• Personal Income Tax for Singapore Residents

Singapore personal income tax is also one of the lowest in the world and foreign scoured income is non taxable. This article will cover on the below topics:

  • Must Know of Singapore Personal Tax
  • Tax Rates
  • Tax Residency
  • Taxable Income
  • Filing of Personal Tax
  • Tax planning

MUST KNOW of Singapore Personal Income Tax

  • IRAS levy tax on income earned from 1 Jan to 31 Dec in each calendar year and income of $0 to $20,000 is at 0% meaning that it tax free.
  • Singapore personal tax rates for residents range from 0% to 22%. Non-residents are taxed at the flat rate of 15% or the resident rates whichever is a higher tax amount.
  • Personal income tax is imposed only on the income sourced within Singapore. The income earned outside Singapore is exempt from taxation. There is no capital gain tax in Singapore.
  • Taxpayer to file the annual personal income tax returns to IRAS by the 15th of April.

Tax Rates for Residents

For resident tax resident, the below tax rates apply to all different type of income such as

  • Employment
  • Trade, Business, Profession or Vocation
  • Property or Investments
  • Other Sources (e.g. annuities, royalties, winnings or estate or trust income)

Tax Rates for Non-Residents

Taxes on Employment Income

The employment income of non-residents is taxed at the flat rate of 15% or the progressive resident tax rates (see table above), whichever is the higher tax amount.

Taxes on Director’s fee, Consultation fees and All Other Income

From YA 2017, the tax rates for non-resident individuals (except certain reduced final withholding tax rates) has been raised from 20% to 22%. This is to maintain parity between the tax rates of non-resident individuals and the top marginal tax rate of resident individuals.

Eric
Tip: If you work for a foreign employer and operate from a base in Singapore to discharge your regional functions and duties, you may be eligible to benefit from the Area Representative Scheme. Those who qualify for this scheme are to be taxed based on the amount of their remuneration attributable to the number of days spent in Singapore. You may want to be tax by IRAS as tax rates could be lower than the country you are residing in.

How Much Tax To Pay Depend On Your Tax Residency?

Every taxpayer in Singapore is regarded as either a tax resident or non-resident.

If a person lives and work physically in Singapore for at least 183 days in a calendar year then it will be considered as a tax resident.

If a lives and work physically in Singapore for less 183 days in a calendar year then it will be considered as a non tax resident.

These are 3 common categories as a non resident status:

  • A person is not regarded as a tax resident if the person has not lived or worked in Singapore for at least 183 days of a calendar year.
  • A non-resident has lived or worked in Singapore for between 61 and 183 days of a calendar year, the non-resident is taxed at either 15% of their income or the resident tax rate, whichever is higher.
  • If a non-resident has lived or worked in Singapore for less than 60 days, the non-resident does not have to pay any personal income tax unless the non-resident
  • a director of a company,
  • a non-resident professional (NRP), or
  • a non-resident public entertainer (NRPE), or
  • if the non-resident’s absences from Singapore are a result of the non-resident’s Singapore employment.

Certain forms of income earned by non-residents are neither taxed at a flat rate of 15% or at the progressive resident tax rates. Below are tables to highlight:

Eric
Tips: There are also two related instances in which withholding tax does not apply. If the director has been in Singapore for more than 183 days of the calendar year at the time that the remuneration is declared or if the director is a managing director who earns a minimum of S$60,000 per year, no withholding tax must be paid.

How to calculate my Singapore Taxable Income

Definition of Taxable Income is the net income after deduction of:

  • Expenses stands for expenses that are ‘wholly and exclusively’ incurred in the production of your  income in Singapore (Example: Entertainment expenses, Subscriptions paid to professional bodies or Travelling expenses)
  • Donations stands for donations to qualified charitable organizations,
  • and personal relief stands for deductions to encourage social and economic objectives example such as Working mother child, Grandparent Caregiver , Course fee and Insurance Relief

The following is the formula provided by IRAS to make the ‘calculation of taxable income’ easily understandable:

Total Income Less Expenses =

Statutory Income Less Donations =

Assessable Income Less Personal Reliefs =

Taxable Income

Let determine what is ‘Total income’ stands for:

Income from Employment

Income from Trade, Business, Profession or Vocation

  • Salary, Bonus, Director’s Fee, Commission and Others

  • Gains from the Exercise of Stock Options

  • Income Received from Overseas

  • Pension

  • Retrenchment and Retirement Benefits

  • Income Received through a Partnership or received as a Self-Employed Person or Sole-Proprietor (commission agents, freelancers, taxi drivers, hawkers, etc.)

