Income tax tips for new expats in Singapore

Singapore is a reputed international financial centre. However, it is not a tax haven and it has tightly regulated tax policies for companies and individual taxpayers. This piece will lay out the salient features of Singapore's taxation system for new expats.

Tax Residency

Resident
You will be treated as a tax resident for a particular Year of Assessment (YA) if you are a foreigner who has stayed or worked in Singapore for 183 days or more in the previous year.¹ Residents are taxed on income derived from or accrued in Singapore, and on income derived from outside Singapore and received in Singapore.

Non-Resident
Non-residents are taxed only on income derived from or accrued in Singapore. They do not have to pay taxes on foreign income received in Singapore. Finally, they are exempt from income tax if they work in Singapore for 60 days or less in a calendar year. However, this rule does not apply if they are a director of a company, a public entertainer, or a professional in Singapore.

Taxable Employment Income

Besides salaries and bonuses, employment benefits such as housing and stock options will also form a part of your taxable employment income.

Progressive Income Tax

Higher income earners pay higher tax, with rates currently ranging from 2% to 20%. The employment income of non-residents is taxed at a flat rate of 15% or the progressive resident tax rate, whichever is higher. Director’s fees and other income are taxed at the prevailing rate of 20%. From 2016 onwards (YA 2017), the tax rates for non-residents will be raised to 22%.

Tax Filing Procedure

Income Tax Return for reporting the income earned in the calendar year has to be filed by April 15th of the following year. If you e-File, you have up to April 18th to do so.

After you file the tax return, the IRAS will process it and issue a notice of assessment (tax bill) to you. Most taxpayers should receive their tax bills for the year by September. Your income tax is payable within one month from the tax bill.

Taxation of Overseas Income

Singapore uses a territorial basis for taxation, which means that only Singapore-sourced income is taxable. Overseas income received in Singapore is not taxable and does not need to be declared unless it falls in one of the following categories.

First, your income is received in Singapore through partnerships in Singapore. Second, your overseas employment is incidental to your Singapore employment, i.e. as part of your work here, you will travel overseas. Third, you are employed overseas on behalf of the Singapore government. Fourth, you have a trade/business in Singapore and you are carrying on a trade/ business overseas which is incidental to your Singapore trade.²

Tax Planning

Two major ways of tax planning for expats are the Not Ordinarily Resident (NOR) scheme and Double Taxation Agreements (DTAs).

NOR scheme
Under this scheme, you will receive favourable tax treatment for a period of five YAs if you meet four criteria.

First, you must not have been a Singapore tax resident in the three consecutive YAs before the year you qualify. Second, you must be a tax resident for the YA in which you wish to qualify and you must be employed with a Singapore employer. Third, you must spend at least 90 days outside Singapore for business each year. Finally, you must earn at least S$160,000 annual income from employment in Singapore.³

DTAs
Under DTAs, you may be protected from being taxed twice in Singapore and your country of residence. International double taxation results when the same income is being taxed twice: where income arises and where it is received.

Depending on provisions of the DTA, you may claim the benefits of an exemption from the tax on income. As the provisions for each DTA may be different, you need to refer to each tax treaty for the specific provisions applicable to you.⁴

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¹https://www.rikvin.com/personal-tax-filing/
²https://www.iras.gov.sg/irashome/Individuals/Foreigners/Your-Situation/Working-Outside-Singapore/
³https://www.iras.gov.sg/irashome/Schemes/Individuals/Not-Ordinarily-Resident--NOR--Scheme/
⁴https://www.rikvin.com/taxation/singapore-corporate-tax-rates/