Sunday, October 02, 2011

Singapore Personal Income Taxes

Individuals are either “resident” or “non-resident” in Singapore for tax purposes. Generally, a person is resident if he or she is physically present or exercises employment in Singapore for 183 days or more in the calendar year.

For individuals, all income derived from Singapore is liable to tax. With effect from 1 January 2004, all overseas income remitted by individuals in Singapore is not taxable, except for overseas income received in Singapore through partnerships in Singapore. Personal income is taxable at progressive rates from 0% to 20% and entitled to claim certain personal reliefs.

Current Personal Income Tax Rates in Singapore
Personal Income Income Tax Rate
<20,000 0
20,000 – 30,000 3.5%
30,000 – 40,000 5.5%
40,000 – 80,000 8.5%
80,000 – 160,000 14%
160,000 – 320,000 17%
320,000+ 20%
Non-resident individuals are taxed at a flat rate of 15% or at the above rates whichever amounts to higher tax.

Interest derived by a non-resident individual on monies held on deposits in an approved bank in Singapore is tax exempt.

Regional representatives based in Singapore and employed by the representative office of an overseas company may be taxed concessionally on income pro-rated based on days spent in Singapore provided certain requirements are met.

Taxation for Foreigners Working in Singapore
Foreign employees working in Singapore either on work permit or employment pass will be taxed as above in Singapore unless:

The person is on short-term employment no exceeding 60 days in a calendar year
his/her earnings are exempt from tax under the Avoidance of Double Taxation Agreement
As a tax resident, you will be taxed on all personal income derived in Singapore.

When a foreign employee stops his term of employment in Singapore, his employer is required to inform IRAS before the termination of employment or departure from Singapore. The employer shall also withhold whatever money due to the employee until tax clearance is given.

Fringe Benefits
Employer-provided fringe benefits are taxed in the employee’s hands. As a number of benefits are taxed on a concessionary basis (e.g. housing) in Singapore, it is possible to reduce an individual’s tax liability through appropriate structuring of his/her remuneration package.

Central Provident Fund (CPF)
Foreigners on work pass are exempt from CPF contributions in Singapore.

Double Taxation
Double taxation can be avoided or minimized by unilateral tax credits and double tax treaties, depending on the type of foreign source income and the source country. Only Singapore resident companies and individuals are entitled to claim such tax credits.

Singapore Corporate Income Taxes

Singapore is a major international finance center which provides an attractive fiscal and economic environment from which to base regional business activities and international holding companies.

The Singapore tax system is territorial. Income tax is levied on the net income of companies from sources within Singapore and on foreign source income if remitted into Singapore. Non-resident Singapore companies and businesses are taxed on the same basis.

Singapore has implemented a one-tier corporate tax system. Under this system, the income tax payable on the normal chargeable income of a company is a final tax and shareholders will not be taxed on such dividend income.

Singapore does not levy a withholding tax on dividends. Interest, royalties or rental of equipment payments to non-residents are subject to a 15% withholding tax.

There is no capital gains tax imposed in Singapore.

Corporate Tax Rates
Zero tax for new Singapore companies on the first 100K annual profits for the first 3 years
All resident companies to enjoy approx. 9% corporate tax rate for profits up to 300K
Overall company tax rate is a flat 17%
Full Tax Exemption
Full corporate tax exemption will be granted on normal chargeable income of a qualifying company up to $100,000, for each of its first three consecutive tax filing years.

To qualify for this full corporate tax exemption for a relevant year under the scheme, a Singapore company must:

be a company incorporated in Singapore
be a tax resident in Singapore for that year
have no more than 20 shareholders throughout the basis period relating to that year; and
At least 10% of the shareholders must be individuals
Any company that does not meet the above qualifying conditions would still be eligible for partial corporate tax exemption as below.

Partial Tax Exemption
All companies are eligible for partial tax exemption on chargeable income of up to $300,000 as follows:

Amount of chargeable income Effective Singapore tax rate
First $10,000 4.5%
Next $290,000 9.0%
In excess of $300,000 17.0%
Related Topic: Personal Income Tax Singapore

Corporate Tax Filing Due Date
A newly incorporated Singapore company that has income accrued in or derived from Singapore or received in Singapore from outside Singapore is required to declare its income by completing an Income Tax Form for companies, known as Form C, each year. The company has to submit its completed Form C with the accounts, tax computation and supporting documents by 31st of October each year.

First Time Filing:
The first set of Form C that a newly incorporated company has to submit to IRAS depends on the financial-year-end of the company.

