Even if you do not belong in the uber rich tax bracket and is currently not paying huge taxes, it doesn’t mean that you can’t apply tax planning on your business. So considering tax strategy to cutting down on income taxes is a wise decision and will surely have a positive effect on your net disposable income. Below are some areas where you might want to start looking into to start your tax cutting strategy rolling.
- Claim applicable reliefs
Remember that any applicable relief in your tax return must be claim first.
As applicable to your situation and possibly be entitled to claim tax relief if you have met the qualifying conditions. Child relief, parent relief, are examples include earned income relief and also wife relief and foreign maid levy relief for married female taxpayers.
- Supplementary Retirement Scheme (SRS) contributions
To enjoy tax relief for the year by a voluntary savings scheme that allow an person in which the contributors are made to their account is called SRS.
Singapore permanent residents and foreigners are subject to different share ceilings with participation in SRS is available to all Singaporeans. SRS shares for the year 2009 are capped, $26,775 for foreigners and $11,475 for Singaporeans and permanent residents.
Selected investments such as insurance products, unit trust and fixed deposits can be use from SRS account funds.
An individual contributor’s retirement for Singaporeans and permanent residents will be taxable for a total of 50% on SRS distribution. For foreigners after 10 year holding period is the minimum.
Withdrawals can be staggered over 10 years to enjoy more tax incentives.
Penalty of 5% for a Premature distribution, also for a normal taxable full.
- Central Provident Fund (CPF) top-up
Those who do not have an income exceeding $2,000 in the preceding year of the top-up or to your grandparents or parents that you can acquire tax relief for the cash top-up made to your spouse or children that is under the CPF Minimum Sum Topping-Up Scheme. The tax relief full amount is $7,000 for the YA 2010.
Under CPF Minimum Sum Topping-Up Scheme, if you or your employer have made cash top-ups to your own minimum sum, you can acquire an additional CPF cash top-up relief. The tax relief full amount is $7,000.
- CPF contributions for self-employed
CPF contribution of up to 34.5 may claim tax relief, by self employed persons who have made Medisave and voluntary CPF contributions in 2009.
The lower part of the CPF relief capped at 26,393 for YA 2010 is subject to it or to the actual amount contributed by you.
- Donations to approved charities
Tax relief for cash donations made may claim made to an approved Institution of Public Character (IPC) or Qualifying Grant-making Philanthropic Organizations.
Cash Donations to IPCs can take form of Singapore-listed shares, as well as land and buildings or unit trusts that are ready to trade in Singapore.
During the recent downturn to encourage greater charitable acts in 2009, applicable tax deductions for YA 2010 have been enhanced to 2.5 times the amount of donations made this year (that is, calendar year 2009).
For a maximum of five years the donor is allowed to carry forward the un-utilised deductions, if the tax deduction for the donation is more than the income for the year.
- Not Ordinarily Resident (NOR) Scheme
If you are a non-resident of Singapore for three consecutive years immediately preceding the year that you have become a resident of Singapore, you can apply for the NOR status for a five-year period starting with that year of residency.
As a NOR taxpayer who spends at least $160,000, you can apply for the concession of time-appointment of employment income. This means you would not be taxed on the portion of employment income that corresponds to the number of business days spent outside Singapore.
If you qualify as a NOR taxpayer earning $160,000 during the calendar year, you should review your travel schedule to ascertain whether you can apply for this time-appointment concession.
- Gains from Employee Stock Option Plan and Employee Share Ownership Scheme
If you are granted stock options or share awards by your employer, there are incentive schemes allowing partial tax exemption on the gains from these stock options and share awards.
However,the first time that you rent out your first property, certain expenses incurred to secure the first tenant are disallowed. These expenses include any commision paid to the property agent, advertising and legal costs.
For any susequent property, your property agent’s commission, advertising and legal expenses incurred for securing the first tenant is deductible against the rental income of that property. The agent’s commission or costs for renewing the lease for a subsequent tenant is also deductible.
If you own several rental properties, rental losses from one property can be used to offset income from another.
Where the final amount from all the rental properties is a loss, you cannot offset the loss against income from the other source.You may, however, transfer this loss to your spouse if he or she has positive rental income to absorb the loss.
In general, any gains from the sale of property are considered capital gains and not subject to tax in Singapore.
However, the Inland and Revenue Authority of Singapore may query the property sale and ask the taxpayer to provide additional information about the transaction to confirm this tax treatment.
Effective tax planning requires you to be aware of any changes to tax laws and regulation that may affect your tax position.You should speak to a tax adviser to determine whether there are any of such changes that you should capitalise on.
Under certain condition, you can also defer paying any applicabletax.You should consult your employer to confirm whether stock options or share awards qualify for the incentives to take advantage of this.
- Rental income from property
If you own a rental property, you should know that while the rental income is taxable, you can claim rental expenses to offset the rental income.
There are different types of allowable deductible expenses, for example, mortgage interest, property tax, Maintenance fee paid to management corporation, fire insurance and general repairs or maintenance undertaken, such as painting and pest control services.