Paying 2017-2018 income tax in Singapore? Read this.
As the regional headquarters to many multinational corporations and a logistics hub for Southeast Asia, Singapore offers many employment opportunities for foreigners and expatriates. If you’re working in Singapore though, you’ll need to pay income tax to the state regardless of your nationality.
In this article, you’ll learn how income tax is reported and paid to the Inland Revenue Authority of Singapore (IRAS), and the factors that affect your liability.
What income is taxable in Singapore?
All income earned in or derived from Singapore is taxable, while income earned from overseas sources after 1 January 2004 is generally exempt from tax. A comprehensive list of taxable income is listed below:
| Type of income | Taxable? |
|---|---|
| Salary, bonus, director's fee, commission and allowances | Yes |
| Gains from the exercise of stock options | Yes |
| Overseas income received in Singapore | No, although some types of overseas income may attract tax. More info. |
| Government pension | No |
| Approved private schemes | Yes, for contributions to the fund after 31st December 1992. |
| Retrenchment and retirement benefits | No, exemption from tax only if the payment is to compensate for loss of income. More info. |
| Income Received as a Self-Employed Person or Sole-Proprietor | Yes |
| Income received through a partnership | Yes |
| Income received in the form of virtual currencies | Yes |
| Dividends | No, unless dividend is paid by a cooperative, or is a Real Estate Investment Trust (REIT) or foreign-sourced dividend derived by an individual through a partnership in Singapore. More info. |
| Gains from sale of property, shares & financial instruments | No, unless individual is deemed to be a property trader. |
| Rent from property | Yes |
| Annuity (Recurring annual payments) | No, unless annuity is received from a business, trade, profession or partnership in Singapore, or comes from the Supplementary Retirement Scheme (SRS) account, or is bought by your employer, in place of a pension. More info. |
| Charge (Alimony, maintenance payments, etc.) | No |
| Estate/Trust income | Yes |
| Royalty earned in Singapore | Yes |
| Winnings (Lottery, jackpot etc) | No |
| Tax on Supplementary Retirement Scheme (SRS) withdrawal | Yes |
(Source 10 December 2017)
Who has to pay income tax in Singapore?
People who need to pay income tax in Singapore can be broadly categorised into 2 categories, i.e. tax residents and non-residents. Tax residents enjoy tax reliefs and progressive rates, which do not apply to a non-resident.
Resident income tax
You’ll be assessed as a tax resident if you hold a work pass, or work and stay in Singapore:
- For at least 183 days in a calendar year
- For at least 183 consecutive days over 2 years (excludes company directors, public entertainers and professionals)
- For a continuous period over 3 years. The first and third year need not meet the minimum 183-day quota.
(Source 10 December 2017)
Non-resident income tax
If you’ve stayed or worked less than 183 days in Singapore, you’ll be assessed as a non-resident. However, if you’ve worked for less than 60 days in the year, you’ll be exempt from paying income tax. This applies only to employees who are not company directors, public entertainers or professionals.
(Source 10 December 2017)
In what instances do Singapore residents working abroad need to pay income tax?
Singapore residents generally do not need to pay income tax on income earned overseas and brought into Singapore. There are, however, certain conditions where foreign-sourced income is taxable:
- You receive the income through a partnership in Singapore.
- Your overseas employment is part of your Singapore-based job, e.g. a regional sales manager.
- You are working overseas as an employee of the Singapore Government.
- You run a business or trade based in Singapore, and your overseas income is related to the work done in Singapore.
- You received service income (e.g. from professional or technical consultancy services) from overseas that is not eligible for tax exemption.
(Source 10 December 2017)
How much income tax do Singapore self-employed persons need to pay?
You’re a self-employed worker in Singapore when you work for others under a contract for service, you have your own business and you realise your own business profit or loss. You can either be a sole-proprietor or a partner in a partnership. If you work under a contract of service, this means that you are an employee, and you work under your employer.
As a self-employed taxpayer, you may deduct allowable business expenses and report the final profit and loss amount to IRAS. If you are a sole-proprietor, you’ll pay tax based on personal income tax rates. As a partner in a business, you’ll need to pay the tax based in your allocated share.
(Source 1, Source 2 10 December 2017)
What are the income tax rates in Singapore in 2017-2018?
How much income tax you pay depends on your tax residency status. Generally, tax residents pay a progressive tax that increases with income, while non-residents do not enjoy preferential rates.
