Tax for expatriates - what you need to know

Mar 5 2020
AccountServe
Stone-Forest-Tax-for-expatriates_article

Whether you are a foreigner working here, a company that has hired or seek to hire foreigners, it is important to know about the tax obligations in Singapore, as managing Singapore’s tax compliance obligation has become more complex, especially with ever-increasing cross-border transactions. It is, therefore, important for taxpayers to understand the mechanism of individual tax to avoid penalties and minimise tax burdens.

“Acquiring basic knowledge of the tax environment goes a long way in helping expatriates settle down in Singapore, and for employers staying compliant.”

Tax resident
Tax liability is dependent on a person's tax residency status. An individual is regarded as a tax resident if he/she fulfils these conditions:

  1. Stays or works in Singapore:
    • for at least 183 days in a calendar year; or
    • continuously for three consecutive years
  2. Works in Singapore for a period of two calendar years and their total period of stay is at least 183 days

If an individual is issued with a work pass that is valid for at least one year, they will also be treated as a Singapore tax resident. If an employment is ceased, this tax residency status will be reviewed at the point of tax clearance. If the individual's stay in Singapore is less than 183 days in a calendar year, he/she will not be regarded as a tax resident.

Non tax resident
Employment income of individuals who are non-Singapore tax resident will be taxed at the flat rate of 15% or the progressive resident tax rates, whichever is the higher tax amount. All other incomes (e.g. director’s fee, consultation fees, etc.) will be taxed at a flat rate of 22%.

A non-resident director’s remuneration does not qualify for the reduced rate, and withholding tax at 22% must be deducted from remuneration paid to a non-resident director.

Benefits for tax resident
Singapore tax residents are entitled to personal reliefs and/or deductions subject to meeting the stipulated criteria. Individual’s income will also be subject to graduated tax rate ranging from 0 to 22 per cent.

  • Forms of tax reliefs

Tax reliefs are available and common deductions include allowable expenses, donations, reliefs and rebates. For employees, tax deductions can be claimed on allowable employment expenses 'wholly and exclusively' incurred in earning your income in Singapore. This is when you use your own money to pay for expenses that are necessary to your employment, such as subscriptions for professional bodies, travel, and entertainment expenses. These expenses may be deducted from your employment income as long as they are allowable expenses. 

Other tax deductions for foreigners include donations and rental expenses, as well as deductions under the Angel Investors Tax Deduction Scheme (“AITD”). To qualify for this, you must have invested in qualifying start-up companies between 1 March 2010 and 31 March 2020; you must have invested at least S$100,000 of qualifying investment in a qualifying start-up company within 12 months from the date of your first investment in that company; and you hold such investment for a continuous period of two years from the date of last qualifying investment. There are also other tax reliefs and rebates available, such as course fees or a spouse relief.

Tax clearance
Tax Clearance is a process of ensuring that your non-citizen foreign employee (i.e. Singapore PRs, Employment Pass, S Pass, Work Pass, etc.) pays all his/her taxes when he/she ceases employment with you in Singapore or plans to leave Singapore for more than three months.

Step-by-step guide on seeking tax clearance
Step 1 - Notify Inland Revenue Authority of Singapore (“IRAS”) via Form IR21 after Determining at IR21 is required.

Step 2 - Withhold Payment Due to Your Employee

Step 3 - IRAS Processes Tax Clearance.

Step 4 - Receive Clearance Directive from IRAS

Step 5 - Employee Receives Tax Bill (Notice of Assessment)

Withholding tax
Withholding tax is another type of tax that foreigners working in Singapore should be aware of. The law in Singapore states that a person (the 'payer') who makes payment(s) of a specified nature (e.g. royalty, interest, technical service fee, etc.) to a non-resident company or individual (the 'payee') is required to withhold a percentage of that payment and pay the amount withheld to IRAS. This amount that is paid is known as withholding tax.

