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Global expatriate tax guide

Expatriate tax - Singapore

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Inevitable shift in the current global mobility environment has caused organisations and workforce to respond and adapt to these changes.
Singapore has unique tax and social security laws and most employers will need professional assistance in managing the needs of their global workforce beyond the filing of their expatriate’s income tax returns to ensure that they are not caught out by double taxation or misreporting of employment remuneration.

The Employer Solutions team at Grant Thornton Singapore has the ability to take on the most complex work to deliver insightful solutions that help employers and their expatriates to successfully implement global mobility policies and ensure global compliance in Singapore.

The Employer Solutions team offer comprehensive services tailored for various business needs and stages of a global mobility cycle from initial pre-tax planning and structuring to review of tax equalisation policies, global compliance coordination to immigration matters, and tax advice to tax filing compliance.

Click on each of the areas below to expand for more information:

Facts and figures
Pre arrival procedures

Singapore has stringent immigration rules and regulations in place to ensure employer compliance with the employment laws. In most instances, the Singapore employer will sponsor and apply for an applicable work permit or pass for the foreign employee in order to work in Singapore. Since travel restrictions started, individuals on work passes will also need to obtain an entry approval from the Ministry of Manpower (MOM) and the entry requirements continue to remain fluid.

Even though there are no monthly tax withholding requirements (except for tax clearance situation), employer should be aware of the payroll taxes requirements when a foreign employee is working in Singapore.

Work passes

A foreign employee taking up employment in Singapore must hold a valid work pass (such as an S Pass or Employment Pass) before commencing employment in Singapore. A local sponsor, generally the employer or a host company in Singapore, is required to support such application for the foreign employee’s relevant work pass (eg Employment Pass).

If the foreign employee’s spouse and dependent family relocates to Singapore together, they will also require the dependent visas.

Tax year

The Singapore tax year is based on calendar year from 1 January to 31 December and tax is levied on a preceding year basis. This means that income for the calendar year 2021 is taxable in the Year of Assessment 2022.

Tax returns and compliance

An individual deriving Singapore sourced income must file an annual income tax return by 15 April (via paper filing) or 18 April (via e-filing) with the Inland Revenue Authority of Singapore (IRAS) on their preceding calendar year’s income. Any request for extension of the time to file the annual tax return will be subject to the IRAS agreement. Grant Thornton Singapore can include clients in a bulk request for extension, which extends the filing date to 30 June.

An employer is required to issue MOM compliant payslips and ensure that statutory deductions and employer contributions (eg Skills Development Levy) are paid. They must also submit employer year end forms, Form IR8A/E and related appendices, by 1 March the following year on the employees’ income for the preceding calendar year. This means that Form IR8A/E reporting the employee’s income for calendar year 2021 need to be filed to IRAS by 1 March 2022.

An employer is not required to withhold any tax on remuneration in Singapore except in a tax clearance situation which arises when a non-Singapore citizen employee ceases employment in Singapore, leaves Singapore permanently or for a period more than three months.

Singapore does not have a Self-Assessment tax system and therefore tax due for the assessment year is payable after the issuance of a tax assessment (ie Notice of Assessment) from IRAS. The taxpayer may either settle the tax liabilities in one lump sum within one month from the date of issuance of the Notice of Assessment or through interest-free GIRO instalments (up to a maximum of 12-months). Any objection to the assessment must be submitted within 30 days from the date of issuance of the Notice of Assessment.

Tax clearance and deemed exercise rule

Where a non-Singapore citizen employee ceases Singapore employment or leaves Singapore (permanently or for a period more than three months), the employer is usually required to file a tax clearance return (Form IR21) at least one month before the date of cessation of employment or departure from Singapore, whichever is earlier. The employer is also required to withhold any payments due to the leaving employee (such as salary, leave encashment, reimbursement of expenses, etc.) from the date the employer is aware of the leaving employee’s departure until a tax clearance directive is received from IRAS.