The table below shows the progressive rates that apply to tax residents.
| Income component range (SGD) | Singapore income tax rate (%) 2017 | Total cumulative tax payable (SGD) |
|---|---|---|
| 0 - 20,000 | 0 | 0 |
| 20,000 - 30,000 | 2 | (Income - 20,000) x 2% |
| 30,000 - 40,000 | 3.5 | (Income - 30,000) x 3.5% + 200 |
| 40,000 - 80,000 | 7 | (Income - 40,000) x 7% + 550 |
| 80,000 - 120,000 | 11.5 | (Income - 80,000) x 11.5% + 3,350 |
| 120,000 - 160,000 | 15 | (Income - 120,000) x 15% + 7,950 |
| 160,000 - 200,000 | 18 | (Income - 160,000) x 18% + 13,950 |
| 200,000 - 240,000 | 19 | (Income - 200,000) x 19% + 21,150 |
| 240,000 - 280,000 | 19.5 | (Income - 240,000) x 19.5% + 28,750 |
| 280,000 - 320,000 | 20 | (Income - 280,000) x 20% + 36,550 |
| >320,000 | 22 | (Income - 320,000) x 22% + 44,550 |
Non-residents are taxed based on their employment status, and the type of work done. The table below summarises the various rates.
| Type of income | Singapore income tax rate (%) 2017 |
|---|---|
| Employment | 15% or using progressive rates, whichever is higher |
| Director's remuneration | 22% |
| Professional income (consultant, trainer, coach, etc) | 15% of gross income or 22% of net income. Details |
| Public entertainer (artiste, musician, sportsman, etc.) | 10% concessionary rate |
| Property rental income | 22%. Details |
| SRS withdrawal by a non-citizen SRS member | 22%. Details |
| Interest, royalty etc. | Reduced final withholding tax rate is Interest: 15% Royalty: 10% OR Reduced final withholding tax rate is not applicable: 22% |
(Source 10 December 2017)
What are the tax exemptions in Singapore?
To reduce your payable tax, you may declare allowable expenses, donations, reliefs and rebates. This option is available to tax residents only, as non-residents are not entitled to tax relief.
Deductions for Employees
You may request for a deduction on personal expenses that were incurred while carrying out your official duties as an employee. These expenses shouldn’t be previously reimbursed by the employer, and aren’t capital in nature.
You’ll also need to track your expenses along with invoices and receipts, and keep them for the next 5 years in case of an audit.
(Source 11 December 2017)
Deductions for Sole-Proprietors, Self-Employed Individuals or Partners in a Partnership
Business owners and self-employed taxpayers can deduct allowable business expenses to reduce the tax liability.
The government also grants tax deductions to businesses that invest in R&R, land intensification, productivity and other initiatives.
(Source 1, Source 2 10 December 2017)
Deductions on Rental Expenses
Landlords can make a deduction on expenses incurred during the period of lease, which is used to produce the rental income.
(Source 11 December 2017)
Deductions on Donations
You may claim 2.5 to 3 times on the total donation value made to an approved Institution of Public Character (IPC), the Singapore Government, or an approved educational or cultural institution. However, donations made with the intention for marketing or advertising purposes, and donations to a overseas funds, are both not tax-deductible.
(Source 11 December 2017)
Deductions under Angel Investors Tax Deduction Scheme (AITD)
Angel investors may claim for tax deduction if they have invested in Singapore-based startup companies. To qualify, you will need to:
- Invest at least SGD 100,000 in a qualifying company, within 12 months of the first investment in that same company.
- Hold the investment for at least 2 years from the latest qualifying investment.
(Source 11 December 2017)
Reliefs and Rebates
Singapore tax residents enjoy many reliefs and rebates to promote social and economic objectives. This table below summarises the benefits, and the prerequisites required.
