u.s. expat tax guide – singapore
What should self-employed US expats in Singapore expect from the IRS?
Many expats assume that if they pay taxes in Singapore, they’re off the hook in the US—but that’s not the case. The IRS still expects you to file a US tax return and may even require you to pay self-employment tax (15.3%), even if you qualify for tax breaks like the Foreign Earned Income Exclusion (FEIE).
One common mistake self-employed expats make is forgetting to file Form 8858, which reports details about your business. Many people don’t know this form exists, but missing it can result in a US$10,000 penalty per year.
If you haven’t filed it before, there’s a way to fix it: the Streamlined Amnesty Program, which lets you catch up on three years of taxes while avoiding penalties.
Another big tax surprise for expats is self-employment tax. Even if you don’t owe income tax thanks to the FEIE, you could still face a 15.3% self-employment tax bill.
For example, if you earn US$100,000 in a year, you might owe US$15,300 in self-employment tax—even if you already paid taxes in Singapore.
—Since Singapore doesn’t have a totalization agreement with the US, there’s no way to avoid this tax unless you set up a company in Singapore and report your income differently.
Thankfully, Singapore is business-friendly, and foreigners can own 100% of their company.
By setting up a Singapore-based business, you might be able to avoid self-employment tax altogether. However, this comes with extra paperwork, including Form 5471, which reports foreign corporations to the IRS.
What are the FBAR and FATCA reporting requirements for US expats?
FBAR (FinCEN Form 114)
- If the total value of all your foreign bank accounts (including checking, savings, and certain investment accounts) ever goes above US$10,000 at any time during the year, you need to file an FBAR online.
- Failing to file can lead to steep fines, but if it was an honest mistake, programs like the Streamlined Filing Compliance Procedures might help reduce penalties.
FATCA (Form 8938)
- Under the Foreign Account Tax Compliance Act (FATCA), you might also need to file Form 8938 with your tax return if your foreign assets—like bank and investment accounts—are worth more than certain thresholds (often starting around US$200,000 for single filers living abroad, or US$400,000 if filing jointly).
- You could also need Form 8621 if you have investments in foreign mutual funds or other Passive Foreign Investment Companies (PFICs).
These rules aim to ensure that US taxpayers disclose their worldwide financial accounts. If you haven’t filed these forms but should have, you can often fix the problem through the Streamlined Procedure if you can show that not filing was unintentional.
How can the Foreign Earned Income Exclusion (FEIE) reduce your US taxes?
Many expats worry about getting taxed both by Singapore and the US. One way to lower your US tax bill is by using the Foreign Earned Income Exclusion (FEIE). Here’s how it works:
- Qualify for the FEIE
- Physical Presence Test: You are outside the US for 330 days out of any 12-month period.
- Bona Fide Residence Test: You live in a foreign country (like Singapore) for at least one full tax year and show that you truly reside there.
- Claiming the Exclusion
- File Form 2555 with your US tax return (Form 1040).
- If you qualify, you can exclude a certain amount of your foreign-sourced earnings from being taxed in the US.
- Foreign Housing Exclusion
- You can also claim a Foreign Housing Exclusion if your housing costs exceed a base amount set by the IRS. This might include rent, utilities, and other necessary expenses.
- Remember Self-Employment Tax
- The FEIE doesn’t apply to Social Security and Medicare taxes, which self-employed people must pay to the IRS (filed via Schedule SE). Because Singapore doesn’t have a Totalization Agreement with the US, you usually owe these taxes unless you meet special rules.
By properly using the FEIE, you can often knock down or wipe out your US income tax on money you earn in Singapore—though you may still owe self-employment tax if you’re not otherwise exempt.
Can you use the Foreign Tax Credit (FTC) to lower your US taxes?
Yes. The Foreign Tax Credit (FTC) gives you a credit for the taxes you pay to a foreign government—like Singapore’s Inland Revenue Authority of Singapore (IRAS)—on the same income you report to the IRS.
Here’s a quick rundown:
- You claim the credit on Form 1116, which then reduces your US tax bill by the amount of Singapore taxes you paid on that income.
- You generally cannot take both the FEIE and the FTC on the same income, so decide which option (or combination) saves you more.
- No US-Singapore Income Tax Treaty: Singapore and the US do not have a typical treaty to prevent double taxation, but the FTC still works as a unilateral credit.
- Types of taxes that qualify: Usually, it’s taxes on income. Consumption taxes like Goods and Services Tax (GST) or property-related charges like Additional Buyer’s Stamp Duty (ABSD) don’t count for the FTC.
What are the tax implications of being Self-Employed in Singapore?
When you’re self-employed in Singapore, you generally have to file taxes in both Singapore and the US:
- Singapore Requirements
- You report your business income to IRAS (possibly on a Form B if you’re an individual sole proprietor).
- Depending on your visa, you might have an Employment Pass or EntrePass. If you later become a permanent resident, you’ll contribute to the Central Provident Fund (CPF)—but that’s separate from US Social Security.
- Singapore’s personal tax rates are progressive, meaning they start low and go higher if you earn more.
- US Requirements
- On your US tax return (Form 1040), you’ll file Schedule C to show your business income and expenses.
- You’ll also complete Schedule SE to calculate Social Security and Medicare taxes.
- If you qualify for the FEIE or Foreign Housing Exclusion, you can apply that to your income. You may also claim the Foreign Tax Credit for any Singapore income taxes you pay, to prevent double taxation.
Even though you pay into Singapore’s system (CPF or local taxes), that does not automatically cancel out your US obligations.
