparency.
Authorized Share Capital and Company Structure
When you register a Singapore subsidiary or private limited company, you define its authorized share capital (the maximum capital your company can raise by issuing shares). You can increase it later, if needed, by submitting the right paperwork to ACRA.
KYC Regulations
Know Your Customer (KYC) rules in Singapore aim to curb money laundering and terrorism financing. Opening a corporate bank account often requires detailed information about shareholders and directors.
Legal Representative and Nominee Director
At least one director must be a Singapore resident, meaning a citizen, permanent resident, or valid work pass holder. Some entrepreneurs hire a Nominee Director if they themselves don’t qualify as a resident right away.
Occupational Health and Safety Compliance
Depending on the sector you’re in, you might need to follow specific workplace safety laws. Failure to comply could lead to fines or legal action.
Zoning and Telecommunications Regulations
Some industries require compliance with zoning laws or telecom regulations—especially if you plan to lease industrial space or provide certain communication services.
Offshore Holding Company
Some foreign entrepreneurs use an offshore holding company to own a Singapore subsidiary, but that setup may come with more reporting duties in the offshore jurisdiction as well.
What are the residency and employment requirements for US expats in Singapore?
To work, manage, or direct a company in Singapore, US expats typically need a valid work pass and fulfill local employment laws:
- Employment Pass (EP)
- A common route for skilled foreigners who plan to work in Singapore. Apply via Employment Pass Online; approvals often consider factors like salary, educational qualifications, and the Fair Consideration Framework (FCF).
- If you plan to be the Resident Director of your own company, the Nominee Director route may be a temporary solution until your EP is approved.
- CPF and Foreign Worker Levy
- Central Provident Fund (CPF) is a mandatory savings plan for Singapore citizens and permanent residents. Foreigners on an EP generally do not contribute to CPF, but if you hire non-Singaporean employees, you might pay a Foreign Worker Levy depending on worker type and the Dependency Ceiling Ratio.
- Work Injury Compensation Insurance
- Employers must insure employees under certain conditions. If you hire local staff, understand the Singapore Employment Act guidelines and ensure you have the appropriate coverage.
- Skilled Workforce and Strategic Location
- Singapore encourages high-skilled professionals, making it easier to get an EP if you have specialized qualifications.
What are the US and Singapore tax responsibilities for Expats?
Singapore Taxes
Your Singapore company is subject to a 17% corporate tax, but tax incentives or partial exemptions can reduce that rate. If you draw a salary, you may pay personal income tax at progressive rates.
Once you become a permanent resident, you’ll also contribute to Singapore’s Central Provident Fund (CPF).
US Taxes
As a US citizen, you’re taxed on your worldwide income. You must file Form 1040 yearly and possibly additional schedules if you’re self-employed. If your foreign accounts exceed certain thresholds, you may need to file FBAR (FinCEN Form 114) or Form 8938 under FATCA.
To avoid double taxation on the same income, you can use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC).
Deadlines and Extensions
Expats typically have until June 15 to file US returns (an automatic two-month extension), but any taxes owed still accumulate interest from April 15 onward.
Singapore individual tax returns are generally due in mid-April, and the Inland Revenue Authority of Singapore (IRAS) sends a Notice of Assessment with the final tax bill and payment date.
Are there tax treaties and agreements that affect US expats in Singapore?
Singapore does not have a comprehensive personal income tax treaty with the United States.
This means you cannot rely on a treaty to reduce your US taxes directly on your Singapore business or salary. You generally have to use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to avoid double taxation.
There is also no totalization agreement between the two countries for Social Security, so you typically owe US Social Security and Medicare tax if you’re self-employed, even if you pay into Singapore’s system.
While Singapore does maintain Double Taxation Agreements (DTAs) with many countries, none of these fully cover personal income for US citizens.
You may still apply for a Certificate of Residence (COR) to claim certain benefits with third countries, but it won’t replace your US filing obligations.
Since no formal tax treaty exists, you should plan your taxes under the assumption that you must comply fully with both Singaporean and US rules—using FEIE, FTC, and other general US provisions to prevent or reduce double taxation.
Ankurita Lala, an IRS Enrolled Agent with 6 years of expat tax experience, specializes in helping individuals and entrepreneurs navigate the complexities of foreign business ownership. *Schedule a consultation with Ankurita today.
*30-minutes US$247.
