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Income Tax in Singapore


Personal Income Tax:

Personal income tax rates in Singapore are one of the lowest in the world. In order to determine the Singapore income tax liability of an individual, you need to first determine the tax residency and amount of chargeable income and then apply the progressive resident tax rate to it. Key points of Singapore income tax for individuals include:

  • Singapore follows a progressive resident tax rate starting at 0% and ending at 22% above S$320,000.
  • There is no capital gain or inheritance tax.
  • Individuals are taxed only on the income earned in Singapore. The income earned by individuals while working overseas is not subject to taxation barring few exceptions.
  • Tax rules differ based on the tax residency of the individual.
  • Tax filing due date for individuals is April 15 of each year. Income tax is assessed based on a preceding year basis. 

INCOME TAX RATES:
Chargeable Income
Rate (%)
Gross Tax Payable ($)
On the first 20,000
On the next 10,000

0
2

0
200

On the first 30,000
On the next 10,000

-
3.50

200
350

On the first 40,000
On the next 40,000

-
7

550
2,800

On the first 80,000
On the next 40,000

-
11.5

3,350
4,600

On the first 120,000
On the next 40,000

-
15

7,950
6,000

On the first 160,000
On the next 40,000

-
18

13,950
7,200

On the first 200,000
On the next 40,000

-
19

21,150
7,600

On the first 240,000
On the next 40,000

-
19.5

28,750
7,800

On the first 280,000
On the next 40,000

-
20

36,550
8,000

On the first 320,000
In excess of 320,000

-
22


44,550


TAX RESIDENT:

You are considered a tax resident if you are:
  • a Singaporean; or
  • a Singapore Permanent Resident and have established your permanent home in Singapore; or
  • a foreigner who has stayed or worked in Singapore for 183 days or more in the tax year.

HOW TO CAALCULATE TAXABLE INCOME?

Total Income
Less: Expenses
Statutory Income
Less: Donations
Assessable Income
Less: Personal Reliefs
Chargeable Income

Whereas

·        Total income means

o   gains or profits from carrying on any business, trade, profession or vocation either as a sole proprietor or partner in a partnership
o   gains or profits from any employment
o    dividends, interests, investment income
o   rents, royalties, premiums and other profits arising from properties
o   exclude qualified income earned overseas

·        Expenses means

o         qualified employment related expenses
o         qualified rental related expenses are expenses

·        Donations means
o      donations to qualified charitable organizations

·        Personal Reliefs means
o   special personal reliefs such as eligible course fees, earned income relief, parent relief, etc.

Personal Tax for Singapore Non-Residents:

You are considered a non-resident for tax purpose if you are a foreigner who stayed or worked in Singapore for less than 183 days in the tax year. As a non-resident, you will be taxed as below:
  • Your employment income is exempt from tax if you are here on short-term employment for 60 days or less in a year. This exemption does not apply if you are a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches etc.
  • If you are in Singapore for 61-182 days in a year, you will be taxed on all income earned in Singapore. You may claim expenses and donations to save tax. However, you are not eligible to claim personal reliefs. Your employment income is taxed at 15% or the progressive resident tax rate (see rate table above), whichever gives rise to a higher tax amount.
  • Director fees and remuneration, consultant fees and all other incomes are taxed at a range of 15% to 22%.

Filing personal income tax returns:

Filing your tax return is a yearly obligation for every eligible taxpayer. All completed forms must be submitted to Singapore tax authority by the 15th of April.

You do not need to pay tax if your annual income (applicable for tax residents only) is less than S$22,000. However, you may still need to file returns if you have been informed by tax authority to submit your tax form. Even if you do not have any income in previous years, you still need to declare zero income in your tax form and submit by 15 Apr. You need to compulsorily file tax returns if your annual income is S$22,000 or more.

You can choose to file your returns online or by mail. IRAS will send you the appropriate paper tax form, upon request, the online form will be available from 1 March every year.

o For tax resident individuals – Form B1
o For self-employed – Form B
o For non-resident individuals – Form M

You will be subject to penalties for filing late or not filing. IRAS might also take legal actions against the individual for non-filing of tax return or non-payment of the tax.

After you have filed your returns, you will receive your Notice of Assessment or tax bill in May to September. The tax bill will indicate the amount of tax you have to pay. If you disagree with your tax amount, you need to inform the Singapore tax authority within 30 days from the date of your tax bill and state your reasons for objection.

You need to pay the full amount of tax within 30 days of receiving your Notice of Assessment. This is regardless of whether you have informed tax authority about your objection. If your tax remains outstanding after 30 days, penalties will be imposed.

Tax treatment of income earned overseas:

Generally, overseas income received in Singapore on or after 1 Jan 2004 is not taxable. This includes overseas income paid into a Singapore bank account. You do not need to declare overseas income that is not taxable.There are certain circumstances under which overseas income is taxable:
  • It is received in Singapore through partnerships in Singapore.
  • Your overseas employment is incidental to your Singapore employment. That is, as part of your work here, you need to travel overseas.
  • You are employed outside Singapore on behalf of Government of Singapore.
You need to declare the qualified taxable overseas income under ’employment income’ and ‘other income’ (whichever applicable) in your tax form.