There are only certain types of payments that qualify for withholding tax: payments for services, interest, royalty, or payments to non-resident directors, professionals, public entertainers and international market agents.

The amount of the withholding tax varies, depending on the nature of the payment. Click here for more details on withholding tax rates. Withholding tax needs to be filed electronically to IRAS by the payer by the 15th of the second month from the date of payment to the non-resident.

At a glance

  • Tax Residency

Physical Presence (Inclusive of employment period) in Singapore

Tax Residency

Tax Implications

At least 183 days in a calendar year

Tax resident for that year

Income is taxed at progressive resident rates.

 

Individual may claim personal reliefs and/or deductions.

Three consecutive years

Tax resident for all three years

Income is taxed at progressive resident rates.

 

Individual may claim personal reliefs and/or deductions.

At least 183 days for a continuous period over two years

Tax resident for both years

Income is taxed at progressive resident rates.

 

Individual may claim personal reliefs and/or deductions.

 

Less than 60 days in a calendar year.

Non-Resident

Individual’s short-term employment income is exempt from tax under Section 13 (6).

 

Less than 183 days in a calendar year

Non-Resident

Individual’s short-term employment income is taxed at 15%.

 

This rule does not apply if:

  1. You are a director of a company, a public entertainer or a professional in Singapore; or
  2. Your absences from Singapore are incidental to your Singapore employment. In this case, your total income (including income for services rendered outside Singapore) is taxable in full in Singapore.

 

Director's fees and other income are taxed at the prevailing rate of 22%.

 

Individual cannot claim personal reliefs and/or deductions.

  • Resident tax rates

Chargeable Income

Income Tax Rate (%)

Gross Tax Payable ($)

First$20,000
Next $10,000

0
2

0
200

First $30,000
Next $10,000

-
3.50

200
350

First $40,000
Next $40,000

-
7

550
2,800

First $80,000
Next $40,000

-
11.5

3,350
4,600

First $120,000
Next $40,000

-
15

7,950
6,000

First$160,000
Next $40,000

-
18

13,950
7,200

First$200,000
Next $40,000

-
19

21,150
7,600

First $240,000
Next $40,000

-
19.5

28,750
7,800

First$280,000
Next $40,000

-
20

36,550
8,000

First $320,000
In excess of $320,000

-
22

44,550

 

Reliefs / Deductions

Claim up to a maximum of

CPF Cash Top-Up

S$7,000

 

Supplementary Retirement Scheme (SRS)

S$15,300 for Singapore Citizen or S$35,700 for foreigner

 

Spouse Relief

S$2,000

 

Handicapped Spouse Relief

S$5,500

 

Qualifying Child Relief (QCR)

S$4,000

 

Handicapped Child Relief (HCR)

S$7,500

 

Parent Relief (Staying/Not staying with you)

S$9,000 if staying with taxpayer or S$5,500 if not staying with taxpayer.

 

Grandparent Caregiver relief (GCR)

S$3,000

 

Handicapped Brother/Sister Relief

S$5,500

 

CPF/Provident Fund

 

Amount as per Form IR8A if your employer is NOT in the Auto-Inclusion scheme.

 

Life Insurance Relief

Claim 7% of capital sum insured or actual premium paid, (whichever lesser) for life insurance if policy was brought in your name or your wife’s name or up to S$5,000.

 

Course Fees Relief

 

Claim S$5,500 or amount spent whichever is lesser for academic/professional/vocational course relating to an existing trade, business or employment.

 

Foreign Maid Levy Relief (FMLR)

 

claim twice the amount of FML paid for one maid and up to a maximum amount of S$6,360

 

We have a team that specialises in meeting basic to complex accounting and accounting-related requirements. We are equipped with requisite knowledge and experience on the range of tax reliefs and deductible allowable expenses, while providing absolute confidentiality and timely delivery of services.

Contact us today at +65 6222 4888 for a complimentary consultation.

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