Singapore is a global financial and business hub known for its stable economy, low crime rate, and excellent infrastructure. The city-state has a simple and straightforward taxation system, which has helped to attract both local and foreign businesses. In this article, we will discuss how taxation works in Singapore, double taxation agreements, main taxes expats need to be aware of, special tax breaks, how and when to file a tax return, and tax exit procedures for anyone leaving Singapore to move abroad.
The Taxation System in Singapore
Singapore’s taxation system is based on the principle of territoriality, which means that only income earned in Singapore is taxable. The city-state has a progressive tax system, with tax rates ranging from 0% to 22% for individuals and from 17% to 22% for companies. The tax year in Singapore runs from January 1st to December 31st.
The Inland Revenue Authority of Singapore (IRAS) is responsible for administering the taxation system. Every individual and company in Singapore is required to register with IRAS and obtain a tax identification number (TIN).
Double Taxation Agreements
Singapore has signed double taxation agreements (DTAs) with more than 80 countries to prevent double taxation of income earned in both countries. These agreements help to promote cross-border trade and investment by providing clarity and certainty to taxpayers. Under DTAs, taxpayers may be eligible for reduced withholding tax rates on dividends, interest, and royalties.
Main Taxes for Expats
Personal Income Tax
Expats working in Singapore are subject to personal income tax on their income earned in Singapore. The tax rates for individuals are as follows:
- 0% on the first SGD 20,000 of chargeable income
- 2% on the next SGD 10,000
- 3.5% on the next SGD 10,000
- 7% on the next SGD 40,000
- 11.5% on the next SGD 40,000
- 15% on the next SGD 40,000
- 17% on the next SGD 40,000
- 18% on the next SGD 40,000
- 19% on the next SGD 40,000
- 20% on the next SGD 40,000
- 22% on any amount above SGD 320,000
Expats are also eligible for personal reliefs, such as the earned income relief, spouse relief, and parent relief. These reliefs can help to reduce the tax payable.
Goods and Services Tax (GST)
The Goods and Services Tax (GST) is a consumption tax on goods and services in Singapore. The current GST rate is 7%, and it is levied on the supply of goods and services in Singapore, as well as the importation of goods into Singapore. Some goods and services are exempt from GST, such as financial services and residential properties.
Property Tax
Property tax is a tax on properties in Singapore, including residential, commercial, and industrial properties. The tax is based on the annual value of the property, which is determined by the IRAS. The tax rates for residential properties range from 0% to 4%, while the tax rates for non-residential properties range from 0% to 10%.
Corporate Income Tax
Companies in Singapore are subject to corporate income tax on their income earned in Singapore. The tax rate for companies is a flat rate of 17%. Companies may be eligible for tax exemptions and deductions, such as the partial tax exemption and the corporate income tax rebate.
Special Tax Breaks for Expats
Not Ordinarily Resident (NOR) Scheme
Expats who meet certain conditions may qualify for the Not Ordinarily Resident (NOR) Scheme, which provides tax exemptions on income earned outside Singapore for a period of five years. To qualify for the NOR Scheme, expats must:
- Be a tax resident of Singapore
- Have been a tax resident of Singapore for the preceding three years of assessment
- Have spent fewer than 183 days in Singapore in the year of assessment
- Earn a minimum of SGD 160,000 in Singapore for the year of assessment
Expats who qualify for the NOR Scheme may be eligible for tax exemptions on their foreign income, including employment income, dividends, and director’s fees.
Avoidance of Double Taxation Agreement (DTA) Benefits
Expats who are tax residents of a country that has signed a DTA with Singapore may be eligible for tax benefits, such as reduced withholding tax rates on dividends, interest, and royalties. To enjoy these benefits, expats must apply for a Certificate of Residence (COR) from their home country’s tax authority and submit it to the withholding agent in Singapore.
Filing a Tax Return in Singapore
Expats working in Singapore are required to file an income tax return with IRAS by April 15th of the following year. The tax return must include all income earned in Singapore, as well as any foreign income that is subject to tax in Singapore. Expats may file their tax return online using the IRAS website or by mail.
Expats who are eligible for personal reliefs or special tax breaks must declare them in their tax return. Failure to do so may result in penalties and interest charges.
Tax Exit Procedures for Expats Leaving Singapore
Expats who are leaving Singapore to move abroad permanently or for an extended period must inform IRAS of their departure and settle any outstanding tax liabilities. Expats must file a tax clearance application with IRAS and obtain a tax clearance certificate (TCC) before leaving Singapore. The TCC certifies that all tax liabilities in Singapore have been settled.
To apply for a TCC, expats must submit the following documents to IRAS:
- A completed tax clearance application form
- A copy of their passport and work pass
- A statement of all income received up to the date of departure
- A statement of all tax payable up to the date of departure
- A statement of all tax deducted by their employer up to the date of departure
Expats who fail to obtain a TCC may be barred from leaving Singapore until all outstanding tax liabilities are settled.
Singapore’s taxation system is simple and straightforward, with a focus on territoriality and progressive tax rates. Expats working in Singapore are subject to personal income tax, GST, and property tax, while companies are subject to corporate income tax. Expats may be eligible for special tax breaks, such as the NOR Scheme and DTA benefits. It is important for expats to understand their tax obligations and file their tax returns on time. Expats leaving Singapore must obtain a TCC to certify that all tax liabilities have been settled before departing the country.