A tax clearance directive and Notice of Assessment will be issued to the employer and leaving employee respectively upon the finalisation of the Form IR21. Final tax payment to be paid and settled to IRAS before the stipulated payment deadline to avoid any enforcement actions imposed by IRAS.

Deemed exercise rule will apply where the non-Singapore citizen employee has unexercised stock options or unvested share awards which was granted during their employment in Singapore upon their cessation of Singapore employment. A deemed exercise / vest of the equity will result in a dry tax charge (a tax charge arising where no cash/income is paid to or can be realised by the foreign employee) which will generally need to be paid by the non-Singapore citizen employee before leaving Singapore.

However, if the actual equity gain upon the actual exercise of stock options or vesting of shares is lower than the deemed gain assessed by IRAS, the taxpayer can apply for a reassessment of the deemed gain within 4 years from the year of assessment following the year in which the deemed exercise rule is applied (ie if the deemed gain for year 2021 was assessed in Year of Assessment 2022, the reassessment application must be made by 31 December 2026). Please note that supporting documents may be requested by IRAS to support the application claim.

An alternative to the deemed exercise rule is the tracking option which allows an employer to track the income realization event of the employee and report the gain to the IRAS at that point rather than applying the deemed exercise rule. An employer needs to meet stringent conditions to apply for the tracking option and the application is subject to the IRAS approval.

Income tax rates

Resident

Chargeable income (SGD)

Income tax rate (%)

Tax due (SGD)

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 - 44,550
Above 320,000 22  

Non-resident

Income from employment is taxed at the higher of either flat rate of 15% or the progressive resident rates. Other income (such as rental income) is taxed at 22%.

Basis of taxation
Charge to tax

Singapore adopts the territorial basis of taxation and tax is levied on an individual based on the income accrued in or derived from Singapore.

Foreign sourced income is generally not subject to tax in Singapore where the Comptroller is satisfied that the exemption will be beneficial to them, unless it is received through a partnership in Singapore.

Residence

An individual will be regarded as a resident for Singapore tax purposes if that individual:

  • Qualitative test: normally resides in Singapore (regardless of temporary absences), or
  • Quantitative test: is physically present or exercises employment in Singapore for 183 days or more in a calendar year.

In addition, an individual can be resident by concession for the two or three years where:

  • Their employment in Singapore is at least a continuous period of 183 days long and straddles over two consecutive assessment years, or
  • They are physically present or exercises employment continuously for three consecutive years.

Otherwise, the individual will be regarded as a non-resident for Singapore income tax purposes.

A non-resident individual who exercises employment in Singapore for 60 days or less in a calendar year may be exempt from tax under the short-stay exemption. This exemption does not apply to director of a company, a public entertainer, or a professional in Singapore. This also does not alleviate the employer from their obligations.

Income from employment

Generally, all gains and profits derived by an employee from his or her Singapore employment are taxable, unless they are specifically exempt from income tax or are covered by administrative concessions. This is regardless of where the employment contract was concluded or where the payroll is administered.

Income arising from employment exercised in Singapore is Singapore sourced and subject to tax in Singapore. When the employee works overseas his/her overseas workdays may still be treated as Singapore sourced if it is incidental to their Singapore source employment.

Special expatriate concession – not ordinarily resident scheme

The Not Ordinarily Resident (NOR) Scheme has ceased and the last NOR status granted will be valid from Year of Assessment (YA) 2020 to YA 2024.

Individuals who have accorded the NOR status from YA 2020 or earlier will be able to continue to enjoy the NOR tax concessions until their NOR status expires, if they meet the conditions of the tax concessions.

It allows eligible individuals to assess their employment income on a time apportionment tax basis and/or allows for an exemption to the employer’s contributions to non-mandatory overseas pension funds or social security scheme subject to certain qualifying conditions.

