Calculation of Taxable Income
After expenses, donations, and personal reliefs are deducted from one’s income, the remaining amount is known as taxable income. The Inland Revenue Authority of Singapore (IRAS), the Singapore government’s tax collection arm, defines expenses as “qualified employment-related and rental-related expenses”, donations as “donations to qualified charitable organizations”, and personal reliefs as “‘support to dependents, academic tuition, professional development expenses, and premiums paid on life insurance policies”. Among the more well-known personal reliefs are course fees relief, National Serviceman relief, and life insurance relief.
According to the IRAS, taxable income is first calculated by subtracting expenses from total income. This preliminary amount is known as statutory income. Donations are then subtracted from statutory income to arrive at assessable income. Finally, personal reliefs are deducted from assessable income. The amount remaining is the taxable income. Taxable income is the amount which determines at what rate a taxpayer is to be taxed.
Tax Treatment of Income Earned Abroad
Income that has been earned in another country is normally not subject to any taxation. This is also true of income that was earned abroad but paid into a bank account earned in Singapore. However, there are situations in which income from abroad will be taxed. This is the case in the following situations: when the taxpayer’s employment abroad is part of the taxpayer’s Singapore employment, when the income is received through partnerships in Singapore, when the income from abroad is non-exempt service income, when the taxpayer is employed abroad on behalf of the Singaporean government, or when the taxpayer has a trade or business in Singapore and is carrying on a trade or business abroad which is incidental to the taxpayer’s trade in Singapore.
If a taxpayer’s gains from employment abroad are taxed in that country, the taxpayer may apply for double taxation relief to avoid having the same income taxed twice. Double taxation relief is a credit of an individual’s or company’s foreign tax suffered against its Singapore tax which is payable on the same income. Double taxation relief can only be enjoyed after submitting a certificate of residence to the foreign country.
Tax Treatment of Employer Benefits
All gains or profits, regardless of their original location, delivered to an individual from business activity are taxable unless they are specifically exempt from taxation or are covered by an existing administrative concession. These gains or profits include all benefits paid or granted to the individual with regard to employment. The benefits may either be monetary or non-monetary. Most benefits provided by an employer are taxed upon the individual’s acceptance. However, certain non-monetary benefits are taxed using a formula known as the concessionary basis. The concessionary basis applies to benefits such as accommodation, insurance premiums, share options, memberships, and subscriptions. Benefits that are taxed using the concessionary basis are subject to lower tax rates than those which are not.
Filing of Personal Income Tax Returns
Every taxpayer in Singapore is required to file a personal income tax return to IRAS. The due date for doing so is April 15 every year. After a taxpayer files an income tax return, the taxpayer will receive a Notice of Assessment, or tax bill, on a date before September 30. The tax bill specifies exactly how much tax is to be paid. Those who do not agree with the amount mentioned in the tax bill must inform the tax authorities within 30 days of the date of the tax bill and state any reasons for disputing the figures.
All taxpayers are required to pay the full amount of tax within 30 days of receiving the Notice of Assessment. Those who do not do so will be punished accordingly.