Global expatriate tax guide

Expatriate tax - Singapore

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Singapore has complex tax and social security laws and most expatriates as well as their employers will need professional assistance to complete their tax returns. The Employer Solutions team at Grant Thornton Singapore has the ability to help employers and their expatriates to successfully implement global mobility policies and comply with the statutory requirements in Singapore.

The team can assist employers and their expatriates in identifying Singapore tax planning opportunities, reviewing tax equalisation policies, and complying with the various filing requirements.

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

Facts and figures
Pre arrival procedures

Foreign nationals must apply for a work permit or pass in order to work in Singapore. In most instances, a Singapore employer will sponsor the employee for the applicable work permit or pass.

Work permits

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

If the expatriate’s spouse and dependent family also relocate to Singapore, they will require dependent visas.

Tax year

The Singapore tax year is based on the calendar year 1 January to 31 December and tax is levied on a preceding year basis. This means that income for the calendar year 2020 is taxable in the Year of Assessment 2021.

Tax returns and compliance

An individual deriving Singapore sourced income must file an income tax return by 15 April (via paper filing) or 18 April (via e-filing) each year with the Inland Revenue Authority of Singapore (IRAS). 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 an extension, which extends the filing date to 30 June.

An employer is required to issue Ministry of Manpower compliant payslips and ensure that statutory deductions and employer contributions (eg Skills Development Levy) are paid. They must also submit employer year-end forms IR8A and related appendices by 1 March. An employer is not required to withhold any tax on remuneration, except in a tax clearance situation which arises when a non-Singapore citizen employee ceases employment or leaves Singapore.

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 30 days of the date of issuance of the Notice of Assessment or through interest-free installments (up to a maximum of 12-months). Any objection to the assessment must also be submitted within 30 days of the date of issuance of the Notice of Assessment.

Tax clearance and deemed exercise rule

Where a non-Singapore citizen employee ceases employment or leaves Singapore, the employer is 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. In addition, the employer is required to withhold any payments due to the employee (such as salary, reimbursement of expenses, etc.) from the date the employer is aware of the employee’s departure until a tax clearance directive is received from IRAS.

Where the employee has unexercised stock options/unvested share awards then there is a deemed exercise/vest of the equity resulting in a dry tax charge (a tax charge arising where no cash/income is paid to the employee), which will generally need to be paid by the employee before leaving Singapore.

If the actual gain upon the subsequent exercise/vesting of stock options/shares is lower than the deemed gain reported on the Form IR21, the taxpayer can apply for a reassessment of the deemed gain within four years from the year of assessment following the year in which the deemed exercise rule is applied (ie if an individual left in April 2020, the deemed exercise rule will apply on departure and therefore is taxed in the Year of Assessment 2021. Therefore the reassessment must be made by 31 December 2025). 

An alternative to the deemed exercise rule is the tracking option which allows an employer to track the income realisation 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)

Cumulative tax due (SGD)

First 20,000 0.0 0 0
Next 10,000 2.0 200 200
Next 10,000 3.5 350 550
Next 40,000 7.0 2,800 3,350
Next 40,000 11.5 4,600 7,950
Next 40,000 15.0 6,000 13,950
Next 40,000 18.0 7,200 21,150
Next 40,000 19.0 7,600 28,750
Next 40,000 19.5 7,800 36,550
Next 40,000 20.0 8,000 44,550
Above 320,000 22.0    

Non-resident

Income from employment is taxed at the greater of either 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 unless it is remitted into Singapore via a partnership.

 

Residence

An individual is treated as a resident for Singapore tax purposes if that individual:

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

In addition, an individual whose employment in Singapore is at least 183 days long and straddles over two consecutive assessment years is usually treated on a concessionary basis as a resident for both 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 the 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 true regardless of where the employment contract was concluded or where the payroll is administered.

For Singapore income tax purposes, the source of employment is generally where the services are rendered.

Expatriate concessions

Not Ordinarily Resident (NOR) relief

For individuals who registered for this relief in YA 2020, or earlier (ie they arrived before 1 Jan 2020), they can claim this relief for five years of assessment.

It allows eligible individuals to assess their employment income on a time apportionment tax basis and allows for an exemption to the employer’s contributions to mandatory overseas pension funds subject to certain limits.

Special scheme – Area representative scheme

An individual 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. However, application of this scheme is subject to qualifying conditions such as:

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

Tax reliefs and rebates are allowed if an individual is a tax resident and meets the qualifying conditions for the reliefs. 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 Singapore citizens and Singapore Permanent Residents) 14,000 (maximum)
CPF relief (applicable to Singapore citizens and Singapore Permanent Residents) 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 (6o years old and above)
Foreign maid levy relief – applicable to female taxpayer only Between 1,440 to 6,360
Grandparent caregiver relief – applicable to female taxpayer only 3,000 (on one caregiver only)
Handicapped sibling relief 5,500 per handicapped sibling
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 dependent)
Handicapped parent relief Between 10,000 to 14,000 (per dependent)
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 Between 15,300 to 35,700
Working mother’s child relief – applicable to female taxpayer only 50,000 per child (inclusive of child relief/handicapped child relief)

The total amount of personal reliefs that can be allowed is subject to an overall relief cap of SGD 80,000 per Year of Assessment.

If a donation is made to an 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 and 2021 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 only a limited amount of deductions that can be claimed against employment income. Employees must prove to the IRAS that the expenses incurred were necessary for performing their duties and the expenses were not reimbursed by the employer.

Double tax relief

A non-resident taxpayer in Singapore may be exempt from tax if they are tax resident of another country that has a double taxation agreement (DTA) with Singapore. To claim relief under a DTA, the conditions stipulated in the DTA must be met.

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.

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 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 a Monetary Authority of Singapore registered bank is exempt from tax in Singapore.

Under the one-tier system, 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 available deductions is subject to tax.

Stamp duty

Stamp Duty is due on dutiable documents relating to immovable properties in Singapore and stocks and shares. Dutiable documents typically include lease/tenancy agreements, transfer documents for properties, mortgage documents, transfer instruments of shares, and mortgage documents for shares.

Social security taxes

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

Employers are exempt from making CPF contributions for foreign employees on a work permit, however, CPF contributions are required once the foreign employee obtains Singapore permanent resident status.

CPF rates 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 rates unless they opt into the full contribution rates with their employers.

Stock options

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 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. Stock options and share awards granted whilst employees are overseas are generally not taxable even if the same are exercised and/or vested when they are 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

To ensure that global mobility assignments are tax efficient, it is critical for employers to look at available tax concessions and benefits that they can leverage. 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 planning.

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

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