While Singapore is widely praised for its friendly personal income tax rates and laws, it can be pretty unforgiving towards those who fail to abide by the tax regulations.
Forgetting to remit your personal income tax, for instance, could have you paying hefty fines within a short period of time. Singapore’s tax boss, the Inland Revenue Authority of Singapore (IRAS), typically orders defaulters to pay penalties of up to double the amount due, as well as thousands of dollars in fines. And if you still fail to pay up accordingly, you might ultimately find yourself in a Singaporean jail serving time.
Luckily for you, we’ve compiled all this information into one comprehensive personal income tax guide. So, buckle up and enjoy the ride!
Taxable and Non-Taxable Income
Well, as it turns out, every single dollar you make in or generate from Singapore is subject to personal income tax. There are no two ways about it.
But, get this. Singapore has been exempting most of the income received from overseas sources since the 1st of January 2004.
Otherwise, if you happen to earn money domestically from employment, business, investments, and property, the IRAS requires you to file your personal income taxes every year.
Here is a breakdown of some of the common taxable sources of income:
- Investments and property income
- Business income
- Income from government grants:
- Employment Income
- Other income sources
Tax Rates and Deduction
When it comes to paying taxes, your rates and overall liability depends on, among other factors, your tax residency status.
Income Tax Rates Based on Tax Residency Status
Tax residents, for starters, don’t have a standard personal tax rate on their earnings. Instead, the IRAS charges them progressive rates- from 0% to 22%- based on their annual income levels.
For the first S$20,000, for instance, IRAS doesn’t charge any tax. Then for the next S$10,000, a tax rate of 2% applies, and so forth- up to 22% for earnings in excess of S$320,000.
Non-resident taxpayers, on the other hand, generally pay their taxes at a flat rate of 15% on their employment income. But, if the corresponding resident rate translates to a higher amount, the IRAS ends up applying the latter.
For director’s fees and other types of income, however, the IRAS typically applies a 22% prevailing rate.
And if you’re hoping to minimize the amount through tax reliefs, we’re sorry to report that the IRAS doesn’t award non-resident payers such privileges. Yes, that’s right- it just so happens that all the personal income tax relief schemes in Singapore are exclusively meant for resident taxpayers.
On the flip side, though, we have some good news for you. It turns out the tax residency status is not exclusive to Singapore citizens. Even foreigners can ultimately qualify as tax residents by staying or working in Singapore for certain periods.
Income Tax Rates
Who qualifies as a tax resident?
Basically, you can qualify as Singapore personal income tax resident by staying or working in the city-state:
- For a minimum of 183 days in a calendar year, including public holidays, weekends, and off-days. This grants you the benefit of applying for tax relief through Form B1. And while you’re it, you can bet that IRAS will additionally exempt you from paying taxes on your foreign-sourced earnings.
- For a minimum of 183 days in an engagement that’s expected to run continuously for two years. After the 183 days have lapsed, you essentially get tax residency status that will cover you for the two years you’ll be in Singapore. Please note, however, that this is not open to foreign professionals, entertainers, or company directors.
- Consistently for three consecutive years. The tax residency status, in this case, covers you for all the three years you live or work in Singapore.
How to apply for a certificate of residence?
A COR or Certificate of Residence, to begin with, is a special document that proves you’re indeed a tax resident in Singapore. As such, you can use it to apply for benefits under Singapore’s Avoidance of Double Tax Agreements (DTAs).
Now, in case you’re wondering, DTAs are tax treaties that Singapore has signed with multiple countries to protect foreign taxpayers from double taxation. You just need to present the Certificate of Residence to foreign tax authorities, and they’ll grant you tax benefits on your Singapore earnings.
Unfortunately, this doesn’t cover non-resident taxpayers. Only tax residents get to benefit from Singapore’s DTAs.
Who is considered a non-resident taxpayer?
As a foreigner, you’ll be classed as a non-resident taxpayer if you stay in Singapore for less than 183 days in a calendar year.
