SG Tax on Co. Allowances?

[2nd Timer]

Hi all,

We will be relocating to Sg this summer and are in final stages of contract negotiations.
Question--- company is willing to pay SG tax on salary while we pay our US Tax. It has not been stipulated that they will also pay for the total tax ie. for the allowances for school, housing , car. Do we need to define that they will pay the total tax in singapore? Will the IRAS compute the tax based on salary or salary and allowances? I read on their website that it is calculated differently based on whether these allowances are paid directly by the employer or paid to the employee and employee  then makes payment.

If anyone could please clarify based on their (recent) experience, it would be much appreciated!

[Lester25]

Your tax will be based on income + allowances. Most allowances (eg school fees) would be taxed at the same rate as income. The exception is housing - if you are given a $$ amount each month by the employer to lease your own place then that is taxed as income. If the employer leases for you and pays rent direct then that is still taxable but a much lower rate. Car allowance or car provided is also taxed but that is a bit more complex as it depends whether you use it for business, etc

The company paying your income tax direct is interesting. To my mind that would count as either income or a taxable benefit on which further tax would therefore be due. Should they then pay that then that would be a further taxable benefit again incurring tax. That is why I am surprised at that benefit being offered because it could get very complicated.

[Beware....]

US taxes on expats just increased dramatically retroactive to Jan. 1. Housing exclusion is now limited to approx US 11,500 and tax rates after income exclusion start at 25% instead of 10%. Investment income now taxed at 25% instead of 15%. Most expats will see an increase of 16 - 40 K per year in their US tax bill. My advice - get your employer to pay your US tax and you pay the Sing tax. It will be much, much lower. Otherwise, get a salary increase to cover these new tax changes, which were part of the tax reform bill passed two weeks ago and signed by bush.

[2nd Timer]

Lestor25....thanks for the reply.

It is a bit confusing to us as well because I am a US citizen being employed by a European company to live and work in Singapore. The US will only require that I pay tax on any income over 80k per annum. Any allowances would not come into play where the US IRS is concerned. Since I will basically be providing information to the US at my sole discretion (European company will obviously not be reporting my income to them), I am only bound by a sort of honor system. Likewise, since I will not be employed by a US company, there is no tax equalization to speak of (whereby I would not pay dbl .tax)

This looks like it could get very complicated and tend to go round and round in circles. What would be my options as I have already agreed that it was probably best to be responsible for my US taxes while they took care of any taxes on the Singapore end. I am afraid that my new company may not have any experience with this as I will be the first US employee in the Singapore office. The rest are European.

[2nd Timer]

Beware....I have not heard any news of these new tax developments. Do you have a link that indicates this that I could forward to my employer?

Thanks.

[Beware....]

The story has run in the WSJ and IHT. Here's the WSJ link:
http://online.wsj.com/public/article/SB114808112290258454-QaFBQ5cbA7SW_QEzEL3xXHH4gbw_20060618.html?mod=tff_main_tff_top

[Lester25]

I think any arrangement where an employer agrees to pay your taxes can get very complicated, because such payments themselves would represent a taxable benefit to you on which further tax would then be due. I must admit I have never heard of that happening. I would say in general you are just better off seeking a satisfactory salary + allowances and being responsible for paying your own tax.

Income tax in Singapore is both low and simple, and pretty much the only structuring of income you can do to reduce income tax is to arrange for your employer to both lease and pay direct for your accommodation in Singapore.

[Who?]

That article is very interesting.  That's the first I've heard of this.

[Beware....]

Yes, interesting, but very painful to expats making over US80K per annum. And all thanks to the Republican party who seem to have become the tax and spend caricature that used to characterize Democrats. It's great for middle and upper class Americans - like most American expats - to support the top 2/10ths of 1 percent of Americans who benefit most from Bush's tax cuts. NOT!

[DimWit Kid]

My company did "pay" my tax when I first came here on expat package. It needs not be confusing. What happened was that what we negotiate is the take home pay, after tax. Let's just say it is 10,000. If effective tax rate is 10%, then the company payslip will reflect 11,111 but then the one landed on my bank account is only 10K.

I have a separate agreement with company that I appoint them as my tax custodian and they keep my 1,111 and they churn out statement of account  - no interest given on that.
End of the tax year, company accountant fill in my tax form, gave to me, I signed, and they submit and pay.

In fact, at that time (donkey years) EP still have to pay CPF and I have another agreement with the company that I return the CPF money when my expat stint is over - this has been done without problem as well.

The only problem I've got is that when I chose to stay and become PR, I had to pay the CPF money I "owe" to my company! And that's not an unsignificant amount, a few hundred thousand, which in the end I settled by interest free installment to the company!

[DimWit Kid]

Oh, about the double taxation issue - sorry I can't really answer how the tax treatment of this kind of package in the US - my country has tax treaty with Singapore so I'm completely free of tax in my home country. But in general I think the  tax in your home country will cover the whole thing, ie. your salary + all "benefit-in-kind" which includes the tax paid by the company!

IRAS definitely tax "benefit-in-kind" so for me last time, PUB allowance, kids education allowance, even my home flight entitlement are all taxable.

[Lester25]

Thanks Dimwit that seems understandable. Basically you have arranged a PAYE scheme whereby your gross salary is $11,111 and the company deducts your tax at source and pays you net and remits the tax to IRAS. Not a bad idea because it takes away the need to pay your annual tax bill in one lump sum, and finding the money to do this can sometimes be tricky, esp if you have spent it!. The downside of course is that the company is retaining (and earning interest on) your tax liability until it is due to IRAS, which could be well over a year after it is collected.

[DimWit Kid]

Yes Lester. And by the way, company paying direct the housing rental is not going to give you any leeway with IRAS.

That was how my company arranged it for me (they sign the lease, pay direct to landlord) but I saw in my Singapore tax statement that this is listed down there as "benefit-in-kind". Even in my company (until now) there's a kind of biggish allowance (few thousand bucks) given to employees every two years for "winter allowance" - this also is listed in tax statement.

If it's listed in Singapore tax statement, well, I figure IRS will not miss that, no?

[2nd Timer]

Dimwit Kid and Lester.....

Seems to me the best way is to simply hand over my tax bill to employer (who has agreed to pay) and let them cut me a check with which to pay.

Otherwise, it would tend to go round and round. I seriously doubt IRS is paying attention to Singapore tax returns of US expats or US expats in any country. Enough work just keeping track of citizens within its own borders.

As far as IRAS is concerned, how are they to know if my bill payment is supplied by me or my employer? Unless of course, this is double checked on the company's own tax statement.

I can't seem to find out any information on how best to handle this benefit. If it were a US company handling me (US citizen) then they would be equalizing my tax and that would be that. Since this is neither a SG or US company, this is a bit more tricky. End result, I personally should not have to pay tax in both countries out of pocket.

[Lester25]

Trouble is if your company pays your tax for you you are legally obliged to report this as a benefit to you in your tax return to IRAS, and more tax would therefore be payable on this by you.
I suggest you follow Dimwit's approach of agreeing a net amount of pay. The company can then gross this up by an extra 10 to 20% as your gross salary, deduct the tax amount before they pay it to you and pay you the agreed net amount.