Income tax is the most burdening tax that no one wants to pay but they have to pay it. An income tax is a tax imposed by governments around the world on individuals and organizations. The governments use these taxes to provide infrastructure and facilities to their people. Income taxes are calculated on net income per year and according to a fixed percentage and different countries have different percentages. Iceland has the highest income tax rate in the world and is a whopping 46%.
The good news is Singapore is one of those countries that have the lowest income tax rate and that is why many people from different countries prefer to work in Singapore.
Who Should Pay Income Tax in Singapore?
According to Inland Revenue Authority Singapore (IRAS), every individual or organization, regardless they are Singapore nationals or PR holders, must pay income tax at the end of the fiscal year if they are earning by any means in Singapore. One can always hire income tax services or tax filing services for ease of the process.
- You are required to file for income tax if you fulfill are earning or deriving a gross annual income of $22000 and fulfil one or more of the following conditions:
- You are earning or deriving an income in Singapore
- You are working outside of Singapore but your employment status is under Singapore.
- You are a Singapore citizen or permanent resident.
- You are a foreigner and earning in Singapore for 183 days or more. Company directors are excluded from this clause.
Who Is Exempted From Paying Income Tax?
- If you are receiving income from a source outside Singapore, you are not liable to pay income tax. Provided the income is not received through a partnership in Singapore.
- Income acquired by an individual as interest from bank deposits or licensed finance companies is exempt from income tax.
- Interest acquired from a debt, insurance, and certain annuities are also exempted from income tax.
However, if the income acquired from interest is derived through a partnership in Singapore, it is eligible for income tax and you must file for income tax.
Taxable and Non-Taxable?
An individual or organization earns income from a lot of different means. However, not all of those sources are taxable. Here we have briefly explained what’s taxable and what’s not.
TAXABLE INCOME:
- Salary
- Director’s fee
- Rent acquired from property or different sources
- Income generated from self-employment
- Salary bonus
NON TAXABLE INCOME
- Any windfall gain, a lottery.
- Capital gains from stocks
- Capital gains from a property
- Pension received
- CPF life payouts
- Contact our tax and accounting services for further information and clarifications.
How Much Income Tax Does One Has To Pay?
The income tax rate in Singapore ranges from 0% to 22%. The IRAS has categorized income and different categories have different rates.
INCOME TAX RATE FOR RESIDENTS
| CHARGEABLE INCOME | INCOME TAX RATE | TAX PAYABLE |
| First $20,000 Next $10,000 | 0% 2% | 0 200 |
| First $30,000 Next $10,000 | – 3.5% | 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 6000 |
| 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 $280,00 Next $40,000 | – 20% | 36,550 8,000 |
| First $320,000 In Excess of $320,000 | – 22% | 44,550 |
NON RESIDENTS:
| TYPE OF INCOME | TAX RATE/ WITHOLDING TAX RATE |
| Director’s income | 22% |
| Income as non-resident (coach, consultant, trainer, etc) | 15% of gross income or 22% of net income |
| Income as non-resident (coach, consultant, trainer, etc) | 10% concessionary |
| Rental income from property in Singapore | 22% |
| Interests or royalty | Withholding tax (subject to conditions) Interest: 15% Royalty: 10% And IF, Withholding tax is not applicable 22% on both interest and royalty |
| Pension | 22% |
Tax Reliefs
Singapore cares about its citizens and residents and that is why there are some cases in which you can claim tax relief. Here is a brief about it:
1. Tax Relief For Parents
Starting a family is challenging and to provide some relief to the parents, the Singapore government is providing relief to the parents. There are several different categories and different amounts of relief for each category. For a handicapped child, you will receive $7500 relief, working mothers will get relief on the percentage of their income, a one-time relief on the birth of every child, and so on.
For more details on tax relief for parents, contact our experts.
2. Parents Relief
If your parents are over 55 years old and are earning not more than $4000, you are eligible for parent’s relief. The condition is omitted if your parents are physically or mentally disabled.
3. Course Fee Relief
You may claim for any course, seminar, or conference that results in a gain in your professional qualifications. You can claim an exam, test, or registration fee. However, the category is capped at $5,500.
4. Relief For Donations
If you donate to Institutions of Public Character (IPC) or Singapore government, you can get tax reductions of 250%.
5. Life Insurance Relief
If you meet the life insurance tax relief criteria, you can expect 7% relief.
6. Relief For Retirement Savings
Your retirement savings can help reduce your income tax. Top up your CPF and SRS accounts and expect tax relief of %7,500 or more.
We hope our guide will help you understand income tax laws in Singapore. If you need more clarification or information, feel free to contact income tax filing Singapore experts at WZ Wu & Partners. We offer one of the best tax and accounting services Singapore.
