It can be very exciting to move to another country such as Singapore; however, that said, it certainly can also be extremely daunting, stressful and overwhelming. This is especially when you will have a multitude of things, such as income tax, to consider and gain knowledge of. During this life-changing and once-in-a-lifetime experience, there will be a lot for you to learn, and that includes exactly how the tax system works.
Being a foreigner in Singapore means having to gain knowledge of and adapt to new tax rules. In order to make the transition easier and smoother for you, this article highlights the key factors you will need to know about taxation in Singapore and how to make it as easy for yourself as possible.
When Do You Become A Tax Resident?
The short answer is that you will have to have lived in Singapore for at least 183 days in order to qualify as a tax resident. So, the next question that will be asked is whether you are or will be a tax resident in Singapore.
The Inland Revenue Authority of Singapore (IRAS) states that you are a tax resident if you fall under one of the following categories:
- Have stayed in Singapore for at least 183 days over a year – you will be a tax resident for that year only
- Have stayed in Singapore for at least 183 days for a continuous period over two years (the employment period must cover two calendar years) – you will be a tax resident for both years
- Three consecutive years – you will be a tax resident for all three years
If you have stayed in Singapore for only 61–182 days, or if you have been employed for 60 days or less, you will be regarded as a non-tax resident.
So basically, if you stay in Singapore for 183 consecutive days or longer, you will not be taxed as much as a resident staying for 183 days or more.
Now that the question has been answered, the next step would determine what you can expect from the tax system in Singapore.
Tax Residents And The Various Rates That Apply
It is well known that Singapore is considered a tax haven when compared to other countries. Personal income tax in Singapore is based on a progressive structure.
The personal income tax rate in Singapore is one of the lowest in the world, and 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.
Important key points of Singapore income tax for individuals include:
- Singapore follows a progressive resident tax rate starting at 0% and ending at 22% for those earning 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 a few exceptions.
- Tax rules differ based on the tax residency of the individual.
- The tax filing due date for individuals is April 15 of each year. Income tax is assessed based on a preceding-year basis.
Individuals who are residents in Singapore are taxed on a progressive resident tax rate, as listed below. Filing personal tax returns for tax residents is mandatory if your annual income is S$20,000 or more. Tax residents do not need to pay any tax if their annual income is less than S$20,000. However, you may still need to file a tax return if you have been informed by the Singapore tax authority to submit your tax return. Note that additional earned income relief is also given to further reduce the tax payable depending on age.
| Taxable income (SGD*) | Years of assessment 2022 and 2023 | Years of assessment 2024 | |||
| Over | Not over | Tax on Column 1 | % on excess | Tax on Column 1 | % on excess |
| 0 | 20,000 | – | 0% | – | 0% |
| 20,000 | 30,000 | – | 2% | – | 2% |
| 30,000 | 40,000 | 200 | 3% | 200 | 3.5% |
| 40,000 | 80,000 | 550 | 7% | 550 | 7% |
| 80,000 | 120,000 | 3,350 | 11.5% | 3,350 | 11.5% |
| 120,000 | 160,000 | 7,950 | 15% | 7,950 | 15% |
| 160,000 | 200,000 | 13,950 | 18% | 13,950 | 18% |
| 200,000 | 240,000 | 21,150 | 19% | 21,150 | 19% |
| 240,000 | 280,000 | 28,750 | 19% | 28,750 | 19% |
| 280,000 | 320,000 | 36,550 | 20% | 36,550 | 20% |
| 320,000 | 500,000 | 44,550 | 22% | 44,550 | 22% |
| 500,000 | 1,000,000 | 84,150 | 22% | 84,150 | 23% |
| 1,000,000 | 194,150 | 22% | 199,150 | 24% | |
The Tax Rate On Goods And Services
The standard tax rate on goods and services is currently 7% – although this is expected to increase to 9% by 2025. Despite the potential increase, this tax rate is still below that of most other countries. The UK’s VAT, for example, is far more expensive at 20%.
In Singapore, the standard goods and services tax (GST) rate applies to most local retail sales as well as commercial activities. According to IRAS, GST is not applicable to:
- Sale and rental of unfurnished residential properties
- Importation and local supply of precious metals
- Financial services, e.g. issue of a debt security
- Digital payment tokens, e.g. exchange of Bitcoin for fiat currency
- Sale where goods are delivered from overseas to another place overseas
- Private transactions
Businesses that have a taxable turnover of over S$1 million at the end of a calendar year must apply for GST registration.
Filing Of Tax Returns
In some countries, foreigners might need to complete more forms and have more checks carried out before filing their taxes. In Singapore, however, it is reasonably simple and pretty straightforward.
Your income is assessed on the preceding year, ending 31 December, and you can usually expect to receive your income tax bills by September. All you have to do is make sure you file your income tax return by 15 April each year.
A popular way to do this is to sign up for the General Interbank Recurring Order (GIRO), and in this way, you can arrange up to 12 monthly interest-free instalments to pay for your income tax.
