Settling into a new job, discovering new places, getting to know the local community – these are the thrilling aspects of relocating to a new country. Amidst the excitement of moving to Singapore, expatriates should be mindful of their administrative duties which include tax matters.
Before tax season comes along, here is a complete guide on what expats in Singapore should know about the personal tax in the city-state.
What is your tax residency status?
Being a Singapore expat, you first need to find out if you are considered a tax resident.
You qualify for tax residence if work in Singapore;
- For at least 183 days in a year,
- For at least 183 days for a continuous period of more than two years,
- For two consecutive years.
You will therefore be deemed a tax resident for that year, for both years, and for all three years respectively.
You are classified as a non-resident if you have stayed in Singapore less than 183 days in a year.
It is to be noted that the number of days counted include weekends and public holidays.
What are the applicable tax rates?
Singapore expats, who are considered tax residents, are taxed at progressive tax rates, meaning that higher income earners pay a proportionately higher tax, the highest personal tax being 22%.
As from the Year of Assessment 2017, the first S$20,000 of chargeable income does not incur any taxation, but the next S$10,000 has an income tax rate of 2% which amounts to S$200 of gross tax payable. The highest income tax rate is at 22% for chargeable income in excess of S$320,000. It is to be highlighted for the Year of Assessment 2017, there is a Personal Tax Rebate of 20% of tax payable, up to a maximum of S$500.
As a non-resident, your employment income is taxed at a flat rate of 15% or the progressive resident tax rates, whichever is higher. It is to be noted that director’s fee, consultation fees and all other income has been raised from 20% to 22% for the Year of Assessment 2017. According to the Singapore Inland Revenue Authority (IRAS), the difference in tax rates (director’s fee, consultation fees and all other income) is meant to maintain parity between the tax rates of non-resident individuals and the top marginal tax rate of resident individuals.
When to file for taxes?
The filing of your Income Tax Return should be done by 15 April of every year for paper tax form, and by 18 April for e-filing. The income will be assessed for the preceding year, ending 31st of December. You will receive a notice from IRAS about tax filing beforehand. You do not need to file for your income tax if you are already on the Auto-Inclusion Scheme from your employer.
What is taxable?
The income that will be chargeable by IRAS include your salary, bonus and any employment benefits such as housing and stock options. Any overseas income which is not originating from Singapore is tax exempt in Singapore. Should you have any property in Singapore and be renting it, you will also need to declare this in your income tax return.
How to save on taxes?
There are a number of ways to save on taxes, subject to conditions.
One way is to obtain tax reliefs to offset against assessable income including on spouse, child and parent support, life insurance policies, course fees and foreign maid levy, provided you are a Singapore tax resident.
For non-residents, you can apply for the Not Ordinarily Resident (NOR) Scheme, whereby you pay income tax only on the part of your employment income that correlates with the number of days you are based in Singapore. Under the NOR Scheme, the non-resident enjoys favourable tax treatment for a period of five years of assessment.
If you are a Singapore expat working for a foreign employer and traveling for work, you can benefit from time apportionment of employment income as part of the Area Representative Scheme.
Lastly, another way of saving on tax payments is through the Avoidance of Double Taxation Treaties. Under this, you may be protected to pay taxes two times, once in Singapore and another time in your country of residence.
How to pay taxes?
Once you receive the amount of tax payable from IRAS, you can either pay in monthly instalments or in one lump sum. To pay the amount every month, you can sign up for GIRO for interest-free instalments or via internet banking. You can also pay for your taxes at one go either via internet banking or at AXS stations or SAM kiosks.
What is tax clearance?
Should you end your work stint in Singapore and leave, or change to another job in Singapore, you will need to settle all your taxes or, in formal terms, tax clearance. In order to settle the tax clearance obligations, your current employer needs to notify IRAS and ensure that all taxes are paid before you stop working.