Income Tax for Individuals
Income tax is a duty levied on your income by the government of the country in which you are making that money. All individuals residing in Singapore and making money in the country are obliged to pay income tax every year. At the same time, there are a lot of situations in which exemptions or deductions can be claimed on tax payment.
The tax authority for the Singapore government is the Inland Revenue Authority of Singapore (IRAS). IRAS administers the Income Tax Act, among other taxes, and ensures that the island-nation receives the revenue to run the government.
Let us look at all the aspects of income tax, tax filing, tax payment, tax reliefs, and tax refunds in Singapore.
Eligibility for Individuals to Pay Income tax in Singapore
Individuals have to pay taxes in Singapore if they are:
- Employed by a company in Singapore or getting paid for services rendered by them in any means
- Self-employed persons in Singapore who are engaged in business as agents, freelancers, taxi drivers, partners, sole proprietors, etc.
- Invested in Singapore through unit trusts, property, shares, fixed deposits, etc.
- Working overseas because of their Singapore employment
- Working overseas for the Singapore Government
- Earning via a partnership in Singapore
- Receiving National Serviceman income in Singapore
- Getting part-time income from Singapore
- Earning pension in Singapore
- Withdrawing their Supplementary Retirement Scheme (SRS) savings
The conditions when you don’t have to pay taxes in Singapore are:
- If you don’t make any money through employment, investment or an economic activity in Singapore
- If your gross income is S$22,000 or less annually
IRAS Income Tax Rate for Individuals
The rate at which you will be taxed depends on your residency status. You are considered a tax resident for the given Year of Assessment (YA) under the following conditions:
- You are a Singapore Citizen (SC) or Permanent Resident (PR) whose primary residence is in Singapore.
- You are a foreigner who has lived or worked in Singapore for at least 183 days in the year before the YA. This is not applicable to the director of a company.
The tax rates applicable to tax residents in Singapore increases as your total income grows. This means that tax rates change as your income tier changes. For example, let’s say you were paying a tax of 2% for your income of S$30,000 for YA 2017. But after a job change, your income for YA 2018 is S$40,000. In this case, you have to pay 2% on the first S$30,000 and 3.5% on the next S$10,000 as per the applicable tax slabs.
The income tax rates are applicable to your income in the previous year and not in the ongoing year. For example, YA 2018 is the year you pay tax on your income earned between 1 January and 31 December 2017. You need to file your income tax details by April every year, after which you will receive the tax bill or notice of assessment, which will tell you how much tax you need to pay.
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Taxable Income for Individuals
The following types of income are subject to income tax:
- Income earned in or coming from Singapore, through any of the following means:
- Money earned by working in a company in Singapore, whether local or foreign-based
- Allowances (transport, medical, etc.)
- Club memberships, gym memberships or other benefits given by employer in kind
- Notice pay for early termination of employment contract
- Tax paid fully or partially by your employer on behalf of you
- Exercising of stock options by employees (ESOP)
- Profits made by employee through Employee Share Ownership (ESOW)
- Pension paid out of contributions made to approved funds after 31 December 1992
- Profession, trade, business or vocation:
- Self-employed person’s income
- Sole proprietors’ income
- Partnership income
- Wage credit and Special Employment credit payouts
- Rent from property
- Dividends paid by co-operatives
- Dividends sourced from abroad and received by individuals through a partnership in Singapore
- Income distribution from Real Estate Investment Trusts (REITs) derived by individuals through a partnership, profession or business in Singapore
- Income from sale of property, insurances, shares and other financial instruments if the transaction occurs with a clear motive for profit (income of a person trading in property, insurance, shares, etc.)
- Interest from deposits with banks not approved by Monetary Authority of Singapore (MAS), financial institutions not licensed with the government, pawnshops, debt securities derived from partnerships, loans to companies or persons, from refund of excess employee’s CPF contributions
- Annuities from business/profession/partnership/bought by your employer in lieu of a pension plan
- Withdrawal from Supplementary Retirement Scheme (SRS) savings
- Estate income or trust income received by beneficiaries
- Royalty on trademarks, copyrights and patents
- Overseas income:
- Received through partnerships
- Where your work outside Singapore is part of your work in the country
- When you are working outside Singapore representing the Government of Singapore
- When your business outside Singapore is a result of or is part of your business in Singapore
- Service income from overseas (except in exempted cases)
- Income received as virtual currency such as Bitcoin
Non-taxable Income for Individuals
The following types of income are non-taxable:
- Payments for restrictive covenants, which refers to the amount paid to you for entering a limiting contractual agreement
- Compensation for loss of job
- Non-monetary benefits that have been given Income Tax administrative relief
- Government pension, pensions collected in approved funds up to 31 December 1992
- Retirement benefits received from the tax-exempt funds or schemes such as government pension schemes under the Pensions Act, Parliamentary Pensions Act or Singapore Armed Forces Act, or from CPF funds.
