Epica Guide Series
Singapore Personal Income Tax Guide
Know more about personal taxation regime in Singapore. All your questions answered here.
Table of Contents
Singapore'sincome tax rules and regulations make it one of the most lucrative destinations for the business community. Singapore’s law offers various incometax incentive at the corporate and individual level, based on a progressive structure. So, one must ask,what are those incometax inventive? which type of income is taxable? And does these laws affect the residents of Singapore only? What if you are a non-resident in Singapore, how then the incometax laws apply to you?All these and many other questions will be addressed in the ensuing paragraphs.
This article will answer all possible queries about Singapore's personal income tax rate, rules and regulations. So, once you have read through this article, you will have all the information on Singapore's personal income tax system in detail.
Singapore Personal Income Tax Rate
Singapore offers one of the lowest Personal income tax rates in the world. If you want to determine the income tax liability of a person in Singapore, you are required to determine the tax residency and the amount of assessable income first and then apply the resident Singapore personal incometax rate to it. Some key points to understand the personal income tax rate in Singapore are as under:
Basic Concept - Glossary of Personal Income Tax Terms
In order to understand the Singapore Personal Income Tax system in a better way, it is imperative to learn about the basic terminologies, correspondence and the functions that are directly related to the tax system. Below is a list of the terms that help you understand the personal income tax system in Singapore.
Year of Assessment
The period of one year in which income tax is calculated and charged is called 'Year of Assessment' (YA). The assessment is done for the income that has been earned in the preceding year commencing on 1 Jan and culminating on 31 Dec.
Example: For instance, for YA 2019, the income that has been earned between 1 Jan 2018 and 31 Dec 2018 will be assessed.
Basis period
An income period which is relevant to the YA is called ‘Basis Period.’ The basis period is always for the year preceding YA.
Example: For instance, the basis period for YA 2019 will be the period of time from 1 Jan 2018 to 31 Dec 2018.
The basis period may be different if you receive business income , and your accounts have been established for a date other than 31 Dec.
Case 1. Employment Income
Mr. X has an employment income from 1 Jan to 31 Dec 2018. Therefore, the basis period for this would from 1 Jan to 31 Dec 2018. Consequently, it will be calculated in the year of assessment (YA) 2019.
Case 2. Business Income
Mr. Y is the owner of a business and a sole proprietor. His financial year ends at 31 Mar 2018. The basis period for his business income will be 1 Apr 2017 to 31 Mar 2018; therefore, will be assessed in the YA 2019.
Notice of Assessment (NOA)
The term Notice of Assessment indicates your incometax bill. It depicts the type of income and the amount of income that is subjected to Tax. It calculates the incometax amount that you are required to pay, the deductions (like expenses, donations, reliefs) given, and the credit balance that is expected to be refunded to you.
Assessable Income
The total income that remains after the deduction of allowable expenses and approved donationsis called ‘Assessable income.' The total income comprises:
Personal Reliefs
The deductions which help you in saving tax are referred to as 'Personal reliefs.' The reliefs and rebates are applicable only if:
IRAS offers many reliefs like, working mother relief, Educational Courses Relief, Donation Relief, Handicapped Child relief etc. The detailed list of these reliefs for personal income tax is available on the IRAS website.
Chargeable income
The part of income that remains after the deductionof personal reliefs and is assessable is called ‘Chargeable Income.
What is Taxable and Non-Taxable Income?
Every type of income that has been earned or generated in Singapore is liable to Personal Income Tax in Singapore. Generally , the income that is collected from overseas is not liable to personal income tax since after 1 Jan 2004barring a few exceptional circumstances.
Sources of Income
Income earned in Singapore that is liable to personal income tax may come from various resources as mentioned below:
Income tax on income from Employment
Income tax on income from Trade, Vocation , Business, or Profession
Income tax on income received in shape of Government Grants
When the payouts are received, these grants by the government are taxable in the Year of Assessment. Only PIC Bonus and Wage Credit Payout will be auto-included in the tax return for self-employed taxpayers.
Income Tax on income earned from the property and Investments
Other Taxable Income Sources
Personal Income Tax Rate in Singapore
The residents of Singapore are taxed as per the progressive resident income tax rate mentioned below. It is mandatory for a resident to file a personal income tax or the resident tax if the income is more than S$22,000 a year. If the annual income is less than S$22,000, you are not liable to pay any tax. However, you may have to file a tax return if informed by the Singapore tax authorities to do so.
