Taxation of International Executives in Singapore
Taxation is an integral part of any state’s economy. It brings in revenue for the government to manage the budget, expenses, utilities, and much more. Every state has taxation proceedings according to its requirements, rules, and laws. It helps them to keep things in order.
The taxation procedure can be different for national and international executives. The government controls the rates differently in multiple sectors to attract these executives. Before proceeding with the global executive’s taxation in Singapore, let us review some basic tax terms.
Basic Tax Terms
Tax year
Generally, in Singapore, the Tax year is the calendar year. The government collects taxes according to calendar year proceedings on any individual or business’s income. The fiscal year of the state is not different but similar to a regular calendar year.
Tax returns
Inland Revenue Authority of Singapore issues tax returns between February to March, following the subsequent year’s tax collection procedure. The executives can have the extension for the submission until 15 April in paper and 18 April online.
Tax rates
In Singapore, not every individual is charged with a similar income tax. The payable tax rate is progressive and applies according to different categories. Here are the chargeable income tax rates:
| Taxable Income | Income Tax Rate |
| First S$20,000 | 0% |
| Next S$10,000 (up to S$30,000) | 2% |
| Next $S10,000 (up to S$40,000) | 3.5% |
| Next S$40,000 (up to S$80,000) | 7% |
| Next $S40,000 (up to S$120,000) | 11.5% |
| Next S$40,000 (up to S$160,000) | 15% |
| Next S$40,000 (up to S$200,000) | 18% |
| Next S$40,000 (up to S$240,000) | 19% |
| Next S$40,000 (up to S$280,000) | 19.5% |
| Next S$40,000 (up to S$320,000) | 20% |
| Above S$320,000 | 22% |
For the non-residents, the tax rates will be higher or fixed to 15 percent. For other income, the tax rate is set at 20 percent.
Residence Rules
In Singapore, the administration pays attention to the evaluation procedure for the residents. Using qualitative and quantitative tests, they determine whether a person is a resident or a non-resident worker.
The nationals and citizens of Singapore usually are entitled as residents as per qualitative measures. However, it is necessary to convince IRAS that they are permanent Singaporean residents so they will be able to enjoy the benefits of resident taxpayers.
Moreover, the quantitative test explains that a person living and working in Singapore for at least 183 days of the tax year will be a tax resident. However, this does not include company directors at all.
Thee-year Administrative Concession
Singapore taxation provides you with a 3-year administrative concession if you are in the country and working to manage your stay. You will have the status of tax resident for 3 years, even if the tax days of your first and third year are less than 183.
End of Employment
If a non-citizen employee is leaving the job or country after having permanent resident status, then the company needs to notify IRAS. The employer has to submit the IR21 Form that deals with the end of employment. It is necessary to submit the Form one month earlier from job termination and leave the country forever.
You do not need tax clearance if the employee is not leaving the country permanently. In such cases, the employees can have specific concessions if they obtain an employee’s undertaking to be back on the job after a vacation time. In this case, employers will sign them under another letter of appointment in advance date. The overseas postings do not get employers this concession at all.
Companies are directed to withhold specific funds to clear the employees’ tax money after ending the employment. In case the employee is unable or did not clear the tax money, the company will have these funds to sort out the accounts. The employer can release the withholding amount after getting permission from IRAS or after 30 days after filing the notification. If the company does not have any employee withholding, the employer must explain it in the Form IR21. Eventually, you have to clear all the taxes owed by the employee in case he or she quits without notice.
Planning tax effectively is important for companies. Learn how to plan effectively here.
The non-citizen employee receives gain on the unvested shares and unexercised stock options. The employees have to track these shares and stock options and provide a detailed report about profit or loss to the IRAS. After the tax clearance process, the non-citizen employees do not have to file taxes anymore. They may have to file the additional tax clearance if they receive a bonus, any other employment’s income, or money that was not reported to IRAS.
A non-resident employee can return to Singapore after some time and invest in a business with all available opportunities. This time, IRAS will tax the income generated with business activity according to the tax residency and employment period. According to the calendar year, the department looks into everything carefully and calculates the time employee spends in the country.
Tax Protection Plans
The employees can apply and receive tax reimbursement for a tax coming from an overseas assignment. They can apply for such concessions by using the tax protection plan or tax equalization plan. If the employee has to pay a heavy tax back at their state, then the company will compensate the taxes for sure. The programs help to provide employees with a little relaxation with their taxes in the home country.
The equalization plans for taxes are different to ensure that every employee will pay the taxes similar to their home country’s hypothetical taxes. It is necessary to consider the employee’s salary and income as a home earning to adjust it according to the home country tax limits. It can be a little tricky and require specific calculations but will benefit in a longer run.
The reimbursement of taxes depends on the tax-equalization policy of the company. The company may reimburse the tax money from salary and other investments altogether. In certain cases, the company will only consider salary for the tax reimbursement in the following year of the tax year.
Employment Income
On employment income, tax is applicable without considering the employer’s residence, deals, and other money matters. If the payments are made abroad or in the country, the tax statements will remain the same.
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Exemptions for short-term visiting employees
In Singapore, you will be able to receive a tax exemption if you are a short-term visiting employee. Any employee working for less than 60 days of a calendar year in the state will enjoy this advantage.
It is necessary to understand multiple types of payments made by companies to employees, to calculate taxes and their exemptions:
Salary
It is a payment made to the employee against the services rendered by the employers.
Allowance
The taxable payments from the employer for meals, transportation, and other benefits.
Director’s fee
The fee is quite different from the salary. You will not get the post’s payment until you are not approved in the annual general meeting of the year. Even if you have the advance approval, you will get the fee once you have started services for the accounting year. It is a taxable income of an employee.
