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QUESTION:
Hi,
I am a US citizen and may take a job where I will be based
and working in Singapore. The HR group for this company
mentioned that I maybe double-taxed and said I should
confirm before making a decision on the job. Obviously I
will be income taxed in Singapore (since I am working
there) but do you know if I have to pay income taxes in
the US as well?
I am a home-owner in the US and will be keeping the
home while I am working in Singapore. I will be paying
property taxes so is this effected at all by me working in
Singapore?
I should be spending more than 90% of my time overseas
and will come back to the states for business trips and
possibly personal vacation time.
Please advise.
Thank you,
JXXXXXXX
++++++++++++++++++++++++++++++++++++++++++
david ingram replies:
A US citizen is taxable on any income earned anywhere inthe world from any source with very few exceptions which usually revolve around disability or welfare type payments.
Therefore, your Singapore Income must still be reported on a US 1040.
However, there are two factors which will eliminate or greatly reduce the tax bite.
1. If you are in Singapore for at least 330 out of 365 days, you can exempt up to $80,000 US$$ by filling in Form 2555.
2. If you are a bonafide resident of Singapore for a full calendar year you can also exempt up to $80,000 of earned income on form 2555. This is the preferential method and will require the filing of form 2350 to delay the time for filing so that you can qualify for the exemption retroactively.
3. If you are not going to be there for enough days, you can file form 1116 to claim a foreign tax credit on your US return for the tax you paid to Singapore. Depending upon your income level and marital status, this can still result in an alternative minimum tax payable to the US.
In fact, if your income was $120,000 US as an example, you would be filing a 2555 to exempt the first $80,000 AND an 1116 to claim the foreign tax credit for the tax paid on the $40,000 in excess.
You should likely buy an hour of my time for a phone consultation. It would be $250.00 US for up to an hour and well worth it for you if the company has not been able to explain this to you.
Keeping your home empty could be a problem if you are not gone enough. You state 90% of the time in Singapore. 90% of 365 days is just on the border line of 330 out of 365 days which is why the Bonefide residence is better.
Article IV of the US / Singapore Income Tax Treaty reads as follows:
Article IV
Fiscal Domicile
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of his residence, place of management or any other criterion of a similar nature. It also includes a partnership, an estate or a trust but only to the extent that the income derived by such person is subject to tax in a Contracting State as the income of a person resident in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, his status shall be determined in accordance with the following rules:
a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (hereinafter referred to as his "centre of vital interests");
b) if the Contracting State in which he has his centre of vital interests cannot be determined or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
c) if he has an habitual abode in both Contracting States or in neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person.
Answers to this and other similar questions can be obtained free on Air every Sunday morning.
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