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Expat Investor : November 2008
QUOTE, UNQUOTE Relocating abroad – the financial implications In a four-part series, The Fry Group looks at the financial implications for UK residents who are relocating from the UK. This article focuses on Singapore. The financial system in Singapore Personal tax rates are generally lower than in other developed countries, and the country itself has a good reputation for having a well-regulated tax system. The organisation that manages the collection and enforcement of taxes and duties is the Inland Revenue Authority of Singapore (IRAS), and all British expatriates working in the country will be liable to pay income tax to the IRAS throughout the duration of their stay. Under Singapore tax laws, it states that if an individual is physically present or exercises employment for an aggregate of 183 or more days in the country in any tax year, they will be resident for that year. In addition, if the stay in Singapore covers three or more consecutive calendar years, it is generally the practice of IRAS to treat them as resident for each of the tax years, even though their stay in the years of arrival / departure may be less than 183 days each. In this case IRAS will require a letter of undertaking from the employer to cover the additional tax which will arise if they depart Singapore earlier than expected. Non-residents are taxed only on Singapore-sourced income. There is an exemption regarding the employment income of a non- resident individual (except for a director or public entertainer) who does not exercise employment in Singapore for more than 60 days during the year. Whether you are taxed at the resident or non-resident rate can significantly affect your taxes, and so it is worth exploring further to ensure you are paying the correct tax. Areas to consider Generally, tax issues can be complicated for UK expatriates, and so it is vital that you are aware of your taxation requirements when relocating to a new country or are returning to the UK. There are a number of areas that UK expatriates need to pay careful attention to ensure you are adhering to the taxation implications of both the Singapore and UK authorities. The financial world is always changing and current areas of concern include HMRC’s recent re- interpretation of residence rules. The Fry Group sends regular updates to clients and posts information online to keep individuals informed about the ever-changing labyrinth of legislation. In the meantime, we have developed a checklist to facilitate exit planning; however we do recommend that professional, personalised advice is sought to ensure all your personal circumstances are taken into consideration; Before leaving for UK – the Singapore checklist ? Ensure your employer completes a tax return IR21 to include all Singapore-generated remuneration, taxable benefits-in-kind and stock options granted while in Singapore employment one month before departure from Singapore. ? Your employer will need to retain monies owed from your income to settle tax from date of resignation / termination / transfer. ? Excess monies will be refunded to you and if there is any deficit, this will also be paid by you before you leave Singapore or at the time you leave your employment, whichever is earlier. ? Please note that if tax is not paid on time, late payment penalties of 5% may be imposed (subject to a maximum of 12%). UK checklist for returning British citizens ? Decide on the date of return before commencing tax planning. ? Close UK deposit accounts – it is tax efficient in the tax year before your return date. For offshore accounts, closure before arrival is sufficient to capitalise accrued interest. ? Realise world-wide capital gains tax before arrival without incurring a UK Capital Gains Tax liability, provided that you have been abroad for at least five complete tax years. ? Pension benefits – any overseas paid pensions may attract a beneficial 10% foreign pension allowance in certain circumstances if you are UK resident. ? Termination and ex-gratia payments – these are more contentious issues to try to have these paid before returning to the UK. ? Capital Gains Tax on property – either do nothing and suffer the charge, sell the property before you return to the UK or place the property into an Interest in Possession Trust in the tax year before your return to the UK. ? Tax Returns – you will be required to register with HW Revenue & Customs after returning and to complete ongoing annual tax returns thereafter. It is vital to ensure you have a strategy for the preparation and submission of your annual tax returns to avoid penalties. These checklists provide some brief, initial guidance on the main points an expatriate should be aware of if they are looking to return to the UK in the near future. It can, however, be no substitute for personalised advice. The Fry Group has teams of advisers located in Singapore, the UK and other regions who would be happy to advise on all aspects of taxation and financial planning. November 2008 ? EXPAT INVESTOR 15