A guide on personal income tax in Singapore

6 minute read

 

Singapore is rather famous in the business world due to its low corporate tax. In addition, personal income tax rates are rather favorable as well.

The personal tax system in Singapore is progressive, which means that the personal tax rate Singapore increases with an increase in the individual’s income. Also, it’s good to know that many types of personal income, such as income from capital gains, income from dividends, estate duty, and some other types, are entirely non-taxable.

If you’d like to learn more about Singapore’s attractive tax system and personal income tax rates in particular, read this tax guide.

 

Overview:

 

Who is considered to be a resident or a non-resident in Singapore?

The tax bracket in Singapore (taxable income) that a person has to pay depends on their tax residency status.

  • A person is deemed a tax resident if their period of stay (work included) in Singapore is at least 183 days long (in a single year). In this case, all of their income is taxed at progressive resident rates, but it is possible for them to claim tax reliefs.
  • In case a person stays in Singapore for at least 183 days for a continuous period over two years, and the employment period is straddled between two calendar years, they are considered a tax resident for both years. The income is taxed at progressive resident rates, and a claim can be made for Singapore tax reliefs.
  • Finally, in case a person stays in Singapore for three consecutive years, that person is deemed a tax resident for all three years, and the income is taxed progressively, again, with the possibility of claiming for tax reliefs.

On the other hand, a person is seen as a non-resident of Singapore for taxes if the following criteria are met:

  • If a person is in Singapore for 61 to 182 days, the person is deemed a non-resident. In that case, the employment income is taxed at 15% or progressive resident rates, whichever gives rise to a higher tax amount.
    Moreover, director fees and other personal income are taxed at the prevailing rate of 20% (22% from the Year of Assessment 2017). No tax reliefs are granted in this case.
  • In case you are employed for 60 days or less, you are not considered a resident. The short-term employment income is exempt from income tax. However, this rule does not apply if the person is a director of a company, a public entertainer, or a professional in Singapore.
    This tax exemption also applies when a person’s absence from Singapore is incidental to their employment there. Should this happen, the total personal income is taxable fully in Singapore. Also, director fees and other income are taxed at the prevailing rate of 20% (22% from the Year of Assessment 2017). No income tax reliefs are provided.

 

Personal income tax rates for a resident

Residents are taxed on a progressive resident tax rate listed below. The filing of the personal tax return for a tax resident is obligatory if the annual income stands at S$22,000 or more.

Singapore tax residents do not need to pay individual income tax if their income (annual) is less than S$22,000.

Take a look at the table below that defines progressive resident tax rates.

Chargeable incomeRate (%)Gross Tax Payable ($)

On the first 20,000

On the next 10,000

0

2

0

200

On the first 30,000

On the next 10,000

3.50

200

300

On the first 40,000

On the next 40,000

7

550

2,800

On the first 80,000

On the next  40,000

11.5

3,350

4,600

On the first 120,000

On the next 40,000

15

7,950

6,000

On the first 160,000

On the next 40,000

18

13,950

7,200

On the first 200,000

On the next 40,000

19

21,150

7,600

On the first 240,000

On the next 40,000

19.5

28,750

7,800

On the first 280,000

On the next 40,000

20

36,550

8,000

On the first 320,000

On the next 320,000

22

44,550

Source: IRAS

 

Personal tax for a non resident

As it was mentioned above, non residents are individuals whose stay (work inclusive) in Singapore is not longer than 183 days (in a single tax year).

There are a few factors that come into play if you are a non resident:

  • The employment income is exempted from personal tax if the person is in Singapore for short-term employment (60 days or less in a year). This tax exemption does not apply if the person is a director of a company, a public entertainer, or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches, and so on.
  • If an individual stays in Singapore for 61 to 182 days in a year, they shall be taxed on all income earned in Singapore. It is possible to claim expenses and donations to save tax, but it is not possible to claim personal relief. The employment income is taxed at 15% or the progressive resident tax rate (see the table above), whichever gives rise to a higher individual income tax amount.
  • Finally, director fees and remuneration, consultant fees, and other income are taxed at a range of 15% to 22%.


