u.s. expat tax guide – singapore
Do I have to pay rental income tax in Singapore as an American?
Many US expats who rent out property in Singapore are unsure whether they need to report that income to the IRS or if they will owe taxes in both countries.
The short answer is yes, rental income must be reported to the IRS, but many expats don’t end up owing US taxes thanks to available tax benefits.
One key benefit is the Foreign Tax Credit (FTC), which allows you to offset US taxes by claiming the taxes already paid in Singapore. Additionally, depreciation deductions can further reduce taxable income.
The US tax system allows property owners to deduct depreciation, even though Singapore does not. This means that while a rental property might show a profit on a Singapore tax return, it could show a loss on a US tax return, reducing overall tax liability.
For those who co-own a property with a non-US person, such as a Singaporean spouse or business partner, the IRS still requires reporting of 100% of the rental income and expenses. However, tax is only owed on the portion of the property owned by the US expat.
Here’s how it works:
- Foreign Tax Credit: If you already pay rental income tax in Singapore, you can use those taxes to reduce or eliminate US taxes on the same income.
- Depreciation Deduction: The US tax system allows you to claim depreciation on your rental property, even though Singapore does not. This often creates a loss on your US tax return, which can help reduce future tax bills.
- Co-Owned Properties: If you own a property with a non-US person (like a Singaporean spouse or friend), you must report 100% of the rental income and expenses to the IRS but will only be taxed on your share of the ownership.
How does the Singapore tax system work for rental income?
Singapore uses a territorial tax system, which means it taxes money made in Singapore or brought into Singapore. Rental income from a Singapore property always counts as Singapore-sourced, so you’ll need to report it to the Inland Revenue Authority of Singapore (IRAS).
- Personal Income Tax Rate (Resident vs. Non-Resident)
- If IRAS considers you a tax resident (usually by living in Singapore at least 183 days in a year), you pay progressive tax rates.
- As a non-resident, some income is taxed at a flat rate or the resident rate—whichever is higher.
- Rental income in Singapore is calculated on a “net” basis (rent minus allowable expenses) regardless of your residency status.
- Property Tax
- This is separate from your rental income tax. Property tax is charged yearly on the property’s annual value. If you don’t live there yourself, the rate is often higher than for owner-occupied homes.
- Stamp Duties
- If you buy property in Singapore, stamp duty applies. Additional Buyer’s Stamp Duty (ABSD) may also apply to foreigners or those buying multiple properties.
- These charges affect your overall property costs but don’t directly reduce your rental income taxes.
- Central Provident Fund (CPF)
- Singaporeans and permanent residents typically contribute to CPF.
- If you’re just a landlord with an Employment Pass or no local job, CPF usually won’t reduce rental tax.
- Goods and Services Tax (GST)
- Standard residential rentals usually aren’t subject to GST unless you provide extra services or rent out certain commercial spaces.
What are the US tax filing requirements for rental income?
Even if you live in Singapore, the US still taxes you on all global income, including rent from a Singapore property. You’ll file an annual return with the IRS:
- Form 1040 and Schedule E
- On your Form 1040, you attach Schedule E (Supplemental Income and Loss) to list your rental income and related expenses (like mortgage interest or repairs).
- FBAR (FinCEN Form 114) and Form 8938
- If your foreign bank accounts hold more than US$10,000 total at any point, file an FBAR (Foreign Bank Account Report).
- If your overall foreign assets exceed certain higher amounts, submit Form 8938 under FATCA rules.
- Foreign Earned Income Exclusion (FEIE) and Other Rules
- The FEIE usually applies to salary or self-employment income, not rental profits.
- Because the US and Singapore do not have a comprehensive tax treaty for individuals, you rely on the Foreign Tax Credit (FTC) (via Form 1116) to avoid double taxation on the same rental income.
- Physical Presence or Bona Fide Residence Tests
- These tests matter if you’re trying to claim the FEIE on wages you earn in Singapore. They don’t usually reduce tax on rental income, which the IRS views as “passive.”
Who is considered a tax resident in Singapore?
While rental profits often follow the same “net rental” rules for everyone, your tax residency status in Singapore can affect other parts of your tax picture:
- 183 Days Rule
- You’re a tax resident if you spend at least 183 days in Singapore in a calendar year.
