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Singapore Singapore Taxation Individual Income Tax Introduction to Individual Income Tax in Singapore
KNOWLEDGE|
Basic Regulation of Individual Income Tax |
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1. |
Tax Principal Singapore adopts a territorial basis of taxation. In accordance with the Singapore Income Tax Act, Individual Income Tax is imposed only on the income sourced within Singapore. The income earned outside of Singapore is exempted from taxation. In accordance with the above principles, those who provide services within the territory of the Singapore, their employment income will be treated as derived from Singapore, namely the person who receive payments (whether in the form of cash or benefits-in-kind) for any service rendered in or any form of employment from Singapore need to pay income tax, regardless of whether the person is Singapore residents, no matter the payment of the income is received in Singapore or overseas. Income derived from outside of Singapore is not taxable in Singapore, unless it’s received through partnerships in Singapore. |
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2. |
Tax Year The basis period of the assessment is income earned from 1 Jan to 31 Dec. Tax payer should report and pay tax on their income earned in previous year by submitting their return from 1 Mar to 18 Apr in the following year. |
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Incidence of Taxation According to Singapore Income Tax Act, the following personal income shall be subject to tax: (1) Employment income (2) Trade, Business, Profession or Vocation (3) Investment income (e.g rental income) (4) Other source (e.g annuities, royalties, winnings or estate or trust income) The forms of income obtained by persons include cash, benefit-in-kind, securities, virtual currency, stock option and other forms of economic interest. Fringe benefits are gains and profit that employees receive from their employer in Singapore. This benefits are taxed under special concessionary basis, thereby resulting lower tax rates to them. For example, car and housing allowance. |
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Compliance Taxpayers who have received taxable income in the previous year should take the initiative to report to IRAS within the specified period. Even if the annual income does not exceed SGD20,000, they still need to report unless they receive written notice from IRAS that they are not required to report. |
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Singapore Tax Resident |
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Determination of Tax Resident You will be treated as a tax resident for a particular Year of Assessment (YA) if you are a : (1) Singapore Citizen (SC) or Singapore Permanent Resident (SPR) who resides in Singapore except for temporary absences; or (2) Foreigner who has stayed / worked in Singapore (excludes director of a company) for 183 days or more in the previous year. i.e. the year before the YA; or (3) Work in Singapore for a period straddling two calendar years and the total period of stay is at least 183 days; or (4) Continuously for three consecutive years. Table 1：The Criteria and Tax Implications for Foreigners as Tax Resident
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Calculation for Individual Income Tax Taxable income is the net personal income of an individual that is subject to taxes. The IRAS provides a computation of the taxable income as follows:
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Individual Income Tax Rates Personal resident ’tax is based on the income of previous year deducted with the reliefs and apply the progressive tax rate, the applicable income tax rates range from 2% to 24%. For the Year of Assessment (YA) 2024, all individuals who are tax residents in Singapore will receive a Individual Income Tax rebate of 50% of tax payable, up to a cap of SGD200. Table 2：Resident Tax Rates from YA2024 onwards
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Exempt from Paying Tax Generally, you do not need to pay income tax if you are earning gross income of SGD20,000 or less in a year or you do not derive or receive any income in Singapore. Taxpayer only need to pay income tax at the corresponding rate on the amount of their annual taxable income exceeding SGD20,000. |
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Tax Deduction Singapore tax resident has the right to claim tax deduction on child support, vocational training, insurance and central provident fund contributions. Taxpayers can apply for Individual Income Tax deduction according to their personal circumstances when filing tax returns. Table 3：Personal Reliefs (Applicable to Year of Assessment of 2019 onwards)
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Singapore Non-Tax Resident |
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Determination of Non-tax Resident Foreign person who have resided or worked in Singapore for less than 183 days during a tax year is considered as non-tax resident. In the following particular tax year, if the foreigner meets the requirements for being a tax resident, he shall pay tax as resident. If you are employed for 60 days or less, your short-term employment income is exempt from tax. This rule does not apply if you are a director of a company, a public entertainer or a professional in Singapore. Director’s fees and other income are taxed at the prevailing rate of 24% and not entitled to tax reliefs. If you are in Singapore for 61 to 182 days, your income generated in Singapore is taxed at 15% or progressive resident rates, whichever gives rise to a higher tax amount. Director’s fees and other income are taxed at the prevailing rate of 24% and not entitled to tax reliefs. Table 5：Tax Impact of Foreigner being Identified as Non-tax Residents
