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.
– 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.
– 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.