- If you don’t meet that, you’re often treated as a non-resident, which may affect certain reliefs or rates on other types of income.
- Employment Pass, EntrePass, GIP Participants
- Holding a Singapore Employment Pass or joining the Global Investor Program (GIP) can lead to becoming a resident if you live in Singapore most of the year.
- EntrePass holders also track days spent to see if they qualify as residents.
- Permanent Resident (PR)
- Becoming a PR involves paying into CPF and possibly qualifying for other local benefits.
- You’ll still file an annual tax return with IRAS and receive a Notice of Assessment (NOA).
- Stamp Duty and Property Tax
- Whether you’re a resident or not, you generally owe property tax and possibly stamp duty on property purchases in Singapore.
What types of income are taxable in Singapore?
Singapore follows a territorial tax system, which means it taxes income that’s earned inside Singapore. If your property is located in Singapore, your rent is considered Singapore-sourced income, so you must declare it to the Inland Revenue Authority of Singapore (IRAS).
Here are some common types of taxable income under the Singapore Income Tax Act:
- Rental Income: Whether from a non-owner occupied residential property or a commercial property, the net rental amount (rent minus allowable expenses) is taxable in Singapore.
- Employment Income: Salaries, bonuses, and other compensation from working in Singapore are subject to local tax.
- Business Income: If you run a business in Singapore, the profits are taxed. For property held under a company, you may have to file corporate tax returns.
- Dividend and Interest Income: Certain local dividends and bank interest might be taxed, depending on how they are paid. Singapore does not tax capital gains on the sale of property, but the US might.
Singapore does not have inheritance tax, estate tax, or net wealth tax. Capital gains from selling property are also not taxed in Singapore, but they could be taxed by the US if you sell your rental property at a profit.
What tax deductions and credits are available for rental income?
In both Singapore and the US, you can reduce your taxable rental income by claiming allowed expenses and taking advantage of credits that lower your final tax bill.
In Singapore:
- Mortgage Deduction: You can usually deduct mortgage interest linked directly to your rental property.
- Property-Related Expenses: Repairs, maintenance costs, property taxes, and sometimes certain capital allowances can be deducted from your gross rent.
- Tax Resident Benefits: If you qualify as a Singapore tax resident, you may receive personal reliefs, although these often apply more to employment income than rental profits.
In the US:
- Foreign Tax Credit (FTC): This credit (claimed on Form 1116) lets you subtract the amount of Singapore tax paid on your rental income from your US tax on the same income. It’s the main way to avoid paying taxes in both countries on identical rental profits.
- Foreign Housing Exclusion or Deduction: Generally for your own housing costs abroad, not for property you rent to someone else.
- Business Deductions: If your rental activity is structured like a business, you may deduct eligible expenses on your US return.
- Additional Child Tax Credit: Not specifically related to rental property, but it can lower your overall US tax if you meet certain child-related criteria.
Discover how US tax benefits can reduce or eliminate your tax liability on Singapore rental income. Consult with a tax pro today.
How can US expats avoid double taxation on rental income?
Since you owe rental tax to Singapore and also have to declare that same rent on your US return, you might face double taxation.
Here are ways to prevent that:
- Foreign Tax Credit (FTC)
- This is the primary tool for expats earning passive income like rent. By claiming an FTC, you get a dollar-for-dollar credit on your US tax for what you have already paid to Singapore.
- You file it using Form 1116 along with your US return.
- Foreign Earned Income Exclusion (FEIE)
- This exclusion (on Form 2555) mainly covers earned (work) income, not rental profits. Since the IRS treats rent as “passive,” the FEIE usually does not reduce tax on your rental property.
- Streamlined Procedure
- If you failed to file US returns or report rental income in previous years because you didn’t know you needed to, the Streamlined Filing Compliance Procedures can help you catch up without huge penalties.
- No Comprehensive Tax Treaty
- The US and Singapore do not have a wide-ranging personal tax treaty for issues like rental income. However, the standard US Foreign Tax Credit is still effective in eliminating duplicate tax payments.
- Avoiding Mistakes
- Keep receipts of mortgage payments, repairs, and other property expenses in case of an audit.
- If you hired local help for the property (e.g., a property manager), you might face additional levies (like the Foreign Worker Levy), but that rarely affects the actual rental income tax.
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.
