Singapore is a popular destination for expats, but it pays to understand the tax landscape before you settle in.
Moving to Singapore is rewarding in plenty of ways: the city offers a high standard of living, represents a gateway to the rest of Asia, and hosts a famously business-friendly environment... But there are also plenty of challenges for expats in the city, especially the often-complicated tax rules and regulations.
Whether you plan to start a business, live or work in Singapore, these tax tips should help you get to grips with your new environment.
1.) Singapore Tax System Basics
New expats should become familiar with the basics of Singapore's tax system.
The tax year runs from 1 January to 31 December, and you must file your tax return by 15 April for the previous year. If you file online, that deadline extends to the 18 April.
2.) Taxable income
As an expat entering Singapore, be aware income tax applies to:
- Business profits
- Work earnings (full or part-time)
- Company share dividends
- Interest on pensions or annuities
- Rent or other property related profits
3.) Determine Singapore Residency Status
For tax purposes, expats are categorized as 'resident' or 'non-resident':
- Resident: If you live or work in Singapore for over 183 days in a specific assessment year, you will be taxed as a resident on domestic and foreign-sourced income received in Singapore.
- Non-resident: Foreigners who spend less than 183 days living or working in Singapore will be treated as non-resident taxpayers and pay tax only on income received from Singapore sources.
If you spend less than 60 days a year in Singapore, you are exempt from income tax.
4.) Tax Rates in differ for residents and non-residents
In Singapore, tax rates differ for residents and non-residents.
Residents are taxed at a progressive rate of 2 - 20%, while non-residents are taxed at a flat 15% (or at the resident rate, if that is higher). From 2016 onwards (the 2017 assessment year), non-residential tax rates will be raised to 22%.
5.) Not Ordinarily Resident Scheme
The NOR scheme is a form of tax relief available to Singapore expat residents.
To qualify the taxpayer must have been a non-resident for three consecutive years, and be entering their first year of resident status. The NOR scheme allows taxpayers to pay tax only on income earned within Singapore itself - useful for expats travelling abroad frequently. NOR also tax exempts employer contributions to overseas pension schemes. NOR status applies for up to 5 consecutive years.
6.) Double Taxation Agreements
Singapore has 34 DTAs in place to ensure expats do not pay tax in both Singapore and their native country.
DTAs represent tax credits, exemptions or reduced withholding, they are generally reciprocal, and do not result in higher net tax payments. Only expat residents can benefit from DTAs - check the details of your arrangement to learn how it applies to your situation.
7.) Resident Tax Relief
Singapore tax residents have a number of tax relief options available to them. Relief options tend to align with the government's social programs and include things like charitable donations, life insurance, education and job-related training.
8.) Dependent support
Resident taxpayers can also claim levels of tax relief to support parents, spouses, children and other dependents. The amount of relief varies by dependent and the specifics of their situation (e.g. specialized health care).
9.) The Supplementary Retirement Scheme (SRS)
The Supplementary Retirement Scheme is available to all taxpayers in Singapore.
It offers a way to save for the future - and reduce tax bills. Tax relief is available for every Singapore dollar contributed to the scheme (up to S$12,750), investment gains are tax-free, and upon retirement, only 50% of SRS savings are subject to tax.
10.) Investment issues
Singapore's tax landscape is complicated. Make sure you understand applicable tax on any financial gains you make. For example, Singapore does not have a capital gains tax per se (a fact which attracts expats to investment opportunities in the city). However, this aspect of the tax system can be deceptive. Since the exercise of (certain) company stock options counts as income, gains made become taxable and must be reported.