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Taxation (Other)

Singapore - Taxation (Other)

There are several other kinds of tax schemes in Singapore that, as a foreigner, you should be aware of.

The Goods and Services Tax (GST) is similar to the Value Added Tax (VAT) that can be found in other countries. It is also fairly new in the country. The IRAS collects, assesses, and enforces the payment of GST. The GST was established as a way to maintain a regular revenue for the government while still lowering personal and corporate income tax rates. The rate is 7% and it is an indirect tax since it taxes expenditures.

The GST is levied on the import of goods and almost all supplies of goods and services in Singapore. Exemptions include the sales and leases of residential properties and the provision of most financial services. Since the GST is charged to the consumer, it doesn’t necessarily compute as a cost to the company.

There isn’t a Capital Gains Tax in Singapore since Singapore tries to encourage investors, both foreign and native. However, if there are gains as a result of disposing of shares from trading, then these are considered income and are taxed accordingly.

In addition, there isn’t an estate duty, wealth, or gift tax in Singapore. There was an estate duty tax for deaths, but this was abolished for all deaths that occurred after February 15, 2008. You will also not find any local taxes that are imposed on income.

There is real estate tax that is based on the property’s annual value. The tax rate depends on the use of the property and whether or not it is occupied. Property tax is the responsibility of the registered owner and is payable to the government. It can be paid a year in advance or by monthly direct debit. The tax payable is calculated by applying the applicable tax rate to the estimated annual rent a property could get if it were rented. If you live in your property, it is taxed at a concessionary rate of 4% of the annual value. Conversely, the prevailing property tax rate for rented residential properties is 10%.

For tax purposes, you may deduct your fire insurance, property tax, mortgage loan interest, cost of renewing a lease, repairs and maintenance, and any commission that’s paid on getting a new tenant. You may not deduct your mortgage payments, costs of renovations, depreciation of furniture, or any commissions for getting your first tenant.

The Central Provident Fund (CPF) is a savings scheme that the government has implemented for Singapore citizens and permanent residents. Like social security taxes, this program requires contributions from employees. If a foreigner is on a work permit or a professional visit pass then employers do not have to make any CPF contributions for them. However, contributions must be made for permanent residents.

The savings in the CPF account can accumulate every quickly. In fact, some people use these savings to purchase their new homes. You can also deduct the amount of your CPF contribution to lower your taxable income which can reduce your taxes. Some expats do not get the CPF deducted from their monthly paychecks. Instead, at the end of their contract term, a lump sum gratuity is paid. This sum is taxable. During the first two years, the percentage of CPF deductions is staggered. You don’t get the full CPF deduction/contribution until your third year as a permanent resident.

Employees under the age of 55 and their employers contribute 30% of the employee’s salary to the CPF fund (the employer contributes 10%.) Although the fund is designed to be used to ensure quality of life in old age, it can also be used to make investments, provide health care, or purchase homes. Expats are now no longer required to make contributions but many do because it is a good savings program and is a potential tax shelter (if the expat is a permanent resident, then they must make the contributions, regardless.)

To withdraw money from your CPF, you must fill out a form and go through an application process.

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