6 Things You Should Know as a U.S. Expat Living in Singapore

Moving to Singapore as an American Abroad

Singapore remains a highly coveted destination for U.S. expats, brimming with opportunities and fun things to do (see our postscript for a short list of suggestions). Nonetheless, Americans considering a move to Singapura, the Lion City, should take the following six items into account:

1. As a U.S. citizen, you’ll still be taxed according to U.S. law.

Despite the favorable tax rates in Singapore, U.S. citizens are subject to citizenship-based taxation. U.S. green card holders are also liable to U.S. taxation on their worldwide income. In other words, regardless of their country of residence, American expats must file U.S. taxes annually to remain compliant with U.S. tax authorities even if they earn below the Foreign Earning Income Exclusion (FEIE).

Following the introduction of the 2010 law known as the Foreign Account Tax Compliance Act (FATCA), the U.S. strengthened its ability to enforce U.S. tax laws upon Americans anywhere in the world. The only way to avoid U.S. tax reporting is for an American to undergo a very lengthy and potentially costly expatriation process.

Avoiding Costly Investments and Products for American Taxpayers

As one of the world’s premier financial centers, Singapore is awash with investment opportunities. Every major asset manager and brokerage firm is likely to have an office in Singapore with the hopes of promoting its financial products to the rest of Asia. Despite this accessibility, Americans need to be wary of the products being promoted to them, as most are not suitable for U.S. taxpayers.

By far the most punitive U.S. regulation targeting foreign investments is the U.S. Passive Foreign Investment Companies (PFICs) regime. This treatment applies to investments in non-U.S. mutual funds, investment-linked insurance products, exchange-traded funds (ETFs), etc. Owning such investments can rapidly become extremely costly and add complexity to estate planning strategies. See the article Why Americans Should Avoid Owning Shares in a Non-U.S. Mutual Fund for more details.

2. Singapore does not tax investments; the U.S. does.

Residents in Singapore get to enjoy relatively low marginal income tax rates (24% marginal rate for incomes over SGD1 million in 2023) that only apply to their locally earned income. In addition, there are no taxes on investments.

While there are several indirect taxes to consider (such as import duties and electronic road pricing), many Americans living in Singapore focus on U.S. tax optimization strategies because of the relatively simple local tax system. These strategies include avoiding PFICs, setting up U.S. brokerage accounts, setting up cost- and time-efficient mechanisms to transfer Singapore dollars to U.S. dollars, and investing their savings in the optimal account type.

And while the absence of bilateral tax treaties between the U.S. and Singapore often leads to complex and unequal treatment of certain accounts, Singapore will allow tax-free withdrawals from U.S. retirement accounts as foreign pensions are not taxed in Singapore.

Leveraging foreign tax credits and income exemptions

In light of these circumstances, it may be beneficial for high income earners facing a U.S. tax liability to employ a contribution strategy using qualified accounts while leveraging the advantages of the Foreign Earned Income Exclusion, the Foreign Housing Exclusion and foreign tax credits.

For instance, many Americans wrongly assume that not having lived in the United States for years renders them ineligible to contribute to U.S. retirement accounts even though their U.S. taxable income proves their eligibility. It remains important to note that U.S.-taxable persons self-employed or employed by local companies need to proactively pay their U.S. estimated taxes every quarter to avoid late fees and penalties.

3. Social Security may be more complicated.

Americans employed in Singapore by a local employer are not required to have U.S. FICA taxes (i.e., Social Security and Medicare taxes) deducted from their paychecks, which means these additional funds can be invested however they choose.

However, the same system outlines that if one does not have the requisite 40 credits to receive U.S. Social Security and Medicare benefits in retirement, then income earned in Singapore, while subjected to U.S. income taxes, will not add qualifying credits for U.S. Social Security and Medicare purposes.

Permanent residency and social security

Furthermore, should an American become a Singapore Permanent Resident (SPR) and make mandatory contributions to the Singapore Central Provident Fund (CPF), these contributions will not add U.S. Social Security credits, as there is no Social Security agreement between the U.S. and Singapore (not to mention that the Singapore Central Provident Fund (CPF) is not recognized by the U.S. Internal Revenue Service (IRS) – more on that below).

The only way a locally employed American in Singapore (i.e., not someone on temporary job assignment in Singapore while remaining on U.S. payroll) could contribute to U.S. Social Security would be through self-employment. Yet, in such a case, the American would be required to pay both the employee and employer’s contributions to FICA taxes, amounting to 15.3% of earnings.

4. Minimizing estate taxes may be complex, depending on your domicile.

Singapore does not impose taxes on the transfers of wealth (notwithstanding real estate stamp duties). As such, a U.S. citizen residing in Singapore need only concern themselves with U.S. estate taxes.

On the other hand, a non-U.S. domicile (which may include a U.S. green card holder resident in Singapore) will only be afforded a $60,000 lifetime exemption from U.S. estate tax on their assets located in the U.S., such as U.S. funds and stocks. This amount falls short of the multimillion-dollar exemption granted to all U.S. citizens, no matter where they reside.

Fortunately, there are solutions for non-U.S. tax residents living in Singapore that allow them to maintain U.S. exposure in their portfolio while avoiding U.S. income and estate taxes. For more information see our Guide to International Estate Planning For Cross Border Families and the article Planning For Mixed-Nationality Couples.

5. Living in Singapore may not exempt you from U.S. state taxes

With thousands of U.S. citizens relocating for work, the temporary nature of their stay can give rise to unforeseen U.S. tax liabilities. As noted above, U.S. citizens and green card holders are liable for U.S. Federal income taxes no matter their location. This situation could precipitate unpleasant surprises relating to U.S. state taxes.

State taxes and residency

State residency rules vary from state to state. Breaking state residency can be hard to do, especially in the case of temporary assignments to Singapore.

Depending on their last state of residency in the U.S., a resident of Singapore may be unknowingly liable to state taxes in the U.S. even while living and working in Singapore. For example, the State of California Franchise Tax Board details a tax regime applicable to residents on their worldwide income. Should one move directly from California to Singapore without clearly breaking California residency, they may find the California Franchise Tax Board demanding tax payments related to Singapore-generated employment income.

6. The U.S. taxes earnings in the Central Provident Fund.

Some Americans decide to become Singapore Permanent Residents (SPRs) for various immigration benefits afforded to them in the city-state. By law, all working SPRs in Singapore must contribute to the Singapore Central Provident Fund (CPF), as must their Singapore employers. Designed to fund retirement, healthcare, and housing needs in Singapore, the CPF is a compulsory savings and pension plan for workers.

Central Provident Fund Scheme fully taxable by the U.S. Internal Revenue Service (IRS)

Key pillars of Singapore’s social security system, the CPF and the Supplementary Retirement Scheme (SRS), are not protected by treaty with the United States and are subsequently not recognized as pension schemes by the U.S. IRS. Therefore, both employer and employee contributions to the CPF, while tax-free in Singapore, are taxable in the U.S.

In addition, earnings within the CPF are taxable in the U.S., despite being tax-free in Singapore. Most importantly, all investment funds available through this retirement plan are taxed by the U.S. IRS as PFICs. For one to withdraw all their assets from their Singapore CPF, their Permanent Residency status would have to be renounced