Singapore Personal Income Tax Overview
Singapore is a world-renowned destination for a reason – it not only provides top-notch facilities and amenities but it’s also situated in an advantageous location where traveling to other Southeast Asian countries is quick and easy. For example, Vietnam, Cambodia, Malaysia, Thailand, and Indonesia are all within a two-hour flight from Singapore’s Changi airport. If you’re looking for an exciting place to work, and live, then look no further than Singapore!
Singapore is a place where foreign investors can take advantage of low taxes and other attractive incentives. For example, progressive tax rates are levied on the personal income of resident taxpayers, with a top marginal rate of 22%. In 2019, the highest tax bracket applied to incomes that exceeded S$320,000 (Singapore dollars or SGD).
The island city-state of Singapore has a very attractive tax policy for companies looking to expand into the Asian markets. It is a global hub for international investment and commerce, and its location makes it ideal for companies looking to do business in the region.
In 2017, the government allocated 49.6% of its budget to social development, 27.8% of its budget to security and external relations, and 18.9% to economic development. The rest of the 3.7% of the total funds were used for administration.
If you’re not a Singapore citizen or a Singapore Permanent Resident, the Inland Revenue Authority of Singapore (IRAS) considers you a foreigner for tax purposes. Depending on your tax-residency status, you may have to pay income tax on any income earned or accrued in Singapore.
Tax-residency of Foreigners in Singapore
If you’re a foreigner working in Singapore, it’s important to be aware of the tax residency rules. To be considered a tax resident, you must work or stay in Singapore for at least 183 days in a single calendar year. This includes weekends and public holidays, as well as any time you’re away from work for an overseas vacation or for work-related reasons. Less than 183 days will be considered for non-resident tax.
At Least 183 Days
According to Singapore’s tax residency rules, a foreigner is considered a tax resident if they stay or work in the city-state for at least 183 days in a single calendar year. This number includes weekends and public holidays, as well as any temporary absences from work for an overseas vacation or for work-related reasons. Being a tax resident of Singapore has many benefits, including access to the country’s world-class healthcare and education systems.
If you are a foreigner and you stay or work in Singapore for three years in a row, you will be considered a tax resident for all three years, even if you spend less than 183 days in Singapore during the first and third years.
If you’re a foreigner living in Singapore, you may be eligible for tax relief when you file your Form B1 (for tax residents). Additionally, your foreign-sourced income brought into Singapore may also be exempt from taxes. The progressive resident tax rates range from 0% to 22%, with the highest rates kicking in at an annual income of S$320,000.
What Is Not Ordinarily Resident Scheme?
The Not Ordinarily Residents (NOR) in Singapore are given special tax privileges for a five-year period to help encourage new businesses in the area.
If you want to remain a non-resident for tax purposes in Singapore, you’ll need to meet the following criteria:
- You must have been a Singapore tax resident in the past three years of assessment
- In the year of assessment in which you qualified for NOR status, you must have been a Singapore tax resident
It’s important to note that to retain your NOR taxpayer status, you only need to be a tax resident.
Benefits of the Not Ordinarily Resident Scheme
A NOR taxpayer is only liable for income tax on the part of their income that corresponds with the days they spent in Singapore, as long as he has spent a minimum of 90 days outside Singapore for business reasons and has received at least $160,000 as total Singapore employment income. A NOR taxpayer can also enjoy tax exemption made by the employer.
Less Than 183 Days
Clear as day, a foreigner is a non-resident for tax purposes only if their stay in Singapore is less than 183 days in one year. For said individuals, Form M for non-residents doesn’t have any tax relief, but the income earned in Singapore is taxed at a 15 percent flat rate (or at progressive resident rates if it results in higher tax liability). It’s important to note that Director’s fees are taxed at 20 percent flat.
Less than or equal to 60 days
According to IRAS, foreigners who stay in Singapore for 60 days or less are exempted from taxes and are considered non-residents.
Singapore Corporate Tax Rate
The one-tier corporate tax system in Singapore is designed so that the tax a company pays is the final tax on its chargeable income. This means that any dividends paid by the company to shareholders are exempt from tax.
The government has set the corporate income tax rate at 17% since 2010. But your business may be eligible for a lower effective tax rate if you take advantage of the government incentives, subsidies, and schemes available. Your company’s chargeable income is the total of your taxable revenues minus allowable expenses and other allowances.
Corporate Tax Exemptions
SUTE scheme for Singapore Companies
The eligibility includes:
- If you’re a corporate shareholder, you should know that the SUTE Scheme applies to you!
- The SUTE plan, or Start-Up Tax Exemption Scheme, provides qualifying start-ups with a unique tax exemption for the first three years of assessments. It provides some tax assistance to these new enterprises by lowering the applicable corporation tax rates.
- The start-up must be registered in Singapore, and for the relevant YA (financial statement), the start-up should be a Singaporean tax resident.
- There is a maximum of 20 shareholders in each YA of the company.
- One individual shareholder beneficially and directly owns 10% or more of the company’s issued ordinary shares
Goods & Services Tax
Singapore’s GST is a consumption tax that is levied on the import of goods, along with the supplies of goods and services made within Singapore.
A company with an annual turnover of more than S$1 million from selling taxable goods and services is required to register for GST. The requirement may be waived if the majority of goods or services are exported or supplied internationally (“zero-rated supplies”).
