Singapore has a progressive structure for the personal income tax. This works out to be one of the lowest globally. It is essential to determine the amount of the income which is chargeable and tax residency of an individual to help you determine the liability of income tax in Singapore. You can then apply the tax rate which is progressive to this. The key points of income tax in Singapore include
- The resident tax rate which is progressive in Singapore starts at 0% and ends at 22%above $320,000.
- An individual is charged income tax only on the income which is earned here. The income earned by an individual overseas is not subject to any taxation sans a few exceptions.
- The rules differ based on the individual’s tax residency.
- There is no inheritance tax or capital gain.
- The filing date of tax returns for an individual is April 15 every year. This income tax assessment is done based on the preceding year.
Rates of Personal Income tax:
The individuals residing in Singapore are taxed on the basis of a progressive rate of tax. It is mandatory to file the personal tax return if the annual income works out to $22,000 or more. Tax residents are not required to pay any tax if the annual income works out to less than $22,000. At the same time, if you have been contacted by the Singapore tax authority to file the tax return, you will have to do so.
On the first 20,000 there is no tax payable. The following 10,000 there is 2% tax charged which works out $200 as the gross tax payable.
On the first 30,000, you pay $200 as tax and the following 10,000 the rate of interest is 3.5% with the gross tax payable working out to $350.
On the first 40,000, you pay a gross tax of $550 and the following 40,000 you pay 7% which is $2,800 as the gross tax payable.
On the first 80,000, the gross tax payable works out to 3,350 and the following 40,000, you pay a tax of 11.5% which is $4,600 as the gross tax payable.
On the first 120,000 you pay a gross tax of $7,950 and the following 40,000 you pay 15% which is $6,000 gross tax payable.
On the first 160,000 you pay a gross tax of 13,950 and the following 40,000 you pay 18% which works out to 7,200.
On the first 20,000 you pay a gross tax of 21,150 and the following 40,000 you pay 15% which works out to $6,000.
On the first 240,000 you pay a gross tax of 28,750 and the following 40,000, you pay 19.5% which works out to $7,800.
On the first 280,000 you pay a gross tax of 36,550 and the following 40,000 you pay 20% which works out to $8000.
On the first 320,000 you pay a gross tax of 44,550. And any excess is charged with 22%.
Key Points to Singapore income tax:
- The tax residency in Singapore determines the amount of tax to be paid by an individual. The taxes of non-residents and residents are different.
- The resident tax rate of 22% starts at $320,000of income which is taxable.
- There is a flat income tax rate of 15% of tax for the non-residents or the resident rates whichever leads to a higher amount of tax.
- Generally, all earnings which an individual gets out of employment under which he/she performs duties in Singapore are fully taxable. This is applicable wherever the funds are made available to an individual.
- Perquisites such as stock options and housing besides the bonuses and salaries form a part of the employment income which is taxable.
Personal Income Tax for Residents of Singapore:
There are different rates of income tax for the residents and different for the non-residents of Singapore. You are treated as a resident of Singapore for a specific year if
- You are a Singaporean
- Foreigner who worked/stayed in Singapore for 183 days in Singapore or even more for the year preceding.
- If you have established your home on a permanent basis in Singapore (SPR).
For Foreigners who are working in Singapore there are specific conditions which are applicable for income tax filing.
- If you work for 60 days or less in Singapore in a specific year, you are exempted from any income tax on your earnings. This is not applicable to the public entertainers, company directors who are considered non-resident, professionals including queen’s counsels, foreign speakers, experts, coaches, trainers, consultants and more.
- If you work or stay for 183 days or more in a specific year in Singapore the income tax filing is at the resident rates.
- If you work/stay for 61 to 182 days in a specific year in Singapore the income is taxed at resident rates or 15%, whichever works out to a higher income tax.
- If you work/stay for 183 days over 2 years continuously in Singapore, you are taxed at the resident’s rates.
- If you work or stay for 3 consecutive years in Singapore the income for the entire time span you are taxed at resident rates.
Income which is Subject to Tax:
Employment income which is taxable includes salary, wages, cash remuneration, perquisites, gratuity, leave pay, commissions, director’s fees and the gains got from the share plans of the employee or even any allowances which are received as compensation.
The net income after deducting the expenses, personal reliefs and donations is the chargeable income. Conditions like academic tuitions support of dependents, development and professional expense, and the premiums which are paid for different insurances can help you in getting Personal Tax Relief.
Calculating Taxable Income:
The IRAS (Inland Revenue Authority of Singapore) calculates the tax in the following manner.
- The total Income sans expense=Statutory Income
- The Statutory Income Less the Donations=Assessable Income
- Assessable Income less the Personal Reliefs=Taxable Income.
It is the responsibility of the Employer to ensure that all the employees are given the IR8A forms and show the benefits-in-kind along with the remuneration for the previous year.