  • Income Received from Overseas

  • Income Received in the Form of Virtual Currencies

  • Special Employment Credit

  • Wage Credit Payout

  • Jobs Support Scheme

  • COVID-19 Related Payouts

Eric
Tip: Only Wage Credit Payout will be auto-included in the tax return for self-employed taxpayers.

Income from Property or Investments

Other Sources of Income

  • Dividends

  • Gains from Sale of Property, Shares & Financial Instruments

  • Interest

  • Rent from Property

  • Annuity (recurring annual payments)

  • Charge (alimony and maintenance payments)

  • Estate / Trust Income

  • National Service Housing, Medical and Education Award

  • Royalty

  • Winnings (Toto, 4D…)

  • Withdrawal from Supplementary Retirement Scheme (SRS)

FAQ: Tax Treatment of Income Earned Overseas

Generally, overseas income received in Singapore is not taxable. This includes overseas income brought into Singapore and paid into a Singapore bank account. However, there are certain circumstances under which overseas income is taxable Example: Foreign income received in Singapore through partnerships in Singapore while working overseas. Your overseas income is incidental to your Singapore employment hence it is deemed to be taxable.

FAQ: Tax Treatment of Employer Benefits

All local and foreign gains and profits delivered to an individual as a consequence of business are taxable unless they are especially exempt from income tax or are covered by an existing administrative concession. The gains or profits include all benefits, whether in money or otherwise, paid or granted to you in respect of employment.

Examples of taxable benefits received from your employer:

  • Overtime payments
  • Fixed monthly meal allowances
  • Fixed monthly allowances for transportation if mileage on private car are reimbursed
  • Car furnished by an employer
  • Accommodation and housing allowance
  • Refunds of medical and dental treatments for dependents other than the income earner, spouse and children
  • Per Diem allowances (such as allowances provided on overseas trips for business purposes), as long as the amount is beyond the acceptable rates.

However, certain non-cash benefits (i.e. accommodations like housing) are taxed using special formulas, known as concessionary basis, leading to lower taxation on these benefits-in-kind. Hence, a compensation package (salary+ benefits-in-kind)has been structured exclusively for executives to help them reduce their individual tax liability in Singapore.

Here are some examples for the benefits-in-kind received as part of the employment:

  • Residential Accommodation
  • Furniture & Furnishings provided
  • Food & Clothing, Hotel Accommodation
  • Home Leave Passage
  • Motor Car, Driver
  • Share Options
  • Interest Subsidy
  • Income Tax paid by Employer
  • Insurance Premium paid by Employer if employee is stated beneficiary in the Policy
  • Subscription, Entrance Fees, Memberships.

Filing Taxes

It is mandatory and required by the Law to file personal income taxes with the Inland Revenue Authority of Singapore (IRAS). You will qualify as a Tax Resident if you meet the following conditions:

  • Singapore Citizen who normally resides in Singapore except for temporary absences; or
  • Singapore Permanent Resident (SPR) who has established a permanent home in Singapore; or
  • Foreigner who has stayed/worked in Singapore (excluding director of a company) for 183 days or more in the previous year i.e. year before the YA.

The completed forms of individual income taxes must be filed by latest the 15th of April. For information related to filing of taxes, we at Paul Hype Page can assist you with them, given our proven track record. Feel free to reach out to us.

Assessment of Taxes and Who has to pay taxes

Individuals Earning less than $22,000 (Annual Income)Individuals Earning More than $22,000 (Annual Income)
You are not required to pay taxesYou will be required to pay taxes
0% Income taxProgressive rates, capped at 22% depending on how high is your Annual Income*
Both are required to file taxes with IRAS

*You may estimate your gross tax rate based on a table from IRAS

Submission of Personal Taxes

You can file your personal taxes online.

Alternatively, you may choose to file your personal taxes via mail. The various forms and it’s different purposes can be seen below.

