Individuals are required to file annual income tax returns to the Inland Revenue Authority of Singapore (IRAS) and pay income tax at the local prevailing personal income tax rate charged on chargeable income. This applies to Singaporean citizens (SCs) and to Permanent Residents (PRs) as well as foreigners deriving income in Singapore.
Singapore’s personal income tax rates for resident taxpayers are progressive. Chargeable income is defined as total taxable income less deductible expenses. The final IRAS tax rate will then be levied on the chargeable income which will work out the final tax amount payable to the tax authorities.
Singapore Individual Income Tax Rate – Tax resident and Non-tax resident
An individual will need to be assessed for his/her tax residency status. A tax resident is one who is a Singapore Citizen or Singapore Permanent Resident or foreigner that has worked for more than 183 days in the calendar year. Tax residents in Singapore are taxed at a progressive tax rate structure. The higher the incremental income earned, the higher tax rate is applied on the incremental difference in income.
Income earned by a foreigner that is employed on short term basis of less than 60 days in a year is exempted. This exemption does not apply for directors of a company or a public entertainer in Singapore. If a foreigner is in Singapore for 61-182 days in a year, he will be taxed on all income earned in Singapore and considered non-tax resident. The employment income is taxed at 15% flat rate or the progressive tax resident IRAS income tax rate, whichever that gives a higher tax amount.
For more information on Individual Income taxes, readers may refer to our tax guide on the IRAS Individual Income Tax Rate.
Personal Income Tax Rates in Asia
To compare Singapore individual tax rates with the rest of the region, the following reference highlights key income tax rates for the highest income bracket for various countries/jurisdictions in Asia for YA2020:
||Personal Income Tax rates
|Hong Kong SAR
Source: KPMG Individual Tax rate
As can be seen from table above, Singapore’s tax rates are the 2nd lowest among all Asian countries. Hong Kong, a special administration region and financial hub has the lowest tax rate in Asia. Each country has their own unique progressive income tax bracket for income earned. The higher the income, the higher the tax rate is levied. Individuals in different countries may fall under different tax brackets, thus incurring different tax payable on the same amount of income earned.
Personal Tax Relief and Rebates in Singapore
To lower tax expenses, each country has unique reliefs which individuals may claim as deduction against their income sources. There are also tax rebates which reduce the final tax payable amount. Some prominent tax reliefs and rebates available in Singapore are the earned income relief, CPF contribution relief, parenthood tax rebate and Course Fees Relief. For instance, the earned income relief of SGD1,000 is automatically granted to all resident taxpayers.
Personal Income Tax filing administration
Taxpayers may download IRAS individual income tax calculator to compute their estimated tax payable. Individual taxpayers in Singapore are required to perform e-filing of their income tax returns by 18 April 2020. For taxpayers performing manual filing, the submission deadline is 15 April 2020.
IRAS will send a notification to inform individuals, locals and foreigners, of their obligation to file for income tax returns. Penalties will be imposed for late filings, either a fine up to a maximum of SGD1,000 or a summon to court. If a taxpayer fails to file tax returns for 2 or more years, order of court may be imposed to the taxpayer to pay a penalty amounting to 2 times of tax payable and a maximum fine of SGD1,000.
For many busy individuals and those new to the country’s tax system, seeking the advice of a qualified tax professional such as PWCO is a good option to maximize tax savings. Finding an experienced tax partner can effectively simplify the individual tax filing procedure to ensure full compliance with IRAS rulings.