Example:
Assuming that a company has commenced business upon its incorporation, the first Form C that the company need to submit is as follows:

Incorporation Date 2008 2008
First Financial Year End Year Any date in year 2008 Any date in year 2009
First Form C To be filed by October 31, 2009 To be filed by October 31, 2010
Tax Exemptions on Foreign-Sourced Income Remitted into Singapore
A Singapore company can enjoy tax exemption from its foreign-sourced dividends, foreign branch profits, and foreign-sourced service income that is remitted into Singapore if the following conditions are met:

The highest corporate tax rate (Headline tax rate) of the foreign country from which income is received from is at least 15% in the year the income is received; and
The foreign income had been subjected to tax in the foreign country from which they were received
For the purpose of corporate tax exemption on foreign-sourced service income, the service income refers to professional, technical, consultancy or other services rendered in the course of a company’s trade through a fixed place of operation in a foreign country.

To enjoy the tax exemption, the company has to furnish the following information:

Nature and amount of income received;
Country from which income is received;
Headline tax rate of foreign country; and
Amount of foreign tax paid in the country from which income was received.
Tax Treaties
Singapore has tax treaties for the avoidance of double taxation with more than 50 countries including Australia, Belgium, Canada, France, Germany, India, Indonesia, Israel, Italy, Japan, Malaysia, Mauritius, the Netherlands, New Zealand, People’s Republic of China, Philippines, Thailand, Switzerland and the United Kingdom.

Holding Companies
Singapore has established itself as a credible and attractive jurisdiction from which to base international holding companies, both as a result of its status as a major financial centre and through the introduction of income tax legislation encompassing specific tax exemptions and tax concessions.

As mentioned above, the Singapore tax system is territorial and foreign source income is taxed if it is remitted into Singapore. Foreign source income which is earned and retained outside Singapore is not taxed in Singapore. Dividends received in Singapore by resident companies are taxable but credit is allowed for foreign tax paid. The tax credits allowed may include the foreign tax paid on the underlying corporate profits out of which the foreign source dividend has been paid. As such when foreign tax credits in aggregate exceed 20%, there is no Singapore tax payable on the dividend.

These exemptions make a Singapore resident company an attractive entity for holding foreign investments. If the foreign source income has borne tax at a rate of 20% or more, the Singapore resident holding company does not pay any Singapore tax on that income and may distribute dividends out of such income to its shareholders on a tax exempt basis.

As Singapore does not tax capital gains further benefits may arise to the holding company upon the disposal of its investment in the foreign company, particularly in tax treaty countries where the treaty concedes to Singapore the right to tax capital gains.

Taxation for Non-Resident Companies
A company is resident in Singapore if the central management and control of its business is exercised in Singapore. Given that such management and control is normally vested with its Board of Directors, a company is generally treated as being resident in the country where its Board meets.

Non-resident Singapore companies are not entitled to the benefits of double tax treaties. However, non-resident companies are not liable to Singapore income tax on foreign source income if it is not received in Singapore. Therefore non-resident companies are an attractive vehicle as international holding or trading companies.

Other Related Information
Annual accounts must be prepared and submitted to the Singapore Inland Revenue Authority (IRAS).

If corporate turnover is less than S$5 million, the Singapore Company is not required to file audited returns, however unaudited returns must still be filed.

Singapore Income Tax Tips & Tricks 4

Query: My wife and I will be moving to Singapore at the end of the month and are considering living in Johor Bahru. We don't have a great housing allowance and want a nice house or condo. I would commute daily to Singapore and understand that I would have to buy a vehicle entry permit for about S$600 per month. Does anyone have any advice, experiences or suggestions?

Tip: What is not in dispute are the following: 1. JB is cheap. 2. You'll probably regret the move. Some Singaporeans have tried exactly what you are planning to do. I know a family. They sold their HDB flat and moved into a proper house and bought a car with the leftover proceeds. To get their kid to school, they ended up waking at 5 am. Because they needed to wake up early the following day, they often had to leave Singapore by 8 pm. Meaning: just about zero social life.