Companies can save money by registering for GST when they have a considerable amount of input GST paid on their purchases and expenses. By claiming these input GST credits when submitting their GST returns, companies essentially receive a refund for the GST paid on their purchases.
The Comptroller of GST may approve a company’s application for voluntary registration, at which point the company is required to remain registered for a minimum of two years.
Property Tax
The Singapore government imposes a wealth tax on property ownership, which applies to both HDBs and private homes. This tax is progressive, meaning that the rates are different for owner-occupied and non-owner-occupied homes. The purpose of this tax is to encourage home ownership in Singapore.
Tax on Rental Income
Under Singapore law, investment homes are subject to income tax, which is levied on the rental income earned from letting out the property.
Stamp Duty
If you’ve got documents relating to immovable properties, stocks, or shares that need to be registered, stamp duty is the tax you’ll need to pay. If you don’t pay the required amount of stamp duty, it’s an offense in Singapore, and you could be fined up to four times the original amount.
To avoid any trouble with the authorities, IRAS offers its e-Stamping system for all documents relating to immovable properties, stocks, or shares. Once signed and dated, the duty needs to be paid instantly using your smartphone or tablet. It couldn’t be easier!
Motor Vehicle Taxes
There are many different types of taxes that are imposed on motor vehicles, and they vary from country to country. In some cases, these taxes are imposed to discourage car ownership and road congestion. They can include things like registration fees, excise duty, road tax, and special tax.
Customs & Excise Duties
Singapore’s free port is a port that allows for the storage and trade of goods without taxes or tariffs being imposed. Duties are, however, levied on motor vehicles, petroleum products, and liquors.
Casino Tax
In Singapore, casinos are required to pay a casino tax on their gross gaming revenue. This tax is levied on the operator of the casino rather than on the players. In addition to the casino tax, there are also taxes on private lottery, betting, and sweepstakes. These taxes are generally levied on the operator of the activity rather than on the players.
Trust Income Tax (including income from estates)
Since 2010, the statutory income of a trustee has been subject to income tax at 17 percent. Resident beneficiaries are entitled to a share of the trust income by virtue of the trust deed, the deceased’s will, or the Law of Intestacy will be assessed on their share of entitlement at their personal income tax rates. Non-resident beneficiaries will have their shares of entitlement taxed at the prevailing trustee rate for the year of assessment.
Filing Date in Singapore
In Singapore, the deadline for filing taxes is April 15th. If you’re using the IRAS e-filing portal, you have an extra three days, and the deadline is April 18th.
You should be aware that the IRAS may not require taxpayers to file an income tax return if they only receive employment income under the Auto-Inclusion Scheme (AIS) and if their relief claims are unchanged from the previous year.
Income Tax Reliefs for Tax Residents* in Singapore
The progressive personal income tax rates in Singapore range from 0-22%, but the effective payable tax may be much lower if you take advantage of various government initiatives, including relief on earned income, spouse, child, and parent support, relief on life insurance policies, course fees, and foreign maid levy, and the relief given on Supplementary Retirement Scheme (SRS).
Tricks to Reduce Income Tax in Singapore
1. Upgrade your skills with a professional course
Did you know that it’s possible to get tax relief on courses that you attended in 2021, as long as it is a relevant course for your employees and you can prove that you’ve paid for it yourself? If that’s the case, you could get up to S$5,500 in tax relief.
2. Make a charitable donation.
What a great way to help others and get a tax deduction! Any donation made to a charity registered as an IPC in Singapore qualifies for a 250% tax deduction, meaning you could get up to $250 back for every $100 donated. Even better – the 250% tax deduction for qualifying donations has been extended for another two years, so take advantage of this great opportunity to help those in need while also getting some relief on your taxes!
3. Top up your CPF
Did you know that by topping up your Central Provident Fund (CPF) Special Account, you could be giving yourself a raise while also paying less in taxes? That’s right – the tax relief is automatic! The amount you are able to contribute is capped at S$7,000 per year for yourself, but you can also top up your parents’ CPF accounts (up to a maximum of S$7,000 each) and receive another round of tax relief for a total of S$14,000 in tax relief per assessment year.
4. Life insurance relief
If you’re unemployed or self-employed, your CPF contributions for the past year may have been low. If the total contributions to your Medisave account are below $5,000, you qualify for the life insurance tax relief on premiums you’ve paid for your own or your spouse’s life insurance policy.
5. Business expenses deductibles
As a business owner, it’s important to be aware that there are always going to be additional operational costs – no matter if you have a small shop or are running a tech startup. However, you can claim most of these business expenses as deductions on your taxes. Some examples of tax-deductible expenses for a business include accounting fees, skills development levies, foreign worker levies, and more. Keep in mind that not all expenses may be eligible for a deduction, so it’s always best to consult an accountant or tax specialist to see if your particular expense qualifies.
6. Rental expenses deductions
If you’re renting out your home for the first time, you may be wondering about the tax benefits of doing so. This can be a great way to save money and get a refund on your taxes.
Tax relief on your rental expenses is a great way to save money. This refers to the expenses you have generated in incurring the rental income. These expenses, based on 15% of the gross rental income, can be claimed as a deduction.
Conclusion
Get in touch with us if you want to learn more about the taxing system of Singapore or want to incorporate a company in Singapore.
