If you’re a foreigner and stay in Singapore for a qualifying number of days, you’ll be liable to pay income tax in Singapore. This will be applicable in cases when most of your income is derived from sources in Singapore. However, as a foreigner you will qualify for certain tax-related benefits such as tax deductions, tax schemes, and more. This article will help you with most of the income tax components in relation to foreigners who are either staying or working in Singapore.
As a foreigner, the income tax amount you’re liable to pay will depend on your “tax residency status” in Singapore.You’ll be considered as a “tax resident” if you comply with the following conditions:
Foreign employers, including registered (with Enterprise Singapore) and unregistered representative offices, are considered as non-residents as far as taxation is concerned. For taxation purposes, foreign employers will be regarded as non-residents. However, any money you earn out of your services or supplies in Singapore will be taxable. This is applicable even if that income is not received in Singapore or if you’re working for a foreign employer. You have to pay tax on the income earned during official visits such as hosting and attending meetings, training, assignments and projects, site visits, and operating machinery.
Employees of foreign companies who are in Singapore in an official capacity will be subject to the same taxation system as Singaporeans – based on the number of days of stay/work and the tax residency status. If you are not a Singaporean citizen, you need to provide a “Letter of Guarantee” from a well-known limited company or a local bank, promising to cover the estimated income tax that you will be liable to pay for the relevant assessment year.
When considering the employment period, public holidays and weekends that fall within your employment duration are also added to the final period of stay/employment. If you go for any business trips outside Singapore for the sake of your work or for a temporary vacation overseas during your Singapore employment, then those days are also included in the calculation. Personal vacations, naturally, are not considered part of your employment or earning period.
|Taxed at “progressive” resident tax rates (post tax relief deductions)||Taxed at 15% flat rate or a resident rate, whichever amount is higher in relation to the income you’ve derived from your employment.|
|Eligible for tax deductions and can claim reliefs.||Do not qualify for deductions and reliefs.|
|You’ll be taxed on the complete income you’ve earned in Singapore & any income earned via a foreign-source which was brought into the country before 1 January 2004. Your “foreign-sourced income” (except income that was earned via Singapore partnership) that was carried into Singapore on/post 1 January 2004 will not be considered as taxable.||You’ll be liable to pay tax only for the income you received in Singapore.|
|You need to fill in “Form B1” (ITR for residents).||You need to fill in “Form M” (ITR for non-residents).|
When your (you being the employer) foreign employee decides to cease his or her work with you in Singapore, opts for a posting (overseas), or intends to make an exit from Singapore for 3 or more months, you need to notify the same to IRAS. Your notification to IRAS should be made in advance of 1 month (minimum). Also, as an employer, you need to ensure to hold back all monies that are due and payable to your employee from the date on which you were intimated about the cessation of his or her employment (or departure) from Singapore. This complete process is referred to as “tax clearance” and this is applicable to every “work pass” holder (includes “Personalised Employment Pass” holders as well).Tax clearance is not needed under the following circumstances:
Note: For all of the 4 scenarios that were mentioned earlier, there is no need for you (employer) to file “Form IR21” provided your employee was not employed by another company in Singapore previously within the year of cessation or the year before the cessation year. In case you’re not aware of your employee’s past employment history, you can e-file “Form IR21” via “myTax Portal”. Also, you will be notified instantly in case your employee doesn’t need tax clearance.Moved to another firm in Singapore because of a company takeover (or merger) or due to posting or restructuring within the company/ies.
Note: You need to intimate IRAS regarding the transfer of your employee through “myTax Mail” in “myTax Portal” to make sure the employment records of your employee has been updated. Also, when you’re writing the email, your “Nature of Enquiry” will be “Tax Clearance/Form IR21”. You need to enclose the “Waiver of tax clearance” template as well.
Make sure the affected employee’s employment income from both the former as well as the new employer has been declared to IRAS through “Form IR8A” within 1 March of the subsequent year. In case your non-Singapore citizen employee successively stops working with the new company in the transitional year, tax clearance will then be needed.Not present in Singapore between 3 and 6 months due to business-related reasons, overseas posting, or training.
