Celtosaxon, let's suppose you find a broker you like (that likes you) and buy S27 (the SGX-listed conduit to SPY, a U.S. domiciled U.S. S&P 500 stock index fund) using Supplementary Retirement Scheme funds. I'd just like to explain how I think the tax issues get sorted out:
1. You get Singapore income tax relief on the SRS deposits, whether or not they're invested. This tax relief is in the form of lower income tax payments in the following year-plus (assuming you're on GIRO payments, which you probably should be).
2. If your U.S. taxable earnings from work are entirely below the Foreign Earned Income Exclusion plus Foreign Housing Exclusion (if applicable), then you keep all of the Singapore income tax savings. If your earnings are above the FEIE/FHE, then the IRS effectively "claws back" a portion of the tax savings. The higher your income, the higher the percentage claw back.
3. What happens within the SRS account has no immediate Singapore tax consequences, but it does have U.S. tax consequences. Dividends are U.S. taxable as they're paid, but they should be mostly or entirely qualified dividends. (Hopefully you get a proper 1099-DIV.) If you sell any shares you'll have U.S. capital gains tax.
4. Upon SRS withdrawal there's no particular direct U.S. tax consequence since you're on a "pay as you go" basis with the IRS (dividends, interest, capital gains). However, here's what happens otherwise assuming this is a qualified SRS withdrawal (no 5% penalty):
(a) There's a 22% withholding rate, which amounts to 11% of the gross as I understand it. (Withholding does not apply to Singaporean citizens.)
(b) If this withdrawal slides below Singapore's income tax threshold, then you get all your withholding back, eventually. Otherwise, you pay whatever the actual tax is and get the remainder back. Rarely will you get zero back.
(c) If Singapore income tax does apply in the end, you'd then take a look at whether you can use it as a U.S. Foreign Tax Credit. And here's where it gets REALLY complicated. My best guess is that you'd first have to separate principal (SRS contributions) from total investment gains. Let's call the principal "P" and total investment gains "G." And I assume you'd adopt a level percentage basis when splitting P and G. For example, let's suppose your total SRS contributions amounted to US$57,000 and your total gains (to that point) conveniently amounted to US$57,000 -- a 50%-50% split. You withdraw US$26,000, let's suppose. That'd mean US$13,000 would be P and US$13,000 would be G, i.e. splitting in the same percentages. You'd continue to track this for subsequent withdrawals, dividing P and G a little differently as G bounces around but still with the same split logic applied.
You'd then apportion the Singapore income tax between P and G at the same, level percentage. For example, if the effective tax rate on the total is 7.5%, then it'd be 7.5% of P and 7.5% of G. Let's call that P-T and G-T.
P-T is essentially deferred foreign income tax on that particular, previously earned income. You'd then have to reduce or eliminate P-T depending on how much your FEIE/FHE factored in the original tax year(s). Basically you're trying to figure out how much incremental FTC you should get, if any. You'll probably use a "First In, First Out" method in treating P, and it'll get complicated if it crosses tax years. The remaining P-T, if any, you could probably apply as a Foreign Tax Credit in the general category. Whether you can spend down that FTC is a separate question.
G-T is foreign income tax on the total gains. You already paid full U.S. income tax on the interest, dividends, and capital gains (including final sale), so G-T should be fully creditable as passive category FTC. It should also be pretty easy to spend down.
That's my "best guess," but I could certainly be wrong! Whatever the calculation is, I expect it'll be
complicated. You'll also have to be careful to get the currency conversions right since the IRS wants everything converted to U.S. dollars first -- each number -- and then you do your adds/subtracts/multiplies/divides in U.S. dollars. (At least that's how it used to be until very recently, unless this changed very recently.) These complex calculations won't be fun if you end up owing any Singapore income tax in the end. Of course you're not required to calculate and take any U.S. FTCs upon withdrawal(s), and I suppose that's one easy way to avoid the calculations.
Your SRS account is surely FinCEN Form 114 and IRS Form 8938 reportable every year, assuming you cross those reporting thresholds.