Within 3 months, they were back in Singapore. The aggro from fighting traffic was just not worth the money saved. Also, as someone pointed out, you can get new 3-bedroom apartments, in the suburbs, for S$1,500 a month. So much so that some expats are spoiled for choice and acting that way too. Contact any of the real estate agent advertisers. They will be able to help you. - contributed by Ang Peng Hwa

Singapore Income Tax Tips & Tricks 3

Query: Does everyone here come to Singapore on an expat pacakge? If so, how did you get this kind of package? - Pat

Tip: No, a lot of people come over to Singapore on "full local terms". Some foreigners come over to Singapore on "full expat terms" ie. they are given a housing allowance, car allowance, club membership, relocation allowance, have their children's international school fees paid by the company etc. (Note - these expat benefits may not be offered by every MNC and financial institution in Singapore. Every company is different in terms of the benefits that they offer to their staff.) Others are employed on "semi-expat terms" ie. they are given a housing allowance by the company but generally receive standard benefits like the locals eg. medical and hospital insurance, CPF etc. A large number of Australians, New Zealanders, Indians and Brits, not to mention other nationalities, are employed on full local terms. Some of these people are happy to come over to Singapore to work because of the low tax rate here or for lifestyle reasons or because they've always wanted to work in Asia.

Many people have a stereotyped image in their minds that anyone who looks "white" and works in Singapore must be on a huge expat package. This is far from the truth. I personally know a lot of Europeans, Australians and New Zealanders who came over to Singapore on full local terms and are sharing a house or condo with 2 or 3 other expats.

If you want to receive some expat perks in your package, you have to negotiate these things up front with your employer before you sign the dotted line and accept the job offer. I always encourage candidates to be open about their current salary packages and to tell me what sort of package they are looking for in their next job. It doesn't hurt to ask for a housing allowance up front. You can always try to get as much out of your employer as possible. The worst thing that can happen is that they say "No". If the company really wants to hire you and think that you're a great candidate, quite often they'll be willing to negotiate with you. It all depends on how good you are and how keen they are to hire you.
- submitted by HR Manager

Singapore Income Tax Tips & Tricks 2

Query: When expats leave Singapore, does anybody know how many days in advance one should notify the immigration office? Should the tax authority be notified too? I heard that they would not allow you to exit unless you show some proof that you have paid all of your taxes.

Tip #1: There is an obligation on your employer to file a notice advising the taxation office of the cessation of your employment. Your employer in effect guaranteed your tax liablities when they sponsored your employment so they will be left with the bag, so to speak, if you were to do a "runner". I think they may even be required to withhold your last month salary until given evidence of tax clearance (which you can arrange to be paid out of what they withhold).

Tax clearance and cancellation of your work permit will follow. The people to see are the adminstration/human resource officers at your place of employment. If your employer does not have anyone experienced in this I would suggest you go in person to the Inland Revenue Department and get them to explain the system for you. They are generally most helpful, and have the ability to process matters very quickly. Another alternative is to speak with your taxation advisor/accountant if you have one.

As an aside, it is not unusual to receive, as much as a year after you have left, a cheque from the Singapore IRD for a refund of tax paid which turns out to be too much. (Tax clearance may involve assessment according to rules/rates which are altered in the following year's Budget).

The preparation of a tax return is always primarily the individual's responsibility. Of course the HR dept should have most of the relevant information to cover income from that source. Even if you engage a professional to prepare a return it will still only be correct in so far as they are fully informed and you check all the details. There are many instances in which returns have been submitted on an incorrect basis for years culminating in a hefty adjustment when the IRD discovers the "error".
Contributed by Buffy

Tip #2: If you are a foreigner leaving Singapore, your HR Department is responsible for helping you to prepare your tax return. Your HR Manager will inform the Inland Revenue Department that you have resigned from your job and that you will be leaving Singapore. He/she will usually handle all of the paperwork for you and withhold your last month's salary for tax purposes. If your final month's salary does not cover your tax completely, you will be required to pay the difference. If your final month's salary is more than enough to cover your tax, you will receive a refund cheque. Some multinational companies in Singapore hire tax consultants from one of the Chartered Accounting firms eg. Price Waterhouse and ask them to provide tax advice and assistance to all of their "expat" staff. This kind of tax preparation assistance is usually only provided to employees who have been employed on "full expat terms" or as "international assignees" ie. they are not hired on local terms.
Contributed by Alison

Singapore Income Tax Tips & Tricks 1

Query: If I earn S$4000 how much should I put aside each month for taxes? Is there a basic untaxed allowance e.g. the first $2000 is tax free for example?

