Singapore Income Tax: Tax Residency & Tax Rates 2023

Singapore personal income tax is also one of the lowest in the world and foreign scoured income is non-taxable.

The phrase “accruing in or derived from Singapore” in the income tax Act describes the territorial scope of Singapore’s tax system. This means that Singapore has the right to tax income if the source of the income is in Singapore.

Singapore also uses deemed-sourced provisions to remove the uncertainty of applying source rules based on case principles. Deemed-sourced provisions create a source of income in Singapore where none may exist under general tax law.

The Income Tax Act (ITA) contains provisions that deem the source of certain types of income to be in Singapore. These types of income include:

The Income Tax Act (ITA) contains expression “income received in Singapore” has an expanded meaning for income tax purposes and is defined to include monies or other assets which are:

Income which accrues in Singapore will normally be subject to tax but income which accrues outside of Singapore will not be subject to Singapore tax unless it is received here by a taxpayer who is either resident here or who has a branch or permanent establishment here.

Here are the factors that have to be taken into consideration but are not necessarily limited to, in determining the source of trade or business:

Every taxpayer in Singapore is regarded as either a tax resident or non-resident. The Singapore income tax for foreigners is also dependent on the tax residency.

If you live and work physically in Singapore for at least 183 days in a calendar year, you are considered a Singapore tax resident.

These are 2 common categories as a non-resident status:

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:

Table – How Much Tax To Pay Depend On Your Tax Residency?

For Singapore tax residents, the income tax rate is progressive from 0-22%. The maximum income tax rate in Singapore is set to increase to 24% from YA 2024.

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

From YA 2017, the tax rates for non-resident individuals (except certain reduced final withholding tax rates) have 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.

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

According to the Singapore Income Tax Act, the definition of Taxable Income is the net income after deduction of the following:

IRAS has developed a simple formula to calculate your tax payable:

Total Income (Employment income + other income) – employment expenses – personal reliefs – approved donations = Chargeable Income.

Let’s determine what total income stands for:

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

For instance, 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.

All local and foreign gains and profits delivered to an individual because 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 include:

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:

It is mandatory and required by the Law to file Singapore income taxes with IRAS.

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.

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

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.

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.

In Singapore, income tax in the year of assessment (YA) is calculated based on the income in the previous financial or calendar year.

Year of Assessment (YA): The YA is the year in which income tax is calculated and charged. Each YA begins on 1 January and ends on 31 December.

Basis Period: The basis period is the calendar year preceding that YA.

Eg. Your personal tax is being calculated during the calendar Year of 2010 for income earned from Basis period between 1 January 2009 to 31 December 2009.

Companies are allowed to adopt a different financial year other than a calendar year. A different basis period applies to businesses whose financial year end is not 31 December.

Eg. For a company with a June financial year end, the basis period for YA2010 is from 1 July 2008 to 30 June 2009. In this case, the income earned in this period is subject to tax in the year 2010 (YA2010).

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

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.

If you are a foreigner thinking of setting up a business or as an individual who would like to have a Singapore tax residency for your company or personal tax planning, reach out to us today.

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.