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Singapore tax laws differ when they are imposed on non-residents. They are also to file tax returns differently. Tax rates are also applied differently with regard to non-residents.

Singapore Personal Income Tax Non Residents

Introduction

Income tax is a very important matter in any country. This is because income tax forms the main source of revenue for the government in most countries. The government will then use this tax money in ways that will better serve the population. The same is true in Singapore. According to the Inland Revenue Authority of Singapore (IRAS), during the 2017-2018 financial year, the government of Singapore received S$50.2 billion in tax revenue. This figure represented an increase of 6.8% from the previous financial year. It came about due to greater economic expansion and overall growth in earnings.

One of the most important forms of income tax is personal income tax. Personal income tax is also known as individual income tax. In Singapore, 21% of all tax revenue received by the government, or S$10.7 billion, was personal income tax money. Everyone who earns an amount of money in excess of the taxable threshold must pay personal income tax. This is true of residents and non-residents alike. In Singapore, the laws regarding personal income tax differ depending on one’s status, or lack thereof, as a tax resident. Many non-residents in Singapore have recently arrived from abroad. Therefore, they might not necessarily be familiar with the tax laws for non-residents in Singapore. Thus, taxation of non-residents will be discussed in further detail in the following paragraphs.

Tax Resident Status in Singapore

The first and most important point to be discussed is that of tax resident status in Singapore. In Singapore, an individual is a tax resident if the individual has lived or worked there for a minimum of 183 days in a calendar year or for a period spanning three consecutive calendar years. In the former instance, the individual will be regarded as a tax resident during that calendar year. In the latter, the individual will be considered one for all three years. Foreigners who have worked in Singapore over a period spanning two calendar years and lived in Singapore for at least 183 days over those two years are also deemed to be tax residents. However, foreigners who are public entertainers, professionals, or directors of a company are excluded from this status. Foreigners who own a work pass which is valid for a minimum duration of one year are also tax residents.

Non-residents are foreigners who have lived or worked in Singapore for less than 183 days in a calendar year. Non-residents who have worked in Singapore for 60 days or less during a particular calendar year are exempt from taxation. Non-residents who have lived or worked in Singapore for between 61 and 182 days during a calendar year will either be taxed at a 15% flat rate or the same rate as a resident with the same earned income. The higher tax amount will be used. When non-residents file income tax, they must file Form M. Form M is meant for all non-residents who have derived their income from Singapore.

The Advantages of Being Taxed in Singapore

Everyone who is taxed in Singapore, including non-residents, benefits greatly from the country’s tax system. This is because Singapore has some of the world’s lowest personal income tax rates. Depending on the amount of time that has been spent in Singapore and the amount of money that has been earned, non-residents will pay income tax at a rate of either 0%, 15%, or the resident rate which cannot exceed 22%. Directors’ fees and consultants’ fees received by non-residents have a tax of 20% imposed on them. Income from a deposit in an approved Singapore bank is not subject to taxation. Should the non-resident receive income which has been sourced from abroad, this foreign-sourced income will also not be taxed. The lack of a capital gains tax in Singapore also adds to the reasons why it is advantageous for a non-resident to be taxed in Singapore, especially when compared to other countries.

Although tax rates in Singapore are already low, we at Paul Hype Page & Co can help you reduce your tax burden even more. Our team can assist you with all your tax planning needs so that you will pay as little tax as possible.

Why Residents and Non-residents Are Taxed Differently

In Singapore, residents and non-residents are taxed at different rates. Although this might not necessarily seem fair or just, there are good reasons for such being the case. One reason is related to tax reliefs. Non-residents are not allowed to claim any of the tax reliefs available to residents. It should also be noted that when filing income tax, residents and non-residents must use different forms. Residents fill in Form B1; non-residents, Form M. Furthermore, residents and non-residents claim benefits from tax treaties in different ways. Residents submit a Certificate of Residence to the relevant authorities of the foreign tax jurisdiction in question, while non-residents submit a Certificate of Residence from Non-Residents to IRAS. Given that all of these situations treat Singapore tax residents and non-residents differently, it only stands to reason that residents and non-residents should also be taxed differently.

How Changes in Tax Resident Status Are Handled

Sometimes, over the course of a YA, someone who is not a Singapore tax resident may become one. Conversely, someone who is a Singapore tax resident might become a non-resident. However, it is not difficult to understand how Singapore’s tax authorities deal with such scenarios. An individual’s tax resident status is determined by which category the individual is classified under at the end of the YA. Therefore, an individual who ends a YA as a tax resident will be taxed as one, while one who ends a YA as a non-resident will be taxed as a non-resident.

Want to Start business in Singapore
Want to Start business in Singapore

The Not Ordinarily Resident (NOR) Scheme

The NOR scheme extends favorable tax treatment to qualifying individuals for a period of five years. To enjoy the tax concessions, a non-resident must first apply for NOR status. To be eligible for the NOR scheme, an individual must be a non-resident in the past three years of assessment (YA), and in that YA in which the individual first qualifies for NOR status, the NOR must be a Singapore tax resident. A YA runs from January 1 to December 31 of a calendar year, making it concurrent with the calendar year.

Those who meet these qualifying conditions will be accorded the NOR status for five consecutive YAs, starting from the YA in which they first meet the criteria

Tax Concessions Available Under the NOR Scheme

Those who are given NOR status can enjoy one or more of the following tax concessions during the NOR period as long as they are a tax resident in the respective YA.

