Income Tax in Singapore

Income
Tax in Singapore

Personal
Income Tax:

Personal income tax
rates in Singapore are one of the lowest in the world. In order to determine
the Singapore income tax liability of an individual, you need to first
determine the tax residency and amount of chargeable income and then apply the
progressive resident tax rate to it. Key points of Singapore income tax for
individuals include:

Singapore
follows a progressive resident tax rate starting at 0% and ending at 22%
above S$320,000.
There is no
capital gain or inheritance tax.
Individuals
are taxed only on the income earned in Singapore. The income earned by
individuals while working overseas is not subject to taxation barring few
exceptions.
Tax rules
differ based on the tax residency of the individual.
Tax
filing due date for individuals is April 15 of each year. Income tax is
assessed based on a preceding year basis.

INCOME TAX RATES:

Chargeable Income	Rate (%)	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	200 350
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

TAX
RESIDENT:

You are
considered a tax resident if you are:

a
Singaporean; or
a Singapore
Permanent Resident and have established your permanent home in Singapore;
or
a
foreigner who has stayed or worked in Singapore for 183 days or more in
the tax year.

HOW TO CAALCULATE TAXABLE INCOME?

Total Income

Less: Expenses

Statutory Income

Less: Donations

Assessable
Income

Less: Personal
Reliefs

Chargeable
Income

Whereas

·
Total
income means

o
gains
or profits from carrying on any business, trade, profession or vocation either
as a sole proprietor or partner in a partnership

o
gains
or profits from any employment

o
dividends, interests, investment income

o
rents,
royalties, premiums and other profits arising from properties

o
exclude
qualified income earned overseas

·
Expenses
means

o
qualified
employment related expenses

o
qualified
rental related expenses are expenses

·
Donations
means

o
donations
to qualified charitable organizations

·
Personal
Reliefs means

o
special
personal reliefs such as eligible course fees, earned income relief, parent
relief, etc.

Personal
Tax for Singapore Non-Residents:

You are
considered a non-resident for tax purpose if you are a foreigner who stayed or
worked in Singapore for less than 183 days in the tax year. As a non-resident,
you will be taxed as below:

Your
employment income is exempt from tax if you are here on short-term
employment for 60 days or less in a year. This exemption does not apply if
you are 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 etc.
If you are
in Singapore for 61-182 days in a year, you will be taxed on all income
earned in Singapore. You may claim expenses and donations to save tax.
However, you are not eligible to claim personal reliefs. Your employment
income is taxed at 15% or the progressive resident tax rate (see rate table
above), whichever gives rise to a higher tax amount.
Director
fees and remuneration, consultant fees and all other incomes are taxed at
a range of 15% to 22%.

Filing
personal income tax returns:

Filing your tax return
is a yearly obligation for every eligible taxpayer. All completed forms must be
submitted to Singapore tax authority by the 15th of April.

You do not need to pay
tax if your annual income (applicable for tax residents only) is less than
S$22,000. However, you may still need to file returns if you have been informed
by tax authority to submit your tax form. Even if you do not have any income in
previous years, you still need to declare zero income in your tax form and
submit by 15 Apr. You need to compulsorily file tax returns if your annual
income is S$22,000 or more.

You can choose to file
your returns online or by mail. IRAS will send you the appropriate paper tax
form, upon request, the online form will be available from 1 March every year.

o
For tax resident individuals – Form B1

o
For self-employed – Form B

o
For non-resident individuals – Form M

You will be subject to
penalties for filing late or not filing. IRAS might also take legal actions
against the individual for non-filing of tax return or non-payment of the tax.

After you have filed
your returns, you will receive your Notice of Assessment or tax bill in May to
September. The tax bill will indicate the amount of tax you have to pay. If you
disagree with your tax amount, you need to inform the Singapore tax authority
within 30 days from the date of your tax bill and state your reasons for
objection.

You need to pay the
full amount of tax within 30 days of receiving your Notice of Assessment. This
is regardless of whether you have informed tax authority about your objection.
If your tax remains outstanding after 30 days, penalties will be imposed.

Tax
treatment of income earned overseas:

Generally,
overseas income received in Singapore on or after 1 Jan 2004 is not taxable.
This includes overseas income paid into a Singapore bank account. You do not
need to declare overseas income that is not taxable.There are certain
circumstances under which overseas income is taxable:

It is
received in Singapore through partnerships in Singapore.
Your
overseas employment is incidental to your Singapore employment. That is,
as part of your work here, you need to travel overseas.
You
are employed outside Singapore on behalf of Government of Singapore.

You need to
declare the qualified taxable overseas income under ’employment income’ and
‘other income’ (whichever applicable) in your tax form.

