How to pay income tax in Singapore
Singapore has an attractive fiscal regime, especially when compared to the prevailing rates in advanced economies. Depending on the duration of your employment in Singapore, you might be required to pay taxes in the country.
Taxes for Residents and Non-Residents
The number of days you spend in Singapore is a key indicator of your tax status. Professionals spending at least 183 days in the country in a year are considered tax residents for the year, and any income received is taxed at a progressive rate. Those who have spent a cumulative 183 days over a period of two years will be considered tax residents for both years, and once again, their income will be taxed at progressive resident rates. In some cases, foreign resident taxpayers might be able to claim tax relief.
In addition, if you're a permanent resident who's established a permanent home in Singapore, you'll be considered a resident.
If you work for 61 to 182 days, you'll be considered a non-resident but will still have to avail yourself of taxes, which will amount to 15% or progressive resident rates, whichever results in the highest amount. For professionals holding directorship positions, income will be taxed at 22%. Finally, those who are employed for 60 days or less are exempt from tax obligations, except for directors, public entertainers, and professionals.
If you're confused about if you'll be considered a Singaporean resident, it's always a good idea to consult with an accountant. However, you'll also receive communications from the Inland Revenue Authority of Singapore (IRAS) telling you whether you need to file your income tax, so you can always wait for this as well. Do note that if you're waiting for an SMS text from them, they'll send it out around mid-February.
You should also note that if you don't hear anything from IRAS, that doesn't necessarily mean that you don't need to file your income tax. If you have an annual net business income that exceeds S$6,000 or an annual income (inclusive of rental income) that exceeds S$22,000, then you'll need to file. Just remember that it's always better to be safe than to be sorry!
Another interesting thing to know is as of 2022, the Singaporean government has decided that around 120,000 taxpayers on the No-Filing Service will get a Direct Notice of Assessment (D-NOA). This means that instead of receiving communications that they need to file, these people will just get a direct bill in May. There are plans to expand this initiative more throughout the years.
Not Ordinarily Resident (NOR) Scheme
The Not Ordinarily Resident (NOR) scheme enables some people to enjoy tax concessions, provided they meet specific criteria in terms of the time they spend in Singapore. Taxpayers who are eligible to participate in the scheme only pay income tax on the part of their income, which corresponds to the number of days spent in Singapore.
The scheme is particularly interesting for individuals who have been classified as non-residents for the three years preceding their new classification as tax residents. Upon being reclassified (if, for example, the individual decides to relocate permanently to Singapore), qualified individuals are given the NOR status for a period of five years. IRAS provides a NOR status calculator for those wishing to check their eligibility.
To qualify for the NOR scheme, you must be a tax resident for that year of assessment (YA). And as we've previously said, you must be a non-resident for three consecutive YAs before becoming a tax resident. In addition, you must've spent at least 90 days outside of the country for business reasons, and your total Singaporean employment income must be at least S$160,000.
Do note that you can't apportion your director's fees or any income tax payable in Singapore that came from your employer, whether it's direct or indirect.
If you want to be taxed as a non-resident, you need to send in your application within four years from the YA after the year you were assessed as a resident. If you submit it after four years, then you won't be allowed for the NOR scheme.
The NOR scheme cap isn't a single amount. Instead, it's based on the total employer contribution to an overseas contribution scheme. This can be either mandatory or non-mandatory.
After the five-year qualifying period, your NOR status will lapse. However, if you meet the qualifying conditions again, you are more than welcome to apply again.
Singapore's income tax rates for residents
The income tax rates paid in Singapore are progressive and go from 0% to 22% for regular employment. For self-employment, this applies to incomes of over $320,000.
Here are the rates for the years 2017 to 2023 (for chargeable income, income tax rate, and gross tax payable):
-
First S$20,000: 0%, S$0
Next S$10,000: 2%, S$200 -
First S$30,000: 0%, S$200
Next S$10,000: 3.5%, S$350 -
First S$40,000: 0%, S$550
Next S$40,000: 7%, S$2,800 -
First S$80,000: 0%, S$3,350
Next S$40,000: 11.5%, S$4,600 -
First S$120,000: 0%, S$7,950
Next S$40,000: 15%, S$6,000 -
First S$160,000: 0%, S$13,950
Next S$40,000: 18%, S$7,200 -
First S$200,000: 0%, S$21,150
Next S$40,000: 19%, S$7,600 -
First S$240,000: 0%, S$28,750
Next S$40,000: 19.5%, S$7,800 -
First S$280,000: 0%, S$36,550
Next S$40,000: 20%, S$8,000 -
First S$320,000: 0%, S$44,550
In excess of S$320,000: 22%
These rates will change in 2024.
In comparison to the rest of the world, Singapore has one of the lowest-tiered tax rates. Combined with the high standard of living, it's no wonder why so many expats choose this nation as their new home.
