US Tax of Singapore CPF & IRS FBAR & FATCA Compliance

Singaporean CPF & US Tax Treatment, FBAR & FATCA

Singaporean CPF & US Tax Treatment: When it comes the IRS tax rules for U.S. Persons with Singapore CPF (Central Provident Fund), it can get very complicated. CPF is a foreign pension. While it is tax deferred in Singapore, there is no tax treaty between the U.S. and Singapore, which further complicates the analysis.  There is the issue of the contributions to the fund; growth within the fund, and distributions out of the fund. While different tax professionals may take contrasting approaches to the U.S. taxation of Singapore CPF, the Internal Revenue Service has issue memoranda in the past on the tax treatment of a CPF. At that time, the IRS determined that both the contributions to the CPF and growth within the fund are taxable in the year the contribution was made and/or the fund growth occurred. 

We have a much more detailed analysis on the U.S. Taxation of CPF, but let’s review 5 common facts to know about the CPF:

Singapore CPF has Three (3) Components to it

The CPF has been a part of Singapore for more than 60-years.

It is a compulsory form of retirement, which takes on the form of both Pension and Social Security.

In the U.S. it is treated as foreign pension, with immediate tax consequences.

The three (3) components to the CPF are:

• Ordinary Account
• Special Account
• Medisave

While there are three different accounts within the CPF, technically each person only has one CPF account, so it is generally reported as one CPF on the U.S. tax return (not as three different accounts).

Contributions to Singapore CPF are Taxable in the U.S.

Deferred salary contributions into the CPF are taxable. 

Thus, even though it is very similar to the 401K, the U.S. does not provide tax deferred treatment to deferred salary contributions.

By contrast, the U.S. and U.K. tax treaty provides for such tax deferred status for employment salary contributions in certain circumstances.

Accrued CPF Growth is Taxable in the U.S.

Likewise, the growth within the CPF is taxable in the year it accrues.

It is not grossed-up and taxed at distribution (which is a common misconception).

Once the income has been taxed, it is not taxed again at distribution since the tax basis will include the previously taxed income.

Singaporean CPF & FBAR

Singaporean CPF & FBAR: As far as the IRS is concerned, the Singaporean CPF (Central Provident Fund) is reportable on the FBAR. The CPF is considered a type of Foreign Bank and Financial Account, which is reported on FinCEN Form 114.

Since there is no tax treaty between the US and Singapore, the CPF is generally taxable as well. In other words, while it is tax deferred in Singapore, there is no tax treaty between the U.S. and Singapore — and this further complicates the analysis.  From a tax perspective, there is the issue of the contributions to the fund; growth within the fund, and distributions out of the fund.

While different tax professionals may take contrasting approaches to the U.S. taxation of Singapore CPF, the Internal Revenue Service has issue memoranda in the past on the tax treatment of a CPF, which determined the income is taxable.

Singaporean CPF & Form 8938

Singaporean CPF & Form 8938: As far as the IRS is concerned, the Singaporean CPF (Central Provident Fund) is reportable on the Form 8938. The CPF is considered a type of Foreign Asset for Form 8938 purposes, which must be reported to the Internal Revenue Service. Since there is no tax treaty between the US and Singapore, the CPF is generally taxable as well.

In other words, while it is tax deferred in Singapore, there is no tax treaty between the U.S. and Singapore — and this further complicates the analysis.  From a tax perspective, there is the issue of the contributions to the fund; growth within the fund, and distributions out of the fund.

While different tax professionals may take contrasting approaches to the U.S. taxation of Singapore CPF, the Internal Revenue Service has issue memoranda in the past on the tax treatment of a CPF, which determined the income is taxable.

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