Tip: Here are relevant text extracts from the government website, plus the tax rates for resident individuals. As you can see from quote 1, most expats here for longer than 6 months will qualify for the rates listed in the table (i.e.
resident for tax purposes).
Quote 1: "You will be regarded as a tax resident for any Year of Assessment, if you were physically present or working (other than as director) in Singapore for 183 days or more during the 12 months prior to that year."
Quote 2: "As a tax resident, you will be taxed on all income derived in Singapore and any overseas income which is remitted, transmitted or
brought into Singapore. However, you will be entitled to the personal reliefs given under the Income Tax Act. Your income (less personal reliefs) will be taxed at the graduated rates of 2% to 28% from Year of Assessment 1997."
Website for tax rates for resident individuals: http://www.iras.gov.sg/info/taxrate.html

Tip: You will pay 7.55% on your first 50k (per year) of taxable income, so that will be about your rate. You'll be able to assume close to the $3,775 bill for a 50k income. You also get tax reliefs, which I asume are like deductions (I've only been here 9 months so havn't done this yet either). I assume the 3k personal relief is like the tax free threshold, ie, it comes off your gross income, in which case your tax will be a little lower. I'm no accountant, but you should be able to get a close estimate from the stuff below.
TAX RATES:
On the first $35000 -> $1,975.00
- 12% On the next $15000 -> $1,800.00
On the first $50000 -> $3,775.00

TAX RELIEFS (Deductons?)
Personal* $3,000
Earned Income* $1,000
Wife/Handicapped Spouse Relief $2,000/$3,500
Handicapped Siblings $3,500 each
Dependent Parents:
1) Living in the same household
2) Not living in the same household
$4,500
$3,500
Course fees $2,500 (maximum)
CPF Actual compulsory contributions
(You can call Iris at 1800-356 8311 for more details).

Income Tax Exemptions

List of benefits-in-kind granted administrative concession or exempt from Singapore income tax for companies and personal income tax for employees working in Singapore.
Source: Inland Revenue Authority of Singapore

Types of benefits Comments
1 Benefits that foster goodwill or promote camaraderie among staff The benefits should be generally available to all staff in order to achieve the objective of fostering good relationship among the staff and it is difficult to assign a specific value to each employee.
a) Sponsored group outings (exclude subsidised holiday trips overseas)
b) Family Day events
c) Corporate Dinner & Dance (including door gifts and lucky draw prizes)
d) Provision of social or recreational facilities (free or subsidised) For (d), prior to Year of Assessment (YA) 2008, the concession to exempt the benefit applied only to those facilities provided by the employer.
With effect from YA 2008, this concession is extended to the facilities provided by third-party vendors from which the employer subscribes a corporate membership. Concession is confined to use of gym, sports venues, holiday chalets, BBQ pits.

Concession does not apply where an employer has corporate country club membership and extends the usage of the country club facilities to all employees, not withstanding that the country club provides gym, sports venues and BBQ pits, etc.

e) Corporate gifts like mugs, T-shirts
f) Free or subsidised food and drinks For (f) and (g), the concession applies to benefits provided on and after 1 Jan 2004.
g) Free transport between pick-up points and the place of work
h) Corporate passes to places of interests in Singapore Concession is effective from YA 2008.
2 Benefits/ perquisites relating to employee's health (free or subsidised) This concession refers only to the medical bills of the employee, employee's spouse and children.
The benefits must be made available to all staff.

a) Outpatient treatment
b) Hospitalisation
c) Dental
3 Benefits/ perquisites given to promote creativity and innovation These are in line with the government's efforts to promote innovation and continuous improvement.
a) Staff suggestion
b) QAC/ WITS award
4 Benefits/ perquisites given to encourage upgrading of skills and knowledge building The benefit is not taxable on the basis that this is part of training provided by the employer and the benefits are available to all staff.
a) Subsidies for course fees
b) Training fees for staff development
c) Scholarships awards
d) Examination fees
5 Gifts (cash/ non-cash) for: These gifts must be generally available to all staff and not substantial in value.
As a guide, a gift not exceeding $100 is considered to be not substantial in value. If the gift exceeds the exemption threshold, the whole value is taxable in full.

With effect from YA 2008, the amount has been increased to $200.

For bereavement, there is no exemption threshold. The whole amount is not taxable.

a) Special occasions like birthdays, weddings, births of child and bereavement
b) Festive season like Chinese New Year, Hari Raya, Deepavali and Christmas
6 Childcare subsidy provided by employers to employees who send their children to licensed childcare centres
7 Death gratuities/Disability payments/Workmen compensation
8 a) Entrance fees for professional, social or recreational club membership where employer joins as corporate member and allows some of its employees to enjoy the use of facilities in private clubs
b) Club subscriptions paid by the company for employees' official or business use (e.g. to entertain company's clients)
9 Insurance premium of the following:
a) Premium where the employer is the beneficiary of the policy Where no beneficiary is named, the employer is the policyholder.
b) Premium of group medical insurance The benefits should be generally available to all staff.
Concession for (b) applies regardless of who the named beneficiary is. This is effective from YA 2008.

