I came to Singapore for work in 2018.
I remember a conversation I had with a close friend.
Friend: What’s good about Singapore?
Me: Taxes are low, and the international environment where I can speak English, Japanese and Chinese for work is good…
Friend: How low is the tax?
Me: I’m on the lower bracket, so the income tax rate is around 7%.
Friend: But you are paying for a monthly rent, right? If you had lived in Korea, you would have lived with my parents without paying rent. So, I guess there is absolutely no financial benefit as low tax offsets the rent.
What I felt after this conversation was that my friend thought of working abroad only in terms of finance, “overseas earned income – living expenses abroad”.
It is not wrong. However, what my friend is missing is that working abroad is more than a simple financial calculation. Working abroad allows you to take advantage of the systems of the country in which you live.
I personally think that Singapore offers better opportunities to prepare for financial freedom than Korea in the following areas:
1) Low tax rate
2) Advanced financial system
3) A good environment for business
1) is obvious. Taxation makes a huge difference when it comes to saving money to prepare for financial freedom. Singapore is one of the lowest taxing countries in the world while Korea is one of the highest.
Singapore is a financially advanced country which has a well-established investment system and friendly environment for investors.
For example, Singapore has no dividend tax. Because the corporates have already paid corporate tax before giving out dividends, they consider it as a double taxation. It does make a difference for anyone who is preparing for financial freedom through dividends (US dividend tax is about 30% and Korea goes from 15.4% all the way up to 49.5%, depending on your annual income).
There is also no capital gain tax, inheritance tax and gift tax. I may not be aware but there may be more taxes which do not exist in Singapore but exist in other countries.
Singapore is also good for business. The corporate tax rate is low, and companies are subject to very few regulations, because the Singaporean government is actively helping them to bring in business. Sweden Volvo’s decision to come from Europe to Singapore and operate electric buses at Nanyang Technology University was mainly helped by the Singaporean government.
What does it all mean for foreign worker like me? I have always been thinking about items for business and tried a few. Setting up system to generate income without my presence is an ultimate goal, so eventually I would like to establish a company in Singapore.
If I live in another country, even if I no longer work in that country, I try to build an asset or system that will continue to generate income. Most people go back to their home country after working for few years abroad, leaving behind all opportunities to build income source when they are not working in that country.
I have passive income streams in the US and Singapore. Even if I’m not physically present in the US or Singapore, the income will nonetheless flow through my US and Singapore accounts.
Going back to the conversation I had with my friend, I really do think that my friend has very a narrow view on working abroad. He dismissed the opportunity as having no financial benefit, but he missed all the other benefits that come with living in other country, let alone the experience itself.
I would like to show him my financial result after 10 to 20 years to prove who is wrong.
Korean article can be found here.
