Individuals who are earning, receiving or deriving income in Singapore have to pay tax each year. Only those individuals who are exempted under Administrative Concession or the Income Tax Act are not required to pay tax.
Individuals are taxed on a year-on-year basis for the income they have earned in the previous year.
Who is Eligible to Pay Tax in Singapore?
Individuals who are working in Singapore:
Any individual who receives payment, regardless of whether the payment mode is cash or benefits-in-kind have to pay tax if the payment was on account of a service rendered in or employment in Singapore.
Individuals who are doing business in Singapore:
Any self-employed individual including partners, sole-proprietors, taxi drivers, freelancers, commission agents, hawkers, etc. have to pay tax if the income they have earned was derived in Singapore.
Individuals who have investments in Singapore:
Any individual who has derived income in Singapore through investments in shares, property, fixed deposits, unit trusts, etc. has to pay income tax. Only in cases where the individual’s investment is specifically exempted from paying tax under the Income Tax Act, the individual does not have to pay tax on said investment.
Individuals who are working outside Singapore:
- If an individual is working overseas and the employment is incidental to his/her Singapore employment, then they qualify to pay tax.
- Those individuals who are working overseas on the Singapore Government’s behalf need to pay tax.
- Any individual who derives income from partnership in Singapore must pay tax.
Individuals not working but are receiving income in Singapore:
Any individual not working but continue to receive income from the below-mentioned sources have to pay tax unless specifically exempted from the Income Tax Act:
- Part-time income.
- Income derived from investments.
- NSman income (also includes awards or allowances such as the IPPT monetary incentives).
- Withdrawals made under SRS or Supplementary Retirement Scheme.
Who is not Eligible To Pay Tax in Singapore?
If an individual fulfils the following conditions, he/she is exempted from paying tax:
- Individuals earning S$22,000 or less (gross income) per year.
- If the individual’s income has not been derived in Singapore.
How the income earned is taxed in Singapore
Any income that is earned in Singapore is taxable. How much tax an individual has to pay will depend on the following factors:
- How much income is earned in Singapore and
- Whether the individual is a tax resident or a non-resident of Singapore.
Who is a tax resident?
An individual will be considered a tax resident for a Year of Assessment (YA) if they fulfil any of the following conditions:
- Singapore citizens residing in Singapore with the exception of temporary absences.
- SRS or Singapore Permanent Residents who have a permanent home in Singapore.
- Foreigners who have stayed in or worked in Singapore for a minimum of 183 days in the previous year. This does not extend to directors of companies.
Tax residents are subject to paying an income tax between 0% and 22% at progressive rates. This percentage has been determined after deducting donations, expenses and tax reliefs.
Who is a tax non-resident?
Any individual who does not qualify to be a tax resident in Singapore will be considered a tax non-resident for the purpose of taxation.
Non-residents are subject to paying an income tax of 15% on their employment income or the progressive tax resident rate, depending on whichever of the two is a higher amount.
Consultant’s fees, director’s fees and other income are subject to a tax of 22%.