10 Interest benefits arising from interest-free or subsidised interest loans provided by employers to employees, for example: The benefits should be generally available to all employees.
Employees must not have substantial shareholdings, or control or influence over the company.

This concession does not cover interest rate subsidies granted by the employer in respect of commercial loans obtained from financial institutions.

a) Housing loan
b) Vehicle loan
c) Computer loan
d) Renovation loan
e) Personal loan
11 Laptops, palmtops and mobile phones provided by the employer for official/business purposes
12 Awards:
a) Retirement award (non-cash) For (a) and (b), the award is not taxable if it is symbolic and a token of little or commercial value.
As a guide, an award not exceeding $100 is considered to be not substantial in value. If the award exceeds the exemption threshold, the whole value is taxable.

With effect from YA 2008, the amount has been increased from $100 to $200.

b) Long service award (non-cash)
c) Service Excellence Award (cash/ non-cash) With effect from YA 2008, this award granted to an employee in recognition of the good service provided is not taxable provided the value of the benefit does not exceed $200. If the award exceeds the exemption threshold, the whole value is taxable.
d) Zero or low Medical Certificate Award (cash/ non-cash)
e) Award for passing of examination (cash/ non-cash)

With effect from YA 2008, the award is not taxable provided the value of the benefit does not exceed $200. If the award exceeds the exemption threshold, the whole value is taxable.
13 Staff uniforms The uniform has to be worn as a job requirement and for corporate identity.
14 Overtime meal allowance and reimbursement Payments made to employees for working beyond official working hours on ad-hoc basis are not taxable, provided that the overtime meal allowance/reimbursements policy is generally available to all staff. This is effective from YA 2006.
Fixed monthly payments remain taxable.

15 Transport-related payments: Fixed monthly payments remain taxable.
a) Reimbursement of transport expenses to attend meetings or visit clients for official or business purposes These payments are not taxable if they are incurred to enable the employees to discharge their official duties, for example, travelling from office to client's place, travelling from the place of one client to another.
b) Overtime transport payment (allowance and reimbursement) Payments made to employees for working beyond official working hours on an ad-hoc basis due to exigencies of work, provided that the payments are generally available to all staff. This is effective from YA 2006.
c) Transport payments for trips to/ from home and airport in respect of overseas business trips For (c) and (d), reimbursements are not taxable.
With effect from YA 2008, per-trip allowance for an actual trip made is not taxable.

d) Transport payments for trips to/ from home to business venue meetings if the travel is for business purposes
16 Private benefit, including reimbursement of car park charges and petrol, derived by drivers of commercial vehicles (e.g. motorcycles, vans, trucks, minibus, lorries) when drivers drive the vehicles home after work, and from home to the designated workplace This concession is effective from YA 2008.
17 Staff discount (excluding interest free or subsidized loans and discounted stock options or awards) offered by employers and its related entities, including discounts that are extended to the staff’s family members, relatives and friends New! With effect from YA2011, the staff discount granted is not taxable provided the value of the item of good or service offered does not exceed $500 and the staff discount is generally available to all staff.
If the value exceeds the exemption threshold, the whole value of the staff discount is taxable.

Singapore Personal Tax Tips 2

If you are leaving Singapore or changing job
If you are about to leave Singapore or changing to another job within Singapore, your current employer
needs to notify IRAS and ensure that you settle all your taxes before you go. This process is known as tax
clearance. If you have any existing stock options or awards on hand which have yet to be exercised or vested,
you will be deemed to have derived gains from the stock or awards at the point of tax clearance.

Tax rates for resident individuals
Chargeable Income (S$) Rate (%) Gross Tax Payable (S$)
On the first
On the next
20,000
10,000
0
3.50
0.00
350.00
On the first
On the next
30,000
10,000
5.50
350.00
550.00
On the first
On the next
40,000
40,000
8.50
900.00
3,400.00
On the first
On the next
80,000
80,000
14
4,300.00
11,200.00
On the first
On the next
160,000
160,000
17
15,500.00
27,200.00
On the first
Above
320,000
320,000
20
42,700.00
For YA 2008 and 2009, a personal income tax rebate of 20%, up to a maximum of $2,000 is granted.

