Singapore is one of the most preferred locations to move to for working individuals, and for good reasons. If you are one of them, there are a lot of ways to migrate to Singapore. Also, before moving to a new country, it is exceptionally important to ensure you know as much as possible about the country and its fiscal system, especially when it comes to the regulations concerning tax.
Singapore is no exception in this regard, though the good news is that Singapore provides residents with a large upper hand when it comes to paying taxes, as the income tax rates are relatively low. While this is a big positive for moving to Singapore, you need to be fully prepared by knowing how and when to pay your income tax bill, as it would not be automatically deducted from your monthly salary and avoid paying any penalties.
Inland Revenue Authority Of Singapore (IRAS)
IRAS is the government agency responsible for the administration of taxes and enterprise disbursement schemes in Singapore. It is effectively the tax authority in the country, tasked with administering, assessing, collecting and enforcing laws regarding the payment of taxes. IRAS also advises the government and represents Singapore internationally on matters relating to taxation. It offers various services and assistance through its website (www.iras.gov.sg), such as an online portal for electronic tax returns, as well as various forms, tax guides, calculators and extensive information on taxation laws, tax rates, payments and refunds.
Tax Year And Payments
If your annual income is S$22,000 or more, filing a tax return with IRAS is compulsory. Singapore’s tax year runs from 1 January to 31 December. The income tax return due date is April 15 every year. Singapore does not allow for the joint filing of income tax returns, and neither do they permit any extension of the filing deadline whatsoever. This is why it is of the utmost importance to know when and what to submit and/or pay for.
After submitting your income tax return, you may choose to pay any tax due for that specific assessment year all at once as a lump sum payment within one month after the issuance of the tax assessment. As an alternative, you may select to pay the amount due in instalments, with a maximum allowance of 12 over one year.
Who Is Liable To Pay Tax?
If an individual, other than a director of a company, has been working in Singapore for at least 183 days or more in the year preceding the assessment, he will be liable to pay income tax. There is a concession for foreigners who live in Singapore and have been in employment for 183 consecutive days for a continuous period overlapping two calendar years. This is known as the “two-year administrative concession”, whereby the foreigner is considered a resident for both years, even though he has spent less than 183 days on either side of each assessment year.
If you are not a resident of Singapore and have worked for less than 60 days in any calendar year, then you are exempt from paying taxes on your income obtained in Singapore. This exemption will not apply to directors of businesses and public entertainers, or professionals working in Singapore.
As a non-resident in Singapore and has worked for more than 60 days, you will be taxed on all income earned in Singapore, though you may claim deductions on expenses and donations to save on your taxes. You will not, however, be eligible to claim personal relief, and your employment income will be taxed at either the flat rate of 15% or the progressive resident tax rate, which is higher. Director’s fees, consultant’s fees and all other income are generally taxed at 22%. Should you, as a non-resident, be unsure of how this is calculated, you may use this tax calculator to estimate the tax payable.
What Is Subject To Tax?
Income is taxable when it accrues in or is derived from employment in Singapore, whether or not the individual is a resident of Singapore. All income earned from any source must be declared in your Income Tax return. This will include:
- Leave pay
- Directors’ fees
- Gains received from employee share plans
- Allowances received as compensation for services
Income derived from sources outside Singapore is only taxable if it is received in Singapore by a resident individual through a partnership in Singapore. Residents of Singapore are subject to gradual tax rates ranging from 0% to 22% (24% from the year of assessment 2024), while non-resident individuals are not entitled to any personal allowances and are subject to tax at a flat rate of 22% (24% from the year of assessment 2024).
If a tax resident from another country that has already concluded a double tax treaty with Singapore receives employment income from Singapore, he may be exempt from paying income tax in Singapore. However, this is applicable only if his period of employment in Singapore does not exceed a certain amount of days, which is usually 183 days, in any given calendar year or within a 12-month period. He must also satisfy any additional criteria as specified in the treaty.
Benefits-in-kind from your employer are also taxable, and these might include things such as:
- Home-leave passage
- Employer-provided housing
- Employer-provided automobiles
- Children’s school fees
What If You Are Self-Employed?
The income tax which you will be subject to is strictly based on your financial statements, which must be prepared under generally accepted accounting principles. According to the tax laws, adjustments will be made to the profits or losses, and your business income will be aggregated with other types of income to determine what the taxable income will, in fact, be.
Any income from a trade, business, profession or vocation paid to a non-resident is taxed at 22%. Income from professional services paid to a non-resident is taxed at 15%
What About Investments And Savings?
If you have investments earning income such as dividends, these will be taxed at the applicable income tax rates. This excludes tax-exempt and one-tier dividends in the hands of shareholders, which are exempt from income tax regardless of whether the dividends are paid out of taxed income or tax-free gains.
Standard savings, together with current and fixed deposits, along with things such as interest from debt securities, annuities and distributions from unit trusts, are all also exempt from tax.
If you intend on leaving Singapore and returning to your home country for which you hold a passport, all your taxes due must have been fully paid because if not, your departure might be delayed until such time as they are. If necessary, at this time, you will be able to arrange a payment plan with IRAS in order to ensure you comply with their regulations.
Singapore’s taxation system is pretty straightforward, and the personal as well as corporate tax rates are one of the lowest in the world. The tax rates are the same for everyone, including foreigners. So if you are planning to move to Singapore on a work pass, taxation should not be anything you need to worry of.
Singapore government also provides many tax benefits to help individuals save on their taxes, but most of them are offered only to Singapore citizens. So once you have moved to Singapore, you should apply for Singapore PR and eventually Singapore citizenship to take advantage of these tax benefits. Consult an immigration agency today to better understand the process of applying for an PR.