Social Security & Taxation
Income Tax in Singapore
- Singapore taxes local employment income; this includes regular wages or salaries, as well as all bonuses and similar payments.
- Fiscal residents pay fewer taxes than non-residents; you can claim fiscal residency for a tax year if you are living or working in Singapore for more than 183 days.
- If you are worried about getting taxed twice, do not fear; Singapore has Double Tax Avoidance Agreements (DTAs) with numerous other nations.
Unless you plan on moving to a tax haven, such as Luxembourg or the Cayman Islands, taxation is an inevitable, though unpleasant topic, no matter where you live. After relocating to the Southeast Asian city-state, you have to pay income tax in Singapore as well.
But don’t worry! Although the city-state is not an international tax shelter, it is known as a business environment that is fairly friendly to companies and taxpayers alike. Rates for income tax in Singapore are progressive and comparatively moderate.
The local tax system operates on the territorial principle. Therefore you only need to pay income tax in Singapore on your local sources. For example, if you have overseas investments, your capital interest from such foreign accounts would not be taxed in Singapore. However, taxes are due on income from local employment, business gains or profits, property rents, pensions, or annuities.
The tax year is the same as the calendar year. You have to file your income tax return for the previous calendar year by 15 April. To get a good estimate of the tax burden that awaits you, it’s important to work out if you count as a Singaporean resident for tax purposes.
Fiscal residents of Singapore have lower tax rates than non-residents. The latter are taxed at a flat rate of 15% to 20% — the latter rate will be increased to 22% in 2017 — depending on the type of income (employment vs. other sources). As a rule of thumb, you can claim fiscal residency for a tax year if you are physically present in Singapore or holding down a job with a local company for more than 183 days a year.
Income Tax in Singapore for Employees
If you are an expat employee with any kind of income from a Singaporean source and have fiscal residency to boot, here are some things to keep in mind regarding income tax in Singapore.
First of all, income from local employment includes your regular wage or salary, as well as all bonuses, gratuities, perks, such as stock options, allowances, such as tuition allowance for international schools, and benefits-in-kind, such as a company car or housing.
Secondly, as a temporary resident from overseas, you do not have to pay any contributions to social security in Singapore. Only citizens and permanent residents have access to the Central Provident Fund (CPF) schemes. Therefore expats cannot claim tax relief for their social security payments, either.
Although they are excluded for tax deductions on CPF payments, fiscal residents can benefit from other kinds of relief on income tax in Singapore. Common forms of tax deductions include:
- tax relief on earned income (1,000-8,000 SGD per year, depending on your age)
- tax relief for the financial support of a dependent spouse, child, parent, or grandparent (2,000-11,000 SGD per year, depending on the relative, their living situation, and whether or not they are a person with disabilities)
- tax relief on life insurance premiums
- tax relief on course fees for employment-related training
- tax deductions for charitable donations
- tax deductions for employment expenses (e.g. entertaining clients, traveling for business purposes)
Tax Rates for Residents
Once you have deducted all kinds of applicable tax relief from your total Singaporean income, you will arrive at your actual taxable income. As mentioned above, fiscal residents are subject to progressive rates for their income tax in Singapore.
For an annual income of less than 20,000 SGD, they don’t have to pay any tax at all. The tax rates for all other brackets range from 2% to 20%; the maximum rate is expected to increase to increase in 2017 to 22%. The latter only applies to the highest income group, with an annual income of more than 320,000 SGD. You can find the exact tax rates for the year 2012 onwards on the IRAS website.
Special Expat Taxation
As the Singaporean government would like to attract foreign companies and transform the city-state into a business hub for the Asia-Pacific region, the IRAS has introduced special clauses for expat executives who work in Singapore, but have to travel a lot. They can claim certain tax benefits for up to five consecutive years under certain conditions:
- They are a new fiscal resident of Singapore.
- They are employed by a local company or the local branch office, representative office, etc. of an overseas business.
- They earn more than 160,000 SGD per year.
- They spend over 90 days in a tax year outside of Singapore for business reasons.
Under these circumstances, they only have to pay income tax in Singapore on the employment income earned during the part of the year that they have actually spent in the city.
For instance, let’s assume that the new sales director of a Singapore company, a temporary resident from overseas, spends exactly 120 days outside the country on business travel. If he or she earns an annual salary of 180,000 SGD, they only have to tax about two thirds of that sum, which would be 120,000 SGD.
However, all benefits in kind remain fully taxable. If the same expat manager lives in local company housing, this is subject to income tax in Singapore for the entire year, no matter how long they stay there.
In addition to these tax benefits, expatriate executives may also profit from exemptions on payments made to overseas pension funds or social security schemes. Please contact the IRAS for more information on these deductions from income tax in Singapore.
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