Special scheme – Area representative scheme

An individual employee working for a foreign employer that operates from a base in Singapore to discharge regional functions and duties may enjoy time-apportionment of employment income, subject to following qualifying conditions:

  • The employee must be employed by a non-resident employer
  • The employee is based in Singapore for geographical convenience
  • The employee is required to travel outside of Singapore in the course of duties; and
  • The employee’s remuneration cost is paid by the foreign employer and such costs are not charged directly or indirectly to a permanent establishment in Singapore.
Dual employment

A dual employment contract is one where an employee has two employment contracts with two different employers covering the period of their employment.

Generally, companies implement dual employment contract arrangement for a number of commercial or economic reasons. This may include individuals who have different roles with multiple companies within a group that take them to different countries. However, such arrangement is often a contentious area with the tax authorities globally.

Whilst a dual employment contract arrangement can assist the employer and employee to mitigate double taxation risk arising on employment income, there is an inherent risk in the implementation due to overlapping/similar duties. Therefore, it is important that dual employment contract arrangement is properly set up and implemented on an ongoing basis to minimise any risk of challenge by the tax authorities.

Tax reliefs

As a tax resident, an individual is entitled to tax reliefs and rebates. Some tax reliefs and rebates are targeted at certain groups of taxpayers in order to promote specific social and economic objectives.

Type of reliefs – available to all taxpayers Amount (SGD)
Course fee relief 5,500 (maximum)
CPF cash top-up relief (applicable to SC/SPR) 14,000 (maximum 7,000 for self and 7,000 for family members)
CPF relief
(applicable to SC/SPR)
20,400 (maximum applicable to individual below 55 years old)
Earned income relief
(depends on age)
Between 1,000 (under 55 years old) to 8,000 (60 years old and above)
Foreign domestic worker levy relief (applicable to female taxpayer only) Twice the amount of levy paid (between 1,440 to 7,200 maximum)
Grandparent caregiver relief (applicable to female taxpayer only) 3,000
(on one caregiver only)
Handicapped sibling relief 5,500 per handicapped sibling or sibling-in-law
Life insurance relief 5,000 (maximum)
NSman Relief (Self) Between 1,500 to 5,000
NSman Relief (Parent) 750
(regardless of number of children who are NSmen)
NSman Relief (wife) (applicable to female taxpayer only) 750
Parent relief Between 5,500 to 9,000 (per dependant)
Handicapped parent relief Between 10,000 to 14,000 (per dependant)
Qualifying child relief 4,000 per child
Handicapped child relief 7,500 per child
Spouse relief 2,000
Handicapped spouse relief 5,500
Supplementary retirement scheme (SRS) relief up to 15,300 (SC/SPR) /
up to 35,700 (others)
Working mother’s child relief (applicable to female taxpayer only) Up to 46,000 per child who is a SC (exclusive of child relief/handicapped child relief)
Note: SC = Singapore Citizen, SPR = Singapore Permanent Resident

A personal income tax relief cap of $80,000 applies to the total amount of all tax reliefs claimed for each Year of Assessment.

If a donation is made to any approved institution of a public character (IPC) or the Singapore government for causes that benefit the local community, the donation can be claimed as a tax deduction against income earned in Singapore. Any qualifying donation made between 2016 to 2023 will enjoy a 250% tax deduction against income earned in Singapore.

Deductions against income

Expenses wholly and exclusively incurred in the production of income are tax deductible. In practice, there are limited type of deductions that can be claimed against employment income. Employees must be able to substantiate their deduction claim to the IRAS where the expenses incurred were necessary in performing their duties and such expenses were not reimbursed by the employer.

Double tax relief

A Double Tax Agreement (DTA) between Singapore and another jurisdiction serves to prevent double taxation of income earned in one jurisdiction by a resident of the other jurisdiction. The agreements provide for reduction or exemption of tax on certain types of income.

Where a resident taxpayer is subject to a foreign income tax on income that is already subject to tax in Singapore, double tax relief may be available if Singapore has a DTA with the foreign country involved.

