Expat Tax in Singapore

Tax Compliance for Expats in Singapore

Singapore is one of the world’s leading financial hubs, thus it is no surprise that American expatriates and many other westerners flock to the nation for business opportunities. Aside from being the world’s fourth largest financial hub, Singapore is also home to one of the busiest container-ship ports in the world. Furthermore, Singapore ranks highly in manufacturing with the manufacturing sector accounting for roughly 30 percent of the country’s GDP. In short, there is more than ample opportunity available in Singapore to make it one of the leading destinations for expats.

In fact, Singapore is one of the most highly globalized nations in the world. With a total population of about 5.5 million people, just under half of the population – 2.1 million – are foreign nationals. In light of the highly immigrant character of the nation, there are four official languages with English being the country’s most commonly spoken language. All this means that Singapore is not only an attractive destination for an American expat, but also one that is accommodating to many cultures. However, despite these unique characteristics, it can still be difficult for expatriates to keep abreast of new tax developments so that they may maintain tax compliance. An experienced tax professional can assist you in maintaining compliance with all tax obligations including FBAR and FATCA.

Expat Tax in Singapore

American Expatriates Must Disclose Foreign Accounts if Their Accounts Exceed Certain Balances

“Secret” wasn’t always a dirty word when it comes to offshore accounts held by Americans. In fact, for at least a generation secret offshore accounts were at least tolerated by government officials. However, like all things, times change and what was once acceptable, or at least rarely prosecuted, for American taxpayers has become a tax enforcement priority for the Department of Justice and IRS. Today holding foreign financial accounts or foreign assets and failing to make a required disclosure can result in extremely serious civil or even criminal tax consequences.

The first step to this new banking regime that emphasizes disclosure of foreign accounts was taken when the Bank Secrecy Act’s FBAR filing obligation was strengthened. The strengthened law not only imposed harsher penalties on willful violators, but also it made inadvertent filing errors punishable by law. Under the provisions of the BSA a taxpayer must disclose a foreign account or foreign accounts when the balance or aggregate balance of those offshore accounts exceeds $10,000. If the disclosure is not made by June 30, the taxpayer can face serious consequences. If it is believed that the failure to disclose was voluntary or the product of intentional conduct, then the act can be punished by the greater penalty: a $100,000 fine or 50 percent of the original account balance.

The next step in ushering in a system of coerced disclosure of foreign assets was the passage of the Foreign Account and Tax Compliance Act . Critic of the law have called it America’s global banking law because it imposes obligations on both American taxpayers and foreign financial institutions, alike. Under FATCA, U.S. taxpayers must disclose the existence of foreign assets or face harsh penalties. American taxpayers are “encouraged” to turn over this information because the U.S. government has established international information sharing agreements with more than 110 nations. Financial institutions in jurisdictions where an agreement is in place can face a withholding penalty of up to 30 percent. The United States uses the information provided by foreign financial institutions to identify and pursue taxpayers who have failed to make required disclosures.

OVDP May Offer an Opportunity to Mitigate the Tax Consequences you Face

While the United States government will not hesitate to pursue noncompliant taxpayers, the government does recognize the huge shift this new focus on foreign account disclosure represents. In light of this consideration, the IRS has created several versions of the Offshore Voluntary Compliance Program  (OVDP). The programs are intended to encourage taxpayers to come forward voluntarily and reveal past noncompliance. In exchange for the tax payer being forthcoming, penalties and tax consequences will be mitigated. Furthermore, prosecutors will typically refrain from brining criminal charges.

If you wish to take advantage of the benefits offered by the program, time is of the essence. If you come under investigation prior to revealing your noncompliance, you will not be eligible for the program and its reduced penalties. Additionally, the IRS is free to change the terms of its OVDP offerings at any time. Past changes have resulted in less favorable dispositions for taxpayers. As taxpayers continue to adjust to the new disclosure requirements, we can only expect changes to continue to make the programs less favorable.

If you are worried about an offshore tax issue, delay can prove to be extremely costly.. To schedule a reduced-rate consultation with the tax professionals of the Tax Law Office of David W. Klasing, call 800-681-1295 or contact our tax law firm online.