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Singapore: Social Security and Taxes

Central Provident Fund? Medisave account? Bilateral tax relief treaty? If all these terms sound Greek to you, you have come to the right place! This part of the InterNations expat guide to Singapore provides a quick and easy intro to social security and taxation in the city-state.

The system of social security in Singapore is often cited favorably in international discussions about the welfare state. Proponents of government support point out the generally good standard of living, the availability of medical care, and the high life expectancy of more than 83 years at birth. On the other hand, those who favor personal responsibility applaud the ways in which the Singaporean model encourages citizens to make provisions for times of need. It remains to be seen how Singapore will be dealing with the demographic challenges that are characteristic of so many highly industrialized nations. The above-average life expectancy and one of the lowest fertility rates in the world lead to an aging society with a decreasing active population. However, the considerable number of expats and migrant workers may offset this potential loss in productivity. Moreover, taking care of the elderly is still regarded widely as the responsibility of the young generation.

Social Security Schemes

Singapore’s social security system is composed of several so-called provident funds. This concept means that all employees must lay aside a certain percentage of their monthly earnings. Their employer also has to contribute to this sum. The allocations are stored in protected accounts with a fixed interest rate, and they may only be used for specific purposes. These include healthcare bills, sickness benefits, and maternity leave; home-ownership, private education for their children, and retirement provisions for the employee’s and their spouse’s old age. Unfortunately, however, these requirements only apply to citizens and permanent residents. Expatriates are therefore included from social security in Singapore. Unlike self-employed Singaporeans, they cannot contribute on a purely voluntary basis, either. Consequently, Singapore has no social security agreements with other countries. Our expatriate guide explains what this means for foreign assignees and how they can make up for the temporary loss of their social security coverage.

Taxation in Singapore

Though expatriates aren’t covered by Singapore’s social security funds, they do benefit from the country’s fairly moderate income taxes. The resulting increase in net income usually allows them to arrange for medical insurance and private pension plans on their own. Often, their employer supports them financially as well. The Singapore tax system is generally efficient and fairly easy to understand. Our guide walks you through the most important aspects of paying taxes in Singapore: from such basics as the fiscal year and the definition of fiscal residency, over tax rates and tax relief to special clauses, for high-earning expat residents. If you have ever wondered how tax clearance upon leaving a country works or what a DTA (double taxation avoidance agreement) is good for, we’ll answer all your questions! While we cannot replace a good tax consultant, we can certainly help you to better understand what your tax consultant is doing.

InterNations Expat Magazine