1) Time apportionment of Singapore employment income. Under this concession, those who have NOR status will not be taxed on the portion of their Singapore employment income that corresponds to the number of days they have spent outside Singapore for business reasons as a resident Singapore employee.

Qualifying Criteria:

– Must have spent at least 90 days outside Singapore for business reasons.

– Total Singapore employment income must be at least S$160,000. If the tax on the apportioned income is less than 10% of the employee’s total employment income, the employee will still be subject to a tax of 10% of the total employment income.

Director’s fees and any amount of income tax payable in Singapore that is borne by the employer, whether directly or indirectly, are not apportionable.

2) Tax exemption of employer’s contribution to non-mandatory overseas pension fund or social security scheme. Under this concession, foreigners who are resident Singapore employees may receive a tax exemption on any contribution made by the employer to any non-mandatory overseas contribution scheme. The amount which is exempt is subject to a cap. This cap is determined based on the laws governing Central Provident Fund (CPF) contributions. It is calculated as if the employer made a CPF contribution for a citizen of Singapore in accordance with the CPF Act.

Qualifying Criteria:

– Must not be a Singapore citizen or permanent resident.

– Singapore employment income must be at least S$160,000.

– Employer is only to claim deductions on contributions made to non-mandatory overseas pensions or provident funds and social security schemes in excess of the NOR cap.

Letter of Guarantee (LOG)

Non-resident individuals who are employed in Singapore are required to submit a LOG from a local bank or an established limited company in Singapore to cover their estimated tax for the coming YA. If the LOG is not provided to IRAS, an advance assessment will be issued.

Leaving Singapore or Changing Jobs

Certain steps must be taken when a non-resident plans to leave Singapore or take a different job in Singapore. The non-resident’s current employer needs to notify IRAS and confirm that the non-resident has settled all unpaid taxes before departure. This procedure is known as tax clearance. Non-residents who have any existing stock options or awards on hand which have yet to be exercised or vested will be deemed to have derived gains from the stock or awards at the point of tax clearance.

Singapore Non-residents and Double Taxation

Double taxation refers to a situation in which the same income earned by an individual is subject to taxation in two tax jurisdictions. Obviously, such a situation is very undesirable. Fortunately for taxpayers in Singapore, the country is part of many tax treaties with various countries around the world. Those who are not Singapore tax residents but derive income from Singapore and are a resident of a country with which Singapore is a tax treaty partner may take advantage of this tax treaty. They may do so by submitting a completed Certificate of Residence from Non-Residents to IRAS. This certificate must be approved by the tax authorities of the treaty country. Once this matter has been settled, the non-resident may begin reaping the benefits of the tax treaty.

Filing of Singapore Personal Income Tax Returns

It is mandatory for taxpayers who are required to do so to file annual personal income tax returns to IRAS. All completed forms, whether they be for a resident’s tax return or a non-resident’s tax return, must be submitted to Singapore’s tax authorities by the 15th of April every year.

Those who are tax residents or who hold an Employment Pass, Personalised Employment Pass, or Entrepreneur Pass; whose annual income in Singapore for the YA in question exceeds S$22,000; or who have received a letter from IRAS requiring them to file personal income tax are required to file personal income tax returns. This is regardless of the amount of annual income earned during the previous year. Those who do not have any income in previous years must still declare a lack of income in the tax form and submit it by April 15.

After the filing of personal income tax returns, the taxpayer will receive a Notice of Assessment (NOA) or tax bill by September. The tax bill will indicate the amount of tax to be paid. If one disagrees with the tax amount to be paid, the tax authorities must be informed within 30 days from the date of the tax bill. The reasons for objection must be stated. The full amount of tax must be paid within 30 days of the NOA. This must be done regardless of whether the tax authorities have been informed about the objection. If the tax remains unpaid after 30 days, the errant taxpayer will be suitably punished.

Should you have any difficulties in filing your taxes, we at Paul Hype Page & Co are always able and willing to help you. Our tax experts will ensure that every aspect of your tax filing is properly handled and appropriately completed.

Singapore Personal Income Tax for Non-Residents FAQs

How to calculate DTR?2020-07-01T11:13:36+08:00

The amount of DTR is dependent on the nature of income and subject to the specific terms and conditions as specified in the DTA with the relevant treaty country.

DTR

= Lower of:

the actual amount of foreign tax paid; or
the amount of Singapore tax attributable to the foreign income (net of expenses)

For trade income

If the company has a permanent establishment (PE) overseas and the income is derived through that PE, the income would generally be taxed overseas. A DTR would be granted only if the income is also taxed in Singapore.

For passive income (e.g. interest, dividend etc)

Passive income derived from outside Singapore will be taxed in Singapore in the year of remittance.

Claiming Double Tax Relief – What is double tax relief (DTR)?2020-07-01T11:13:22+08:00

Foreign income earned by a Singapore company may be subjected to taxation twice. Once in the foreign country, and a second time when the foreign income is remitted into Singapore.

A double tax relief (DTR) is the credit relief provided for under an Avoidance of Double Taxation Agreement (DTA) to reduce this double taxation. A DTR is granted by allowing the Singapore tax resident company to claim a credit for the amount of tax paid in the foreign country against the Singapore tax that is payable on the same income.

A company is a tax resident of