Why You Should Move to Singapore... Part I
By Graham Summers
August 14, 2007
Greetings from Singapore... a place that feels like a weird hybrid of Miami, Pittsburgh, and New York.
Like Miami, the weather here is humid and tropical. Palm trees line the streets. And during the months of May through September, you're going to want to take an air-conditioned taxi if you're traveling more than four blocks.
Downtown Singapore is divided by the Singapore River, much as Pittsburgh's core is split by the Ohio, Allegheny, and Monongahela Rivers. Both cities share a dense area of skyscrapers right around their respective rivers' banks.
And finally, Singapore has the endless shops and financial industry of New York. From the 59th floor of my hotel room, nearly half of my view is filled with signs for HSBC, Maybank, OCBC Bank, and others.
However, something Singapore offers that U.S. cities don't are low personal income taxes. It's always struck me as sad that the U.S. went to war for its independence based on the measly tax rates the British imposed, only to now "unburden" its citizens a quarter to a half of their incomes.
Personal income tax for residents of Singapore ranges from 0% to 20% on a sliding scale as follows:
Annual Income Bracket |
Rate |
S$0- S$20,000 |
0% |
S$20,000 - S$30,000 |
3.5% |
S$30,000 - S$40,000 |
5.5% |
S$40,000 - S$80,000 |
8.5% |
S$80,000 - S$160,000 |
14% |
S$160,000 - S$320,000 |
17% |
S$320,000 and above |
20% |
|
The thing to remember here is that you pay these tax rates on each chunk of income earned in its respective bracket. But even then, you still pay much less than you would in the U.S. For example, let's say your annual income is S$300,000 (roughly $200,000 U.S. dollars). You will pay as follows:
Income |
Tax Rate |
Taxes Paid |
S$0- S$20,000 |
0% |
S$0 |
S$20,000-S$30,000 |
3.5% |
S$350 (10K X 3.5%) |
S$30,000-S$40,000 |
5.5% |
S$550 (10K X 5.5%) |
S$40,000-S$80,000 |
8.5% |
S$3,400 (40K X 8.5%) |
S$80,000-S$160,000 |
14% |
S$11,200 (80K X 14%) |
S$160,000-S$300,000 |
17% |
S$23,800 (140K X 17%) |
Total |
Avg: 13% |
S$39,300 |
|
So if you were a resident, you'd pay an average income tax of 13% while making nearly a quarter million dollars a year.
If you made this kind of money in the U.S., you'd pay $52,000 on personal income tax: more than four times what you'd pay in Singapore.
Remember, this is the income rate for residents in Singapore. To qualify as a resident, you first need to get a work pass – this costs between S$500 and S$1,000 depending on the type of work you're doing. Then you'd have to work or live in Singapore for six months or so. Once you've done this, you simply fill out residency forms, pay S$100, and boom; you're a Singaporean resident.
But why even go through this little hassle when non-residents are taxed a flat rate of 15% or the residential rates shown above, whichever is higher? So unless you're making more than S$320,000, you'll be paying 15% a year in income taxes: again an extremely low rate for this much income.
Singapore is so hungry for foreign talent and wealthy ex-pats that there are all kinds of loopholes to this system. For instance, if you invest more than US$1 million in a Singapore business, you immediately qualify for permanent residence.
An asset manager I met here claims you can also become a permanent resident if you show up with a letter from a Singapore bank indicating you have an account worth S$3.5 million. I have yet to verify this, but it wouldn't surprise me. These people understand incentives.
However, there's one snag to this tax haven... and naturally, it only pertains to U.S. citizens.
If you're a U.S. citizen living in Singapore, you'll be double taxed on everything over the first US$82,000. The U.S. does give you the first US$82,000 tax-free – though you're paying the tax in Singapore. But once you get above US$82,000, look out. Uncle Sam doesn't let you off that easy. The U.S. is the only developed country in the world that taxes its citizens working overseas.
Singapore has worked out tax relief programs so that citizens from almost any other country on the planet – the U.K., Switzerland, France, India, etc. – won't face double taxation.
If you're a high-income citizen from any country other than the U.S., consider spending half of your year in Singapore. The tax advantages are more than worth it. If you're a U.S. citizen, however, it's only worth considering if you make less than $82K a year.
If you think the personal income tax advantages are good, wait until you hear about the benefits of opening a corporation in Singapore. I'll detail all of this in my next essay. Until then...
Good trading,
Graham