That, of course, means that you’ll be paying most of your personal income taxes at a 15% flat rate, and without any tax reliefs.
Who is exempted from personal income taxes?
Fortunately, the IRAS is considerate enough to exempt foreigners who stay or work in Singapore for less than 60 days.
But, the rule comes with a caveat. Apparently, this benefit doesn’t extend to foreign professionals, public entertainers, and company directors. So, you can count yourself out if you’re planning to briefly offer your services in Singapore as a coach, trainer, consultant, speaker, or expert.
How to get your Singapore tax identification number
As an individual
Every single taxpayer in Singapore uses a unique Tax Identification Number to file and manage their personal income taxes. You can think of it as some form of identification unit for tax purposes.
Now, with that said, it’s worth noting that Tax Identification Numbers for individuals are sourced directly from the IRAS. As such, you can apply for yours by registering an IRAS Unique Account, or perhaps signing up for Singapore’s SingPass. Whichever you choose, it typically takes less than five working days for IRAS to process a request, and subsequently, issue a unique Tax Identification Number.
And in case you’re wondering, Singapore’s Tax Identification Number is available to both local citizens and foreigners. That’s why, in fact, IRAS’ online application system accepts both National Registration Identity Card Numbers (NRIC) and Foreign Identification Numbers (FIN).
As an entity
The rules for organizations, however, are slightly different. You see, instead of using Tax Identification Numbers, entities in Singapore rely on Unique Entity Numbers (UEN).
This wasn’t always the case, though. Unique Entity Number only became a thing after it replaced what was known as the Tax Reference Number. Each registered entity is now required to have one for the sake of identification and legal procedures like tax filing.
And speaking of which, it just so happens that UEN isn’t issued by the IRAS. Rather, organizations and businesses acquire it from entity regulatory bodies like ACRA (Accounting and Corporate Regulatory Authority).
- Both foreign-owned companies and local businesses should be able to get their UEN through ACRA.
- Charitable institutions and non-profits, on the other hand, should apply for UEN numbers from Singapore’s Ministry of Culture, Community, and Youth (MCCY).
- As for trade unions, Singapore’s Ministry of Manpower (MOM) would be the best place to apply for a UEN.
- Then basic societies get theirs from the Registry of Societies of Singapore.
Other bodies that deal with UENs include; the Singapore Land Authority (SLA), the Ministry of Defense (Mindef), and the Ministry of Communications and Information (MCI).
Click to find more information about Singapore tax identification number.
One of the best things about Singapore’s personal income taxes is, they come with some very favorable deductions. Tax residents get to minimize their tax bills by simply capitalizing on the numerous tax deductions.
The trick here is to reduce your taxable income by deducting all the expenses you’ve incurred along the way.
Types of Tax Deductions
Some of the most prominent personal income tax deductions include:
- Employment expenses deductions:
- Deductions for self-employed individuals, sole-proprietors, and partners
- Deductions on donations
- Deductions on rental expenses
- Deductions under the Angel Investors Tax Deduction Scheme (AITD)
Special Tax Treatments
Tax treatment of income earned overseas
While overseas income is often exempted from taxation in Singapore, there are special circumstances where the IRAS proceeds to tax earnings from foreign jurisdictions.
Thankfully, though, at least Singapore is considerate enough to accept DTA claims on personal income taxes that have been paid to its foreign treaty partners. This saves you the trouble and anguish of separately paying taxes to foreign authorities and the IRAS.
Tax Treatment of Employee Benefits
While you’d expect the IRAS to tax employees for every single dollar they make from their employers, it turns out there are exemptions. Singapore gives you the privilege of excluding quite a wide range of employee benefits from your overall taxable income.
- Transport allowances.
- Scholarship payments.
- Taxes already paid by employers.
- Stock options.
- Staff discounts.
- Social and recreational facilities.
- Per diem.
- Overtime payments.
- Overseas holiday trips.
- Medical and dental care allowances.
- Meal expenses.
- Insurance premiums.