Tax Evasion Is A Criminal Offence
In Singapore, tax evasion is a criminal offence and is punishable by law. The penalties for tax evasion can vary, depending on how severe the case is. You could be let off with a warning, or you could face one or more of the following harsher penalties:
- Penalty amounting to 300% of taxes underpaid
- A fine of S$10,000, three years of imprisonment, or both.
- Penalty amounting to 300% of GST underpaid.
- If documents have been falsified, you will be made to pay up to 400% of the tax underpaid. If found guilty, you could also face a fine of up to S$50,000, five years of imprisonment, or both.
- A fine of up to S$10,000 for the company involved and up to seven years of imprisonment for guilty individuals.
These strict penalties made headline news in 2019 when a couple both faced jail time, along with a fine of S$1 million between them.
Income Earned Outside Singaporean Territory
In general, if you receive any kind of income abroad whilst living in Singapore, you will not be taxed on it. You also won’t need to have it declared in your tax returns.
This isn’t always the case, though. Overseas income is taxable in Singapore if:
- It is received through partnerships in Singapore.
- Your overseas employment is secondary to your Singapore employment (i.e. you are required to travel overseas for your work).
- You are employed overseas on behalf of the Singapore Government.
- You have a business in Singapore, and you are continuing a trade/business overseas, which is secondary to your trade in Singapore.
This is one of the reasons why some tech giants, such as Dyson, have recently relocated overseas to Singapore.
Tax Relief Options
If you’re a tax resident and you meet certain conditions, you might qualify for different tax relief options.
Some rebates are targeted only at certain groups of taxpayers. There are some forms of relief, however, that are available to all tax residents, including:
- Course fees (this is not applicable to the national education system – see point 9 for more information).
- CPF cash top-up (applicable to Singapore citizens and Singapore permanent residents only).
- CPF (applicable to Singapore citizens and Singapore permanent residents only).
- Earned income.
- Handicapped brother/sister.
- Life insurance.
- Parent/handicapped parent.
- Supplementary Retirement Scheme (SRS).
There are also additional reliefs that are available only to married, divorced, or widowed taxpayers. If you fall under this category, it’s worth researching the options which may be on offer.
Course Fees Relief
Course Fees Relief is provided to individuals in Singapore to encourage them to enhance their skills and hence make them more employable. This option is targeted solely at people who are currently employed or who have been employed previously but are now unemployed.
You can claim relief for any course, seminar, or conference you attend, as long as it is relevant to your current employment or vocation or alternatively leading towards a qualification.
Courses, seminars, and conferences are not eligible for relief if they are:
- For recreational or leisure purposes.
- For general skills or knowledge, such as social media skills, basic website building skills, and Microsoft Office skills.
- To acquire skills or knowledge for a hobby rather than your profession.
- Polytechnic/university courses if graduates have never been employed previously.
If you meet the requirements, you’ll be able to claim up to S$5,500 each year.
Are You Self-Employed?
If you’re planning to be self-employed in Singapore, IRAS states that there are seven vital things you need to do to stay on top of your taxes:
- Know your tax obligations – Self-employed people need to report any income earned from their company’s operations as business income, not as salary. This business income forms part of your total personal income, which is taxed at individual income tax rates.
- Decide on the accounting period – Every year, you need to declare your business income for a specific accounting period. You can choose any accounting period, but most choose one that ends on 31 December each year (the end of Singapore’s financial year).
- Keep proper records and accounts – You’ll need to keep accurate records and accounts for all business transactions. These will need to be supported with invoices, receipts, vouchers, and other documents.
- Prepare your statement of accounts – At the end of every accounting period; you must prepare the statement of accounts, which includes accounts of your profits and losses, along with a balance sheet.
- Prepare a 4-line statement – From your statement of accounts; you’ll need to extract the relevant figures and prepare a 4-line statement with which to file your income tax return.
- File income tax – At the beginning of the year, IRAS will send you a notification or an individual income tax return form for you to report the income from your business
- Pay withholding tax – Withholding tax applies to services that are carried out in Singapore and will incur the corporate tax rate on the gross payment. If you need more help with this, refer to IRAS dedicated page.
Capital Gains
Capital gains from the sale of property, shares and other financial assets in Singapore are generally not taxable. However, gains from trading in properties might be taxable.
If you’re thinking of buying and selling property with a motive to seek profit, any gains you have might become taxable. Of course, this can be difficult to determine at times.
Some criteria used to assess if you are trading in properties include:
- Frequency of transactions (buying and selling of properties).
- Reasons for acquisition and sales of the property.
- Financial means to hold the property over the long term.
- Holding period.
Conclusion
Hope this article has provided you with some in-depth information about income tax which you might require when resident in Singapore. As a tax resident of Singapore, you need to ensure that you remain in compliance with IRAS’ requirements and the tax laws of Singapore.
To simplify things and be more convenient, you can engage a tax consultant in Singapore to help you file your or your company’s tax returns. This will indeed ensure you stay compliant with the Singapore tax laws and avoid any late payment penalties.
