Singapore Personal Tax Guide
This article covers the applicable taxes, the tax rates, calculation of taxable income, allowable deductions, and taxation of foreign income for individuals in Singapore. According to a recent analysis by EY, Singapore’s personal tax rates are significantly lower than most other countries across the globe and the country therefore is very good place for high-earning professionals to relocate to.
The personal tax system in Singapore is progressive in nature. Progressive tax rate means that the tax rate increases with an increase in the individual’s income (capped at 20% at present for portion of the annual income exceeding $320,000). However, many types of personal income such as income from capital gains, income from dividends, estate duty, etc. are not taxed at all. Overall, Singapore offers an extremely attractive set of features in its personal tax system that residents of most other countries can only dream of.
The income taxable in Singapore depends on the “residential” status of an individual. An individual is a resident for tax purposes if he is:
- A citizen of Singapore,
- A Permanent Resident (PR) of Singapore, or
- Any foreigner who works in Singapore for a period exceeding 183 days on an aggregate in the year in which relevant chargeable income was received.
For resident individuals, the personal tax rates range from 0-20%. Any income below $20,000 is not subject to tax whereas income above $320,000 is subject to 20% tax. Since the country follows a progressive tax structure, the tax increases with an increase in income starting at 0% and capped at 20%.
An individual pays tax on the taxable income. Following are the tax rates which depend on the income of the individual:
|Taxable Income||Until YA 2016||YA 2017 and after|
|Next $10,000 (i.e. upto $30,000 total)||2.0%||2.0%|
|Next $10,000 (i.e. upto $40,000 total)||3.5%||3.5%|
|Next $40,000 (i.e. upto $80,000 total)||7.0%||7.0%|
|Next $40,000 (i.e. upto $120,000 total)||11.5%||11.5%|
|Next $40,000 (i.e. upto $160,000 total)||15.0%||15.0%|
|Next $40,000 (i.e. upto $200,000 total)||17.0%||18.0%|
|Next $40,000 (i.e. upto $240,000 total)||18.0%||19.0%|
|Next $40,000 (i.e. upto $280,000 total)||18.0%||19.5%|
|Next $40,000 (i.e. upto $320,000 total)||18.0%||20.0%|
|Above $320,000 (i.e. no limit on total)||20.0%||22.0%|
Individuals who are considered non-residents of Singapore for tax purposes are taxed as described below.
The tax rates applicable to employment income of a non-resident individual generally depend on the number of days the individual resides in Singapore. Accordingly, the tax implications are as follows:
|Number of Days||Tax Applicable|
|Employment for up to 60 days in Singapore||Exempt from tax|
|Employment for 61-182 days in Singapore||Tax rate - 15% of employment income or the prevailing progressive resident rates (whichever is higher)|
Director’s fees and other types of taxable income for non-residents are taxed at the prevailing rate of 20% (From Assessment Year 2017 tax rate this rate will rise to 22%). For a non-resident who is a director, public entertainer or professional in Singapore for a period up to 60 days, the withholding tax rates will apply. The income is not exempt from tax for these three categories. Additionally, if the absence of the individual from the country is in connection with the employment itself, his income will not be exempt from tax.
Not Ordinary Resident (NOR) Scheme
The Not Ordinary Resident (NOR) scheme is a scheme that provides various tax concessions to qualified tax non-resident individuals. The scheme was introduced with the objective of attracting talented individuals. The scheme is applicable to the employment income of an individual who is not a resident of Singapore. According to the NOR Scheme, an individual can enjoy the benefit of reduced taxes that are proportional to the fraction of year he spends in Singapore . If an individual qualifies for this scheme, his employment income is taxable only according to the number of days he resides in Singapore. Additionally, any contributions by the employer to an overseas pension fund will be exempt from tax for any NOR.
An individual is eligible for this scheme on the following basis:
- If the individual is a non-resident in the 3 immediately preceding assessment years and
- If the individual is a tax resident in Singapore in the assessment year where he applies for the NOR status.
The benefit under the scheme will be available for 5 assessment years.
Once an individual qualifies for the scheme, he will have to fulfill the following additional conditions:
- The individual shall ensure that he spends at least 90 days outside Singapore for his business.
- His Singapore-sourced income must be at least $160,000.
- If the tax on the apportioned income of the individual is less than 10% of his total employment income, he will still be subject to tax on 10% of the total employment income.
Tax Types and Tax Rates
Following is a quick summary of the tax types and rates applicable for residents and non-residents in Singapore:
|Income tax||0-20% (depends on taxable income, see above)||0-22% (depends on the number of days an individual resides in Singapore, see above)|
|Capital gains tax||Exempt||Exempt|
|Tax on Dividend Income||Exempt||Exempt|
|Rental income tax||Included in an individual’s total taxable income and taxed at resident rates as above.||22%|
|Tax on interest||Included in an individual’s total taxable income and taxed at resident rates as above.|
Interest received from Singapore Banks or Licensed Finance Company is not taxable.
|Tax on royalties||Included in an individual’s total taxable income and taxed at resident rates as above.||10%|
|Withholding tax||N.A.||The withholding tax rates depend on the type of payments made to the non-resident.