Form NameWho is it for
Form B1Employed Individuals
Form BSelf Employed, Sole Proprietors
Form MNon-Resident

After filing your personal income tax returns, you will receive your Notice of Assessment(NOA) or tax bill by September. The tax bill will indicate the amount of tax you have to pay. If you disagree with your tax amount, you need to inform the tax department within 30 days from the date of your tax bill and state your reasons for objection.

You need to pay the full amount of tax within 30 days of receiving your Notice of Assessment. This is regardless of whether you have informed the tax authority about your objection. If your tax remains outstanding after 30 days, a penalty will be imposed.

Important information:

1. Even if you do not have any income in previous years, you will still need to declare zero income in your tax form and file your personal tax.

2. Taxes are assessed by Annual Year, from 1 January to 31 December of the previous year.

How Tax Planning May Reduce their Tax Burden?

In Singapore, there are five ways by which a taxpayer may save money on taxes to be paid.

1. If the taxpayer is a tax resident, the taxpayer is entitled to certain tax reliefs and deductions. Among the tax reliefs that can be claimed by residents include

  • Life Insurance Relief,
  • Earned Income Relief, and
  • Supplementary Retirement Scheme (SRS) Relief.

Deductions may also be claimed if they are related to employment expenses, business expenses, certain types of donations, rental expenses, research and development (R&D) expenditure, or various other categories.

2. If the taxpayer is not a Singapore tax resident, Avoidance of Double Taxation Agreements (DTAs) may be used by the taxpayer to avoid being taxed in both the taxpayer’s country of residence and Singapore. A DTA specifies all taxing rights between Singapore and the other country involved regarding income generated from economic activities between the two countries. Only tax residents of Singapore or the partner country may benefit from the effects of the DTA.

3. By using the Not Ordinarily Resident (NOR) scheme, a taxpayer could benefit from either Tax Exemption of Employer’s contributions to Overseas Pension Fund, Time Apportionment of Singapore employment income, or both. A taxpayer qualifies for the NOR scheme if the taxpayer had not been a Singapore tax resident for the entirety of the three-year period before the YA in which the taxpayer applies for the scheme. The taxpayer must also be a tax resident during the current YA in order to be eligible. A taxpayer with NOR status will have it for five years.

4. A taxpayer may claim any expenses incurred against the taxpayer’s employment income and benefit from tax deductions for any approved charitable donations. Tax-deductible donations include donations of cash, shares, land, buildings, or artefacts to approved bodies or organizations. The value of the tax deduction that can be claimed is 250% of the value of the donation made.

Conclusion

If you are a foreigner thinking of setting up a business or as an individual like to have a Singapore tax residency for your company or personal tax planning. With current tax regime implemented by OECD where there is common reporting standards (CRS) among all banks and Automatic exchange of information among tax authorities, Singapore offers a legitimate mean for international tax planning.

FAQs

What if you are a Singapore tax resident? What If you receive foreign income?2020-07-01T11:16:54+08:00

When your company earns foreign income from a treaty country, you may wish to claim the benefits under the DTA that entitles a company not to pay tax or to pay tax at a reduced rate in the foreign country. To enjoy this benefit, you would need to submit a COR to the foreign country to prove that the company is a Singapore tax resident. To find out more about the application process, please refer to Applying for Certificate of Residence.

When you receive foreign income in Singapore, you may be taxed on the income. In the case where the benefit under the DTA is not an exemption of tax, but a reduction of tax rate, the Singapore company will also suffer tax in the foreign country. In this way, the same income is subjected to taxation twice.

The DTA provides relief for this double taxation by allowing the Singapore company to claim a credit of the foreign tax suffered against its Singapore tax payable on the same income. This credit is known as a double tax relief (DTR). To find out more about this relief, please refer to Claiming Double Tax Relief.

How Singapore personal income is assessed?2020-07-01T11:15:50+08:00

Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA.

How Much Personal Income Tax do Non-residents have to Pay?2020-06-17T11:28:57+08:00

Every taxpayer in Singapore is regarded as either a tax resident or non-resident. Residents and non-residents are subject to different income tax rates and regulations.

How Singapore Personal Income is Assessed?2020-06-17T11:28:15+08:00

Income is assessed on a preceding year basis. This means that the basis period for any Year of Assessment (YA) generally refers to the financial year ending in the year preceding the YA.

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