Tax treatment of employer benefits:

All gains and profits derived by you in respect of your employment are taxable, unless they are specifically exempt from income tax or are covered by an existing administrative concession. The gains or profits include all benefits, whether in money or otherwise, paid or granted to you in respect of employment. Examples of taxable benefits received from your employer:
  • Accommodation and housing allowance
  • Car provided by employer
  • Reimbursements of medical and dental treatments for dependants other than yourself, your spouse and children
  • Overtime payments
  • Per diem allowances (daily allowance given to employees on overseas trips, out of Singapore, for business purposes), provided the amount is in excess of acceptable rates
  • Fixed monthly allowance for transport or if mileage on private cars are reimbursed
  • Fixed monthly meal allowance
Note however that some of the non-cash benefits (e.g. accommodations) are taxed using special formulas resulting into a lower taxation on these benefits-in-kind. Thus, a properly structured compensation package (i.e. salary plus benefits in kind) for the executives can help reduce their individual tax liability in Singapore. Further details on this are outside the scope of this guide.

Corporate Income Tax:

Listed below are general tax exemptions/incentives currently available to Singapore tax resident companies. Once these tax exemptions are applied to the taxable income, the effective income tax rate for small-to-midsize Singapore companies is reduced significantly.
  • 0% tax on S$100K taxable income
The corporate income tax rate is 0% on the first S$100,000 taxable income for each of the first three tax filing years for a newly incorporated company that meets the following conditions:
    • be incorporated in Singapore
    • be tax resident in Singapore (Please see below the tax residency of company)
    • has no more than 20 shareholders of which at least one is an individual shareholder holding at least 10% of shares.
  • 8.5% tax on taxable income of up-to S$300K
All Singapore resident companies are eligible for partial tax exemption which effectively translates to about 8.5% tax rate on taxable income of up-to S$300,000 per annum. The taxable income above S$300,000 will be charged at the normal headline corporate tax rate of 17%. 




Effective Corporate Tax Rate:

The above general tax incentives mean very attractive tax rates for small-to-midsize companies. For example, a typical Singapore resident company with S$2,000,000 annual taxable income will be taxed as below:

First Three Years of Income Tax Filings

Taxable Income (S$)
Tax Rate
0 – 100,000
0%
100,001 – 300,000
8.5%
300,001 – 2,000,000
17%

After First Three Years of Income Tax Filings

Taxable Income (S$)
Tax Rate
0 – 300,000
8.5%
300,001 – 2,000,000
17%

One-off Corporate Income Tax (CIT) Rebate for YA 2016 & YA 2017
According to the Singapore Budget 2016, every Singapore company will be eligible for a corporate income tax rebate. Singapore companies can claim a one-time 50% corporate income tax rebate on corporate income tax payable for YA 2016 & YA 2017, subject to a cap of S$20,000. This is an enhancement to Budget 2015 to help companies, especially SMEs.

 Tax residence of company:

A company is considered as a tax resident in Singapore if the control and management of the business is exercised in Singapore. “Control and management” is the making of decisions on strategic matters, such as those on company policy and strategy. Generally, the location of the company’s Board of Directors meetings, during which strategic decisions are made, is one of the key factor in determining where the control and management is exercised. If the company has an executive director or key management personnel whom is playing important role in decision making based in Singapore is one of the key factor too in determining where the control and management is exercised.

In general, a company is considered non-resident in Singapore if the directors manage and control the business and hold board meetings from outside Singapore. This is true even if, for example, the lower level operations are taking place in Singapore. A company’s residence may change from one year of assessment to the next depending on the circumstances. A Singapore branch of a foreign company is generally not treated as a Singapore tax resident since the control and management is vested with an overseas parent company.
The basis of taxation for a resident company and non-resident company is generally the same with the exception of certain benefits that are available to resident companies. These include:
  • A Singapore tax resident company is eligible for income tax exemption scheme available for new start-up companies except for investment holding and property development  company.
  • A Singapore tax resident company can enjoy income tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income under section 13(8) of the Income Tax Act with certain conditions.
  • A Singapore tax resident company is entitled to benefits conferred under the Avoidance of Double Taxation Agreements (DTA) that Singapore has concluded with treaty countries.
  • Please note that the place of incorporation of a company is not necessarily indicative of the tax residence of a company.   
Income tax filing due date:

Income tax filing due date for Singapore companies is November 30. The company has to file a complete set of returns including Form C, audited/unaudited accounts, and tax computation. The Form C is a declaration form for a company to declare its income whereas tax computation is a statement showing the adjustments to the net profit/loss as per the accounts of a company to arrive at the amount of income that is chargeable to tax.




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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.



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This blog is Created by CA Anil Kumar Jain.