- Childcare subsidy.
- Vehicle and vehicle-related costs.
For a step-by-step process on tax treatment on employer benefits, visit this page.
Filing Your Taxes
Annual Tax Filing
Just like we’ve seen with corporate taxes, individuals in Singapore are required to file their taxes every single year without fail. Once you receive a Notification to File Income Tax Return in the form of an SMS message or formal letter, the IRAS expects you to comply and file your personal taxes accordingly.
The only exemption here is individuals who receive an NFS notification from IRAS. That means they’ve been chosen for the No-Filing Service. Otherwise, without such a notification, you should go ahead and file your personal income taxes regardless of your income level, and the filings made by your employer.
That said, the filing process itself is pretty straightforward. You could physically mail your tax returns to IRAS, or simply log in to myTax Portal using your Singpass ID and file everything online.
But, get this. Interestingly, the deadline for e-filing is April 18, while paper filing should be done by April 15. Whichever you end up choosing, the data that you submit should reflect your personal financials in the preceding year, between January 1 and December 31.
If you’re filing your Singapore personal tax returns in April 2021, for instance, the report should only cover your financials between January 2020 and December 2020.
Personal tax filing forms
As you’d expect, the tax filing forms are not uniform across the board. IRAS requires you to choose one of its three form options based on your tax residency status and employment level.
- Form M: which is reserved for non-resident taxpayers.
- Form B: which is structured for self-employed individuals.
- Form B1: which targets employed individuals.
How to Get Your Notification of Assessment (NOA)
Once you’ve filed your Singapore personal income taxes accordingly, IRAS will confirm, and then send you a tax bill between the months of May and September. This document, in other words, is known as the Notice of Assessment, or NOA in short.
However, it doesn’t give you much time. It comes with a 30-day deadline, which compels individuals to settle their taxes in about a month. Failure to do so attracts a 5% fine.
In case you happen to discover an error in your NOA, you can file an Objection of Assessment within 30 days. But, in the meantime, you’ll still be required to settle your tax bill within the stipulated period. There’s no exemption whatsoever, even when you raise genuine issues regarding the numbers on the tax bill.
How To Process and Submit Your IR8A
Employers, on the other hand, are required to fill the IR8A form, which declares their employees’ earnings. This data is then used by the IRAS to compare and assess the workers’ personal income tax remittances.
As an employer, you get to process and submit the form after registering with IRAS’ Auto-Inclusion Scheme. The system allows you to enter all the details electronically, with the help of IRAS-approved Human Resource Management tools.
You can, for instance, use Talenox software to compile all your employees’ records, and subsequently submit your IR8A form at the click of a button.
Tax Filing When Leaving Singapore
If you intend to leave Singapore at some point, you should be aware that IRAS won’t let you off scot-free. For years now, the revenue authority has used employers to keep tabs on individuals who are planning to leave the city-state.
Normally, every single employer is required to get in touch with IRAS when their non-citizen employee is posted overseas, ceases employment, or is looking to leave Singapore for more than three months.
Now, to be specific, your employer will fill in Singapore’s Form IR21 and then forward it to IRAS one month in advance. But, it doesn’t end there. You see, meanwhile, IRAS will further compel your employer to retain all the amounts you’re owed.
This whole procedure is known as tax clearance, and it particularly targets work pass holders in Singapore. IRAS uses it to salvage any taxes that are possibly owed by leaving employees.
In fact, any employer who fails to file Form IR21 in time without a valid reason risks a fine of up to S$1,000.
Need More Help?
Well, there you have it. We bet you now have a good idea of what to do to get your Singapore personal income taxes in order before IRAS comes knocking.
However, we also admit that while we’ve tried our best to address all the essentials, there’s so much we’ve left out of this guide to keep it brief and digestible. But, tell you what- you can get in touch with us for well-personalized tax management solutions.
In fact, we invite you to start with a free consultation today. Our seasoned tax experts are waiting to answer all the questions you might have regarding corporate and personal income taxes in Singapore.