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Singapore - Income Tax

Singapore - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

15 April.

What is the tax year-end?

31 December. The Singapore tax year runs from 1 January to 31 December annually. The tax charged for a particular Year of Assessment (“YA”) is based on income accrued / derived in the calendar year preceding that YA.

What are the compliance requirements for tax returns in Singapore?

Individuals will receive a letter, tax return (Form B/B1/M) or text message from the Inland Revenue Authority of Singapore (IRAS) in February/March of each year, requesting them to file their tax returns either electronically (by 18 April) or via paper filing (by 15 April). Employment income details are generally submitted to the IRAS by employers electronically, so individuals who receive only employment income may also receive a letter or text message from the IRAS informing them that they have been selected for No Filing Service, whereupon they need not file a tax return unless they wish to do so to report additional sources of income or amend their personal relief claims.

Assessments are made by way of notices of assessment. The tax is normally due for payment within 1 month from the date of issue of the notice of assessment.

Tax rates

What are the current income tax rates for residents and non-residents in Singapore?

Residents

Income tax is calculated by applying a progressive tax rate schedule to chargeable income as follows.

Income tax table from the YA 2017, in Singapore dollars (SGD)

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From SGD To SGD SGD %
0 20,000 0 0
20,001 30,000 0 2
30,001 40,000 200 3.5
40,001 80,000 550 7
80,001 120,000 3,350 11.5
120,001 160,000 7,950 15
160,001 200,000 13,950 18
200,001 240,000 21,150 19
240,001 280,000 28,750 19.5
280,001 320,000 36,550 20
320,001 No limit 44,550 22

Non-residents

A non-resident individual is generally subject to tax at flat rates, depending on the type of income. For employment income, tax is charged at a flat rate of 15 percent or at the resident rates, whichever is higher. Other income of a non-resident individual is generally taxed at 22 percent unless specifically exempt or subject to a reduced rate (such as, tax treaty).

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Singapore?

An individual is regarded as resident in Singapore for a YA if, in the year preceding that YA, they reside in Singapore, is physically present or exercises an employment (other than as a director of a company) in Singapore for 183 days or more.

Under the 3-year administrative concession, an individual will be considered a resident from the year of arrival in Singapore if their stay straddles 3 consecutive years or more, notwithstanding that the 183 days test may not have been met either in the first or final year of employment.

Under the 2-year administrative concession, a foreign employee who exercises employment in Singapore for a continuous period of at least 183 days straddling 2 years would be treated as a resident of Singapore for both years.

Is there a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/territory for more than 10 days after their assignment is over and they repatriate.

No. If the individual is a resident, they would be regarded as a resident for the entire year and there is no de minimus number of days that will exempt the individual from tax for that year.

If the individual is a non-resident in the year concerned and they exercise an employment (other than as a company director) in Singapore for not more than 60 days in a calendar year, they are exempt from tax on income arising from that short-term employment.

What if the assignee enters the country/jurisdiction before their assignment begins?

An assignee may arrive in Singapore before the start of their assignment for several reasons such as searching for accommodation, making personal arrangements, and so on. Whether they will be treated as a resident of Singapore will generally depend on the number of days they are physically present or exercises employment in Singapore.

However, it is important to note that they are not permitted to engage in any form of business, profession, occupation or paid employment during this interim period, if they have not obtained a valid employment pass.

Termination of residence

Are there any tax compliance requirements when leaving Singapore?

An employer is required to notify the IRAS if a non-citizen employee (including a Singapore Permanent Resident who is leaving Singapore permanently) ceases or is about to cease employment in Singapore. In addition, the employer is required to withhold all monies due to the employee for clearance of the employee’s outstanding tax liability. The notification must be lodged no later than 1 month before the employee’s cessation of the employment or date of departure from Singapore, whichever is earlier. The employer can only release the monies withheld to the employee upon receiving permission from the IRAS or until 30 days after notification of the employment cessation was made, whichever is earlier.

