The Supplementary Retirement Scheme (SRS) in Singapore is a voluntary savings program designed to encourage individuals, including foreigners working in Singapore, to save for retirement. SRS allows participants to contribute a portion of their income into a special SRS account, which is eligible for tax benefits.
Funds in the SRS account can be invested in a range of financial instruments, such as stocks, bonds, and unit trusts. Upon retirement, the withdrawals which can then be made from the SRS account are subject to tax at a lower rate than normal income tax rates.
When is a Foreigner Considered a Tax Resident?
For a foreigner to be considered a tax resident in Singapore, the determination is based on the concept of “tax residence” as established by the Inland Revenue Authority of Singapore (IRAS). While the specific criteria may vary depending on individual circumstances, the following factors are generally taken into consideration:
Physical Presence: If you have stayed or worked in Singapore for at least 183 days in a calendar year, you are likely to be considered a tax resident. The 183 days do not need to be continuous but can be cumulative throughout the year.
Employment Period: If you are employed in Singapore for three consecutive years, you will be considered a tax resident for each of those years, regardless of the actual number of days spent in Singapore.
Why Should You Consider Using the Supplementary Retirement Scheme (SRS) in Singapore?
The Supplementary Retirement Scheme (SRS) in Singapore offers several potential benefits that may make it attractive for individuals to utilise. Here are a few reasons why one might consider using the SRS:
Contributions made to the SRS account are eligible for tax relief, meaning you can reduce your taxable income by the amount contributed. This can result in potential tax savings.
SRS provides an additional avenue for saving specifically for retirement, helping individuals build a nest egg for their post-work years.
Flexibility in Investments:
The funds within the SRS account can be invested in various financial instruments, such as stocks, bonds, and unit trusts. This allows for potential growth and diversification of your retirement savings.
Lower Tax Rates during Withdrawals:
When you retire and start withdrawing funds from the SRS account, the withdrawals are subject to tax at a lower rate compared to regular income tax rates. This can potentially reduce your overall tax burden in retirement.
Foreigners in Singapore:
The SRS is open to both Singapore citizens and foreigners working in Singapore. It provides an opportunity for foreigners to save for retirement while also enjoying tax benefits. It also shows your intention to reside in Singapore and can benefit you while applying for your Singapore PR.
How Does One Qualify for the Supplementary Retirement Scheme (SRS) in Singapore?
To qualify for the Supplementary Retirement Scheme (SRS) in Singapore, you generally need to meet the following criteria:
- Age Requirement: You must be at least 18 years old to open an SRS account.
- Residency: The SRS is available to both Singapore citizens, PRs and foreigners who are residing and working in Singapore. You need to hold a valid work pass such as Singapore Employment Pass, Personalised Employment Pass, EntrePass, or S Pass, among other eligible passes.
- Not an Undischarged Bankrupt: You should not be an undischarged bankrupt when applying for the SRS.
- Not an Existing SRS Account Holder: If you already have an existing SRS account, you are not eligible to open another one.
- Contribution Limits: There are contribution limits for the SRS. The annual contribution limit is S$15,300 for Singapore citizens and permanent residents and S$35,700 for foreigners.
How Much Should One Contribute to the SRS Account as a Foreigner?
Since foreigners who are working in Singapore do not receive CPF contributions, they are allowed to contribute a higher amount each year to their SRS account as compared to Singaporeans and PRs.
The contribution limits for the Supplementary Retirement Scheme (SRS) in Singapore differ for Singapore citizens/permanent residents and foreigners. Here are the contribution limits specifically for foreigners:
Foreigners can contribute up to a maximum of S$35,700 per calendar year to their SRS account. This contribution limit is subject to change, so it’s essential to refer to official sources or consult financial institutions for the most up-to-date information regarding SRS contribution limits for foreigners.
For locals and PRs, the limit is S$15,300 per annum. It is also essential to keep in mind that one can contribute to the SRS account only if he has earned any form of income for the year.
In conclusion, the Supplementary Retirement Scheme (SRS) in Singapore stands as a valuable tool for individuals, including foreigners working in the country, to secure their financial future and enjoy tax benefits. The program’s appeal lies in its provision of a structured and incentivised approach to retirement savings. By allowing participants to contribute a portion of their income to a dedicated SRS account, the scheme encourages long-term financial planning and wealth accumulation.
The SRS not only offers tax relief on contributions, potentially leading to substantial tax savings but also provides flexibility in investment choices, empowering participants to tailor their portfolios to their risk tolerance and financial goals. Moreover, the prospect of lower tax rates on withdrawals during retirement enhances the scheme’s allure, ensuring that retirees can maximize their savings and reduce their overall tax burden.
Ultimately, the Supplementary Retirement Scheme not only encourages sound financial habits but also underscores Singapore’s commitment to supporting its citizens and residents in achieving a secure and comfortable retirement.
If you are planning to apply for a Singapore PR, you should consider investing in SRS to show your intent to stay in Singapore. Engage a reliable and experienced PR consultancy to know more about the scheme and what other initiatives you can take from your end to make your application stand out.