Note: “Tax Clearance Calculator” is an option via which you can check if tax clearance is needed.
With permanent residents, you (employer) need to get an LOU (Letter of Undertaking) from your employee wherein he or she mentions that they will not exit from Singapore permanently. When you have an LOU, you need not file “Form IR21” for your employee. You need to retain the Letter of Undertaking in your records.
As a foreign employee, you’ll qualify for various types of tax deductions:
You’ll be able to claim for tax deduction on employment expenditure you’ve incurred “completely and solely” during the process of earning your salary. As in, you spent your money in order to pay for an expenditure that was related to your employment. A few examples of employment-related expenses include travel charges, subscriptions, entertainment expense, etc.
When you’re self-employed (example: freelancers, commission agents, hawkers)/a sole proprietor/partner in a partnership, you can claim for tax deduction on any of the expenses given below provided you meet the required eligibility criteria:
You can make a tax deduction claim on an expense you incurred in relation to the rental income you earned in Singapore. The qualifying conditions include:
You might be eligible to claim for a tax deduction on a donation you made. You can claim up to 2.5 or 3 times your donation amount for a donation that was made between 2009 and 2021. The following type of donations qualifies you for tax deduction:
You will be able to raise a claim for tax deduction under the following circumstances:
If you’re a foreigner who is working in Singapore or a foreigner who is commuting to Singapore for employment-related work, your taxable income includes:
Work at Singapore: When you’re earning income out of services you rendered within Singapore, that income will be subjected to tax in Singapore. This is because the income was generated due to an employment that was sourced out of Singapore. The tax rates and your tax payable amount will vary according to your “tax residency” status.
“Tax Clearance” process when you’re a non-citizen employee: The “tax clearance” process will be applicable to every work pass holder. This includes even PEP (Personalised Employment Pass) holders.
When you relocate to Singapore: Post your relocation to Singapore, you’ll qualify for relocation benefits in the form of home leave passages, reimbursements, and cash allowances. Your relocation benefits will include:
When you own a property in Singapore: As a foreigner, you will be liable to pay both property tax as well as tax on the income you’ve earned via your property rent. When you own a property in Singapore as a foreigner you can earn income either by renting out your property or by selling your property. The net rental income earned by you as a foreigner who is a tax resident of Singapore will be taxed at a resident rate. The net rental income earned by you as a foreigner who is a non-resident in Singapore will be taxed at a prevailing rate (non-resident) of 22% (increased from 20% starting YA 2017).
When you’re doing business within Singapore: You will be treated as a “self-employed” individual when you earn income by operating a business, a trade, vocation, or profession. Mostly, sole-proprietors & partners who have registered themselves with ACRA (Accounting and Corporate Regulatory Authority) are self-employed. If you come under this “self-employed” category, you need to report the income you’ve earned via the operation of your business as “business income” and not salary. This business income will be a part of your total “personal income” and will be taxed at separate income tax rates.
When you’re the “Director” of a company: Your tax obligation as a “non-resident” company director will vary in comparison to an executive director. Take a look at the scenarios given below which summarises the two kinds of tax obligations that are applicable to “non-resident” directors.
When you’re a foreign public entertainer (sportsman, artiste, musician, etc.): Public entertainers comprise athletes, radio, television, or stage artistes. You’ll be considered as a non-resident public entertainer when you stay in Singapore for lesser than 183 days.
Your taxable income as a non-resident public entertainer (NRPE)
As an NRPE, you will be subjected to a withholding tax. Here, taxable income comprises both cash/non-cash payments minus deductible expenses.
Tax exemptions you’ll get as an NRPE
Your income as an NRPE will be exempted from tax when your visit is largely funded (that is >50%) by your home country’s government. As a payer, you are not required to withhold tax nor make the “Form IR37D” submission. Nevertheless, you need to send an email to IRAS to provide the supporting documents and information that is required.
Tax refund you’ll receive as a resident entertainer
A public entertainer who is a foreigner and has been present in Singapore physically for a minimum of 183 days within a calendar year will qualify for a tax refund.
