Self employment tax on foreign earned income

Generally, overseas income received in Singapore by you is not taxable and need not be declared in your Income Tax Return. This includes overseas income paid into a Singapore bank account.

Table of Contents Show

Taxable overseas income
Example 1: Regional sales manager employed by a Singapore company
Reporting overseas income
What is considered as self-employed?
How is self-employment income taxed as an expat?
What is the self-employment tax?
What expat tax breaks are available for self-employment income?
Use Expatfile to report your self-employment income
Is foreign earned income subject to self
How is foreign earned income taxed?
Is foreign income considered earned income?

Taxable overseas income

Overseas income is taxable in Singapore if:

1. It is received through partnerships in Singapore.

2. Your overseas employment is incidental to your Singapore employment (i.e. you are required to travel overseas as part of your job requirements).

Example 1: Regional sales manager employed by a Singapore company

You are a regional sales manager employed by a Singapore company. As part of your job responsibilities, you travel overseas frequently to oversee operations in other countries/regions. Your employment income is fully taxable in Singapore since your work overseas is incidental to your Singapore employment.

3. You have a trade/business in Singapore and you are carrying on a trade/business overseas which is incidental to your trade carried out in Singapore.

4. You are employed overseas on behalf of the Singapore Government.

Tax treatment in Singapore for overseas employment on behalf of the Singapore Government

As a Singapore Citizen or tax resident in Singapore, your income from your employment exercised outside Singapore on behalf of the Singapore Government is deemed to be derived from Singapore. All the gains from your employment including overseas allowances are taxable in Singapore.

Your employer will send your employment income details (including allowances paid to you while you are working outside Singapore) to IRAS. The tax on overseas allowances will be remitted if the application for tax remission was approved by the Minister of Finance.

Tax treatment outside Singapore for overseas employment on behalf of the Singapore Government

Generally, your gains from such employment overseas will not be taxed in the foreign country/region if:

There is a Double Taxation Agreement (DTA) between Singapore and the foreign country/region; or
There is a provision for reciprocal exemption by Singapore and the foreign governments.

Please approach your employer for clarification on the application for tax remission for Overseas Cost of Living Allowances.

Reporting overseas income

For overseas income which is taxable, you must declare the income under 'Employment Income' (if your employer is not under the Auto-Inclusion Scheme), 'Trade Income' or 'Other Income' (whichever is applicable) in your Income Tax Return.

Should your gains from your overseas employment be taxed in the foreign country/region, you may apply for double taxation relief, to avoid being taxed twice on the same income.

Many self-employed expats, or digital nomads, have a common misconception that their self-employment income is tax-free in the US. While this is partially true, as self employed expats can still qualify for the same expat tax breaks many other expats do – they still need to be aware of the “self-employment tax”.

This article gives you an overview of expat taxes for the self-employed and explains how to get the most expat tax breaks available as a digital nomad.

What is considered as self-employed?

Basically, you’re considered self-employed if you work for yourself, whether that’s on a part-time or full-time basis. Many expats organize their self-employment businesses through a US limited liability company (LLC). Unless you have elected to treat your LLC as a corporation, you are still considered self-employed by the IRS.

Any income you earn while self-employed is considered “self-employment income”.

How is self-employment income taxed as an expat?

Self-employed expats and digital nomads are subject to the same tax rules as any other American living abroad, which requires all U.S. citizens to file and report their worldwide income, no matter where they live.

This also means self-employed expats are subject to the same self-employment taxes as US residents, also known as the “self-employment tax”.

In other words, a self-employed expat or digital nomad will basically be subject to two forms of US taxation:

Regular income tax
Self-employment tax

This distinction is important, because the common expat tax breaks are typically only available to use against the regular income tax.

What is the self-employment tax?

Self-employment tax refers to additional tax (over and above regular income taxes) applied to self-employment income, and specifically refers to the combination of Social Security and Medicare tax.

The self-employment tax rate is 15.3%. The rate consists of two parts:

12.4% for Social Security – applied only on the first $137,700 (2020) of self employment income
2.9% for Medicare

What expat tax breaks are available for self-employment income?

For the regular income tax, self-employed expats can still take advantage of the same expat tax breaks available to any other American living abroad, which means that the Foreign Tax Credit and Foreign Earned Income Exclusion are both available for self-employed expats and digital nomads!

Foreign Tax Credit – The Foreign Tax Credit, or FTC, is a non-refundable credit that will reduce your U.S. tax liability dollar-for-dollar for taxes you paid to a foreign country. Simply put, if you paid taxes to a foreign country, you can claim these foreign taxes as a credit against your U.S. taxes. If you paid mor taxes to a foreign country, than usually you will owe no U.S. tax on that income.
Foreign Earned Income Exclusion – The Foreign Earned Income Exclusion, or FEIE, is one of the tax breaks available for U.S. expats to eliminate or reduce any U.S. tax liability on income earned from living and working abroad.

For the self-employment tax, unfortunately the Foreign Tax Credit or Foreign Earned Income Exclusion cannot be used to reduce what you would owe for self employment tax. However, if you are paying foreign social security or equivalent tax in the foreign country you reside in, you may not have to pay US self employment tax if the country you are paying foreign social security tax to has a totalization agreement with the US.

If the country you are paying foreign social security tax does have a totalization agreement with the US, then you do not need to pay US self-employment tax, but you will need to obtain a “certificate of coverage” from the foreign government, and keep it in your records!

Use Expatfile to report your self-employment income

ExpatFile is designed to reduce your time filing taxes while making sure you are able to claim all the best expat tax breaks available, and this includes helping out self-employed expats and digital nomads too!

Expatfile automatically will determine if the foreign earned income exclusion or the foreign tax credit is the best choice for you, and in addition, will help you claim exemption from self-employment tax if you live in a country that has a totalization agreement with the US.

Is foreign earned income subject to self

You must pay self-employment tax on your self-employment income even if it is excludable as foreign earned income in figuring your income tax. Net earnings from self-employment include the income earned both in a foreign country and in the United States.

Does self

For self-employment tax, you cannot exclude any income you earn while abroad. You must pay self-employment tax on all of your net profit, including the amount excluded under the FEIE.

How is foreign earned income taxed?

The maximum foreign earned income exclusion amount is updated every year. For the 2021 tax year you can exclude up to $108,700 or even more if you incurred housing costs. (Exclusion is adjusted annually for inflation). For your 2022 tax filing, the maximum exclusion is $112,000 of foreign earned income.

Is foreign income considered earned income?

Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income.