Self-employed in Singapore? Understand your US tax obligations and avoid unexpected penalties.
How does the Singapore tax system affect US expats?
Singapore uses a territorial tax system, meaning it primarily taxes income that’s earned in Singapore.
- Lower Tax Rates vs. the US
- Singapore’s top rate for personal income is around 22%. For many self-employed expats, this rate can be lower than what they’d pay in the US, depending on their total income.
- Central Provident Fund (CPF)
- This is Singapore’s mandatory savings and pension plan for citizens and permanent residents. Foreigners on work passes do not usually contribute unless they become permanent residents.
- Goods and Services Tax (GST)
- A value-added tax (VAT) currently at 8% on most goods and services. It doesn’t count as “income tax,” so you generally can’t claim it as a Foreign Tax Credit on your US return.
- Property and Stamp Duties
- Singapore charges property taxes and stamp duties (like ABSD) on real estate transactions. These are not typically creditable against US tax because they’re not income taxes.
- Business-Friendly Environment
- Singapore is known for making it relatively straightforward to start and run a business, but your US filing demands remain, so keep good records for both systems.
What are the tax deadlines and penalties for US expats?
US Tax Deadlines
- April 15 – Standard filing due date for Americans.
- June 15 – If you reside outside the US on April 15, you automatically get two extra months (until June 15) to submit your federal return (Form 1040). However, any tax owed starts accruing interest from April 15 if it isn’t paid by then.
- October 15 – You can request an additional extension (using Form 4868) to push your filing date to October 15, though interest on unpaid taxes keeps building.
Singapore Tax Deadlines
- Singapore’s Inland Revenue Authority of Singapore (IRAS) generally requires individuals to file by mid-April. If you receive a Notice of Assessment (NOA), you typically have about one month from the NOA date to settle your tax bill.
Penalties and Interest
- Failure-to-File Penalty (US): 5% of the unpaid tax per month, up to 25%.
- Failure-to-Pay Penalty (US): 0.5% of unpaid tax per month, up to 25%.
- Interest: The IRS charges daily interest on any unpaid balance starting April 15.
Estimated Taxes: If you expect to owe at least US$1,000 after applying credits or deductions, you’re supposed to make quarterly estimated payments (Form 1040-ES). Missing these can lead to extra fees.
Does a US-Singapore tax treaty or totalization agreement exist?
No Comprehensive Personal Tax Treaty
Some countries have treaties with the US detailing how income is taxed between the two. Singapore does not have such a broad personal income tax treaty with the US. That means you don’t have an automatic treaty-based protection against being taxed in both places. However, you can still use things like the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) to reduce or eliminate double taxation.
No Totalization Agreement
A totalization agreement usually coordinates Social Security systems so you don’t pay into two countries for the same benefits. The US and Singapore do not have this agreement, so contributions to Singapore’s Central Provident Fund (CPF) do not replace or reduce the US Social Security and Medicare taxes you owe if you’re self-employed.
What are the US tax filing requirements for self-employed expats in Singapore?
Form 1040
- Every year, as a US citizen or green card holder, you must file a tax return (Form 1040) covering all your income—no matter where it’s earned.
Schedule C (Profit or Loss from Business)
- If you’re self-employed, report your income and expenses on Schedule C. This helps determine your net profit (income minus business costs).
Schedule SE (Self-Employment Tax)
- You calculate US Social Security and Medicare taxes on your net profit here. Because there’s no totalization agreement with Singapore, you typically owe these taxes in the US even if you pay into CPF or other local schemes.
FBAR (FinCEN Form 114)
- If the total in your foreign bank accounts (checking, savings, investments, etc.) tops US$10,000 at any point, file an FBAR online by April 15 (though an automatic extension to October 15 is available). Missing the FBAR can trigger large fines, but the IRS offers reduced penalties if the failure was an honest mistake.
FATCA (Form 8938)
- Under FATCA, if your foreign assets surpass certain thresholds (often starting around US$200,000 if you live abroad), you include Form 8938 with your tax return. This covers bank accounts, investment accounts, and in some cases, shares in foreign companies.
Form 5471 (If You Own a Singapore Company)
- If you have at least 10% ownership in a Singapore-incorporated company, you may need to file Form 5471 to report the company’s finances to the IRS. The penalties for missing or incomplete Form 5471 can be significant.
Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC)
- If you qualify for the Physical Presence Test or Bona Fide Residence Test, you can exclude a certain amount of foreign-sourced income through the FEIE (filed with Form 2555).
- Alternatively, you can use the Foreign Tax Credit (Form 1116) to offset US taxes with what you’ve paid to Singapore’s IRAS. You generally can’t apply both the FEIE and FTC on the same chunk of earnings.
Streamlined Filing Compliance Procedures
- If you realize you haven’t filed US taxes for several years, you can often catch up by using the Streamlined Procedures, which reduce or eliminate penalties for non-willful failure to file. You typically file three years of tax returns and six years of FBARs.
If you’re self-employed in Singapore, you’re responsible for filing tax returns in both countries: Singapore for your local income and the US for your worldwide income.
There’s no personal tax treaty or totalization agreement between the two nations, but you can still avoid double taxation with tools like the FEIE or FTC.
Keep an eye on deadlines—both in the US and in Singapore—and remember that US taxes can be complex.
If you’re in doubt, consult a tax professional who understands the challenges of expat tax matters, so you can focus on growing your business in Singapore without worrying about surprise penalties from the IRS.
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.
