Table of contents:
Singapore businesses and investments
Opening a local business in Singapore as a U.S. citizen
Of course, before opening a local business in Singapore, you must have the right to live and work in Singapore. You will need to secure a proper visa (i.e., an EntrePass). You can contact Singapore's Ministry of Manpower for details regarding work permits. What's more, you must decide on your business structure, which determines the liability of your business debts and tax obligations.
Types of local business structures in Singapore and the U.S. filing requirement
Singapore has several business structures: sole proprietorship, limited liability partnership (LLP), limited partnership (LP), and company. You must contact the Accounting & Corporate Regulatory Authority (ACRA) to register your company.
A sole proprietorship is a business run by a single owner who possesses complete control and assumes personal responsibility for the company's liabilities. As a sole proprietor, you are self-employed. You must report your self-employment to the IRS via form Schedule C (included in our PREMIUM package).
Partnerships, LLPs, and LPs
There are three types of partnerships: partnership, limited liability partnership (LLP), and limited partnership. Each partnership type must be reported to the IRS via Form 8865. Partnerships can have up to 20 members. Each member of the partnership is personally liable for the partnership's debts and the other partners' debts.
Limited partnerships (LP) do not limit the number of partners, and there are two types of partners: general and limited. Unlike general partners, limited partners are not personally liable for business debts, are not required to take part in the business, and must be registered with the Accounting and Corporate Regulatory Authority (ACRA). Unlike the partnership and LP business structure, all partners in the limited liability partnership (LLP) have limited liability regarding business debts.
The Company (Corporation) business structure has two forms: private and public. A private company may have up to 50 owners. However, a public company has an unlimited number of owners. The company must have at least one shareholder and director. The company will need to be reported to the IRS via Form 5471.
Singapore savings bonds
Singapore Savings Bonds (SSB) are virtually risk-free, as the Singapore government backs the bonds, and there are no penalties for early withdrawals (with one month's notice). Of course, such low risk is ideal for expats and investors. You can report the interest income from your SSB in the Passive Income section of the Tax Questionnaire.
Social Security and pensions
The Central Provident Fund (CPF) is an account-based social security system that enables working Singapore Citizens and Permanent Residents to set aside funds for retirement. Expatriates are not mandated to pay into the CPF unless they gain permanent residency in Singapore. Both employers and employees make contributions to the CPF.
The employer and employee contributions are allocated to various accounts, including an Ordinary Account (O.A.), Special Account (S.A.), Medisave Account (M.A.), and Retirement Account (R.A.). The OA can be used for property acquisition, insurance, investments, and education. The S.A. is the CPF account for pensions, as its primary purpose is retirement savings (old age and investment-related financial products) for individuals under the age of 55. Once the participant reaches the age of 55, the S.A. becomes an R.A. M.A. is basic medical insurance.
In addition to the CPF, Singapore also has the Supplementary Retirement Scheme (SRS). This voluntary scheme is utilized to save for retirement above and beyond the CPF. Although salaried income earners use the SRS, self-employed expats can also utilize the SRS to build their pension funds. The SRS contributions may be used to purchase various investment instruments, including unit trusts, ETFs, shares, and bonds, and to exercise company stock options.
Singapore income reporting
Singapore Form IR8A (provided by your employer) indicates your income and the amount of taxes paid for the year.
Gross salary or wages
To report the total amount of the annual gross salary in the Tax Questionnaire:
Click the Configure Life & Income button on the left side.
Click Yes next to I receive payments from an employer.
Click Next Step and Submit.
On Income > Wages click Yes to the question Did you receive payments during the tax year from a non-U.S. Employer?
Enter the gross salary amount to the question Gross wages/salary earned with this employer during the tax year? Use the income calculator to convert to a calendar year.
Bonus payments received during the tax year should be reported in the Tax Questionnaire under the same question Gross wages/salary earned with this employer during the tax year? as a component of gross wages. For further details, please click More info next to this question in your Tax Questionnaire.
Your director's fee should be reported as self-employment income only if you are self-employed. To report it, navigate to Income > Self-employment tab and enter the amount under the question Gross Income from the Self-employment.
If you are an appointed director in the corporation, this income is added to wages.
If you own 10% or more shares in the corporation, this income is still reported as wages. You also must file Form 5471. Ownership in the foreign corporation should be reported in the TQ on Income > Corporation & Trust > Entity List. To display this tab, click the Configure Life & Income button at the left, and select Yes next to the statements: I have a corporation or trust and I have ownership in a non-US corporation or partnership.
If your employer provided the allowance on top of direct salary (car, education, home leave, etc.), report it in the TQ under Income > Wages, click Yes under the question Did your employer provide an allowance on top of direct salary (car, education, home leave, etc.)?
Contributions made by the employer to any pension
Contributions made to a foreign employer pension plan are considered by the IRS as a part of the annual compensation unless there is a country-specific Treaty Exemption (for example, U.K., Belgium, and the Netherlands).
In the Tax Questionnaire, navigate to Income > Wages > Did you receive payments during the tax year from a non-U.S. Employer? > Were contributions made to a non-U.S. pension plan (whether yourself or by your employer)? > Did your employer contribute to your pension plan?
Contributions to the Central Provident Fund (CPF)
The Central Provident Fund (CPF) is the statutory authority that administers Singapore's public pension system. Voluntary retirement savings complement the Central Provident Fund, with no Social Security system in Singapore. Expatriates are not mandated to pay into the CPF unless they gain permanent residency in Singapore. Mandatory CPF contributions are tax-exempt for both the employer and employee in Singapore. The same applies to pre-retirement and retirement withdrawals from the accounts.
Contributions to CPF go to three accounts:
Ordinary Account (O.A.)
In the U.S., employer contributions to an Ordinary Account (O.A.) must be added to annual taxable income.
Special Account (S.A.) dedicated to old age
Contributions to Special Accounts are not included in the U.S. taxable income as they substitute for Social Security contributions.
Medisave Account collecting funds for health coverage
Contributions to Medisave Accounts are not included in the U.S. taxable income as they substitute for Social Security contributions.
Contributions to the Social Security fund should be reported in the Tax Questionnaire under Taxes And Deductions > Taxes Paid. Click Yes to the question Did you pay any tax to any non-U.S. country on any of your income this year?
Income tax borne by the employer
To report the income taxes you paid during the calendar year, navigate to Taxes And Deductions > Taxes Paid, and click Yes to the question Did you pay any tax to any non-U.S. country on any of your income this year?
Employee stock option
If you participate in a company Employee Ownership Plan and are issued matching shares for your contribution, these shares are considered stock-based compensation. They are reported separately from your regular income.
To report your employee stock ownership, navigate to Income > Wages and click Yes under the question Did you receive stock-based compensation from your employer? (If you do not see the Wages tab, refer to these instructions).
Singapore financial accounts reporting
Individual bank accounts include savings accounts, checking accounts, and time deposits.
Brokerage accounts, commodity futures, or options accounts.
Insurance policies and annuity contracts with a cash value (i.e., such as a whole life insurance policy).
Business accounts where a U.S. person has a greater than 50 percent interest in the entity.
Real Estate Holding.
Precious metals held directly.
Financial Account held at a U.S. branch of a foreign financial institution.