Ways to save tax
Tax residents are eligible for tax reliefs that can be offset against the assessable income. You can get reliefs for wife support, child maintenance etc. Conditions apply.
You may claim expenses incurred against your employment income; enjoy tax deductions for approved charitable donations. Conditions apply.
Under the Not Ordinarily Resident (NOR) Scheme, you can enjoy either Time Apportionment of Singapore employment income or Tax Exemption of Employer’s contributions to Overseas Pension Fund, or both. Conditions apply.
If you work for a foreign employer and need to travel overseas in the course of work, you may enjoy time apportionment of employment income under the Area Representative Scheme. Conditions apply.
With the Avoidance of Double Taxation Treaties signed by Singapore, your income may not be taxed twice in Singapore and your home country. Conditions apply.
Need help on your Tax assessment and submission?
Rikvin can assist you in your personal income tax filings. Our personal tax filing services include:

Registration for new tax payers
Preparation and filing of income tax return based on your income and determination of possible deductions and reliefs that are applicable to you
Request for extension of deadline, if necessary
Preparation of Form IR8A for employees
Tax planning and tax advice
If you would like us to assist you with your personal income tax return, please contact us at +65-63034600 to discuss your requirement in detail or send us an email at ptax@rikvin.com and we will get back to you.

Singapore Personal Tax Tips 1

General Personal tax Information – for Individuals (Foreigners):
The amount of income tax that you have to pay depends on your tax residency in Singapore.
Top marginal resident tax rate of 20% kicks in at S$320,000 of taxable income. Non-residents are taxed at the flat rate of 15% or the resident rates whichever results in a higher tax amount.
Income is assessed on a preceding calendar year basis, ending 31 December. You must File Your Annual Tax Form by 15 April of the following year. You can usually expect to receive the income tax bills from May to August.
Besides salaries and bonuses, perquisites such as housing and stock options will form part of your taxable employment income.
Overseas income derived outside Singapore, Singapore dividends and bank interests are tax exempt in Singapore.
Paying your taxes: Sign up for the 12-month interests free GIRO Deduction Plan to pay your income tax
by installments. Otherwise, full payment has to be made within one month from the date of the income tax bill.

Are you a Tax resident or non-resident?
Different tax rates apply for tax residents and non-residents. You will be treated as a tax resident for a
particular Year of Assessment (YA) if you are a:

Singaporean; or
Singapore Permanent Resident (SPR) if you have established your permanent home in Singapore; or
Foreigner who stayed/worked in Singapore for 183 days or more in previous year (excludes director of a company).
Otherwise, you will be treated as a non-resident for a particular YA for Singapore tax purposes.

Tax rates for non-resident individuals
Employment income
Your employment income is taxed at 15% or resident rate, whichever gives rise to a higher tax amount.
Director's fees, consultation fees & all other income
The director's fees, consultation fees and all other income that you received will be taxed at 20%.

Tax relief for seniors: How many will really benefit?

SENIOR citizens will surely appreciate Mr Jimmy Ho's Forum Online letter on Monday ('Provide tax waiver for seniors') and his suggestion to raise their taxable barrier to $50,000 a year. However, it is arguable how many would really benefit from such a move.

It has been some years since the Internal Revenue Authority of Singapore informed me that, as I was no longer 'gainfully employed', it was not necessary for me to submit further annual returns.

In fact, the interest on my accumulated savings does not even cover travelling expenses incurred in regular scheduled appointments for check-ups at hospitals.


Narayana Narayana

This article was first published in The Straits Times.

Tax rented properties on actual income

I APPLAUD the Government for using the property tax system to regulate tax collection from homes in accordance with economic conditions.

For example, the upward revision of annual values (AVs) of HDB flats was delayed from Jan 1 this year. According to a press statement on its website, the Inland Revenue Authority of Singapore (Iras) reviews annually the AVs of all properties, including HDB flats, to ensure they reflect prevailing market rental values for the purpose of determining property tax.

The current reaction to the HDB rent increases was delayed and now the Government will give a one-off rebate to cushion the impact of the taxman's actions.


However, the announcement is silent on AVs of other properties. I suggest Iras segregate the imposition of property tax according to property type since it tackles a specific group at any one time, even after it has reviewed all properties.

Let me explain. Iras uses an assessment system to determine the property tax payable by homes which are mostly owner-occupied (that is, no rental evidence) and even grants a 4 per cent owner-occupier concession to residential homes.

However, such an assessment system is not efficient for properties that are rented out. Rented-out properties should be taxed on their actual income rather than reply on an assessment which can be prone to error of judgment.

I therefore urge the authorities to have two systems of property taxation - one based on assessment of the property if it is owner-occupied and another based on actual rent if it is leased out.

Patrick Sio

This article was first published in The Straits Times.

How to reduce your taxes

By BJ Ooi AND Dave Loh

MANY people tend to focus only on investment when planning their finances. But it is equally important to consider your tax strategy, as income taxes can have a direct effect on your net disposable income.

