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Singapore individual income tax rates are one of the most competitive in the world. It has been designed in such a way that it remains friendly to its most critical resource, namely the human resource. The 2010 KPMG International’s survey of individual income tax around the globe has identified an increase in the global average, indicating that globally governments are increasing the tax rates, driven by deficit concerns. But in Singapore, the highest rate of individual tax has stayed static at 20% since 2007 and it is one of the lowest in Asia Pacific. The income bracket at which this highest rate takes effect is third highest among countries surveyed. This means that most Singaporeans pay an effective rate of tax of less than 20%. The following is an overview of Singapore personal/individual tax regime.

Key Features

• Singapore follows a progressive taxation policy. The rate ranges from 0%-20%. While incomes below S$20,000 are exempted from tax incomes above S$320,000 are subjected to a tax rate of 20%.
• Singapore adopts a territorial taxation policy whereby all income generated in Singapore by an individual is subjected to tax. Barring a few exceptions, incomes generated overseas are not subjected to tax.
• There is no tax on capital gains or inheritance
• Taxation differs depending on the residency status of an individual

Tax Rates

Taxation of Residents

An individual is a Singapore tax resident for a Year of Assessment (YA) if he:

• resides in Singapore, except for temporary absences; this includes Singapore citizens and Permanent Residents
• is physically present or employed in Singapore (other than as a director of a company) for 183 days or more during the basis year

Resident individuals are taxed at progressive rates ranging from 0% to 20% as per the table above

Taxation of Non-Residents

Non-resident individuals are taxed on employment income at of a flat rate of 15% (without any deduction of personal reliefs and allowances) or the progressive resident tax rates, whichever yields higher tax amount.

All other Singapore-sourced income, such as, director fees, consultation fee etc, derived by non-resident individuals is taxed at a flat rate of 20%.

Income of non-resident derived from a short-term employment for 60 days or less is exempted from tax. However this rule does not apply if you are a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches etc.

Interest derived by a non-resident individual, on investments held on deposits in an approved bank in Singapore, is tax exempt.

Taxable Income

An individual’s taxable income would normally include some or all of the following:

• Gains or profits from a trade or profession
• Earnings from employment (including benefits-in-kind)
• Pension, charge or annuity
• Dividends interests and other incomes from investments
• Rents, royalties, premiums and other profits arising from property
• Any gains or profits of an income nature not covered by the above

Treatment of Overseas Income

Overseas income received in Singapore is generally not taxable. These include overseas income paid into a Singapore bank account. Individuals need not declare overseas income that is not taxable.

Overseas income is taxable

• If it is received in Singapore through partnerships in Singapore.
• If overseas employment is incidental to Singapore employment.
• If the individual is employed overseas by the Government of Singapore.

Service income, that is, income from professional, technical, consultancy or other services provided by a person in the course of its trade, profession or business, received from overseas will be considered as Singapore-sourced if it is not rendered through a fixed place of operation in the foreign jurisdiction and if one is carrying on a trade, business or profession of providing such a service in Singapore. Such income is taxable in Singapore.

Treatment Of Employee Benefits

All gains and profits derived by an individual in respect of his employment are taxable, unless they are specifically exempt from income tax or are covered by an existing administrative concession. The gains or profits include all benefits, whether in cash or kind, paid or granted to him in respect of employment. Where employers also extend the benefits to the employee’s family members, relatives and friends, the benefits would be taxable in the hands of the employee as a benefit from employment. Some examples of benefits are:

• Tax paid by employer
• Stock option
• Meal allowance
• Transport allowance
• Accommodation allowance
• Medical allowance
• Per diem
• Overseas holiday trips
• Overtime payment

Deductions

Following nature of expenses are allowed to be deducted from an individual’s income for the purpose of tax computation

• Expenses
  • Qualified employment expenses – Those incurred in the course of earning employment income. Such incomes should not be personal or capital in nature, should not be reimbursed by the employer and should have been incurred in the course of performing official duty.
  • Qualified Rental Expense – Incurred in the course of earning rental income and must be incurred during tenancy.
• Donations made to qualified charitable organizations
• Reliefs – Several personal reliefs are available for individuals and an individual can claim deductions for those which are relevant for him/her. Some examples of reliefs are approved course fee relief, CPF cash top up relief, foreign maid relief, grandparent caregiver relief, working mother’s child relief, souse/handicapped souse relief etc.

Special deductions

Angel Investor Tax deduction – an incentive scheme to encourage individuals to invest in start-up companies and help the companies grow through their management expertise / business networks etc. The amount of tax deduction for each YA is based on 50% of the cost of qualifying investment, subject to a cap of $500,000 of investment costs i.e. deduction cap of $250,000. The qualifying deduction will be offset against the individual’s total taxable income. Any unutilized deduction in any YA will be disregarded.

Tax Filing

Individuals whose income is below S$22,000 are exempted from filing Tax Return.

Individuals whose employers are participating in Auto Inclusion Scheme (AIS) need not file the Tax Return if their source of income is limited to employment as employers will send the employment income details to IRAS electronically. IRAS may waive the requirement to file an Income Tax Return for taxpayers who only have auto-included employment income and their relief claims are the same as the previous year.

However if individuals have other means of income in addition to their income from employment they are required to file Tax Return.

IRAS may specifically require some individuals to submit their Tax Return. They must file regardless of their annual income (even if it is zero) in the previous year or whether their employer is participating in the AIS.

All individuals whose annual earning is above S$22,000 must file their Tax Returns. Filing of Tax Return is an annual obligation for every eligible individual and it must be filed by 15 April every year. It can be submitted as paper returns or via electronic filing. For e-filing via IRAS website, the last date for filing is 18 April.

Specific forms are applicable for each category of tax payer, as below. IRAS will send the appropriate forms to the individuals

• Form B1 – for employed individuals
• Form B – for self-employed individuals
• Form M – for non-resident individuals

Failure to file Tax Return or late filing will attract strict enforcement action from the authority. IRAS may issue an estimated tax assessment which the defaulter must pay within 30 days from the date of notice, or issue summons to court or take legal actions where a penalty that may be twice the tax amount assessed by IRAS) may be imposed.

Payment of Tax

Taxpayers should receive their Notices of Assessment by September every year. Income tax is payable within one month from the date of the Notice of Assessment, unless the individual opted for payment through an installment plan.

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Taxable Income