Tax season is an annual event that prompts both anticipation and apprehension. A majority of individuals find themselves entangled in the complexities of tax codes, deductions, and credits. Moreover, the lack of a strategic approach often results in missed opportunities for tax savings. In Singapore, where the tax system is progressive but nuanced, efficient tax planning is paramount. Not only does it help you understand your financial obligations, but it also opens potential doors for you to save money on taxes in Singapore.
Tax filing requires thoughtful consideration throughout the year. Therefore, whether you’re a salaried individual, self-employed, or a business owner, tax planning should be an integral part of your financial management strategy. Singapore offers a variety of avenues for tax relief, ranging from CPF contributions to targeted tax exemptions for specific life events. Consequently, understanding these avenues can result in substantial tax savings.
Understanding Singapore’s Tax System
Year of Assessment (YA) and Tax Rates
Understanding your tax bracket is fundamental to effective tax filing in Singapore. In Singapore, tax rates for the Year of Assessment (YA) 2023 range from 0% to 22%. These rates are progressive, increasing as your income does. Thus, the first step in tax planning is knowing where you stand.
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
| First $20,000 | 0 | 0 |
| Next $10,000 | 2 | 200 |
| First $30,000 | – | 200 |
| Next $10,000 | 3.5 | 350 |
| First $40,000 | – | 550 |
| Next $40,000 | 7 | 2,800 |
| First $80,000 | – | 3,350 |
| Next $40,000 | 11.5 | 4,600 |
| First $120,000 | – | 7,950 |
| Next $40,000 | 15 | 6,000 |
| First $160,000 | – | 13,950 |
| Next $40,000 | 18 | 7,200 |
| First $200,000 | – | 21,150 |
| Next $40,000 | 19 | 7,600 |
| First $240,000 | – | 28,750 |
| Next $40,000 | 19.5 | 7,800 |
| First $280,000 | – | 36,550 |
| Next $40,000 | 20 | 8,000 |
| First $320,000 | – | 44,500 |
| In excess of $320,000 | 22 | – |
What Constitutes Taxable Income?
Additionally, it’s vital to distinguish between taxable and non-taxable income. Your salary, bonuses, and—if you are a landlord—rental income are subject to taxation. However, compulsory CPF contributions, dividends from shares, and capital gains are tax-exempt. Knowing these nuances can serve as your roadmap for effective tax planning.
Also Read: Important Tax Forms For Business Owners To Understand
7 Best Ways to Minimize Your Tax Liability
Maximizing Your Retirement Savings
Contribute to CPF Accounts: One of the most efficient ways to reduce your taxable income is through CPF contributions. For every dollar you contribute to your Special account and Medisave account, a dollar is deducted from your taxable income. Furthermore, this applies to contributions made to your parents’ or grandparents’ CPF accounts as well.
Supplementary Retirement Scheme (SRS): Another avenue is the Supplementary Retirement Scheme (SRS). Contributions to an SRS account can be deducted from your income, providing tax relief. However, these funds are locked in until retirement. Make sure to also invest these funds to prevent them from depreciating due to inflation.
Co-residing with Parents or Grandparents
Parent Relief Benefits: The government incentivizes taking care of senior citizens through the Parent Relief scheme. You can get up to S$9,000 per dependent in tax relief if you live with your parents or grandparents. To qualify, the senior citizen’s annual income must not exceed S$4,000.
Investing in Skill Enhancement
Course Fee Relief: Upskilling isn’t just good for your career; it can also reduce your tax bill. If the course is relevant to your job, you can claim up to S$5,500 in course fee relief.
Philanthropy as a Tax-Saving Strategy
Donations to IPCs: Charitable donations made to Institutions of a Public Character (IPCs) are eligible for a 250% tax deduction. Additionally, donations in the form of SGX-listed shares, artworks, and artefacts can also offer tax relief.
The Financial Benefits of Parenthood
Various Tax Reliefs: Parents can avail themselves of multiple tax relief options, such as Working Mother’s Child Relief and Qualifying Child Relief. Additionally, the Parenthood Tax Rebate offers direct deductions from your income tax bill.
Business Expenses for the Self-Employed
Deducting Eligible Expenses: If you’re a freelancer or self-employed, take advantage of the tax relief for business expenses. It’s crucial to keep all invoices and receipts to substantiate your claims.
Opt for Tax-Efficient Financial Products
Types of Tax-Efficient Investments: Certain financial products offer tax benefits. Tax-efficient mutual funds, for example, are structured to minimize tax liability, making them a smart choice for long-term savings.
Verification and Double-Checking
Most of these deductions are automatically reflected in your tax summary. However, always double-check to ensure all contributions and reliefs are accurately recorded.
Who Can Help You with Efficient Tax Filing
WZ WU & Partners is a trusted and reliable accountancy firm that can help you in the process of tax filing in Singapore. It provides consulting services for individuals and businesses. They have a team of highly efficient professionals who will help you to make this whole process completely smooth.
In summary, to save money on taxes in Singapore is a critical aspect of financial planning. With these tax-saving strategies, you’ll be better equipped to minimize your tax liability this season.