Singapore tax-exempt dividends

In general, the dividends below are not taxable:

  • Dividends paid on or after 1 January 2008 by a Singapore resident company under the one-tier corporate tax system except for co-operatives.
  • Foreign dividends received in Singapore on or after 1 January 2004 by resident individuals. If an individual resident in Singapore receives foreign-sourced dividends through a partnership in Singapore, these dividends may be exempt from Singapore tax if certain conditions are met.
  • Income distribution from Real Estate Investment Trusts, except for distributions derived by individuals through a partnership in Singapore, or from the carrying on of a trade, business, or profession in REITs.

In addition, here are a few examples of non-taxable dividends:

  • Tax-exempt dividends are dividends from resident companies listed on the Singapore Stock Exchange.
  • Tax-exempt dividends are dividends from share buyback through Special Trading Counters (STC).
  • Dividends from private resident companies are tax-exempt dividends.
  • NTUC Fair-Price dividends are non-taxable except for dividends received through co-operatives.
  • Singapore dividends from approved CPF investment Scheme agent banks are non-taxable.
  • Non-taxable dividends also include Singapore dividends from unit trusts.

 

What is the personal income tax rate in Singapore?

A person is considered to be a tax resident if they:

  • Are a Singaporean
  • Permanently reside in Singapore with an established home and Permanent Resident status
  • Are foreigners but have worked or stayed in the country for more than 183 days in the tax year

Such people pay income taxes on their chargeable income as per the resident tax rate table above. The income subject to taxation (chargeable income) for tax residents is determined as shown in the table below:

Total Income

Less: Expenses

= Statutory Income

Less: Donations

= Assessable Income

Less: Personal Relief

= Chargeable Income

Source: IRAS

The following are considered to be total income:

  • Profits or gains acquired from any employment
  • Profits or gains acquired by carrying on a trade, business, vocation, or profession as a sole proprietor or in a partnership
  • Royalties, rents, premiums and other types of profits arising from properties
  • Interests, investment income, dividends

In the majority of cases, income earned overseas does not qualify as total income.

Expenses are qualified:

  • Rental-related expenses
  • Employment-related expenses

Donations are the money given to charitable organisations, while personal reliefs are eligible course fees, earned income relief, parent relief, and other special personal reliefs.

This leaves us with chargeable income as the adjusted income after deductions from the total income.

 

How do you calculate Singapore personal income tax?

The best way to learn this is to follow a real-life example. Let’s take a look.

 

Tax resident

Let’s say that a gentleman that is 35 years old earned $50,000 in 2019.

He has a newborn child in 2019 and is eligible for a Parenthood Tax Rebate of $5,000. His chargeable income for the Year of Assessment (YA) 2020 is S$34,750, calculated as shown in the table below:

Total Employment Income 2019$50,000
Less: Donations$250
Assessable Income$49,750
Less Personal Reliefs 
– Earned Income Relief$1,000
-Qualifying Child Relief$4,000
– Employee CPF Contribution Relief$10,000

Chargeable Income

(Assessable Income – Personal Reliefs)

$34,750

($49,750 – $15,000)

Chargeable Income Tax Payable 
Tax on the first $30,000$200.00
Tax on next $4,750 @ 3.5%$166.25
Gross Tax Payable$366.35 (200+166.25)
Less: Parenthood Tax Rebates (PTR)$366.25
Net Tax Payable for YA 2020$0

Also, this gentleman is entitled to a PTR of $5,000 for the first child born in 2019, which is used to offset his personal income tax payable for YA 2020.

The remainder ($5,000 – $366.25) is used to offset his income tax payable in subsequent years until the rebate has been utilized.

 

Non-tax resident

This lady is a foreigner who has stayed and worked in Singapore from 1 August 2019 to 31 October 2019.

She received a total salary of $21,000. Hence, her chargeable income for YA 2020 is calculated as shown in the table below.

Total Employment Income in 2019$21,000
Less: Employment Expenses$0
Assessable Income$21,000
Less: Personal ReliefsN.A.

