Guide to Singapore Personal Income Tax Rates
This article intends to throw light on the personal income tax regime in Singapore that is considered progressive and very competitive. You will come to know about various features of this tax system with incentives and reliefs as well as differential tax treatment of citizens and non residents of Singapore. The tax year in Singapore startsfrom1 January and ends on 31 December and the tax is assessed on previous year’s income.
Budget update (2013)
All those taxpayers who are residents of the country will receive tax relief up to S$1500 depending upon their age as on 31 December 2012. This relief is for the assessment year 20112/2013. There is a relief of 30% for residents aged 60 or below and 50% for residents aged 60 and above.
Salient features of personal income tax in Singapore
As there is a difference in taxes for residents from taxes meant for non residents, your tax liability is dependent upon the status of your residency. The highest income tax rate of 20% is applicable upon you when your income is S$320000 or more and you are a resident of Singapore. For the non residents, the highest tax rate is 15% though higher amounts of tax can be realized from them. All income earned for duties performed in Singapore is taxable whether you have received the income in Singapore or outside. Your income includes not just hard cash but also perks and incentives in the form of kind such as a house or shares that are offered to you by your employer.
Rates of personal income tax
Income tax regime in Singapore is progressive and the rate goes up with your income. All citizens who have to reside outside for 6 months or more in a calendar year are treated as non residents for the purpose of tax assessment. If an individual earns income from abroad that is received in Singapore, it is not subject to taxes provided it fulfills certain conditions.
Singapore Personal Income Tax Rates – YA 2013
|Band (SGD)||Requirement||Band (SGD)||Rate (%)|
|0 – 20,000||0.0||120,001 – 160,000||15.0|
|20,001 – 30,000||2.0||160,001 – 200,000||17.0|
|30,001 – 40,000||3.5||200,001 – 320,000||18.0|
|40,001 – 80,000||7.0||Above 320,000||20.0|
|80,001 – 120,000||11.5|
Note: The above rates are before tax rebate of 30% (below 60 years) and 50% (60 years and above), capped at $1,500. *NEW
Is there a difference between tax rates for residents and non residents?
|Resident individuals||Non-resident individuals|
|Progressive taxation||Starting rate of 15% that goes up to 20%.|
|Double tax reliefs available||Double tax reliefs not available|
|Tax benefits for dependents, child, etc.||No such reliefs available.|
|Earned interest exempt from taxation||Interest earned from deposits with banks not taxable.|
|Employment income is taxable.||Employment income from local employment of less than 60 days is exempt from taxation|
|Tax reliefs are available.||No tax reliefs available.|
Income that is subject to tax
In addition to cash that is received from the employer in the form of salary, other benefits such as wages, incentives, perks, leave pay, bonuses, commissions, etc are also taken into consideration when computing personal income tax. Benefits that are not in cash but in kind such as automobiles and houses provided by the employer are also considered for tax purposes. In fact, even the school fee paid by the employer can be taxed in Singapore.
Definition of chargeable income
Also referred to as taxable income, chargeable income is the figure arrived at after all expenses, donations, and personal reliefs have been deducted from the income. There are tax reliefs in the form of tuition, dependent support, professional development and premium of insurance policies.
The method of income tax computation
The formula to calculate income tax has been provided by IRAS. Statutory income is arrived at after deducting all expenses from the total income. Deduct donations from this statutory income to arrive at assessable income. Personal reliefs are also subtracted from this income to get taxable income.
Total income-expenses-donations-personal reliefs=Taxable income
How to define total income?
If you are doing a business or a trade as a sole proprietor or a partner, the profit earned from the activity is treated as your income. This income includes benefits you receive from employment, shares, dividends, investments, incomes from interest, and so on. Rental income, premiums, royalties, and other monetary profits are also included into your total income. Benefits that are received in kind can also be taxable and included in your total income. These include HRA, furnishing and furniture provided by the employer, accommodation in hotel, automobile, driver, food, clothing, shares, tax liability shared by the employer, premium of insurance policy paid by employer, subscription of clubs and membership fees etc.