Under the deemed exercise rule, the non-citizen employee is deemed to have derived a final gain in respect of unexercised stock options and/or unvested/restricted employee stock ownership plan shares when the employee ceases employment in Singapore. An exception would be if the employer is on tracking option, where the employer will track the income realization event to report to the IRAS.

As an administrative concession, an individual may apply for a reassessment of this tax liability within 4 years from the YA following the year in which the deemed exercise rule applies, if the actual gain at date of exercise / vesting is lower than the deemed taxable gain.

What if the assignee comes back for a trip after residency has terminated?

If the assignee comes back for business purposes, any income attributable to their business presence may be subject to tax in Singapore, depending on their tax residency and the period of employment exercised. In determining the tax residency and period of employment exercised, the time spent in Singapore throughout the calendar year would be considered.

Communication between immigration and taxation authorities

Do the immigration authorities in Singapore provide information to the local taxation authorities regarding when a person enters or leaves Singapore?

Yes. In general, the immigration authorities would share information relating to the application / cancellation of work passes with the IRAS.

Will an assignee have a filing requirement in the host country/territory after they leave the country/territory and repatriate?

Generally, a non-citizen employee who have completed their tax clearance process with the filing of Form IR21 will not have a filing requirement in Singapore after they repatriate. However, if they subsequently receive income that is related to their former Singapore assignment (such as, bonus that is paid after their departure) and not previously reported to the tax authorities, additional tax clearance is required.

Economic employer approach1

Do the taxation authorities in Singapore adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Singapore considering the adoption of this interpretation of economic employer in the future?

Based on the IRAS’s current practice, the economic employer approach has not been adopted as of yet. There is no indication as to whether the IRAS would adopt this approach in the future.

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable. The IRAS has not adopted the economic employer approach.

Types of taxable compensation

What categories are subject to income tax in general situations?

Employment income or profits for employment services rendered in Singapore are taxable regardless of whom or where the employer may be or, to whom (or where) the employment income may be paid.

Typical items of an expatriate compensation package, such as the following, are taxable unless otherwise indicated.

  • Salary, wages, bonuses and allowances.
  • Benefits-in-kind such as housing/hotel accommodation, home leave passages, motor car benefit, insurance premiums for personal insurance and certain group insurance policies, certain interest-free loans etc.
  • If the employer bears the cost of tax for the employee, this is regarded as a taxable benefit and is computed on a tax-on-tax basis.
  • Any gain or profit derived (directly or indirectly) by any person by the exercise, assignment, release, or acquisition of a right or benefit to acquire shares in a company is income if the right or benefit is obtained by them by reason of their office or employment in Singapore.
  • Contributions made by the employer to overseas pension and provident funds in connection with the employee’s employment in Singapore are generally deemed taxable income of the employee, unless certain conditions are satisfied.
  • As a concession, medical expenses paid on behalf of an employee, their spouse, and children are generally not taxable if the benefit is available to all staff.

 

Intra-group statutory directors
Will a non-resident of Singapore who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Singapore trigger a personal tax liability in Singapore, even though no separate director's fee/remuneration is paid for their duties as a board member?

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Singapore?

Generally, director’s fees are sourced in the country/territory where the company is resident. Where director’s fees are paid by a Singapore resident company, the board member will be liable to tax in Singapore, even though they may not be physically present at the board meetings in Singapore. Where there are no director’s fees / remuneration paid for the duties as a board member, there will be no taxation triggered.

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Singapore (i.e. as a general management fee where the duties rendered as a board member is included)?

No.

c) In the case that a tax liability is triggered, how will the taxable income be determined?

N.A.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Singapore? If so, please provide a general definition of these areas.

Exemption of interest income

Interest income derived by any individual from deposits with an approved bank or a finance company licensed under the Finance Companies Act in Singapore, is exempt from tax.

Interest from debt securities and income from certain annuities, life insurance policies, distributions from certain collective investment schemes, fee or compensatory payments from securities lending or repurchase arrangements, derived from Singapore.

However, if the interest income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession, such income is taxable.