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| 2. |
Non-tax Resident Convert to Tax Resident Status After a foreigner is identified as a non-tax resident, he/she shall pay tax as a tax resident in a particular tax year if he/she meets the requirements to be tax resident. The criteria of tax residency status are: (1) Stay in Singapore at least 183 days in a year (exclude director). or; (2) Stay in Singapore at least 183 days for a continuous period over two years and the employment period must straddle two calendar years. or; (3) Stay in Singapore for three consecutive years. In practice, when a taxpayer makes his first tax return, as long as the foreigner has lived or worked in Singapore for less than 183 days in the previous tax year, he/she will be considered as non-tax resident first. Once the foreigner’s residence time in the following year reach the judgment criteria as tax resident, he/she shall apply to IRAS to change his/her tax residency status. Taxpayer may appeal to IRAS for a retrograde adjustment for the tax payable in the previous year and apply for a refund. |
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| 3. |
Tax Rate for Non-tax Resident Table 6：Singapore Non-tax Resident Tax Rate
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Special Tax Scheme |
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1. |
Tax Exemption for Foreign Sourced Income
In general, the income earned overseas by any Singaporean employee on or after 1 January 2004, is not taxable, as per the guidelines put forth by IRAS (Inland Revenue Authority of Singapore). However, there are certain exceptions wherein the overseas income becomes taxable in Singapore. (1) If the overseas employment of an individual is in relation to his/her Singapore employment. (2) If the income earned overseas is received through partnerships in Singapore. (3) If an individual is working overseas at the behest of the Singaporean government. |
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Not Ordinarily Resident (NOR) Scheme The Not Ordinarily Resident (NOR) Taxpayer Scheme was announced in the 2002 Budget Statement. It aims to attract talents to relocate to Singapore. A NOR taxpayer will enjoy the benefit of time apportionment of employment income only if he meets additional conditions. In addition, an NOR taxpayer will enjoy favourable tax treatment of pre-assignment income and favourable tax treatment of contributions to overseas pension funds. Any individual may qualify for the NOR status for a 5-year period if the following criteria are met: (1) He must not be a Singapore tax resident in the 3 years of assessment prior to the year he qualifies for the NOR scheme; (2) He must be a tax resident for the year of assessment in which he wishes to qualify for the NOR scheme; (3) He must spend 90 days or outside Singapore for business; and (4) He must have at least SGD160,000 employment income. NOR taxpayers will enjoy the following benefits, the period of validity will be 5 years: (1) Time apportionment of Singapore employment income will be subject to tax; and (2) Employer’s contributions to approved mandatory overseas pension funds on behalf of the non-citizen NOR will be exempt from income tax in the hands of the employees. Where the employer’s contributions are to non-approved mandatory overseas pension funds, only the amount that is up to the prescribed Central Provident Fund (“CPF”) contribution cap will be exempt from tax. The NOR scheme will cease after YA 2020. As such, the last NOR status granted will run / be valid from YA 2020 to YA 2024. Individuals who have qualified for the NOR status will continue to enjoy NOR tax concessions until their NOR status expires, if they continue to meet the conditions of the concessions. |
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Taxation of Area Representatives Area representative status is accorded to an individual who is employed and remunerated by a company outside Singapore with duties covering territories other than Singapore. His employment contract should cover more than one territory. An area representative is assessable to tax based on his prorated income attributable to his presence in Singapore. Hence, he must keep a schedule of his travelling outside Singapore and such schedule should reflect the dates of arrival and departure from Singapore and places visited. In determining the numbers of days in and outside Singapore, part of a day in Singapore is regarded as a day in Singapore. Where an area representative is treated as tax resident in Singapore, he will be taxed at graduated rates and will also be entitled to personal reliefs. Otherwise, non-resident rules mentioned above will apply. |
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Individual Income Tax Filing and Payment |
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1. |
Individual Income Tax Filing If you are resident in Singapore, you can e-File your completed tax form from 1 March to 18 April every year. If you file paper tax return, you are required to submit the completed tax form by 15 April of each year.
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| 2. |
Payment of Taxes After filing your Individual 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 tax department within 30 days from the date of your tax bill and state your reasons for objection. The Inland Revenue Authority of Singapore offers a variety of payment methods to help taxpayers pay their tax, GIRO(General Interbank Recurring Order) is a recommended method by IRAS. Through Giro, taxpayers can pay their taxes directly from their personal bank accounts, which is fast and convenient. They can also apply for interest-free instalments. Taxpayers need to fill out the Master Giro application form to apply if they are using this in the first time. |
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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