Singapore Income Tax: Tax Residency & Tax Rates 2024

Singapore’s personal income tax is among the lowest globally, and income sourced from abroad is non-taxable.

4 Things About Singapore Income Tax Every Foreigner Must Know

3 Ways Your Income is Liable to Tax in Singapore

The phrase “accruing in or derived from Singapore” in the income tax Act delineates the territorial scope of Singapore’s tax system. Essentially, this provision signifies that Singapore possesses the authority to tax income if its source originates within the boundaries of Singapore.

Moreover, Singapore strategically utilizes deemed-sourced provisions as a proactive approach to eliminate ambiguity associated with applying source rules primarily based on case principles, thereby ensuring greater clarity and consistency in the taxation framework. Furthermore, these provisions establish a source of income in Singapore even where none may exist under general tax law.

Income Sourced in Singapore

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:

Income Received in Singapore

The Income Tax Act (ITA) incorporates the term “income received in Singapore,” providing an extended interpretation for income tax purposes. Moreover, this includes monies or other assets that are:

Income Accruing in Singapore

Tax authorities typically subject income that accrues within Singapore to taxation. Furthermore, income originating outside Singapore typically remains exempt from Singapore tax unless received by a taxpayer who is either a resident or has a branch or permanent establishment in the country. Nevertheless, this exemption is subject to specific conditions and criteria meticulously outlined by the tax authorities, signifying the importance of adhering to established regulations.

Moving on to the factors influencing the determination of the source of trade or business income, several considerations come into play. Additionally, these factors, which are not necessarily limited to, play a crucial role in assessing the tax implications:

Singapore Tax Residency – Are you a Tax Resident?

Tax authorities in Singapore categorize taxpayers as residents or non-residents, determining the income tax for foreigners based on their tax residency.

Additionally, if an individual resides and works in Singapore for at least 183 days in a calendar year, they are deemed a Singapore tax resident, impacting their tax obligations.

These are 2 common categories of 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.

Singapore Income Tax Rates for Residents

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

Singapore Income Tax Rates for Non-Residents

Taxes on Employment Income

Tax authorities apply a flat rate of 15% or the progressive resident tax rates, whichever is higher, to the employment income of non-residents.

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

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

How to calculate my Singapore income tax payable?

As per the Singapore Income Tax Act, Taxable Income is defined as the net income after deducting the following:

Formula for Tax Payable Calculation

Hence, IRAS has devised a straightforward formula for calculating your overall tax payable.

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

Let’s determine what total income stands for:

Singapore Income Tax Treatment of Income Earned Overseas

In general, overseas income received in Singapore is not taxable. This applies to income brought into Singapore and deposited into a local bank account.

Nevertheless, specific circumstances exist where overseas income becomes taxable.

For example, foreign income received in Singapore through partnerships while working overseas is deemed taxable because it’s considered incidental to your Singapore employment.

Singapore Income Tax Treatment of Employer Benefits

Moreover, tax authorities tax all gains and profits from business, whether local or foreign, unless specifically exempt or covered by administrative concession. Additionally, this includes all benefits, whether monetary or otherwise, related to employment.

Examples of taxable benefits received from your employer include:

Nevertheless, tax authorities utilize concessionary formulas for specific non-cash benefits, like housing, thus reducing taxation on these benefits-in-kind. Consequently, executives benefit from a compensation package strategically designed to lower their individual tax liability in Singapore.

These are some examples of employee benefits received as part of employment:

Filing Taxes

The law requires individuals and businesses to file Singapore income taxes with the Inland Revenue Authority of Singapore (IRAS). Hence, all companies must stay compliant by filing their taxes in Singapore.

Individuals must file their completed income tax forms by April 15th. For information related to filing of taxes, we at Paul Hype Page can assist you with them, given our proven track record. Therefore, we encourage you to feel free and reach out to us for any assistance or inquiries.

Assessment of Taxes and Tax Payers

*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. You can see the various forms and different purposes in this table 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.

Nevertheless, in case of disagreement with your tax amount, promptly notify the tax department. State your reasons for objection within 30 days from your tax bill date.

Subsequently, within 30 days of receiving your Notice of Assessment, you must pay the full tax amount, irrespective of whether you have informed the tax authority about your objection. Furthermore, penalty charges apply if your tax remains outstanding after 30 days.

When is your income taxed?

In Singapore, the government computes income tax for the year of assessment (YA). This tax is based on income earned in the previous fiscal 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. You can calculate the personal income tax of the calendar Year of 2010 based on the income earned between 1 January 2009 to 31 December 2009.

Additionally, companies can select a financial year that differs from the calendar year. A different basis period applies to businesses whose financial year end is not 31 December.

Eg. If you company has 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).

How Tax Planning May Reduce Your Income Tax Burden?

There are four ways to save money on taxes in Singapore. Listed below are the methods to help you save money on taxes.

Tax Residency

First, if the taxpayer is a tax resident, they are eligible for specific tax breaks and deductions. Residents can claim tax relief, including:

Taxpayers can claim deductions for employment, business, donations, rental, R&D, and other expenses.

Double Taxation Agreements

Second, if the taxpayer is not a Singapore tax resident, they may utilize Avoidance of Double Taxation Agreements (DTAs) to avoid paying taxes in both his or her home country and Singapore.

A DTA clarifies the tax rights of Singapore and other countries regarding income from cross-border activities. Only tax residents of Singapore or the partner country may benefit from the effects of the DTA.

NOR Scheme

Thirdly, by utilizing the Not Ordinarily Resident (NOR) scheme, a taxpayer could benefit from either Tax Exemption of Employer’s contributions to the Overseas Pension Fund or Time Apportionment of Singapore employment income.

A taxpayer qualifies for the NOR scheme if the taxpayer has not been a Singapore tax resident for the entirety of the three years before the YA in which the taxpayer applies for the scheme. The taxpayer must also be a tax resident during the current YA to be eligible. A taxpayer with NOR status will have it for five years.

Expenses Claimable

Lastly, 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 artifacts to approved bodies or organizations. The taxpayer can claim a tax deduction equal to 250% of the value of the donation made.

Conclusion

For foreigners setting up businesses or individuals planning personal tax strategies, you can reach out to us for more information. Singapore provides legitimate options for international tax planning under OECD’s common reporting standards and automatic exchange of information among tax authorities.