Bonus
Bonuses are the contractual or non-contractual payments an employer can make to employees other than salary. These are added benefits for the employees but taxable at the same time. The contractual bonuses mention in an employment contract is taxable by default. Non-contractual dividends are taxable once they are paid to the employee at a certain time.
Benefits-in-kind
Companies offer some of the non-cash benefits to their employees, including insurance, vehicle, and accommodation. All these benefits are also taxable and require companies to pay them off in time.
Accommodation provided by the employer
Currently, that tax payable by the employers on these benefits is calculated as follow:
- Annual property value excluding the rent paid by the employee
- Fittings, fixture, and furniture computed on 40% to 50% of the annual value
In 2018, amendments were proposed that are yet to be approved in the payable tax for the benefits-in-kind. According to these amendments, the proposed tax payable will be:
- Rent paid by the employer, including fixtures and furniture OR rend paid by employee minus Annual value.
There are numerous other benefits added by the companies for the employees and tax added to these benefits. Since the company is arranging all these activities and services, it is necessary to pay a reasonable tax value.
Home leave passage
For all the non-resident employees, the companies offer a home leave passage for a spouse or immediate family member. There are certain restrictions applied to the taxable amount in his case. The tax will apply on the 20 percent of a single return fare for the spouse or on two return fares per child.
The facility is only available on the trips to the home country and not available for the permanent residents or citizens of Singapore.
Vehicle
When a company offers a vehicle as a benefit to the employee, there is a certain formula to calculate the taxable value. IRAS provides the procedure to companies and employers to make tax payments on these vehicles.
The premium paid by the companies for employee’s personal or group insurance is a taxable benefit. At the same time, the claim payouts are not taxable at all. In case the payouts or claims are payable to employees against insurance, then it is a taxable benefit. If the request is paid to a spouse, children, or other than an employee, then premiums are not taxable.
Tax paid by the employer
Tax is simply a taxable benefit that employees get from employers. The company is responsible for paying the employee’s taxes.
Equity-Based Remuneration
The companies allow their employees to buy a specific number of company shares at a particular price and period. All the gains coming from these shares are taxable. To calculate taxable profit, they have to find the difference between share price in the open market and their acquisition price.
Loans
The companies offer another taxable benefit to the employees by providing them a reduced rate or zero-interest loan. The interest deduction is the benefit amount that is not taxable if the loan conditions are available for all the employees.
Contributions to overseas pension/ provident Fund
It is another taxable benefit when the employer takes part in the overseas pension and provident fund. The company can get a non-taxable concession by IRAS if the home country government for the overseas workers organizes the program. The company will not take a corporate tax deduction on it.
Gifts
Last but not least, the taxable benefit is cash or non-cash gifts to employees. If the gifts are worth $2000 or less and presented to all employees on celebrations, these are not subjected to tax by IRAS.
Not Ordinarily Resident Scheme
There are certain tax breaks available for NOR during their qualifying period, but they have to meet some specific conditions. These conditions refer to the income before, and at the time of employment and tax exemption, the employer is enjoying non-mandatory overseas pension plans.
Area representatives of non-resident companies
These are the representatives of the companies that are not technically operating in Singapore. However, the individuals are running their regional offices for distribution and particle doing business here. They have to pay taxes according to the income coming from their actual time spending in the country. After qualifying IRAS’ set conditions, you can get approval as an area representative based on taxation.
Earnings from abroad
Despite contract and working scenarios, the income coming from the employment or project outside Singapore will be taxable. IRAS has specific regulations for such projects that businesses do outside the country to expand the company. It is about earning something out of what has been done to expand income. To be fair with the employees, Singapore’s person will not be subjected to income tax for the assignments. It is like visiting any other country for one project, and the person will have tax relief.
Investment/ interest income
In 2006, it was declared that the individual’s income coming from the investment with a licensed finance company or bank would be tax-exempt. Any profit or revenue coming from the interest-based investment will not be changed by the tax at all. The same rule applies to the interest on debt securities starting since 2004.
However, if the interest is coming out of a private partnership, profession, trade, or business, then you have to pay tax on it. To avoid taxation on the interest, you need to look into the investment conditions with specific companies and firms. It will help you to make the more out of this facilitation.
Dividend income
Anyone can buy the public shares to enjoy the profit, trade, and dividend on them. In January 2008, it was declared that shareholders would not pay taxes on dividends. Only in case these dividends are coming from the Singapore resident companies. These companies and dividends fall in the one-tier corporate tax system. Therefore, the shareholders do not have to pay tax on these dividends.
Rental income
The rental income in Singapore is taxable. If you collect rent from a property based in Singapore, you need to pay tax on it. It is necessary to declare gross rental income from each property, including its furnishing, services charges, and other charges. The other claims, such as maintenance, mortgage, insurance, interest, and property tax, are part of the calculation. It would help if you came up with a detailed estimation of tax.
Tax on capital gains
There are no taxes imposed on capital gains and even losses as well.
Forex gains and losses
Investing in the foreign exchange market is legal in Singapore. There are no taxes on the profit neither grant deductions on losses by the government.
Income deductions
If 100 percent of your expenses depend on the income, you can deduct them from the payment. It will be a relief for you to have these expenses as a tax deduction or relaxation. For all these deductions, there are certain standards of qualification. The ease of income deduction is not available for non-residents on their income.
The table shows some recent reliefs and deductions:
| Your age as of 31 Dec of the previous year | Maximum amount claimable |
| Below 55 | $1,000 |
| 55 to 59 | $6,000 |
| 60 and above | $8,000 |
Double Taxation Agreement
Singaporean authorities have signed a double taxation agreement with many other countries. It is an initiative to avoid double taxation on account of foreign workers. People working in other countries or different countries will not have to pay tax in their home country and working country. Certain conditions apply in the agreements that you can review in detail from official resources.