| Tax relief | Prerequisite | Remarks |
|---|---|---|
| Course Fees Relief | Everyone | Tax deduction on course fees to upgrade skills and enhance employability. Details. |
| CPF Relief | Singapore citizen or permanent resident | Tax deduction on cash contributions to the taxpayer’s Central Provident Fund (CPF) account. Details. |
| Earned Income Relief | Everyone | Tax deduction for taxpayers who need to pay taxes on income. Details. |
| Handicapped Brother/ Sister Relief | Everyone | Tax deduction for taxpayers who live in the same household as a handicapped sibling and are supporting them financially. Details. |
| Life Insurance Relief | Everyone | Tax deduction on annual premiums for a life insurance policy. The insurance company must have an office in Singapore. Details . |
| NSman (Self) Relief | Singapore citizen | Tax deduction for citizens who have either served the mandatory National Service stint in the armed forces, police or civil defence. The wife and parents of the NSman will also be given tax deductions separately. Details. |
| Parent/ Handicapped Parent Relief | Everyone | Tax deduction for taxpayers who are currently supporting or taking care of their parents. Details. |
| Supplementary Retirement Scheme (SRS) Relief | Everyone | Tax deduction for taxpayers who make voluntary contributions to their Supplementary Retirement Scheme (SRS). Details. |
| Qualifying/ Handicapped Child Relief | Married/ Divorced/ Widowed Taxpayers | Tax deduction for parents looking after an unmarried child below 16 years old or is currently studying full-time. Details. |
| Spouse/ Handicapped Spouse Relief | Married/ Divorced/ Widowed Taxpayers | Tax deduction for taxpayers currently supporting his or her spouse, who is earning less than $4,000 annually or is handicapped. Details. |
| Foreign Maid Levy (FML) Relief | Married/ Divorced/ Widowed Female Taxpayers | Tax deduction for married women who employed a foreign domestic worker in the last assessment year. Details. |
| Grandparent Caregiver Relief | Married/ Divorced/ Widowed Female Taxpayers | Tax deduction for working mothers who engage the help of parents or grandparents to look after her children. Details. |
| Working Mother's Child Relief | Married/ Divorced/ Widowed Female Taxpayers | Tax deduction for working mothers who have a child with Singapore citizenship and qualify for child relief deductions. Details. |
What are the tax penalties in Singapore?
The Income Tax Act defines the penalties to be meted out for tax evaders and incorrect reporting.
| Type of offence | Penalty |
|---|---|
| Failure to report income | Up to $1,000 fine or 6 months imprisonment.Further penalty of $50 every day if offence is continued after conviction. |
| Failure to report income for 2 years or more | Pay double of the tax amount as assessed by the Comptroller.Up to $1,000 fine or 6 months imprisonment. |
| Incorrect reporting | Pay the equivalent amount of the assessed tax. |
| Incorrect reporting without reasonable excuse or wilful negligence | Pay double the equivalent amount of the assessed tax.Up to $3,000 fine or 36 months imprisonment or both. |
(Source 11 December 2017)
What sort of double taxation agreements are there with Singapore?
Avoidance of double taxation agreements (DTA) between Singapore and treaty partners define the tax rights on income from cross-border economic activities.
Certain types of income may also qualify for a reduction or exemption of tax under a DTA.
The following lists the countries which have signed a DTA with Singapore.
(Source 1 Source 2 12 December 2017)
How do I pay income tax in Singapore?
You can file your taxes using any of the following channels
- Paying income tax online
- Mobile phone
- Paper form
The first 2 electronic channels are done via the myTax Portal, while you need to opt in for paper form submissions to get the documents from IRAS.
(Source 12 December 2017)
Paying income tax online
Visit myTax Portal and login using SingPass, which is a single login account for all government e-services. Alternatively, you can request for an IRAS PIN.
Prepare the following documents before you begin:
- Form IR8A (if your employer is not participating in the Auto-Inclusion Scheme)
- Particulars of your dependants (e.g. child, parent) for new relief claims
- Details of other sources of income, if applicable
- Business Registration Number / Partnership Tax Reference Number (applicable to self-employed or partners)
Once ready, click on "Individuals" > "File Form B/B1" to start. You’ll be directed to an acknowledgement page after the e-filing is completed.
To make payment, the most convenient channel is auto-payment through GIRO, which works for local bank accounts.
If you’re sending money from your overseas account to pay for tax, IRAS accepts telegraphic transfers. Note that telegraphic transfers are usually converted on poor exchange rates defined by banks or traditional money transfer services, and incur additional charges that need to be absorbed by the sender.
To save on these additional costs, Wise uses its smart new technology to use local banking systems to get money to Singapore from overseas. And because all of the money stays local, they can cut out huge international costs and offer you the real mid-market rate, the same you get on Google. Before you pay your taxes from abroad, however, do check with IRAS if they are able to accept payments from a third party (Wise). Moreover, to facilitate fund transfers, you can use a Wise borderless multi currency account to hold your money and transfer dozens of currencies easily, including the Singapore Dollar. For no monthly fee.
If you can’t use Wise to pay directly to IRAS, for instance when you don’t have a bank account in Singapore yet, consider sending the money to a family member or a trusted friend in Singapore, to help make the payment on your behalf. You can then use Wise to reduce the cost in transferring the funds to that local bank account.
Tax reporting and paying your taxes is a complicated process, and under-reporting is a criminal offence. Hence, it’s important to know what options are available to you, and how to file it correctly. It’s also a good idea to seek some help from a professional, to make sure that you’re filing your taxes correctly and that you don’t lose out on any tax exemptions that might be applicable to you.
Also, if you’re working abroad and need to pay taxes in Singapore, consider using Wise to save you some money on cross-border payments. Every dollar saved can be better spent on paying off your tax liability!
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