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Old 26-06-2020, 01:26 PM   #2431
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Is my understanding of Family Account correct?
- Each family member opens an individual account. Say, 4 family members open 4 individual accounts. Each account has its own amount of $60k exemption of estate duty (ie $240k total for the 4 accounts for non-resident). One person is nominated to manage and do trading for their accounts.
OK, but as I understand it there's a monthly minimum activity fee per account. If all of the accounts have a total value of US$100,000 or more, then the monthly minimum activity fee should be zero.

- When the nominated person trades, does he open 4 separate TWS on his computer or is there a consolidated TWS for the accounts?
I have no idea, sorry.

- If a non US citizen (Singaporean) but living in US opens an account, is he treated any difference from another Singaporean living in Singapore – as far as the tax is concerned?
It depends on whether that person is a "U.S. person" in tax terms.
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Old 26-06-2020, 01:35 PM   #2432
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Hi BBC

What if I will remain single without any dependent, and no plan to leave over a bequest to anyone, I have a fully paid HDB bought with CPF OA years ago, my SA & MA is at FRS limit now.

Should I choose BRS+HDB or FRS or ERS when I 55?

Last edited by quincymmx; 26-06-2020 at 01:45 PM..
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Old 26-06-2020, 04:16 PM   #2433
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Quote:
- If a non US citizen (Singaporean) but living in US opens an account, is he treated any difference from another Singaporean living in Singapore – as far as the tax is concerned?

It depends on whether that person is a "U.S. person" in tax terms.
If my niece is a Singaporean, now studying in US, has SSN, is she considered U.S. person or non-resident/citizen for tax purpose?
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Old 26-06-2020, 04:58 PM   #2434
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What if I will remain single without any dependent, and no plan to leave over a bequest to anyone, I have a fully paid HDB bought with CPF OA years ago, my SA & MA is at FRS limit now.

Should I choose BRS+HDB or FRS or ERS when I 55?
CPF Retirement Accounts are presently excellent savings opportunities with attractive yields, so if consistent with reasonable global diversification and reasonable liquidity (if you can afford it, in other words) you’d jack up your Retirement Account as high as it’ll go and every year. Then you’d likely defer payouts to age 70 and choose the Escalating Plan. And then you’d presumably give surpluses to causes and charities you care about, spread happiness, and live happily ever after.

If my niece is a Singaporean, now studying in US, has SSN, is she considered U.S. person or non-resident/citizen for tax purpose?
She’s probably not a U.S. person from a tax point of view at this point in time, but it depends. (If she has a “choice,” she might want to be since that’ll make her eligible for the US$1,200 in free COVID-19 money from the IRS, and there’s some talk about another installment.) Maybe she falls in love and settles there, for example. It’s been known to happen and to work out well.

Or, at least before she leaves, there are some lovely zero fee U.S. accounts she probably ought to open. Possible examples: Alliant Credit Union (ordinary checking and/or savings account), TreasuryDirect, maybe a Schwab One account with their lovely debit/ATM card, American Express Bluebird, Capital One’s Journey credit card, Deserve Edu Mastercard, ....
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Old 28-06-2020, 12:21 PM   #2435
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Hi BBCWatcher


Been following your insightful comments. Thanks!

May I know any reason why transfer of $7000 each is recommended in June and then Jan? Pardon my ignorance, is there a difference between monthly transfers reaching the same for maximum tax reliefs or allocating the amount for transfer in end Dec to top up parents' RA account (eg. transferring $14,000 in Dec), just before the financial tax year assessment concludes for maximal benefits?

Cheers




If you’re going for maximum tax reliefs then it’s $7,000 this month (CPF e-Cashier PayNow QR on June 29 I suggest just to give the CPF Board a little buffer, although June 30 should work too), then $7,000 every January 30 (PayNow QR again, allowing one day of buffer again). If a sibling or two can do the same, even better. The tax relief maximum isn’t the contribution limit, though. You’re allowed to push in more, up to the Enhanced Retirement Sum. She’s a long way from the ERS. Just make sure you’re maintaining adequate liquidity after these top ups.