Taxation of fringe benefits
According to income tax laws in Singapore, all benefits that accrue to an individual on account of his employment are subject to taxation. However, there are many personal relief measures as well as incomes that are exempt from income tax. These gains and benefits can take many different shapes and they can be in cash or kind such as accommodation, housing allowance, car, driver, medical treatments for self and dependents, pay for overtime, meal allowances that may be monthly, transportation allowance, sponsored overseas trips etc. All such benefits enjoyed by employees get taxed as soon as they get them. There are some benefits in kid that are taxed according to a special formula to face lower taxation. This is why the tax authorities have come up with a compensation package to reduce the tax liabilities of executives in Singapore. You can log on to our website to know more about this special compensation package.
Taxation of income that is earned abroad
There is no tax on income that is earned overseas. You can take your income earned abroad to Singapore and spend there without paying any taxes. However, you are required to pay taxes on such income under certain circumstances.
- If you have earned income inside Singapore because of your partnership in the country
- Your income from abroad ids incidental to your work in Singapore
- You have been posted outside the country by Singapore government
How to save income tax
There are many tax reliefs for residents to save on taxes that can take the shape of support for wife and children. Other important tax reliefs include charitable donations and expenses that you incur in your employment. You can avail the benefits of contributions made by your employer towards your Overseas Pension Fund or benefit of Rime Apportionment or even both under the scheme of Not Ordinarily Resident. Time Apportionment is a benefit that you are entitled to, if you travel overseas in connection with your employment. This is a benefit that is provided under a scheme called Area Representative Scheme.
You are protected from paying double taxation as the government of Singapore has avoidance of double taxation treaties signed with many countries. You can have a look at a list of all these countries under the list of DTA treaties.
Estate duty, inheritance tax, and capital gains tax
There are no taxes on capital gains in Singapore since 2008. Inheritance tax that is also popularly known as estate duty has also been abolished in the country. Incomes arising out of investments in property, shares, stocks, bonds, and other assets also do not attract capital gains tax.
How to file personal income tax?
Before filing tax, it is necessary to know who falls in the net of taxation. You have to pay income tax if you are a resident, employment pass holder, or entrepass holder. You have to file income tax return if your income exceeds S$22000. You have to file income tax if you have received a letter to this effect from the IRAS.
Responsibility of the employer
All companies in Singapore are directed by the government to issue relevant tax forms to their employees to make it easier for them to know about tax rates and the benefits that they can avail to reduce their liabilities.
The due date for filing personal income tax
One has to file his income tax by 15 April every year. IRAS reminds tax payers about their liability and requests them to fulfill their obligation to avoid penalties and prosecution by courts. The tax liability is computed to assess tax for the preceding year that ends on 31 December. You must file your tax by 15 April to avoid raised assessment by tax authorities. IRAS imposes a penalty of 5% with an additional 1% for a delay of every month. It can also serve a recovery notice to you for noncompliance. For every month that the tax remains unpaid, IRAS can levy a penalty of up to 12%. It can even direct the employer of the erring employee to deduct the tax at source. IRAS also has the power to instruct his bank or other parties to hold payments to him to recover taxes from him. Such a tax evader can be restricted from going abroad and other legal actions can also be taken against him.
Raising objection against NOA
If you are unhappy with the assessment imposed upon you, you can appeal and raise objection in writing within 30 days of receiving the assessment. If you fail to reply within 30 days, the assessment becomes final and binding upon you.
Protection against double taxation
There are many countries that do not have avoidance of double taxation treaty with Singapore. If you have earned income through consultancy or other professional service in any such country, IRAS provides you relief from double taxation. If there is tax on the income earned in a country and Singapore has double taxation treaty with that country, the individual can expect relief from the tax authorities in Singapore. At present, Singapore has double taxation treaty with 72 countries.
If you receive income in Singapore but you are a resident of another country, you may be exempt from income tax in Singapore provided your stay in the country does not exceed 183 days in the country.