Remittances of offshore funds

All overseas income remitted by individuals resident in Singapore is not taxable. However, this exemption does not apply if the foreign-sourced income was received through a partnership in Singapore.

Double taxation agreement

An Avoidance of Double Taxation Agreement (DTA) between Singapore and another country/territory serves to prevent double taxation of income earned in one country/territory by a resident of the other country/territory.

Capital gains tax

There is no capital gains tax in Singapore.

Expatriate concessions

Are there any concessions made for expatriates in Singapore?

Concessions are available under the Not Ordinarily Resident (NOR) Taxpayer Scheme. This scheme, however, will be abolished after 2019. Residents who have been granted the NOR status prior to year 2020 will not be affected.

Salary earned from working abroad

Is salary earned from working abroad taxed in Singapore? If so, how?

In Singapore, tax is payable on an individual’s remuneration that is derived from Singapore employment irrespective of where the contract is made or the remuneration is paid. The term Singapore employment includes not only the exercise of employment in Singapore but also the exercise of employment outside Singapore where the services performed outside Singapore is considered an extension of the duties and responsibilities of their employment in Singapore.

On the other hand, where the individual is employed to perform services entirely outside Singapore (e.g. they are sent on an overseas assignment), the remuneration is not subject to Singapore income tax.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Singapore? If so, how?

Any interest income derived by any individual from the deposit of monies with an approved bank or a licensed finance company would be tax exempt. Any interest by any individual from debt securities derived is also exempt from tax.

Dividends paid by Singapore-resident companies would be taxed under the one-tier corporate taxation system and are exempt from tax in the hands of the shareholders.

The one-tier system is not applicable to co-operatives.

Dividends, interest, and rental income

Any interest income derived by any individual from the deposit of monies with an approved bank or a licensed finance company would be tax exempt. Any interest by any individual from debt securities derived is also exempt from tax.

Dividends paid by Singapore-resident companies would be taxed under the one-tier corporate taxation system and are exempt from tax in the hands of the shareholders.

The one-tier system is not applicable to co-operatives.

Rental income derived in respect of property located in Singapore is taxable.

Foreign exchange gains and losses

Foreign exchange gains and losses are neither taxable nor deductible.

Principal residence gains and losses

Principal residence gains and losses are generally capital in nature and are neither taxable nor deductible respectively.

Capital losses

Capital losses are generally not tax-deductible.

Personal use items

Any capital gains or losses from the sale of personal use items are not taxable/deductible.

Gifts

There is no gift taxes in Singapore.

However, gifts (cash and non-cash) from employers are taxable benefits-in-kind. Under the administrative concession granted by the IRAS, gifts given on festive and special occasions which are not substantial in value (SGD200 or less per occasion) and generally available to all staff are not taxable.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Singapore? If so, please discuss?

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Are there capital gains tax exceptions in Singapore? If so, please discuss?

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Pre-CGT assets

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Deemed disposal and acquisition

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

General deductions from income

What are the general deductions from income allowed in Singapore?

Expenses are tax deductible only if they are wholly and exclusively incurred in the production of the income, are not capital in nature and their deduction is not prohibited by statute. In general, there are very few deductions that can be claimed against employment income.

Personal reliefs, given as deductions against income, are available to a resident individual depending on their personal circumstances in the year preceding the YA.

From YA 2019, the total amount of personal income tax reliefs which can be allowed is subject to a cap of SGD80,000 per YA.

Some of the personal reliefs applicable for the YA 2019 are summarized as follows.

  SGD
Earned income relief  
Under age 55 Up to 1,000
55 to age 59 Up to 6,000
Age 60 and above Up to 8,000
Spouse relief  
Spouse living with or maintained by taxpayer and spouse's income is not more than SGD4,000 2,000
Child relief  
Unmarried child and does not have income of more than SGD4,000 4,000
Dependent parents relief  
Living with taxpayer in the same household (each parent) 9,000
Not living with taxpayer in the same household (each parent) 5,500
Supplementary Retirement Scheme (SRS) Capped at 35,700 for foreigners

* Dependent parents relief may be shared with other claimants provided no one else is claiming any other relief (except Grandparent Caregiver Relief) on the same dependent.