If she’s turning 65 next year then she was born in 1956. One thing to check is whether her RA is so low because she already joined CPF LIFE and had that premium deducted already. That’d be wonderful news if so, wouldn’t it? But if not then she has a choice of remaining with the classic Retirement Sum Scheme or choosing CPF LIFE. Either way she can also choose to start monthly payouts at 65 or at any time up to age 70. The longer she waits the higher her monthly payout will be. Unless she needs the income she ought to wait, and unless she’s in poor health CPF LIFE is probably the better choice to protect her. (RSS payouts may end before she does.)


Well, that’ll depend on whether and how much she has withdrawn previously. But she probably doesn’t want to be going down from her current low balances if she can avoid it.


If she qualifies that will be a good program. That doesn’t mean you should wait for it, though. This year’s tax relief is still presumably available.

Silly/“stupid“ question: has she received her deceased spouse’s CPF savings already, either via nomination or via the public trustee if there was no nomination?

I should also point out that you and/or other family members who have sufficiently well funded Special Accounts may be able to transfer Ordinary Account funds to her Retirement Account. There’s no tax relief for such transfers, but it could be a viable option.

Last edited by polar27; 28-06-2020 at 12:24 PM..
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Old 29-06-2020, 03:34 PM   #2436
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BBC,

Over the weekend I’ve been trying to figure out how I might be able to claim back (as a U.S. person) the 30% dividend withholding that would presumably apply to S27. I haven’t been able to find anything conclusive. The only other thought I had is to contact State Street directly, but not sure if they would bother with unique cases like this. Do you have any thoughts or insights?
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Old 29-06-2020, 04:01 PM   #2437
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May I know any reason why transfer of $7000 each is recommended in June and then Jan? Pardon my ignorance, is there a difference between monthly transfers reaching the same for maximum tax reliefs or allocating the amount for transfer in end Dec to top up parents' RA account (eg. transferring $14,000 in Dec), just before the financial tax year assessment concludes for maximal benefits?
June is this month (as I write this), so if you haven't made this top up for tax relief in 2020 (for Year of Assessment 2021), then now's the time (as I write this). Then you have more opportunities in the tax years that follow this one, and the earliest opportunity is in January.

Over the weekend I’ve been trying to figure out how I might be able to claim back (as a U.S. person) the 30% dividend withholding that would presumably apply to S27.
It wouldn't. You'd file IRS Form W-9 with the broker, and (assuming you're not subject to mandatory IRS withholding), you're not subject to withholding.

However, if the broker screws up or otherwise cannot handle this properly -- somewhat possible -- you'd report the 30% dividend tax withholding as tax already paid. And then it'd just percolate through your ordinary tax filing. That's not ideal, but you'd get the overage back eventually. The current highest marginal tax rate on qualified dividends is 23.8%, inclusive of the Net Investment Income Tax (NIIT). So you'd at least get 6.2 percentage points back. If you're overpaying you could also reduce your estimated tax payments if you have a good handle on that part.
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Old 29-06-2020, 06:08 PM   #2438
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It wouldn't. You'd file IRS Form W-9 with the broker, and (assuming you're not subject to mandatory IRS withholding), you're not subject to withholding.
I would be surprised if a local broker would collect either form W8-BEN or W-9 for transactions on the SGX. UOB Kay Hian states on their website that such forms are only collected for clients trading in US markets.

According to the S27 prospectus:

“withholding tax at the rate of 30% will generally be imposed on payments of dividends on Units to certain foreign entities (including financial intermediaries) unless the foreign entity provides the withholding agent with certifications and other information (which may include information relating to ownership by U.S. persons of interests in, or accounts with, the foreign entity).”

In this case, I believe any S27 shares held by the foreign entity (presumably the SGX share custodian) would be pooled and assessed a withholding tax in aggregate. Anything other than that would be a very special exception that a local broker may not even know how to handle.

