Pre-immigration Planning for Singaporeans Moving to the USA
Singaporeans are known for being world travelers. Many Singaporeans visit the U.S. Some even decide to temporarily / permanently move to the U.S. Well known Singaporeans in the states include names like Tila Tequila, Sharon Tay, and Neeraj Khemlani. Careers in the media aside, one would imagine that Singaporeans decide to temporarily / permanently move to the U.S. for varying reasons including –
1. To work – particularly those transferred by an MNC employer;
2. To study in the U.S. at either undergraduate or post graduate level – some decide to remain in the U.S. after graduation to get work experience in the much larger American market; and
3. To retire - especially for those with family who live in the U.S.
Immigration under any circumstance can be a stressful and confusing time. Migration to the U.S. can be particularly challenging because of the far reaching financial and tax implications. To make matters more confusing, the type of visa may also have tax consequences. Nevertheless, there are three (3) key considerations for most of those facing an impending long term stint in the United States.
Firstly, there is the issue of U.S. credit. New immigrants learn quickly that you can not easily rent an apartment, buy a car or get a credit card without U.S. credit history. Without any history, new immigrants are starting from scratch. There are many ways of establishing credit after arrival in the U.S. but it is best to take steps before moving. Think about opening an account with either an American financial institution or a financial institution with a U.S. presence. If you are joining family members, work with them to use their address as you seek to establish yourself. Alternatively, there are institutions that specialize in dealing with foreign nationals on US soil. Citibank, Bank of China and HSBC are particularly helpful.
Secondly, tax is much more complicated than in Singapore. Estate planning in particular should start long before moving to the U.S. When you pass away, be aware that your Singaporean assets may be subject to U.S. estate taxes before they are made available to your family. Also keep in mind that estate tax is not just levied at the federal level but possibly at the state level as well. Rules vary state by state. Even gifts exchanged between an American and a non-American spouse may have tax reporting implications.
Thirdly, there are extensive tax considerations. As a U.S. person, you will be taxed on your worldwide income. That would include for example, the rental income from your Singapore condo or the interest on your CPF account. In terms of your property, if your condo is sold, it could be subject to U.S. capital gains tax. Which is very different from Singapore where this is no capital gains tax. For those with HDBs – HDB rules may prevent ownership of property in other countries or having tenants before a certain period of ownership. Furthermore, certain non US mutual funds, life insurance policies or pension plans that you may have, risk being classified as a passive foreign investment company or a PFIC. This means that they risk being taxed in a particularly punitive way.
Most advisors would suggest a strategy that focuses on accelerating the realization of non U.S. source income prior to immigration while deferring losses and deductible expenses until after immigration. Accelerating income typically involves collecting outstanding amounts that may be due—such as accounts receivables, stock options, accumulated earnings from foreign entities, taxable deferred compensation plans and notes held from installment sales. Special focus should be paid to assets with substantial built-in gain. Would-be immigrants may consider liquidating assets at their present fair market value and the proceeds transferred to the individual before immigration.
This is just a cursory introduction to the many factors to consider. For those with businesses in Singapore, even more attention is required. In short, the key to effective pre-immigration planning is getting the right advice in good time which means – long before receiving any sort of U.S. immigrant or work visa.