Tax planning is not something that applies only to wealthy individuals. As 2009 draws to a close, you may wish to consider the following tax tips still available to you before Dec 31.


While these tips may help you to reduce your income tax bill for the Year of Assessment (YA) 2010, do note that they are general in nature, and you should consult your tax adviser about your particular situation.

Claim applicable reliefs

First, remember to claim any applicable relief in your tax return.

If you are a Singapore resident and have met the qualifying conditions, you may be entitled to claim tax relief as applicable to your situation. Examples include earned income relief, wife relief, child relief, parent relief and foreign maid levy relief for married female taxpayers.

Supplementary Retirement Scheme (SRS) contributions

The SRS is a voluntary retirement savings scheme that allows individuals to enjoy tax relief for the year in which the contributions are made to their SRS account.

Participation in SRS is available to Singaporeans, Singapore permanent residents and foreigners, and is subject to different contribution ceilings. For 2009, SRS contributions are capped at $11,475 for Singaporeans and permanent residents, and $26,775 for foreigners.

Funds in the SRS account can be used for selected investments, such as fixed deposits, insurance products and unit trusts.

In general, 50 per cent of total SRS distributions will become taxable on an individual contributor's retirement for Singaporeans and permanent residents. For foreigners, this is after the minimum 10-year holding period.

However, withdrawals can be staggered over 10 years to enjoy more tax savings.

Premature distribution is normally taxable in full, with a possible 5 per cent penalty.

Central Provident Fund (CPF) top-up

Under the CPF Minimum Sum Topping-Up Scheme, you can claim tax relief for the cash top-up made to your spouse or siblings who do not have income exceeding $2,000 in the year preceding the year of top-up, or to your grandparents or parents. For the YA 2010, the maximum amount of tax relief is $7,000.

In addition, you can claim separate CPF cash top-up relief if you or your employer have made cash top-ups to your own Minimum Sum under the CPF Minimum Sum Topping-Up Scheme. The maximum amount of tax relief is $7,000.

CPF contributions for self-employed

If you are a self-employed person who has made Medisave and voluntary CPF contributions in 2009, you may claim tax relief for your CPF contribution of up to 34.5 per cent of your net trade income assessed.

This is subject to the lower of the CPF relief capped at $26,393 for YA 2010, or the actual amount contributed by you.

Donations to approved charities

You can claim tax relief for cash donations made to an approved Institution of Public Character (IPC) or Qualifying Grant-making Philanthropic Organisations.

Besides cash, donations to IPCs can take the form of Singapore-listed shares, or unit trusts that are ready for trade in Singapore, as well as land and buildings.

To encourage greater charitable acts in 2009 during the recent downturn, applicable tax deductions for YA 2010 have been enhanced to 2.5 times the amount of donations made this year (that is, calendar year 2009).

If the tax deduction for the donation is more than the income for the year, the donor is allowed to carry forward the un-utilised deductions for a maximum of five years.

Not Ordinarily Resident (NOR) Scheme

If you are a non-resident of Singapore for three consecutive years immediately preceding the year that you have become a resident of Singapore, you can apply for the NOR status for a five-year period starting with that year of residency.

As a NOR taxpayer who spends at least 90 days outside Singapore for business with an employment income of at least $160,000, you can apply for the concession of time-apportionment of employment income. This means you would not be taxed on the portion of employment income that corresponds to the number of business days spent outside Singapore.

If you qualify as a NOR taxpayer earning at least $160,000 during the calendar year, you should review your travel schedule to ascertain whether you can apply for this time-apportionment concession.

Gains from Employee Stock Option Plan and Employee Share Ownership Scheme

If you are granted stock options or share awards by your employer, there are incentive schemes allowing partial tax exemption on the gains from these stock options and share awards.

Under certain conditions, you can also defer paying any applicable tax. You should consult your employer to confirm whether stock options or share awards qualify for the incentives to take advantage of this.

Rental income from property

If you own a rental property, you should know that while the rental income is taxable, you can claim rental expenses to offset the rental income.

There are different types of allowable deductible expenses, for example, mortgage interest, property tax, maintenance fee paid to management corporation, fire insurance and general repairs or maintenance undertaken, such as painting and pest control services.

However, the first time that you rent out your first property, certain expenses incurred to secure the first tenant are disallowed. These expenses include any commission paid to the property agent, advertising and legal costs.

For any subsequent property, your property agent's commission, advertising and legal expenses incurred for securing the first tenant is deductible against the rental income of that property. The agent's commission or costs for renewing the lease for a subsequent tenant is also deductible.

