In Singapore, taxpayers are taxed at different rates depending on various factors. One of these factors is whether the taxpayer is a tax resident in Singapore. Resident and non-resident tax rates in Singapore are different.
Tax Resident versus Non Tax Resident
A taxpayer is to be categorized as a resident for tax purposes if any of the following apply to the taxpayer: if the taxpayer is a citizen of Singapore, if the taxpayer resides in Singapore and has a permanent home there (i.e., a Singapore permanent resident), or if the taxpayer is neither of the preceding, but is a foreigner who has lived and worked in Singapore for a minimum of 183 days of the preceding year of assessment (YA). However, this third category excludes foreigners who are the director of a company. Most Singapore tax residents pay their income tax at progressive income tax rates. Under this progressive income tax system, taxpayers who earn at least S$20,000 of chargeable income in a year must pay income tax. In Singapore, the lowest possible rate at which a resident individual is to be taxed is 2%; this rate rises as one’s chargeable income does up to a maximum tax rate of 22%. This 22% tax rate is imposed on individuals who earn a minimum of S$320,000 of chargeable income per year. Tax residents are also eligible to be protected from the effects of double taxation as long as Singapore and the other country involved have concluded one or more tax treaties.
How foreigners’ income in Singapore is taxed, as well as their tax resident status, is contingent on certain criteria. Those who work in Singapore for 60 days or fewer of a particular calendar year do not have to pay any tax on their earnings. However, public entertainers, non-resident company directors, and foreign professionals such as trainers, coaches, consultants, and speakers are not tax-exempt. Foreigners who live or work in Singapore for between 61 and 182 days of a calendar year are taxed at either a 15% flat rate or the same progressive rates imposed on residents. Whichever amount is higher will be used. As stated in the previous paragraph, foreigners who live and work in Singapore for at least 183 days of a calendar year are tax residents and as such, are to pay income tax at the progressive income tax rates imposed on all tax residents. The same is true of foreigners who live or work in Singapore for a continuous period of at least 183 days spanning two different calendar years. Any foreigner who lives or works in Singapore for three consecutive calendar years will not only be deemed to be a tax resident but will also be taxed at resident rates for all three years.
Special Cases on Tax Resident Status
Foreigners who are company directors in Singapore are not regarded as tax residents unless they have an employment pass, lived or worked in Singapore for at least 183 days of the previous YA. A non-resident director’s remuneration, which may include director’s fees and salary, related to a tax resident company in Singapore is subject to a withholding tax rate of 22%. Tax resident companies in Singapore are those whose control and management is exercised in Singapore. “Control and management” refers to board of directors meetings. This tax payment is mandatory regardless of the actual location of board meetings or the director’s own physical location while working. Should the director receive profits from Exercise of Stock Options (ESOP) or Vesting of Stock Awards (ESOW), the director is required to report these gains and will subsequently receive a tax bill detailing how much tax is to be paid. Director’s remuneration as a board director valued at a minimum of S$10,000 is subject to a withholding tax at a 20% rate if the director is physically present in Singapore for fewer than 183 days of a YA. If the director’s remuneration is at least S$15,000, it is subject to a 20% withholding tax rate if the director has been in Singapore for fewer than 183 days of the calendar year at the time that the remuneration is declared.
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 is required to be paid.
Non-resident Public Entertainers
Non-resident public entertainers (NRPEs) are also not subject to the usual tax laws for non-residents. NRPEs are defined as any of the following: stage, radio, or television performers; musicians; or athletes who are in Singapore for fewer than 183 days of a calendar year. NRPEs are subject to a withholding tax of 15% of their taxable income earned from services performed in Singapore. However, this tax rate is reduced to 10% should the income for the services performed in Singapore be due and payable to the NRPE during the period spanning February 22, 2010, to March 31, 2020.
Non-resident professionals (NRPs) also operate under a different set of tax rates. NRPs include consultants, coaches, trainers, foreign experts, speakers, individuals who operate through foreign firms, and academics who are in Singapore for fewer than 183 days of a calendar year. The income earned by NRPs is subject to either a withholding tax at 15% of the gross income or fees payable to the NRP or the non-resident rate of 22% if the NRP prefers to be taxed based on net income.
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