Singapore's income tax rates for non-residents
As a non-resident professional, you'll be taxed either 15% of your gross income or 22% of your net income. To find out the exact rate, you'll have to see the IRAS's page about Taxable Income of Non-Resident Professionals.
Non-resident public entertainers who have provided services in Singapore were taxed at a 10% concessionary rate up to 31 March 2022, but after that date, it went up to 15%.
If you're a non-Singaporean SRS account holder who received SRS withdrawals, your rate is 22%. And if you received interest, commission, or a fee that's associated with loan or indebtedness, you'll be taxed at either a 15% reduced final withholding tax rate or 22% if it's not applicable.
All numbers given are for YA 2017 to YA 2023.
The Singaporean fiscal year
The Singaporean fiscal year runs from January 1st to December 31st. The IRAS publishes a calendar for when taxes are due, and this is generally towards the mid to end of April. Tax returns can be filed by paper filing or online through the myTax Portal using your SingPass.
Income isn't taxed at source and is payable in multiple installments. When leaving Singapore, be sure to ask for a tax clearance certificate, as this is a compulsory step.
Items taxed in Singapore
Benefits such as housing or stock options are also taxed in Singapore, on top of your income and any bonuses associated with your performance. In a similar manner, rent received when renting out property in Singapore will be subject to income tax and needs to be part of your tax return. Rental income covers rent and related payments such as maintenance, furniture, and fittings.
Non-taxable income in Singapore
Earlier, we mentioned that Singapore has an attractive fiscal regime, which has caused expats to flock from all over the world. So this might be of interest to you.
Some of the main things that aren't taxable in Singapore include capital gains from stocks and property investments, national service housing, medical and education awards, and Central Provident Fund (CPF) life payouts. For those who like to gamble, then you're in luck, as winnings from TOTO and 4D, as well as soccer and horse betting, are all non-taxable!
This isn't an extensive list of what's taxable either. Take a look at IRAS's website to find out more about what's taxable and what's not.
Saving on your tax obligations
There are numerous ways in which you can reduce your tax bill. Do note that if you qualify for several deductions, there's a tax relief ceiling of S$80,000 (for 2022).
First, if you have rental expenses, then you can deduct them. It can be 15% of the gross rent and the mortgage interest on that property.
You can also get deductions donations. The deductions will equal 2.5 times the qualifying amount.
Those who are self-employed or have a business, trade, partnership, profession, or vocation can also make certain deductions, so long as you qualify for them. Otherwise, employees can claim deductions if they work from home and need other deductions for expenses that their employers don't cover.
This includes deductions on rental expenses, donations to charitable institutions, investment schemes, course fees, and medical expenses, to name a few. Be sure to regularly check the IRAS website to consult and update the list of potential deductions.
Students can also get some help with their tuition. Thanks to the Course Fees Relief initiative, you can deduct up to S$5,500.
If you're married, there are also certain tax reliefs and rebates available to you. For example, there's the Parenthood Tax Rebate (PTR), which is given to encourage residents to have more children.
Area Representative Scheme
If you're employed by a foreign employer and need to travel outside Singapore for your work, you could benefit from the apportionment of your income under a scheme called the Area Representative Scheme. Do note that benefits-in-kind (BIK) you receive in Singapore will be fully taxed.
To qualify as an area representative, you need to be employed by a non-resident employer. You must also be based in the country for geographic convenience, and you're required to travel outside of Singapore for business. Lastly, your remuneration is paid by your foreign employer. It shouldn't be charged to the accounts of a permanent Singaporean establishment, whether it's direct or indirect.
To apply, you'll need to submit the application form. You'll also need to submit it with your annual tax return, as well as your employment contract or job description with the foreign employer's letterhead. This letter must be signed by authorized personnel. In addition, you need to submit your travel schedule by using the Area Representative Travel Calculator.
The good news is, that if you apply as an area representative and are approved, you won't need to reapply every year. This is if your employment arrangement hasn't changed. Do note that you're still required to submit the Area Representative Travel Calculator every year in order to still get the scheme's tax concession.
If there has been a change in your employment arrangement, then you'll need to contact IRAS. That way, they can reassess whether or not you're still eligible for the Area Representative scheme.
Prevention of double taxation
Singapore has signed treaties that prevent double taxation. This is commonly found in many countries of the world, so if you've been an expat in another nation, then you might be familiar with this concept.
Essentially, Singapore has signed Avoidance of Double Taxation Agreements (DTAs) and similar documents with approximately 100 jurisdictions. Some of the countries that have agreements with Singapore include Australia, Austria, Belgium, Brazil, Cambodia, Canada, China, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Norway, the Philippines, Poland, Portugal, Saudi Arabia, Serbia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Thailand, the United Kingdom, and Vietnam.
The following countries have limited DTAs with Singapore: Bahrain, Bermuda, Brazil, Chile, Hong Kong, Oman, Saudi Arabia, United Arab Emirates, and the United States.
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