If you own several rental properties, rental losses from one property can be used to offset income from another.

Where the final amount from all the rental properties is a loss, you cannot offset the loss against income from other sources. You may, however, transfer this loss to your spouse if he or she has positive rental income to absorb the loss.

In general, any gains from the sale of property are considered capital gains and not subject to tax in Singapore.

However, the Inland Revenue Authority of Singapore may query the property sale and ask the taxpayer to provide additional information about the transaction to confirm this tax treatment.

Effective tax planning requires you to be aware of any changes to tax laws and regulations that may affect your tax position. You should speak to a tax adviser to determine whether there are any of such changes that you should capitalise on.

BJ Ooi is executive director and head of private client services, and Dave Loh is director at KPMG Tax Services in Singapore. The views expressed are those of the authors and do not necessarily represent the views of KPMG in Singapore

This article was first published in The Business Times.

Singapore Income Tax

The Inland Revenue Authority of Singapore (IRAS) acts as an agent of the government and administers, assesses, collects and enforces payment of taxes. The IRAS also advises the government and represents Singapore internationally on matters relating to taxation.

A Singapore citizen or a Singapore Permanent Resident who returns to work here will be liable to pay income tax. You will be required to complete and submit the relevant tax form that will be mailed to you.

Your employer may furnish your salary details to IRAS directly and this portion of your income need not be included in your tax return. However, you must still submit the tax form and report other income you received in Singapore in the previous year.

Should your employer not give IRAS your salary details, you should be issued with the IR8A form, which is the form that shows the gross employment income that you have earned in the previous year. You must include the IR8A with your completed tax form. The chargeable income, that is, your income after deduction of personal reliefs, will be taxed at resident rates of between 0% and 20% from Year of Assessment 2007. The resident rates only apply to a taxpayer who is considered a tax resident, that is, he has been in Singapore for more than 183 days or can prove so by other qualitative means in the previous year.

Non-Resident

A person is considered a non resident when working (or living) in Singapore for less than 183 days per year. A non resident's employment income is taxed at 15 percent or the resident rate, whichever is higher. Only income derived in Singapore will be taxable. Non residents will not be considered for Personal Reliefs.

Foreigners who are working in Singapore on a Employment Pass will be taxed regardless of the time spent working here.

Foreigners who has rental income from a property in Singapore, director's fee or all other incomes will be taxed at 20 percent of the respective income.

Foreigners who are on short term employment of less than 60 days per calendar year are exempted from income tax for their employment income.

Foreigners whose main country of residence has an Avoidance of Double Taxation Agreement with Singapore are exempted from income tax for their employment income.

Reliefs and Rebates

As a tax resident, a person is taxed on all income earned in Singapore including overseas income which is transmitted, remitted or otherwise brought into Singapore.

There are personal reliefs given under the Income Tax Act. Income without personal reliefs are taxed on a graduated scale from 0% - 20%.

Tax reliefs and rebates are given in recognition of a person’s efforts. Instead of compensating for certain type of expenses fully, reliefs and rebates are given to promote certain social objectives.

There are reliefs available to encourage family formation, retraining, training and upgrading of skills as well as reliefs given to those serving National Service.

Submitting Your Income Tax

You can submit your tax return by post or through e-filing at www.iras.gov.sg, or by phone. If you fail to submit your return by 15th April or to pay your taxes within the specified due date, you will be penalised. To avoid late payment penalties on your tax payable, you may arrange to pay your taxes by GIRO or log on to do it electronically at www.iras.gov.sg for immediate payment. Do remember to print the acknowledge copy for your own records.

For more information, please contact:

Taxpayer Services Centre
Inland Revenue Authority of Singapore
1st Storey, Revenue House,
55 Newton Road, Singapore 307987
Website: www.iras.gov.sg

What income is taxable?

Profits from a business, profession or vocation

Earnings from full or part-time work

Dividends from shares in a company

Interest · pension, charge or annuity

Rent, royalties and other profits arising from property

Singapore has tax relief agreements with 34 countries to avoid double taxation. They are:

Australia

Mauritius

Bangladesh

Mexico

Belgium

The Netherlands

Canada

New Zealand

People's Republic of China

Norway

Denmark

Pakistan

Finland

Papua New Guinea

France

The Philippines

Germany

Poland

India

Sri Lanka

Indonesia

Sweden

Israel

Switzerland

Italy

Taiwan

Japan

Thailand

Republic of Korea

United Arab Emirates

Luxembourg

United Kingdom

Malaysia

Vietnam

 

University of USA | Degree of USA