Does that make sense?

Last edited by celtosaxon; 29-06-2020 at 06:12 PM..
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Old 29-06-2020, 07:52 PM   #2439
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Accumulating ETFs basically reinvest any dividend back into the fund correct?

What about distributing ETFs? Does this mean they will pay the dividends back into my brokerage after misusing any withholding tax? Is that how it works
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Old 29-06-2020, 09:27 PM   #2440
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I would be surprised if a local broker would collect either form W8-BEN or W-9 for transactions on the SGX. UOB Kay Hian states on their website that such forms are only collected for clients trading in US markets....

In this case, I believe any S27 shares held by the foreign entity (presumably the SGX share custodian) would be pooled and assessed a withholding tax in aggregate. Anything other than that would be a very special exception that a local broker may not even know how to handle.

Does that make sense?
Yes, and who knows, really. You’re in fairly uncharted waters here. All you can do, really, is put a W-9 on file with the broker and see what happens. Worst case you’ll claw the extra withholding back via your tax return....

And let’s think about this a bit. Is this overwithholding a bad thing? I’d say no, actually. It means your SRS account has sprung a small leak, as it were. The erosion of the SRS via higher dividend tax and U.S. tax refunds will tend to keep the future Singapore income tax lower, and (via a complicated future calculation) you probably won’t be able to take a full Foreign Tax Credit in the future anyway. So you’d effectively be liberating a small slice of your SRS account each year.

Accumulating ETFs basically reinvest any dividend back into the fund correct?
Exactly, after the fund pays whatever dividend taxes the fund owes.

What about distributing ETFs? Does this mean they will pay the dividends back into my brokerage after misusing any withholding tax? Is that how it works
They distribute the after tax dividends (after taxes the fund pays; you might still owe tax depending on your tax residence). What do you mean by “misusing”?

Last edited by BBCWatcher; 29-06-2020 at 09:29 PM..
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Old 29-06-2020, 09:48 PM   #2441
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Yes, and who knows, really. You’re in fairly uncharted waters here. All you can do, really, is put a W-9 on file with the broker and see what happens. Worst case you’ll claw the extra withholding back via your tax return....

And let’s think about this a bit. Is this overwithholding a bad thing? I’d say no, actually. It means your SRS account has sprung a small leak, as it were. The erosion of the SRS via higher dividend tax and U.S. tax refunds will tend to keep the future Singapore income tax lower, and (via a complicated future calculation) you probably won’t be able to take a full Foreign Tax Credit in the future anyway. So you’d effectively be liberating a small slice of your SRS account each year.


Exactly, after the fund pays whatever dividend taxes the fund owes.


They distribute the after tax dividends (after taxes the fund pays; you might still owe tax depending on your tax residence). What do you mean by “misusing”?
Sorry I meant ”after subtracting any withholding tax". Also, is there a lead time for how long it will take for these dividend to show up in the brokerage account? I assume the process is not as fast as if you were owning the underlying stocks directly

Last edited by lingalong; 30-06-2020 at 02:24 AM..
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Old 29-06-2020, 11:07 PM   #2442
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Yes, and who knows, really. You’re in fairly uncharted waters here. All you can do, really, is put a W-9 on file with the broker and see what happens. Worst case you’ll claw the extra withholding back via your tax return....
I’m afraid this may be more like up the creek without a paddle. I’ve combed through the web searching for situations where a U.S. person needed to refund some erroneously withheld taxes on a 1042. The closest thing I could find was form 843, but that doesn’t cover this situation. Form 1040 does cover overwithholdings from a 1099, but I won’t be getting one of those. The only possible place I could find was 1040 schedule 3 line 13 has a place for any other tax payments by checking box d and entering “Tax” in the space. Seems like a red flag audit risk there.

State Street will probably issue the foreign entity a 1042 for withholdings on all S27 shares held by that entity, and that is likely where it will end. Good chance I need to be prepared to kiss those taxes goodbye.

