The Not Ordinarily Resident (NOR) scheme was unexpectedly withdrawn from Singapore’s 2019 budget this year, effectively ending the most attractive incentive for foreign nationals with cross-border responsibilities to relocate to Singapore.
The removal of the scheme will hit employees with significant travel outside Singapore the most. Therefore, individuals relocating to Singapore, or companies intending to relocate individuals to Singapore should consider accelerating moves to Singapore in 2019 rather than 2020. Consideration should be given to the individual’s tax position with NOR relief and without NOR relief to ensure that they do not pay more tax than they need to. Moving to Singapore in 2020 may lead to higher taxes or more complicated positions (to minimise Singapore tax) and therefore advice should be sought.
First implemented in 2002 with the aim of attracting foreign nationals with regional roles to Singapore, the NOR scheme’s imminent end may signal a reduced reliance on non-local talent, implying that Singapore may have an adequate foreign talent pool for the time being.
Scheduled to lapse after Year of Assessment (YA) 2020, the NOR scheme currently enables qualifying foreign employees to enjoy a time-apportionment concession on their income tax, subject to a minimum tax rate of 10%. This results in substantial tax savings compared to Singaporeans with similar responsibilities.
In addition to the loss of time-apportionment concession, employees will also lose relief on employer’s contributions to overseas non-mandatory pension schemes. Therefore, foreign employees coming into Singapore would be worse off than local employees as Singapore citizens and permanent residents obtain tax relief on contributions made to the Central Provident Fund (CPF) which is not available to foreign employees working in Singapore.
While the lapse of the NOR scheme reduces incentives for incoming foreign nationals, Singapore’s personal tax rates remain one of the most attractive in Asia Pacific. Another major draw for multinational corporations and foreign nationals is the stability of the local government, making Singapore a prime launchpad for regional and global growth – even without tax concessions.
What this means for foreign nationals and employers
Once the NOR scheme is withdrawn, foreign nationals who are normally based in Singapore may find themselves subject to double taxation if they spend a significant amount of time working outside the country. This could mean more complex compliance considerations for avoiding double taxation, such as dual employment contracts and foreign tax credits.
This is less of an issue for foreign nationals arriving in 2019, who can – and should – still apply for NOR status commencing YA 2020. This would allow them to enjoy NOR tax concessions until YA 2024.
By the same token, companies in Singapore that are planning to fill regional roles or replace regional heads might wish to consider doing so before the end of 2019. This would allow incoming assignees to qualify for NOR relief before the scheme lapses, while limiting the compliance paperwork for their employers.
To find out more about your own, or the tax position of your assignees following the end of the NOR scheme and the options available, please contact Adrian Sham, Grant Thornton Singapore.