Chargeable Income

(Assessable Income – Personal Reliefs)

$21,000

The tax payable on her chargeable income of $21,000 is calculated like this:

Chargeable Income$21,000
Tax Rate for Non-Residents15%
Net Tax Payable for YA 2020$3,150 (21,000 x 15%)


 

How do I file personal income tax Singapore?

In Singapore, each eligible taxpayer has a duty to file a yearly personal income tax return. All completed forms have to be submitted to the Singapore tax authority by the 15th of April.

Individuals that earn a personal income of less than S$22,000 a year do not need to pay tax (applicable for tax residents only). However, they may still need to file returns if they have been informed by tax authorities to submit the income tax form.

Even if there is no income in previous years, it is still mandatory to declare zero income in the tax form and submit it by April 15 (paper) or April 18 (online). It is also mandatory for an individual to file tax returns if their annual income is S$22,000 or more.

It is possible to file the returns online or by mail. IRAS sends the appropriate tax form upon request, which is available starting 1 March every year.

  • For tax resident individuals – Form B1
  • For self-employed – Form B
  • For non-resident individuals – Form M

Failing to file on time or not filing at all results in penalties. IRAS can take legal actions against individuals for non-filing or non-payment.

After an individual has filed their returns, they shall receive their Notice of Assessment or tax bill from May to September.

The tax bill indicates the amount of tax that has to be paid. If an individual disagrees with the tax amount, it is necessary to inform the Singapore tax authority within 30 days from the date of the tax bill and state the reasons for the objection.

It is necessary to pay the full amount of personal tax within 30 days of receiving the Notice of Assessment.

It does not matter if you have informed the tax authority about your objection. If the personal tax remains unpaid after 30 days, penalties shall be imposed. This should be taken seriously since the authorities do not tolerate delays or failures to make a payment!

 

Frequently asked questions regarding Singapore personal income tax rates

Recently, both employees and entrepreneurs have had some uncertainties regarding this issue. There have been quite a few questions about the tax.

Below are listed accurate answers to some of the more frequent questions.

 

What is the due date for personal income tax filing in Singapore?

The due date of e-filing for individuals is April 18, while the deadline for the paper filing option is April 15.

Bear in mind that income tax is assessed based on a preceding year basis. To put it simply, on these dates a person has to file the return for the previous year.

 

Do self-employed individuals have to file taxes?

Yes, self-employed individuals have to file taxes too. They have to declare their business income for the relevant accounting period.

In general, the accounting period is a 12-month period for which profits or losses are calculated. It is mandatory to keep comprehensive records and accounts of the business transactions.

They should be supported by invoices, receipts, vouchers, and other documents. At the end of every accounting period, it is necessary to prepare the statements of accounts comprising the profit and loss accounts and the balance sheet.

 

What happens when an individual fails to file tax returns or does not file at all?

IRAS will most certainly take action if a taxpayer fails to file returns or fails to meet the deadline.

IRAS usually imposes various measures such as:

  • IRAS can impose a late filing fee that can range from S$150 to S$1,000 and depends on the prior history of your filing and tax payment. Repeat offenders are likely to receive higher fees.
  • IRAS can also issue an Estimated Notice of Assessment (NOA).
  • IRAS is also likely to issue a summons to attend the court if it has not received the required tax return and the payment of the late filing fee by the due date.
  • Finally, keep in mind that the failure to pay the penalty or fine ordered by the adhering court makes a taxpayer subject to imprisonment.

 

What are the common mistakes when filing a Singapore personal income tax return?

Avoid these common mistakes when filing a tax return:

  • Incorrect declaration of income
  • Claiming inappropriate deductions
  • Incorrect claim for CPF contributions (self employed)
  • Submitting incorrect documents
  • Not clicking the “Submit Income Tax Return” button

If you decide to file the returns by yourself, make sure to double-check the IRAS website before you finally submit the document.

 

Wrap up

Having read this Singapore tax guide, you know that Singapore laws clearly indicate that one’s tax liability is based on the person’s residential status, the prevailing personal income tax rates, and the allowable deductions.

If you are not fully aware of all the details but planning to relocate to Singapore and start a business there, the best way to handle taxes is to seek professional assistance. Feel free to contact us so you don’t find handling taxes a difficult task ever again.

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