Six Common Challenges Foreign Taxpayers Face in Singapore
Moving to a new country to work is always exciting. It provides great opportunities for career progression, but one has to do research and prepare for the new life in the new country. Getting to know your host country and all its income tax related matters is a crucial starting point.
This article pertains only to individual tax payer matters, not to companies or other entities. Of course, you can always look for tax advisory services in Singapore, to help you out.
There are many Singapore tax services, so you should explore and find the one the suits you best. Nevertheless, here are some things you should be familiar with.
Assuming that the Income Tax Reference Number is Issued Separately
Unlike many other countries, the tax reference number in Singapore is the same as the Employment pass, or other work permit numbers. There is no separate distinct Tax Number issued by the Inland Revenue Authority of Singapore (IRAS), as the work pass issuing department will automatically notify the IRAS about it.
In Singapore, income tax is self-assessed and individual income tax rates are progressive. This means that the more you earn, the higher the tax burden you are expected to bear. As a guide, you will not need to pay any taxes for the first $20,000 of your chargeable income. The next $10,000 will be charged at an income tax rate of 2%.
Not Filing the Income Tax Return/Missing the Deadline
Those who have recently joined the Singapore workforce from overseas have many things on their mind, like finding accommodation, blending into the new work environment, and the new country. Most will likely forget about their commitment to IRAS for filing their tax returns. All taxman around the world do place the responsibility of filing taxes to the taxpayers, who need to be aware of their responsibilities, obligations, and rights.
Individual taxpayers in Singapore, are expected to file their personal tax returns by April 14th (or April 18th for online filing) each year.If you fail to file the necessary returns or you do not file them on time, you will incur penalties.
Submitting Your Taxes via the Auto Inclusion Scheme
At times, the employer can submit your tax return directly to IRAS under the Auto Inclusion Scheme. With this scheme, IRAS will automatically assess the employee’s income tax and tax payable. If you have only one source of income (your employment income), you do not need to re-declare your income tax. However, if you have other sources of income (such as property or investment), you need to include them in your tax returns.
Omitting Other Income Streams
The most common mistake taxpayers make is that they do not declare other sources of income. This might include commissions, rental income, certain interest income, royalty, gains from exercising stock options, and other forms of income.
Failure to declare other income is an offence under the Income Tax Act and IRAS can take certain actions against the taxpayer, which may include fines, tax payable interest, and additional taxes.
Verifying Your Notice of Assessments
Your Notice of Assessment (NOA) or tax bill will be mailed to you between the end of April and September each year, after the filing of the income taxes has been done. The NOA will be computed based on the income submitted to IRAS (including the income filed under the Auto-Inclusion Scheme, as well as other reported income), less exempt income, donations, and other forms of relief claims, which may be subjected to certain eligibility criteria.
It is important to note that it is each individual taxpayer’s responsibility to ensure the accuracy of their NOA and any objections should be submitted to the comptroller of income tax within 30 days after the NOA date, after the payment of the income taxes as per the NOA. Otherwise, the NOA would be considered as final and conclusive.
Not Obtaining Tax Clearance
In the case of cessation of employment with non-Singapore citizens who have been leaving Singapore for more than 3 months, it is important to ensure that the form IR21 is submitted to IRAS 1 month before the termination of employment, although a shorter notice period may be granted on a case-by-case basis. This is done to ensure sufficient time for the income taxes for such individuals to be assessed and IRAS may require such taxes to be cleared within 7 days after the NOA, before the individual leaves Singapore. Failure to do so may result in employers being fined up to $1,000.
- Speak with your human resource department about your income tax obligations in Singapore.
- Speak to a service provider.
- Read materials from IRAS for guidance and help.
- Look out for the notice to file income taxes sent by IRAS (often in the form of a letter) between February and April each year.
- Familiarise yourself with the tax procedures once you have obtained a job.
- Set up and register for your individual tax portal to manage your submission and review your tax payable and payment.
- Submit your income tax online (e-Filing at myTax Portal) or by paper filing.
- For employees whose income taxes are filed under the Auto-Inclusion Scheme, you can verify the details of the taxes filed and preview your NOA (PNOA) via the IRAS’ myTax Portal using your SingPass or IRAS PIN before filing the deadline.