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Singapore Income Tax: Tax Residency & Tax Rates 2023

15 min read|Last Updated: November 18, 2022|
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Singapore personal income tax is also one of the lowest in the world and foreign scoured income is non-taxable.

4 Things About Singapore Income Tax Every Foreigner Must Know

  • The Inland Revenue Authority of Singapore (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 is tax free.

  • Singapore income tax rates for residents range from 0% to 22%. Non-residents are taxed at the flat rate of 15% or the resident’s rates whichever is higher
  • 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.

3 Ways Your Income is Liable to Tax in Singapore

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.

Income Deemed to be 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:

  • royalties
  • technical fees
  • management fees
  • employment income
  • profits of non-resident owners or charterers of ships or aircraft
  • income of non-residents from cable or wireless undertakings, and
  • rent from movable property

Income Deemed to be Received in Singapore

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:

  • remitted to, transmitted or brought into Singapore;
  • used in or towards the settlement outside Singapore of any debt which was incurred in respect of a trade or business that is carried on in Singapore; or
  • used to purchase any movable property that is brought into Singapore,
  • to the extent that the relevant monies, or other assets, concerned represent the taxpayer’s income as opposed to capital.

Income Accruing in Singapore

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:

  • where contracts are entered into and where acts under the contracts are performed;
  • where capital is employed. For instance, the ownership of patents, trademarks or stocks of goods in Singapore may give rise to a source of income in Singapore;
  • where title to goods passes;
  • whether a permanent establishment exists in Singapore.

Singapore Tax Residency – Are You a Tax Resident?

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:

  • Non-residents who have lived or worked in Singapore between 61 to 183 days in a calendar year will be taxed at either 15% of their income or the resident tax rate, whichever is higher.
  • Non-residents who have lived or worked in Singapore for less than 60 do not have to pay any Singapore income tax unless the non-resident is a

    • 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:

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

Eric
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Singapore Income Tax Rates for Residents

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.

Singapore 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, whichever is higher.

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

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

Eric

How to calculate my Singapore Income Tax Payable?

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

  • Expenses, which 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, which stands for donations to qualified charitable organisations
  • Personal relief, which stands for deductions to encourage social and economic objectives (Examples: Working mother child, Grandparent Caregiver, Course fee and Insurance Relief)

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:

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
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)

Singapore Income 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

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.

Singapore Income Tax Treatment of Employer Benefits

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:

  • 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 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.

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 taxes

You will be required to pay taxes

0% Income tax

Progressive 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 Name Who is it for
Form B1 Employed Individuals
Form B Self Employed, Sole Proprietors
Form M Non-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.

Which Period is your Income being Taxed

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).

How Tax Planning May Reduce Your Income 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 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.

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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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