If I Move to Singapore, Am I Obligated to Pay U.S. Taxes?

If I Move to Singapore, Am I Obligated to Pay U.S. Taxes?

U.S. Tax Obligations after Relocating to Singapore

There are many reasons why a U.S. Taxpayer may relocate to Singapore. Sometimes, it is because the U.S. taxpayer is originally from Singapore and is simply returning home. Other times, the Taxpayer may have an employment opportunity that brings them across the globe — or possibly a romantic interest. Nevertheless, a common question we receive is whether the taxpayer is still obligated to pay U.S. taxes after relocating to Singapore. Whether or not they have to pay U.S. tax is determined by their US tax status, along with whether they have any U.S.-sourced income. Let’s look at a few common examples to consider.

U.S. Visa (Substantial Presence)

Michelle was previously living in the United States on an H-1B U.S. visa. Late last year, she returned to Singapore, and in the current year, she resides in Singapore as a Singaporean citizen for the entire year. In this type of situation, Michelle did not reside in the United States for at least 31 days in the current year so she would not have met Substantial Presence in the current year — and thus is not required to pay US tax on her worldwide income. Rather, if Michelle still maintains some income in the United States and depending on the category of income and the applicable sourcing rules, Michelle may still be required to pay US tax on her U.S.-sourced income and potentially have to file a 1040-NR.

Permanent Residency and Treaty Election

When it comes to permanent residency, there are various factors to consider:

Example 1

In our first example, Jennifer is a Singaporean citizen and a Lawful Permanent Resident of the United States. Recently, she relocated back to Singapore and wants to maintain her U.S. person status, so she did not give up her permanent residence. Forgetting for a moment the immigration implications have not living in the United States sufficient to maintain the green card (she did not obtain or reentry permit), Jennifer is still considered a U.S. person for tax purposes and would have to pay tax on her worldwide income even if all of her income is sourced in Singapore and she pays tax in Singapore. Jennifer may qualify for the foreign earned income exclusion or foreign tax credits.  

Example 2

Dana is also a Singaporean citizen and Lawful Permanent Resident of the United States who relocated back to Singapore. Dana is also maintaining her green card but does not want to have to pay tax on her worldwide income. Therefore, Dana wants to file a Form 8833 Treaty Election to be treated as a foreign person for tax purposes along with Form 1040NR. But, since there is no tax treaty between Singapore and the United States, Dana does not have this option, which may have otherwise been available to her had she relocated to a treaty country.

U.S. Citizens/Singapore

Peter is a U.S. citizen who recently relocated overseas to Singapore for an employment opportunity. Peter obtained permanent residency in Singapore and earns all his income from Singapore. Unfortunately, since Peter is a U.S. citizen there are not many opportunities for Peter to avoid having to pay tax on his worldwide income. The treaty election typically will not apply to a U.S. citizen to be treated as a foreign person for tax purposes period since Peter pays a significant amount of tax in Singapore, he will have foreign tax credits to offset his US tax liability. In addition, Peter will qualify for the Foreign Earned Income Exclusion.   In addition, if Peter decides he no longer wants to be subject to U.S. tax on his worldwide income, then he can consider obtaining second citizenship either through Singapore or by acquiring a Citizenship-by-Investment/Golden Visa, then if Peter wants to he can formally expatriate from the United States and renounce his U.S. citizenship. Since this is a big step for a U.S. citizen who was born a U.S. citizen to take, Peter should be cautious before taking affirmative steps to expatriate.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.  Contact our firm today for assistance.