A non-resident individual is not entitled to personal reliefs.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Singapore?

The common methods of recognizing tax reimbursements paid by the employer:

  • Current year full gross-up
  • Current year partial gross-up
  • One-year rollover

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Singapore? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

An expatriate employee’s remuneration from Singapore employment is generally not subject to income tax withholding.

Pay-as-you-go (PAYG) withholding

Not applicable.

PAYG installments

Not applicable.

When are estimates/prepayments/withholding of tax due in Singapore? For example: monthly, annually, both, and so on.

Not applicable.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Singapore? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Where an employee suffered taxes in Singapore and in the foreign jurisdiction for the income received in respect of their services physically rendered in that jurisdiction, foreign tax credit (Double Tax Relief (for countries/territories which have concluded Double Taxation Agreements (DTAs) with Singapore) or Unilateral Tax Credit (for countries/territories that do not have DTAs with Singapore) may be granted, provided certain conditions are met.

General tax credits

What are the general tax credits that may be claimed in Singapore? Please list below.

See above.

Sample tax calculation

This calculation assumes a married taxpayer resident in Singapore with two children whose 3-year assignment begins 1 January 2016 and ends 31 December 2018. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.

  2016
USD
2017
USD
2018
USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 5,000 5,000 5,000
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = SGD1.40.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income2

Year-ended 2016
SGD
2017
SGD
2018
SGD
Days in Singapore during year 366 365 365
Earned income subject to income tax      
Salary 140,000 140,000 140,000
Bonus 28,000 28,000 28,000
Cost-of-living allowance 14,000 14,000 14,000
Housing allowance 16,800 16,800 16,800
Company car* 8,020 8,020 8,020
Moving expense reimbursement 0 0 0
Home leave (20% concession applies)                         1,400                                0                                0
Home leave (100%) 0 7,000 7000
Education allowance 4,200 4,200 4,200
Total earned income 212,420 218,020 218,020
Other income 0 0 0
Total income 212,420 218,020 218,020
Deductions 11,000 11,000 11,000
Total taxable income 201,420 207,020 207,020


Calculation of tax liability

  2016
SGD
2017
SGD
2018
SGD
Taxable income as above 201,420 207,020 207,020
Singapore tax thereon 20,920** 22,484 22,484***

* Cost of company car (new car at point of purchase) = USD50,000; Assume: residual value = USD8,000; petrol/maintenance expenses paid by company; private mileage travelled = 10,000km.

Taxable benefit = 3/7 x (50,000 - 8,000)/10 x 1.40 + (0.55 x 10,000) = SGD8,020.

**Inclusive of 20 percent tax rebate up to a maximum of SGD500, as announced by the Minister for Finance in the 2017 Budget speech on 20 February 2017.

**Inclusive of 50 percent tax rebate up to a maximum of SGD200, as announced by the Minister for Finance in the 2019 Budget speech on 18 February 2019.

FOOT NOTES

1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/territory for a period of less than 183 days in the fiscal year (or a calendar year of a 12-month period), the employee remains employed by the home country/territory employer but the employee’s salary and costs are recharged to the host entity, then the host country/territory tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country/territory.

2Sample calculation generated by KPMG Services Pte Ltd and based on the Singapore Income Tax Act (chapter 134) and the prevailing practices of the Inland Revenue Authority of Singapore.

The information, as summarized by KPMG Services Pte. Ltd., a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity, is based on relevant provisions of the Singapore income tax legislations, regulations issued thereunder and judicial and administrative interpretations thereof, and the web sites of the Inland Revenue Authority of Singapore, Central Provident Fund Board, Ministry of Manpower, Monetary Authority of Singapore and Personal Data Protection Commission.

© 2019 KPMG Services Pte Ltd (Registration No. 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative, KPMG International. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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