Tax treatment of employer benefits:

All gains and
profits derived by you in respect of your employment are taxable, unless they
are specifically exempt from income tax or are covered by an existing
administrative concession. The gains or profits
include all benefits, whether in money or otherwise, paid or granted to you in
respect of employment. Examples of taxable benefits received from your
employer:

Accommodation
and housing allowance
Car
provided by employer
Reimbursements
of medical and dental treatments for dependants other than yourself, your
spouse and children
Overtime
payments
Per diem
allowances (daily allowance given to employees on overseas trips, out of
Singapore, for business purposes), provided the amount is in excess
of acceptable rates
Fixed
monthly allowance for transport or if mileage on private cars are
reimbursed
Fixed
monthly meal allowance

Note however
that some of the non-cash benefits (e.g. accommodations) are taxed using
special formulas resulting into a lower taxation on these benefits-in-kind.
Thus, a properly structured compensation package (i.e. salary plus benefits in
kind) for the executives can help reduce their individual tax liability in
Singapore. Further details on this are outside the scope of this guide.

Corporate
Income Tax:

Listed below are
general tax exemptions/incentives currently available to Singapore tax resident
companies. Once these tax exemptions are applied to the taxable income, the
effective income tax rate for small-to-midsize Singapore companies is reduced
significantly.

0%
tax on S$100K taxable income

The corporate
income tax rate is 0% on the first S$100,000 taxable income for each of the
first three tax filing years for a newly incorporated company that meets the
following conditions:

be
incorporated in Singapore
be tax
resident in Singapore (Please see below the tax residency of company)
has no more than 20 shareholders
of which at least one is an individual shareholder holding at least 10%
of shares.

8.5%
tax on taxable income of up-to S$300K

All Singapore
resident companies are eligible for partial tax exemption which effectively
translates to about 8.5% tax rate on taxable income of up-to S$300,000 per
annum. The taxable income above S$300,000 will be charged at the normal
headline corporate tax rate of 17%.

Effective Corporate Tax Rate:

The above general tax incentives mean
very attractive tax rates for small-to-midsize companies. For example, a
typical Singapore resident company with S$2,000,000 annual taxable income will
be taxed as below:

First Three Years of Income Tax Filings

Taxable Income (S$)	Tax Rate
0 – 100,000	0%
100,001 – 300,000	8.5%
300,001 – 2,000,000	17%

After First Three Years of Income Tax Filings

Taxable Income (S$)	Tax Rate
0 – 300,000	8.5%
300,001 – 2,000,000	17%

One-off Corporate Income
Tax (CIT) Rebate for YA 2016 & YA 2017

According to the
Singapore Budget 2016, every Singapore company will be eligible for a corporate
income tax rebate. Singapore companies can claim a one-time 50% corporate
income tax rebate on corporate income tax payable for YA 2016 & YA 2017,
subject to a cap of S$20,000. This is an enhancement to Budget 2015 to help
companies, especially SMEs.

Tax
residence of company:

A company is
considered as a tax resident in Singapore if the control and management of the
business is exercised in Singapore. “Control and management” is the making of
decisions on strategic matters, such as those on company policy and strategy.
Generally, the location of the company’s Board of Directors meetings, during
which strategic decisions are made, is one of the key factor in determining
where the control and management is exercised. If the company has an executive
director or key management personnel whom is playing important role in decision
making based in Singapore is one of the key factor too in determining where the
control and management is exercised.

In general, a company is considered non-resident in Singapore if the directors
manage and control the business and hold board meetings from outside Singapore.
This is true even if, for example, the lower level operations are taking place
in Singapore. A company’s residence may change from one year of assessment to
the next depending on the circumstances. A Singapore branch of a foreign
company is generally not treated as a Singapore tax resident since the control
and management is vested with an overseas parent company.

The basis of
taxation for a resident company and non-resident company is generally the same
with the exception of certain benefits that are available to resident
companies. These include:

A Singapore
tax resident company is eligible for income tax exemption scheme available
for new start-up companies except for investment holding and property
development company.
A Singapore
tax resident company can enjoy income tax exemption on foreign-sourced
dividends, foreign branch profits, and foreign-sourced service income
under section 13(8) of the Income Tax Act with certain conditions.
A Singapore
tax resident company is entitled to benefits conferred under the Avoidance
of Double Taxation Agreements (DTA) that Singapore has concluded with
treaty countries.
Please
note that the place of incorporation of a company is not necessarily indicative
of the tax residence of a company.

Income
tax filing due date:

Income tax filing due
date for Singapore companies is November 30. The company has to file a complete
set of returns including Form C, audited/unaudited accounts, and tax
computation. The Form C is a declaration form for a company to declare its
income whereas tax computation is a statement showing the adjustments to the
net profit/loss as per the accounts of a company to arrive at the amount of
income that is chargeable to tax.

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Note:
Information
placed here in above is only for general perception. This may not reflect the
latest status on law and may have changed in recent time. Please seek our
professional opinion before applying the provision. Thanks.