For the net dividends that I do receive, I suppose those could be still be claimed as qualified based on the honor system, since there will be no 1099 to substantiate them.

Last edited by celtosaxon; 29-06-2020 at 11:23 PM..
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Old 30-06-2020, 08:13 AM   #2443
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Also, is there a lead time for how long it will take for these dividend to show up in the brokerage account? I assume the process is not as fast as if you were owning the underlying stocks directly
The accumulating funds accumulate as soon as the underlying stocks distribute their dividends. Distributing funds can distribute at practically any interval, and that detail should be noted in the prospectus: monthly, quarterly, semiannually, annually, or “ad hoc.”

I’ve combed through the web searching for situations where a U.S. person needed to refund some erroneously withheld taxes on a 1042. The closest thing I could find was form 843, but that doesn’t cover this situation. Form 1040 does cover overwithholdings from a 1099, but I won’t be getting one of those. The only possible place I could find was 1040 schedule 3 line 13 has a place for any other tax payments by checking box d and entering “Tax” in the space. Seems like a red flag audit risk there.
Red flag or not, if you paid the tax you paid the tax. But if there’s a 1042 you’re instructed to report that withheld tax on Line 17 (2019 IRS Form 1040), so that’s quite clear.

State Street will probably issue the foreign entity a 1042 for withholdings on all S27 shares held by that entity, and that is likely where it will end. Good chance I need to be prepared to kiss those taxes goodbye.
Maybe, but your employer is forcing this issue with the SRS contributions. You can run this experiment with a small S27 purchase now (something consistent with the minimum commission probably), see what happens (whether you get a 1099 or 1042, and how much is withheld), then sell the S27 position if you’re not happy with it (with a capital gain or loss).

For the net dividends that I do receive, I suppose those could be still be claimed as qualified based on the honor system, since there will be no 1099 to substantiate them.
Or there will. You don’t know yet.

This’ll be a fairly cheap experiment if you wish to run it. Buy about US$6,200 of S27, let’s suppose, and that’ll be something like US$18 in broker commissions each way plus currency. At 2% gross dividends — and let’s suppose one full year of dividends, which is probably overstated too — the total tax withheld at 30% will be US$37.20. Of which you’ll only be able to get back a portion, depending on your marginal tax rate. If the stars misalign and you have to pay another ~US$30 in tax, OK, lesson learned, still not too expensive. Your other basic choices are individual bank stocks (e.g. DBS, UOB, OCBC) and Singapore Government Securities. Those kick off dividends or interest that attract tax at ordinary, non-qualified rates. And the bank stocks pay relatively high dividends and, for more than one, require multiple commissions, so they’re not exactly attractive either.

I suppose you could take the 5% penalty plus pay Singapore income tax on 100% via premature withdrawals, but you cannot take penalties as Foreign Tax Credits (and the FTCs are tempered anyway with your FEIE).

I think you ought to run this S27 experiment and report back.
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Old 30-06-2020, 11:47 AM   #2444
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Hi man, do you agree that going forward the expected returns for both stocks and bonds will not be as good as the past? If so, do you think the stock portion of the portfolio should be of higher %, maybe 50-50 or even 60-40?

I ask so not only due to that but also we have cpf component and the avg life expectancy should be longer than now too.
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Old 30-06-2020, 12:36 PM   #2445
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Thanks for the advice. I see what you are saying on 1040 Line 17, but it says attach the 1042. So two possibilities, file W-9 and hope they don’t withhold... and if they do withhold, hope to get a 1042. At the same time we are hoping that this thing won’t be considered a PFIC and hope to find a U.S. friendly broker. Fun at every corner! Good learning though.

I will go ahead and attempt to open an account with UOB KH. Do you see any reason I should not choose their in-house custodian (sub-account) over CDP?

Last edited by celtosaxon; 30-06-2020 at 01:37 PM..
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