- Employer’s payments to an overseas pension or provident fund
- Productivity and Innovation Credit (PIC) cash payout
- Dividends paid on 1 January 2008 or later under the one-tier corporate tax system by a Singapore resident company
- Foreign dividends received by resident individuals on 1 January 2004 or later in Singapore
- Income distribution from REITs that are not part of partnerships, profession or business
- Income from sale of property, financial instruments and shares are considered capital gains
- Payouts from insurance policies
- Amounts received as interest on deposits in authorised banks or financial institutions
- Amounts received as interest from debt securities or bonds except if it is part of a trade or partnership
- Overseas income received in Singapore on or after 1 January 2004, except certain conditions stated above
- Overseas income if Singapore and that country have a Double Taxation Agreement (DTA) or reciprocal exemption
- Director’s fee when the company is not present or operating in Singapore
- Alimony and maintenance payments from an ex-husband (exempt from YA 2012 onwards)
- National Service Recognition Award (NSRA)
- Lottery and betting winnings from activities such as Singapore Sweep, 4D, horse racing, football, Toto, casino and fruit machine (jackpot)
Tax Deductions for Individuals
IRAS allows you to claim deductions on certain aspects of your income and expenditure to bring your income tax down. These deductions are encouraged in order help you save money or grow. The deductions could be in the form of reliefs, donations, expenses or rebates. The following tax deductions are allowed in Singapore:
|Deductions for employees
- Expense incurred while on official work or for the employer
- Expense not reimbursed by employer
- Expense that is not private or capital-related
- Subscriptions to professional organisations for networking or upskilling
- Travel expenses
|Deductions for self-employed persons, sole proprietors or partners
- Employee costs such as mandatory CPF contributions by employer, insurance for staff, selected medical expenses, salary, bonus, retrenchment perks, allowances, etc.
- Finance costs such as Hire purchase interest, renewal of leases, interest on business loans, accountancy fees, legal fees incurred in recovering business debts
- Operational costs such as advertising, rent, telephone and other utility bills paid, capital allowances on fixed business assets, COE for vehicles used for business purposes, public transport expenses, renovation of premises, maintenance and repair of equipment and other assets, bad debts incurred during the course of trade, R&D expenditure
- Expenses allowed under government schemes such as PIC, Business and IPC Partnership Scheme and Land Intensification Allowance
- Religious dues such as donations to zakat, mosque building or fitrah
- Capital allowances such as weathering of fixed assets (equipment, machinery, etc.)
|Deductions on rental expenses
- Interest paid on home loan for the rented property
- Property tax paid when the house is rented to someone
- Fire insurance premiums
- Cost of maintenance of property
- Cost of getting a tenant such as advertising and agent’s fees
- Replacement cost of furniture or fittings
- Any utility bills (internet, water or electricity bill, for example) paid by the owner but not reimbursed by the tenant
- Rental expense incurred only in order to produce rental income
- Rental expense incurred when the place was rented out to a tenant
|Deductions on donations
- Cash donations to approved charities or the government
- Donations of public shares or unit trusts to approved charities
- Donations of artefacts to approved museums
- Donations under Public Art Tax Incentive Scheme
- Donations of land or buildings to approved charities
|Angel Investors Tax Deduction Scheme (AITD)
||Investment of at least S$100,000 in an eligible startup within a year of first investment in the same company
- Relief on course fees
- Relief on CPF Cash Top-up
- CPF Relief for employees, self-employed persons, and for mandatory and voluntary Medisave contribution
- Relief on earned income
- Relief for handicapped siblings
- Relief on life insurance
- Relief for National Serviceman (self, wife and parents)
- Relief for taking care of parents/in-laws/grandparents, handicapped or otherwise
- Relief on Supplementary Retirement Scheme (SRS)
- Relief on qualifying/handicapped child
- Relief on spouse/handicapped spouse
- Foreign Maid Levy relief for women
- Grandparent caregiver relief for women
- Working mother’s child relief for women
||Parenthood tax rebate
Tax Schemes for Individuals
Some of the government schemes with tax benefits available for individuals are:
Tax Payments and Refunds for Individuals
You need to file your taxes by mid-April every year. This basically means that you need to declare your income for the previous calendar year as is relevant to the ongoing assessment year. You don’t have to file income tax under the following conditions:
- If you have no income in the previous calendar year;
- If you only have employment income and that is recorded through Auto Inclusion Scheme for employers;
- If you have been selected for No-Filing Service (NFS).
Once the taxes are filed, the Inland Revenue Authority of Singapore will send you the Tax Bill or Notice of Assessment. This will tell you how much tax you need to pay. If you do not agree with the tax computation, you can raise an objection with IRAS.
Tax payment can be done through several modes such as GIRO transfers, credit cards, internet and phone banking of selected banks, AXS and SAM stations, etc. Make sure you do not miss the tax payment due date, as a penalty of 5% or more is levied on late payments.
Once the taxes are paid, the IRAS automatically calculates the refunds due to you, based on the applicable rebates, reliefs and other deductions. Usually the payment – of S$15 or more – is disbursed through cheque, GIRO or bank drafts within 30 days of generation of the refund request. If you don’t get the refund within this period, the IRAS will pay you an interest.
If a refund you are eligible to is not automatically determined by IRAS, you can raise a request through myTax portal.
Audits, compliance and voluntary disclosure
You need to maintain records of your income, tax payments and documents supporting your claims for relief/deductions for at least 5 years. These documents include CPF statements, salary slips, Forms IR8A, and business expense receipts. This will not only help you determine your income and when to claim reliefs, but will also be needed to be produced if the IRAS decides to audit your account.
Audits are performed occasionally to assess tax evasion risks among individuals in Singapore. Even if you are chosen to be part of the audit, it doesn’t mean you have done something wrong. It is a routine administrative activity.