A non-resident taxpayer in Singapore may be exempt from tax if he/she is a tax resident of another country that has a DTA with Singapore subject to the conditions stipulated in the DTA.

Other taxes
Capital gains tax

There is no capital gains tax in Singapore. However, care must be taken when determining whether proceeds from a transaction are capital in nature or income arising from carrying on a trade. Income arising from a trade is taxable in Singapore.

Inheritance, estate, and gift taxes

Estate duty is a tax on the total market value of a person's assets (cash and non-cash) at the date of his/her death. It does not matter if the person has a will or not, the assets are still subject to estate duty. Estate duty has been abolished for deaths occurring on and after 15 February 2008.

There is no gift tax in Singapore.

Investment income

Generally, investment income (with certain exceptions) is aggregated with other types of income and is subject to tax based on the tax rates set out above.

Interest earned on standard savings as well as current and fixed deposits with an approved bank or a licensed finance company registered with Monetary Authority of Singapore is exempt from tax in Singapore.

Dividends are profits you receive from your share of ownership in a company, which may be paid out to you in cash or in kind. Under the one-tier corporate tax system (except co-operatives), most dividends paid by Singapore tax-resident companies are exempt from tax.

Real estate tax

Property tax is levied on properties located in Singapore. The property tax is generally based on the annual value of the property and the rate of tax is typically dependent upon on the category of the property (residential or commercial/industrial) and whether the property is owner occupied (for residential properties). When property in Singapore is rented, the rental income less any allowable rental expenses is subject to tax.

Stamp duty

Stamp duty is a tax on dutiable documents relating to any immovable property in Singapore and any stocks and shares. Dutiable documents typically include the following:

  • Lease/tenancy agreements
  • Transfer or mortgage documents for properties
  • Transfer instruments of shares
  • Mortgage documents for shares.
Social security taxes

The Central Provident Fund (CPF) is the social security system in Singapore and it is a compulsory savings scheme instituted by the Singapore government for individuals who are Singapore citizens or Singapore permanent residents.

CPF contributions are payable at the prevailing contribution rates and vary depending on the age and immigration status of an employee. Singapore permanent residents in the first and second years of their permanent resident status are subject to lower contribution rate unless they jointly apply with their employer to contribute at higher CPF contribution rates.

Employer is exempt from making CPF contribution for foreign employee on a work permit. However, CPF contribution will be required once the foreign employee obtains Singapore permanent resident status.

Stock options

As Singapore taxes income on territorial basis, stock options or share awards granted to employees while they are exercising employment in Singapore are regarded as Singapore sourced and reportable for tax purposes. Therefore, they generally become taxable when the stock options are exercised and/or when the shares are vested. Where a sales moratorium is imposed, the taxable event is when the moratorium is lifted. In addition, deemed exercise rule will apply on the unexercised stock options or unvested share awards upon cessation of employment in Singapore.

Stock options and share awards granted whilst employees were exercising overseas employment are not taxable in Singapore even if the same are exercised and/or vested when they are working in Singapore.

There is generally no tax on the date of grant of the stock options/share awards or on the proceeds upon the sale of the shares.

Tax planning opportunities

With constant changing tax rules and global mobility environment, multinationals are adapting to take care of the needs of their global workforce to ensure global mobility assignments are tax efficient and in compliant.

It is critical for multinationals to look at available tax concessions and benefits that they can leverage to manage costs within the group. There should be appropriate attention given to equity-based compensation to ensure that the employers and expatriates are not exposed to unnecessary taxes that can be avoided with proper pre-assignment structuring / planning to minimise tax burdens for both parties and offer possible tax savings opportunities.

The suite of services provided by our Employer Solutions team offer insightful solutions tailored to your business needs.

For further information on expatriate tax services in Singapore please contact:

Adrian Sham.png

Adrian Sham
E adrian.sham@sg.gt.com