Thinking beyond borders
Singapore income tax is imposed on a territorial basis whereby the individual is generally taxed on all income accruing in or derived from Singapore. Foreign-sourced income received in Singapore by resident individuals is exempt from tax unless the income is received through a partnership in Singapore. Non-residents are taxed only on Singapore-sourced income.
A frequent business traveler or short-term visiting employee who exercises employment in Singapore for more than 60 days in a calendar year will be subject to tax in Singapore on the income derived from the individual’s services performed in Singapore, unless exempt by treaty.
A person’s liability for Singapore tax is determined by the source of the person’s income as well as their residence status.
Singapore adopts the territorial basis of taxation where an individual, whether resident or non-resident, is subject to tax on income derived from or accrued in Singapore. Foreign-sourced income remitted into Singapore by an individual is exempted from tax. However, this tax exemption does not apply to foreign-sourced income received by a resident individual through a partnership in Singapore.
The residence status of the individual would affect the tax rates to be applied on the taxable income.
An individual is treated as a resident if they reside in Singapore except for such temporary absences therefrom as may be reasonable and not inconsistent with a claim by such individual to be a resident in Singapore (i.e. Qualitative rule), and includes an individual who is physically present or who exercises an employment in Singapore for 183 days or more in a calendar year (i.e. Quantitative rule). Physical presence in Singapore for any part of the day shall be counted as one day in Singapore.
The Inland Revenue Authority of Singapore (“IRAS”) may, on a concessionary basis, assess an individual to tax as a resident for all years where their employment in Singapore is expected to cover a continuous period of at least 183 days straddling over 2 calendar years (i.e. 2-year administrative concession); or a continuous period over 3 consecutive calendar years (i.e. 3-year administrative concession) notwithstanding that the period of employment in the year of arrival or departure is less than 183 days. A non-resident of Singapore is generally someone who spends less than 183 days in Singapore during the year preceding the year of assessment.
Employment income is generally treated as Singapore-sourced if the services are performed in Singapore, regardless of where the payment is made or the contract of employment is concluded.
A short-term visiting employee who exercises employment in Singapore for no more than 60 days in a calendar year (other than as a director or a public entertainer) is exempt from tax. The dates of arrival and departure are to be included in determining the 60 days.
Based on the above, a frequent business traveler whose stay in Singapore exceeds 60 days in a calendar year would be subject to tax in Singapore on the income derived from the individual’s work performed in Singapore. To the extent that the individual qualifies for exemption under the conditions of the dependent personal services article of the applicable double tax treaty, there will be no tax liability. Note that approval for tax treaty exemption must be obtained from the IRAS.
Notwithstanding that tax-exemption may apply in accordance to the local tax laws or the double - taxation agreement, there may be filling requirements for the employer and the employee.
As a general rule, all payments (whether in the form of cash or benefits-in-kind) made by an employer to an employee for employment in Singapore are taxable, unless specifically exempted under the Income Tax Act or by concession.
The following payments made by the employer for employees based outside Singapore and travelling into Singapore for business purposes are not taxable:
A resident is taxed on the resident’s chargeable income (after deducting applicable personal reliefs) at graduated rates ranging from 0 percent to 22 percent. Non-residents are subject to tax on employment income at a flat rate of 15 percent or at the resident tax 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 treaty rate.
All foreign individuals are currently exempted from participation in Singapore’s national pension scheme, the Central Provident Fund (“CPF”). Upon becoming a permanent resident of Singapore, however, participation in the CPF is compulsory.
Notification to file Income tax returns (Form B1/B/M) are issued by the IRAS in January each year. Individuals are required to complete and submit the form to the IRAS by 15 April. The IRAS may grant an extension beyond the 15 April deadline if there are valid reasons.
There is no requirement for the employer to withhold monthly taxes from the employee. Employers, however, are required to complete a return of remuneration form (Form IR8A) setting out the various payments under the employment for the year. The form is to be completed and given to employees by 1 March of the following year. For the Year of Assessment 2020, employers who have seven or more employees (in total) for the entire year ended 31 December 2019 are required to submit their employees’ income information to IRAS electronically.
In the case of departing non-Singapore citizens, written notice (Form IR21 – Notice of Cessation of Employment of non-Singapore Citizens) must be given at least 1 month prior to the date on which the person ceases employment or leaves Singapore permanently, or for a period exceeding 3 months. In addition, the employer must retain any money that is due to the employee. The employer can release the money to the employee only when the IRAS grants the tax clearance, or upon the expiration of 30 days after receipt by the IRAS of the Form IR21, whichever is earlier. Form IR21 tax clearance is however not required for short-term visiting employees working for no more than 60 days in a calendar year.
Where a frequent business traveler travels to Singapore for business purpose for no more than 60 days within a calendar year, an employer must still file the annual Form IR8A by 1 March of the following year. However, if the employee had been in employment with the same employer for the full calendar year, Form IR8A is not required. If work/ employment passes are issued to the short term visiting employees who had exercised employment for 60 days or less and remained with the same employer for the full calendar year, the employer is required to provide the IRAS with the following information by 31 January of the following year to request a waiver from the Form IR8A filing requirement:
A work pass will be required for a foreign individual who would like to be engaged in some form of business, profession, occupation or paid employment while in Singapore.
Generally, if the foreign individual wishes to work in managerial, executive or specialized jobs in Singapore, the foreign individual must apply to the Work Pass Division, Ministry of Manpower (MOM) Singapore, for a work pass regardless of the length of the assignment. A registered entity in Singapore will need to sponsor the work pass for the foreign individual.
It is the sole discretion of the MOM to grant an employment pass to an individual typically taking into account an applicant's qualifications, work experience, salary and role to be performed in Singapore.
Under the Fair Consideration Framework (FCF) rules, companies must advertise job vacancies on a new jobs bank administered by the Singapore Workforce Development Agency (WDA) for at least 14 calendar days before submitting new EP applications.
Exemption from advertising on the jobs bank is given subject to the employer meeting various criteria such as firms with 10 or fewer employees, a high monthly salary and intra-company transferees. In tightening the immigration rules, the government introduced the ‘Triple Weak’ firm concept, under which the assessment of work pass applications will also focus on “company-centric” factors such as:
Companies who are assessed as ‘Triple Weak’ will face closer scrutiny which may lead to suspension of work pass privileges.
Singapore has entered into double taxation treaties with close to 80 countries/jurisdictions to mitigate double taxation and allow cooperation between Singapore and overseas tax authorities in enforcing their respective tax laws.
A permanent establishment (PE) could potentially be created as a result of frequent business travel, but this would generally depend on the type of services performed and the level of authority the employee has.
Goods and service tax (GST) is currently applicable at 7 percent on domestic consumption. GST is levied on the sale of goods and services in Singapore by GST-registered traders and on goods imported into Singapore. Businesses whose turnover exceeds 1 million Singapore dollar (SGD) are required to register for GST.
A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided.
Personal data in Singapore is protected under the Personal Data Protection Act.
Singapore does not currently impose exchange controls.
Non-deductible costs incurred by employers relating to assignees generally include private passenger car expenses and medical expenses exceeding a certain cap.
All information contained in this publication is 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, 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.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.