Tax season is here and it is time to consider your personal tax strategy in time for the April 15th deadline. Tax planning is an essential part of managing your personal finances. Here are nine tax-saving tips to help you manage your filings this year:
Claim tax reliefs and rebates
Singapore gives tax relief in multiple areas as part of its social policy and focus on citizen welfare. You can claim relief to support parenthood and family formation, caring for aging parents, and upgrading personal skills.
For example, in the case of upgrading your skills, you can claim relief for 2016 on the course fees paid in 2015 for any course, seminar, or conference you attended in 2015 that has either led to an approved qualification or is relevant to your current employment. You can claim the fees incurred up to S$5,500 each year regardless of the number of courses, seminars, or conferences you have attended.1
Contribute to Supplementary Retirement Scheme (SRS)
In addition to encouraging voluntary savings, the SRS scheme also helps you make tax savings. If you are a citizen or Permanent Resident, you can contribute a maximum of S$ 12,750 per year. For foreigners, maximum contributions are capped at S$29,750 per year.
Make a voluntary contribution to your Medisave Account (VC-MA)
Tax reliefs are also available for employees and self-employed Singapore citizens and Permanent Residents who make voluntary contributions to their Medisave account. While the amount of tax relief is determined by the IRAS regulations, you would qualify if two conditions are satisfied. First, you made VC-MA in the previous year. Second, you earned income in the same year as VC-MA were made.2
Top-up your or your family members' CPF accounts
You can enjoy tax savings when you put top-up CPF savings for yourself or your family members. You will enjoy this tax relief if you top-up your contributions to either your CPF special account or retirement account, or the CPF special accounts and retirement accounts of your immediate family members. Under the scheme, family members include Parents or Parents-in-law, Grandparents or Grandparents-In-Law, Spouse, and siblings.
In the case of your spouse of siblings, you will not be able to claim tax-reliefs for cash top-ups, if their annual income exceeds S$4000. The maximum CPF top-up relief that you can claim per year for yourself and your family members is S$14,000.3
Make a charitable donation
Cash, computer, land/building, and public shares donations to approved Institutions of a Public Character (IPCs) as well as works-of-art donations to the National Heritage Board (NHB) and artifact donations to the organisations with the Approved Museum Status are tax-deductible. It is important to remember that not all charities registered in Singapore are IPCs. The status of an organisation can be checked online at the 'Charity Portal'.4
Every dollar donated to an IPC from January 1, 2015 until December 31, 2015 would generate a 300 percent tax deduction. Qualifying donations made from January 1, 2016 until December 31, 2018 would generate a 250 percent tax deduction.
Finally, if the tax deduction exceeds the income for the tax year, unutilised deduction amount can be claimed in the period of up to 5YAs.5
Apply for Not Ordinarily Resident (NOR) scheme
You can apply for the Not Ordinarily Resident (NOR) status if this is your first year of tax residency in Singapore and you were not a Singapore tax resident in the previous three years.
NOR scheme provides at least two substantial benefits. First, you are eligible for the concession of time-apportionment of employment income if you have been outside Singapore for business for at least 90 days, and your employment income is above $160,000 during the same year. This concession represents favorable tax treatment as you are paying income tax only on the employment income during the days spent in Singapore as opposed to the whole year. Second, under the NOR scheme you are exempt from taxes on "contributions made by [your] employer to an overseas pension fund."6
Importantly, even though the NOR status is valid for five consecutive years, you have to file a new application each year during the NOR validity period if you are claiming any of the above concessions in that year.
Claim exemptions from stock options gains
If your compensation consists of Employee Share Options (ESOPs) or Employee Share Ownership (ESOW) plans, you may qualify for a variety of tax savings. You can apply for tax deferment under the Qualified Employee Equity-based Remuneration Scheme. Under the scheme, you can defer tax payment on gains from stock options to up to five years.
You can also apply for the Equity Remuneration Incentive Scheme. If you qualify, you can enjoy full exemptions on the first S$2000 of gains from your employee share options. Additionally, 25 percent of the remaining amount of gains from ESOP or ESOW plans will also be considered exempt.
File for deductible expenses from rental property
IRAS allows a variety of costs that you incur during a rental period to be claimed as a tax deduction. Some examples of types of expenses are: housing loans, property tax, fire insurance, repairs, utility expenses, etc. A full list can be found at the IRAS website.7 These costs have to be incurred exclusively in the process of producing your rental income.
Claim qualifying expenses
In addition to expenses incurred from the leasing of properties, you can claim expenses associated with your official duties, but not reimbursed by your employer. These have to be itemised and fully supported with corresponding receipts. Examples of qualifying expenses include client entertainment and subscription to professional associations.
If you are self-employed, business expenses related to upgrading fixed assets as well as employee training expenses are tax-deductible too.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Satish Bakhda is the Chief Operating Officer at Rikvin. He brings with him over 15 years of experience in the corporate services industry and is a regular speaker at marketing events around the world. He is also a consultant on matters relating to incorporation, relocation, accounting and taxation in Singapore.