When you’re a contracted employee who works overseas in order to provide complete employment services out of Singapore, you’ll not be liable to pay taxes in Singapore since your “employment” income is derived from out of Singapore. This is applicable irrespective of where & how you’re receiving your pay. The company you’re employed with need not file the “Form IR8A” on your behalf.
Mostly, any overseas income you’ve accepted in Singapore on/post 1 January 2004 will not fall under the “taxable” category. These comprise any overseas income that was paid into your bank account which is of Singapore origin. You will not have to declare any overseas income that does come under the “taxable” section.Providing services in Singapore in relation to your employment overseas
When you have exercised your Singapore employment for less than or equal to 60 days in a CY (calendar year), you will be exempted from paying tax.
When you’re employed in Singapore for a period which is between 61 and 182 days in a CY, you will be considered as a “non-resident”. Your income (employment-related) will be taxed at 15% flat rate (no sanctioning of personal reliefs) or a progressive resident rate, whichever results in a greater tax amount.
When you have had a Singapore employment for 183 days (or more) in a CY, you will be treated as a “tax resident”. Post tax relief deductions, you will be taxed at a progressive tax rate. Also, the company you’re employed with has to get tax clearance after you’ve intimated them about your employment cessation in Singapore.When will your overseas income be subjected to tax in Singapore?
You need to declare the taxable overseas income under 'employment income' or 'trade income' (whichever is applicable) in your tax return.
In case you have terminated your employment service in Singapore and consequently worked with a different company in Singapore within the same year, your complete employment income applicable for the year will include the income you’re derived from both the companies.
Who are foreign employers?
Foreign employers comprise both representative offices that are registered with ES (Enterprise Singapore) and other organisations which do not have a registration in Singapore. For taxation reasons, a foreign employer will be treated as a “non-resident” employer.
You’ll be taxed on the income you’ve earned for the term during which you provided services in Singapore. This is applicable, even you didn’t receive your income in Singapore.
This is also applicable when your company sends you to Singapore for training purposes, site visits, machinery operation, assignments, and for attending or conducting any meeting.How is the income of a foreign employee assessed by a foreign employer?
As a “non-Singapore” citizen you need to pass on an LOG either from a renowned limited company or a local bank in Singapore, in order to cover the tax payable amount (estimated) for the upcoming YA (Year of Assessment).
You need to factor in the following points:
If you fail to file your income tax return within the due date (e-filing: 18 April/paper filing: 15 April), IRAS might take any of the following actions against you:
In case you were at fault for not filing your income tax return on time, IRAS will allow you to settle this fault of yours in the form of a late filing fee payment. The late filing charges range between S$150 and S$1,000. Also, this amount will be determined based on your past payment and filing records. A letter will be dispatched to you by IRAS in order to notify you on the late filing fee you’re liable to pay.When you get a letter that notifies you regarding your late filing charges, you need to follow the steps listed below at the earliest:
You’ll be summoned to the court by IRAS on a particular date. This will occur when IRAS doesn’t receive the following:
Situation 1: In case you do not intend to attend court, you need to perform the following actions minimum 1 week prior to the court date:
Situation 2: In case you need additional time in order to file and/or make the composition amount payment, you’ll need to attend the court session on the summoned date in order to make an appeal for a “postponement”.
Situation 3: If you fail to attend the court session, IRAS will take other legal actions against you such as an arrest warrant might be issued against you. After your charges are given out in the court, you will have to make an appeal. On your conviction, you might also be liable to pay a fine which can go up to S$1,000.
Situation 4: In case your income tax return still remains pending post your conviction, you might end up facing further actions of prosecution.
Situation 5: In case you fail to complete your tax return filing for 2 or more years, you might be summoned by the court. Once you’re convicted, you might be asked by the court authorities to pay:
If you fail to make the penalty or the fine payment to the court, it might result in your imprisonment of up to 6 months.
IRAS might also issue an estimated Notice of Assessment to you if you fail to file your ITR (income tax return) as required. The “estimated” tax might be calculated depending either on your income from past years’ or the information that available is with IRAS.
