U.S. expats living in Singapore have various strategies available to them for minimizing their tax liabilities, the key being planning ahead and taking advantage of government offerings.

Singapore's one-tier corporate tax system enables post-tax profits to be distributed as tax-free dividends to shareholders - providing significant tax savings opportunities for US expats living there.

This is the summary of the recent conversation we had with the expert in USA taxation in Singapore, Derren Joseph from US tax service for Americans in Singapore HTJ.tax . 

1. Know Your Rights

Compliance with both countries' complex tax codes is vitally important, whether on a work visa or as an immigrant citizen of Singapore. Failure to do so often results in penalties which could have been avoided with professional advice on financial planning for your future. Therefore it's highly advisable that when considering financial plans it be undertaken with assistance of qualified financial specialists.

Singapore boasts some of the most advantageous tax rates worldwide for residents. On average, residents pay only 17.5% of their income in taxes! Furthermore, no capital gains or inheritance taxes exist within its borders making Singapore an excellent place for Americans seeking to reduce their international tax liability.

However, American expats must still consider U.S. taxes when living abroad. Social Security taxes can be substantial, while all income - including foreign earnings - must be subject to federal income tax unless exempted under Foreign Earned Income Exclusion or similar programs.

US citizens and green card holders in Singapore must also contribute to the Central Provident Fund (CPF), Singapore's equivalent of social security. Employers and employees both contribute a portion of each paycheck towards this fund; however, CPF contributions do not count as pension assets and may therefore be subject to U.S. taxes when repatriated back home.

There are various strategies you can employ to lessen the impact of these additional expenses, including avoiding PFICs, setting up the right type of U.S. brokerage account and taking advantage of tax deductions for foreign investment expenses.

2. Take Advantage of the Foreign Earned Income Exclusion (FEIE)

Singapore is an attractive locale for US expats looking for an international experience with vibrant cultures, dynamic business scenes and high quality of life - so much so that over 1.3 million people call Singapore home (including over 30,000 Americans! ). However, when living there as an American it can be challenging to understand your tax obligations.

Singapore utilizes a territorial tax system, meaning you're only subject to taxes relating to income earned in Singapore - unlike in the US where all worldwide income is subject to taxation.

However, living abroad in Singapore offers you multiple strategies to lower your US tax liability, such as the Foreign Earned Income Exclusion (FEIE). Under FEIE you can exclude up to $107,600 of earned income from US tax - this can make a considerable dent in your overall tax burden.

To qualify for the FEIE, one must fulfill either the physical presence test or bona fide residence test. For the former, you must physically present in another country for at least 330 out of 12 consecutive months; to fulfill bona fide residence test requires you to prove that where you currently reside is your primary home country.

Your US tax bill may also be reduced by taking advantage of the foreign tax credit, which enables you to deduct the amount of taxes paid to foreign governments from your US bill. This option may prove particularly helpful for US expats living in Singapore as there is no double tax treaty between their respective governments and that may lead to double taxation of income earned within either.

3. Take Advantage of the Foreign Housing Exclusion (FHE)

Singapore provides many advantages for expats - from its global culture and vibrant business scene, to its cleanliness and low crime rate. However, Americans moving there must understand how their US taxes may be affected before making their move.

Tax rates for individuals in Singapore may be relatively low compared to many other countries; however, expats should still follow proper tax planning strategies in order to maximize deductions and minimize their overall tax liabilities. As previously noted, income earned in Singapore may still be subject to US expat taxes due to its non-Tax Treaty status.

US tax law offers several exclusions and credits - such as the Foreign Earned Income Exclusion and Foreign Hedged Exclusion -- designed to offset an individual's worldwide tax liability. These provisions allow individuals to exclude certain amounts earned and taxes paid in foreign countries from their taxable income in order to balance out their worldwide tax burden.

Additionally, the US permits its citizens to deduct housing expenses on their tax returns. The exact deductible amount will depend on where an individual lives and has incurred these costs; for example if living in Dubai they can claim up to $57,000 annually as housing expenses.

Finally, expats should take full advantage of all available investment and savings accounts in their host country, such as tax-free retirement savings accounts in the U.S. such as Roth IRAs and 401(ks). It would also be wise to hire reliable U.S. tax services in Singapore who can assist in creating a quality U.S. tax return and ensure all taxable income is reported correctly.

4. Take Advantage of the Foreign Tax Credit (FTC)

Singapore provides US expats living there with an easy, territorial tax system that taxes only income earned within its borders, making Singapore an attractive location with lower marginal income tax rates and no investment taxes; furthermore, Singapore supports research and development, new technology development and entrepreneurial efforts.

Due to the absence of a bilateral tax treaty with the US, Singapore presents some issues which must be carefully considered. While Singapore doesn't impose direct taxes, American expats should be wary of indirect ones imposed on certain goods and services (for instance 7% sales tax imposed on most purchases except real estate and precious metal imports) along with excise duties on tobacco, alcohol beverages, and petroleum products that need to be taken into account when planning.

The Foreign Tax Credit (FTC) can be an invaluable asset to expats living abroad. The FTC allows them to claim a dollar-for-dollar reduction on their US tax liability from taxes they've paid abroad, particularly those living in countries with high tax rates where more taxes were levied than would have been owed based on equal income in the United States. Expats may switch from deduction to credit on a year-by-year basis; any unused credits can even be carried forward for up to 10 years!

Understanding US expat tax laws can be complex and time consuming to navigate without professional help, so it's wise to consult a tax professional prior to making decisions that could have repercussions for both federal and state taxes. At Tax Solutions International (TSI), we specialize in preparing US expat tax returns for American residents living abroad who hold Green Cards; our experts can assist in selecting strategies which minimize or eliminate U.S. tax liabilities - for instance by making sure you receive maximum advantage from Exclusions such as Earned Income Exclusion or Foreign Housing Exclusion while simultaneously maximising FTC eligibility.

5. Take Advantage of the Foreign Tax Credit Exemption

Singapore differs significantly from the US in that investment income isn't taxed, which makes investing here attractive to Americans as they won't need to worry about double taxation or PFIC regulations that could quickly add up in costs. Still, Americans should exercise caution when investing abroad as certain US rules may still apply.

Singapore operates under a territorial tax system, so residents are only subject to taxes on locally earned income, yet self-employed Americans who continue paying US social security and Medicare taxes via Schedule SE of their US expat returns should continue making these payments regardless of where they live or work. Furthermore, those moving directly from California without breaking residency could unwittingly find themselves subject to California Franchise Tax Board taxes on all their worldwide earnings as part of its resident regime.

Both the United States and Singapore provide tax credits that mitigate most dual taxation for citizens living abroad. For American expats relocating to Singapore, tax exemptions such as the FTC can help eliminate most double taxation by using foreign taxes paid (that would otherwise be subject to both local and US taxes) to offset their US tax liability, with any unused credit carrying over into future years. FEIE and FTC benefits can especially assist US expats since no current treaty between them would otherwise eliminate double taxation on this income - this makes planning ahead essential when taking advantage of these exemptions rather than trying to navigate complex rules by themselves!