Tax Planning and Tax Return in Singapore

Corporate Taxation in Singapore

Normally, a Singapore company has to pay taxes on the revenue generated in the previous year. For example, income earned in the financial year 2017 is taxable in 2018.

Going from the example above, 2018 is the Year of Assessment (YA). In other words, the YA is the year when a company’s income is assessed for taxation purposes. To complete this tax assessment, the Inland Revenue Authority of Singapore (IRAS) looks at the income, expenses and other aspects incurred during the financial year. The financial year is named the “basis period”. A basis period is a 12-month period that precedes the YA.

Singapore’s corporate tax rate is set at 17 percent. The rate only applies to the company’s chargeable income i.e., taxable revenues less allowable expenses and other allowances. This rate may be one of the lowest in the world, but the effective tax payable is even lower when a company utilizes all the government incentives, subsidies and schemes they are eligible for.

Find out how we can help you fulfil your tax obligations as a business through our services on corporate taxation.

Personal Taxation in Singapore

When it comes to personal tax, the Inland Revenue Authority of Singapore (IRAS) treats non-Singaporeans and non-Singapore Permanent Residents as foreigners for tax purposes. That being said, a foreigner’s tax-residency status can determine whether they need to pay income tax on all income derived from or accrued in Singapore.

In addition to remuneration and bonuses — contractual or non-contractual — other benefits from employers, including housing and stock options can constitute part of your taxable income in Singapore. However, overseas income generated outside Singapore, Singapore dividends and bank interests are classified as tax-exempt in Singapore.  

Tax-residency in Singapore for foreigners

Ultimately, your tax residency status determines the amount of tax liability you will have. The amount of taxes a foreigner pays in Singapore can be dictated by the following cut-off periods of 60 days and 183 days. For example, if you receive a one-year work pass, you will be classified as a Singapore tax resident immediately.

At least 183 days

You are a tax resident if you stay or work in Singapore:

• For at least 183 days in a calendar year: Under Singapore’s tax residency rules,  foreigners who live and work in Singapore for 183 days or longer are regarded as tax residents. Do note that weekends, public holidays, and temporary absences for a vacation or work-related travels are all factored into the above-mentioned period of 183 days. While the foreigner can claim tax reliefs (discussed below) when filing up the Form B1 applicable to tax-residents, their foreign-sourced income transferred into the city-state is tax-exempt.
• For at least 183 days for a continuous period over two years (this is applicable to foreign employees who have entered the country from January 1, 2007, but excludes company directors, public entertainers or professionals): If you live or work in Singapore for an ongoing period of at least 183 days straddling two years, you will be categorized as a tax resident for the two years as per the two-year administrative concession.
• Continuously for three consecutive years: If you live or work in Singapore continually for three consecutive years, you will be categorized as a tax resident for all the three years in accordance with the three-year administrative concession. This rule applies even if you spent fewer than 183 days in the first and third year. The progressive resident rates range from zero to 22 percent; the rates in the highest tier kicks in at annual incomes that are at least $320,000.

Less than 183 days

A foreigner is categorized as a non-resident for tax purposes if he or she stays in Singapore for fewer than 183 days in a calendar year. No tax reliefs are provided for these individuals when they fill up Form M (applicable to non-residents). However, for them, only income earned in Singapore is taxed at a flat rate of 15 percent (or at progressive resident rates, if it gives a higher tax liability). Do note the Director’s fee and other forms of income are taxed at a slightly higher rate of flat 22 percent, from YA 2017. However, when it comes to earlier YAs, this rate is set at 20 percent.

Less than or equal to 60 days

For foreigners who are in Singapore for less than or equal to 60 days, IRAS doesn’t charge any taxes and treats them as non-residents. But this exemption does not apply to directors of a company, public entertainers, foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches, etc.

This rule will not apply if your absences in Singapore are incidental to your Singapore occupation. In this case, your total income (including income for services rendered outside Singapore) is taxable in full in the country.

Learn more about how we can help with your personal taxation matters.

Singapore Tax Season 2018

Filing for the Year of Assessment (YA) 2018 begins on March 1, 2018. Should you be required to submit an income tax return, you will need to e-File your tax return. To do so, log in to myTax Portal using your SingPass or IRAS PIN by the following dates:

• e-filing: April 18, 2018
• paper filing: April 15, 2018

In Singapore, a majority of taxpayers use GIRO for tax payment. Though other electronic payment methods including internet and phone banking, credit cards, or telegraphic transfer, can also be used. If you are not agreeable with the tax assessment, you may file an objection and explain your reason(s) for the objection within 30 days from the tax bill’s date.

Not Ordinarily Resident Scheme in Singapore

In Singapore, a special category of people, who are categorized as Not Ordinarily Residents (NOR), are given favourable tax treatment for five years of assessment.

To qualify, an individual has to be:

• a non-resident in Singapore for tax purposes in the past three years of assessment; and
• in that year of assessment where the individual qualifies for the NOR status, he or she must have been a Singapore tax-resident

Under the scheme:

• a NOR taxpayer pays income tax on only the parts of his employment income that corresponds with the number of days he spends in Singapore; this is provided he had spent at least 90 days away from Singapore for business reasons and has generated at least $160,000 as their total Singapore employment income. Hence, if the tax on the apportioned income is less than 10 percent of the individual’s total employment income, they will still be required to pay a tax that is 10% of the total employment income.
• a NOR taxpayer will enjoy tax exemptions on contributions made by the employer to a non-mandatory overseas pension fund, which would have otherwise been taxable if it were in his hands.