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Taxes

Singapore has a well-regulated tax system, and personal income tax rates are generally lower than in other developed countries. The Inland Revenue Authority of Singapore (IRAS) assesses, collects and enforces various taxes, duties and levies. Note: Just to prove the point (about the low tax rates), check out the ExpatSingapore survey right here, providing a comparison between Singapore and some other developed nations:

Who are exempted and who aren’t

Singapore uses a territorial basis of taxation. Tax is imposed on income derived from or accrued in Singapore. The source of income is determined mainly by the location at which the services are rendered.

  • Residents are taxed on income derived from or accrued in Singapore, and on income derived from outside Singapore and received in Singapore.
  • Non-residents are taxed only on income derived from or accrued in Singapore. They do not have to pay taxes on foreign income received in Singapore. Also, they are exempted from income tax if they work in Singapore for 60 days or less in a calendar year.

Tax rates for non-resident individuals

  • Residents are taxed at graduated rates ranging from 2 per cent to 28 per cent, after the appropriate reliefs have been deducted.
  • Non-residents are taxed at either a flat rate of 15 per cent on employment income, without personal reliefs, or the residents' graduated rate, whichever is higher. In addition, non-residents are taxed a flat rate of 27 per cent on non-employment income derived from Singapore.

Singapore has concluded tax relief agreements with some 34 countries to avoid double taxation. The list includes:

  • Australia
  • Bangladesh
  • Belgium
  • Canada
  • People's Republic of China
  • Denmark
  • Finland
  • France
  • Germany
  • India
  • Indonesia
  • Israel
  • Italy
  • Japan
  • Republic of Korea
  • Luxembourg
  • Malaysia
  • Mauritius
  • Mexico
  • The Netherlands
  • New Zealand
  • Norway
  • Pakistan
  • Papua New Guinea
  • The Philippines
  • Poland
  • Sri Lanka
  • Sweden
  • Switzerland
  • Taiwan
  • Thailand
  • United Arab Emirates
  • United Kingdom
  • Vietnam

Paying your taxes/tax preparation

Tax returns are based on the calendar year and must usually be filed by 15 April. All tax must be paid within one month of the notice of assessment, which usually comes in the later part of the year. You can arrange to pay your taxes in installments.

Goods and Services Tax (GST)

There is a 3 per cent Goods and Services Tax (GST) on domestic consumption. The GST is levied on the sale of goods and services in Singapore by GST-registered traders, and on goods imported into Singapore. The export of goods and international services is not subject to GST.
The GST covers almost all goods and services, except for the rental and sale of residential land and buildings in Singapore, and the provision of certain financial services. Businesses whose turnover exceeds S$1 million are required to register for GST.

GST alert: Some retailers have tried to profit from GST collection by displaying GST and non-GST prices in different font sizes in their advertisements. Note that under the Goods and Services Tax (GST) Act and its regulations, traders are required to reflect the GST in their advertised, displayed, published or quoted prices. Thus, GST-registered traders should indicate only one price (the GST price)--the idea being that the price shown is the price that consumers will pay. Non-GST-registered traders should not be collecting GST and should therefore indicate only non-GST prices.

Central Provident Fund (CPF)

The CPF is a social security savings scheme in which employees (under 55 years) and their employers contribute a total of 30 per cent of the salary, with the employer contributing 10 per cent. Besides providing a safety net for old age, the fund can also be used to buy homes, to pay for health care expenses, and to invest in stocks and shares.

Previously, expatriates and their employers were required to make CPF contributions, unless a waiver was granted by the CPF Board. Waivers were generally granted to expatriate employees who were not Singapore permanent residents or citizens. However, some expatriates chose to make CPF contributions because the contributions were tax-free and could later be withdrawn from the fund, also tax-free, when the expatriate left Singapore.

The rules have since changed with effect 1 August 1995. Expatriates and their employers are now not required to make CPF contributions. However, this also means that expatriates lose a potential tax shelter.

Transitional provisions cater for expatriates who were already employed in Singapore on or before 1 August 1995, or who had submitted applications for employment passes before that date. Expatriates who are already making tax-free CPF contributions may continue to do so until 31 December 1998 or the date their employment pass/work permit expires, whichever is earlier. After 31 December 1998, the new rules apply.

If an expatriate later becomes a permanent resident, he and his employer will be required to make CPF contributions from that time.

How to get around CPF

Although CPF contributions are no longer compulsory for expatriates, they and their employers may still make contributions, but with less favourable tax outcomes. If the terms of the employment contract mandate CPF contributions, your contributions continue to be tax-deductible. Your employer's contributions also remain tax-deductible, but become taxable income for you. If no contractual obligation is stated, neither you nor your employer are allowed tax deductions for your respective contributions.

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