Tax rates will differ if Singapore has entered into an Avoidance of Double Taxation Agreement (DTA) with the country where the non-resident resides.
|Tax on Freelance Income||Included in an individual’s total taxable income and taxed at resident rates as above.||Included in an individual’s total taxable income and taxed at non-resident rates as above|
Income not taxable in Singapore
As pointed out in the table, the following types of income are not subject to taxes in Singapore:
Capital Gains Tax
These are personal gains of individuals, for instance, any gain on sale of a fixed asset, stocks, etc. or gains on capital transactions.
From 2008, Singapore does not levy estate duty. The government earlier levied this tax on an individual’s wealth that he left behind after his death. This tax is now exempt. An individual’s estate includes:
- Everything owned in the individual’s own name
- The individual’s share of assets that are jointly owned
- Any gift made within five years before the death of the individual
- Any assets in a trust from which the individual receives a personal benefit
The exemption of estate duty in Singapore makes it a very good place for inheritance planning.
Dividend is an individual’s profit from his shareholding in a company. From 2008, the dividend paid by Singapore resident companies to their shareholders is exempt from tax.
The exemption of capital gains tax, estate duty and tax on dividend income in Singapore makes the country an attractive place for foreigners to invest in. Various foreign investors hold assets in the country due to the exemption of these taxes.
Tax on Foreign Income
The receipt of overseas income by an individual in Singapore is generally not taxable. The reason for the non-taxability is that the source of the income is from an overseas country and not Singapore. For instance, the appointment of an individual by the employer to work in an overseas office will not be taxable in Singapore as the source of employment income will be overseas and not in Singapore.
However, IRAS has listed the kinds of overseas income that are subject to tax in Singapore:
- If the receipt of overseas income is through a partnership in Singapore.
- The employment the individual carries out overseas is incidental to the employment in Singapore. This implies that if the part of the work done overseas is, in fact, a part of an individual’s employment in Singapore, it will be taxable in Singapore.
- Employment of an individual overseas on behalf of the Singapore Government.
- Individual’s trade or business is in Singapore and the individual has a trade or business overseas incidental to the Singapore trade.
- Receipt of service income by an individual from overseas.
Double Tax Avoidance
To avoid the situation where an individual may be subject to tax on his income both in Singapore and in foreign countries, Singapore has an extensive set of DTAs. To avoid tax on the same income twice, an individual can apply for double taxation relief. Singapore has a very extensive network of double tax avoidance treaties with other countries. Many of these tax treaties also offer further reduction in the applicable tax rates.
Tax Calculation and Tax Filing
Taxable income is the net personal income of an individual that is subject to taxes. The Inland Revenue Authority of Singapore (IRAS) provides a computation of the taxable income as follows:
Computation of Taxable Income
|(=) Taxable Income|
|(=) Statutory Income|
|(=) Assessable Income|
|(-) Personal Reliefs|
An individual will pay taxes according to the prevailing tax rates on their taxable income.
Tax deductions include donations, reliefs, and expenses which an individual can claim to reduce the tax burden. When computing your taxable income you can claim the following as deductions:
- Employment expenses that an individual incurs in the course of employment. These deductions are not allowable in case of personal income or any income of capital nature. The expenses have to be in the course of carrying out the official duties. The following are a few instances of allowable deductions providing overall tax benefits to employees:
- Meal Allowances
- Transport allowances
- Car Services
- Medical reimbursements
- Housing allowances etc
- Donations made by the individual to qualified charitable organizations.
- Allowable expenses the individual incurs when earning rental income. The net amount of rental income after the deduction of allowable expenses such as repairs and maintenance, property tax, fire insurance etc., will be subject to tax.
- Tax reliefs and rebates that the government provides as recognition of an individual’s efforts at self improvement. These reliefs include:
- Course Fee Relief – To encourage individuals to upgrade their skills
- CPF Cash Top-up Relief – To encourage individuals to set aside money for retirement needs
- Supplementary Retirement Scheme (SRS) Relief – To encourage individuals to save for their old age etc
Filing of Returns
Individuals have to file their returns through forms available on IRAS. The kind of forms depends on the residential and occupational status of the individual.
- Form B1 – Employed individuals
- Form B – Self-employed individuals
- Form M – Non-resident individuals
The individuals have to observe the following deadlines:
- Filing Tax Returns: Where the annual earning of an individual is above $22,000, the individual will have to file tax returns. Every individual who is required to pay tax has to file a tax return annually by April 15. The annual filing of tax returns can be done either via paper means or electronically. In the case of e-filing of returns, the deadline is April 18. An individual has to file his annual tax returns anytime between March 1 to April 18.
- Payment of Taxes: Once the individual files the tax return he will receive a Notice of Assessment (NOA) by September stating the tax amount payable. The tax is payable within a period of 30 days from the date of the notice. However, the individual also has an option to pay in installments.
An individual’s tax liability is on the basis of his residential status, the prevailing tax rates, and the allowable deductions. It is advisable to consult a corporate services provider who can assist you in optimizing your personal tax strategy and the filing of your tax return.
Example: For the Assessment year 2017, the income of the individual is that of the previous year – January to December, 2016.