When you get an estimated Notice of Assessment, you need to mandatorily complete the following 2 steps:
IRAS will audit your income tax return and levy a penalty on you when there is an omission, discrepancy, or an error. During the process of deciding the penalties, IRAS will consider individual circumstances only when there is no proof to confirm that your objective was to avoid taxes.Penalties you might face include:
Scenario 1: In case your income tax return was submitted with an omission/error/discrepancy, and you didn’t do it on purpose just to escape taxes, based on the ITR Act, you may be imposed with the following penalties:
Scenario 2: In case you submitted your ITR with a discrepancy/error/discrepancy deliberately with an intention to avoid taxes, you may face the following consequences under the ITR Act:
You will receive a notification in writing regarding the penalty amount you’re liable to pay and the due date by which you need to make the penalty payment. Also, you will be provided with a detailed explanation as to why IRAS has levied a penalty on you.
You can choose to make a “Voluntary Disclosure” of omissions, errors, and discrepancies with an aim to bring down the penalties that were imposed on you based on the IRAS' VDP (Voluntary Disclosure Programme).
Q. One of my employees is away on an overseas posting, is tax clearance required for him?
A. A tax clearance will not be required for an employee who is on an overseas posting when the following criteria are met:
The conditions mentioned above are applicable to any overseas posting that occurred on/post 1 January 2016 in relation to an employee’s work assignment in Singapore. Hence, a tax clearance will still be needed for an individual who rendered services overseas which are not in relation to an employment in Singapore.
Q. What happens if I as an employer fail to notify IRAS one month in advance about my worker’s cessation of work?
A. In case you fail to provide IRAS with a 1-month notice about the cessation of work in relation to your employee, you need to report to IRAS about the reason (for example, a sudden resignation from your employee) for the cessation of employment using the “Form IR21”. As an employer, if you miss to file the “Form IR21” or file it post the due date, you’ll end up paying a late payment fee which can go up to S$1,000.
Q. Can I hold back a share of my employee’s monthly pay so that I as an employer I can make an income tax payment?
A. As per the Employment Act, you cannot withhold any amount from the monthly salary of your foreign employee so that you can accrue adequate funds for “tax clearance”.
Q. How can I report the income information of my employee for his or her overseas posting duration?
A. When your employee renders his or her services overseas which are related to his or her employment in Singapore, this needs to be reported by you (the employer) to IRAS. The income earned will be subjected to tax in Singapore. You can report it via AIS (Auto-Inclusion Scheme) or the “Form IR8A”.
Q. How can I know if tax clearance is required for an employee post his or her resignation?
A. You can use the “Tax Clearance Calculator” online to check if tax clearance is needed for your employee.
Q. How can I update my contact and address details?
A. You need to ensure that your latest address is updated so that IRAS can send your “tax bill” to you. You can update your details online by logging in to “myTax Portal”. In order to log in, you’ll need the IRAS PIN or SingPass. In case you don’t have either of these, you can apply for it via the IRAS website.
Q. As a foreigner, how can I file my tax?
A. If you’re a tax-resident who stayed or worked in Singapore for equal to or more than 183 days, you can file your income tax return in 2 ways:
If you’re a non-resident who worked or stayed in Singapore for less than 183 days, you need to submit a paper income tax return that is the Form M within 15th April.
Q. Can I make changes after filing my tax return?
A. If you’ve e-filed your actual income tax return and want to make a few changes after your return filing, you can re-file your return through “myTax Portal”. In case your actual return was paper filed, you will need to send a note to IRAS regarding the changes that need to be made.
If you choose to re-file, you will need to adhere to the following steps:
You can only re-file once and re-filing of your original return has to be done either within 14 days of your prior submission or within 18 April 2018, whichever occurs first. Listed below are the steps you need to follow in order to re-file your actual return:
Also, make sure to include all the details pertaining to your income and expenses, relief claims, and donations (if applicable) when you’re re-filing your income tax return. Post your successful re-filing, your previous tax return submission will be overwritten with your new tax return submission.
Q. How can I check the filing status of my return?
A. You can do it by either signing into “myTax Portal” or by giving a call to the IRAS hotline.