Singapore Personal Income Tax Rate Chart
Chargeable Income |
Rate (%) |
Gross incomeTax ($) |
|
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 |
200 350 |
|
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 In excess of 320,000 |
- 22 |
44,550 |
Personal Income Tax – Singapore Residents
Who is a Tax Resident of Singapore?
As per the Singapore Tax Law, you will be considered as a tax resident in the following cases:
How to Determine the Chargeable Income for Personal Income Tax of Residents?
The tax residents of Singapore pay resident tax as per the table given above. However, the income that is subject to taxation, i.e. Chargeable income is determined as under:
Total Income includes
What do Expenses include?
The qualified expenses related to the employment
The qualified expenses related to the rent
What do Donations include?
Amount given to the charitable institutions that are qualified as per the law
What is meant by Personal Relief?
special personal reliefs such as earned income relief, parent relief, eligible course fees, etc.
So, the chargeable income is the income that is adjusted after the deduction has been made ( as shown in the picture above).
Personal Income Tax for Singapore Non-Residents
If you are a foreigner and have stayed or worked for less than 183 days in Singapore; you are considered as a non-resident for personal tax purposes as per the Singapore Tax Law. So, being a non-resident, you will be taxed as under:
Filing of the Personal Income Tax Returns
It is an obligation for every eligible taxpayer to file a Personal Income Tax return. All the documents and completed incometax returns are to be submitted with Singapore tax authority by April 15 every year.
The residents of Singapore are taxed as per the progressive resident tax rate mentioned below. It is mandatory for a resident to file a personal income tax or the resident tax if the income is more than S$22,000 a year. If the annual income of yours is less than S$22,000, you are not liable to pay any incometax. However, you may have to declare zero income in your incometax return and submit by due date that is 15 April for filing of hardcopy and 18 April for e filing.
In order to file a Personal Income tax return online, the forms are made available every year by 1 March.
For late filing or not filing, you will be subject to penalties. Individuals who do not file the Personal income tax return or do not pay the tax are subjected to legal actions by IRAS.
From May to September, after you have filed your returns, you will receive your Notice of Assessment or tax bill. The amount of incometax that you are required to pay will be indicated in the tax bill. If you donot agree with the amount of tax, you are required to inform the tax authorities within 30 days of the issuance of the tax bill alongwith the reason for objection.
After receiving your Notice of Assessment, you are required to pay the full amount of incometax within the 30 days regardless of the fact that you have file an objection or not. Any incometax that is outstanding after 30 days is liable to penalty.
IRAS also allows to pay taxes in installment by a GIRO arrangement. In this case your tax will be deducted from your bank account in 12 monthly installments.
Personal Income Tax on the Income Earned Overseas
As per Singapore law, any income received in Singapore on and after 1 Jan 2004 is not taxable. This includes the overseas income that is paid in a Singapore bank account. You are not required to declare anyforeign income that is not taxable in Singapore.
However, there are few exceptions as mentioned below when the overseas income is liable to tax:
You are required to disclose the qualified taxable overseas income under the employment or other income, whichever is applicable.
Income Tax Rate on Employment Benefits – Fringe Benefits
Unless specifically exempted from income tax or are covered by an existing administrative concession, profits and gains derived by you in respect of your employment are taxable. This include all perks and benefits whether in cash or otherwise, paid or given to you in respect of your employment. Examples of taxable benefits that are received from the employer are mentioned below.
Note: For executives,a properly structured compensation package (i.e., salary plus benefits in kind) can reduce their individual incometax liability in Singapore. Because some of the non-cash benefits (e.g. accommodations) are taxed using special formulas thus resulting in a lower taxation on these benefits-in-kind.
Inheritance Tax, Capital Gains Tax, andEstate Duty
The investment income that is accrued in relation to real assets like financial assets (shares, bonds), property and intangible assets like goodwill is called Capital Gains. Singapore does not levy capital gains tax.The tax that is paid on the financial estate that you leave behind after death is called Estate Duty in Singapore. Since 2008, estate duty has been abolished by the Singapore Government.