ABOUT PERSONAL INCOME TAX STRUCTURE IN SINGAPORE

Singapore is known for its progressive income tax structure that is applicable to both local and foreign residents in Singapore. Since Year of Assessment 2007, the tax rates range from 0% to 20%. The Year of Assessment is a calendar year starting from 1 January to 31 December and the income tax for the specified year is payable on preceding year basis.

The Singapore taxation system is dependent on the principle of the source of income. According to which income earned in Singapore or delivered by foreign entities, but received in Singapore is only taxable. After 1 January 2004, an individual earning income from foreign sources, but receiving in Singapore is exempt from taxes. Nonresident Singaporeans and foreign workers are also liable to pay income tax in Singapore. Depending on the type of income, non-resident Singaporeans are charged at the rate of 15% to 20%. Compared to non-residents, Singaporeans have a lower income tax rate.

Budget 2015 Income Tax Update: Starting from YA 2017, high-income earners are liable to pay more income tax as per the update in Singapore Budget 2015. For the first time after decades, the Singapore government has revised their income tax rates. However, the move is said to be affecting only 5% high-income earners with income above S$160,000. The applicable tax rates will start from 0% and will be capped at 22% starting from YA 2017 for individuals earning S$320,000 and above.

Click here to analyze the updates for calculating Singapore Income Tax Rates from YA 2017.

To understand the income tax rates for the YA 2015 and YA 2016 visit here.

TAX SAVING OPTIONS AVAILABLE FOR LOCAL SINGAPOREAN TAXPAYERS

Cash Top-ups Under CPF Minimum Sum Topping-Up Scheme

Under the scheme, individual taxpayers are able to avail two different tax reliefs. First, S$7000for topping-up own CPF account and S$7000 for topping-up family members account.

All the caregivers are eligible for S$7000 tax relief, even though the top-up is made for the same recipient.

If the Special Account in which top-ups are made has a balance of more than S$40,000 then it can be used for investment. On the other hand, funds deposited in Special Account are liable to earn an interest of 4%.

NSman (Self/Wife/Parent) Relief

To recognize the contribution of eligible operationally ready National Servicemen a default tax relief is offered to them by the government for their work in the previous year.

In continuation with that, the spouse and parents of the NSman are also provided with the equivalent tax relief as a recognition of the support they are providing for their son and husband.

Parenthood Tax Rebate (PTR)

In order to encourage Singaporean parents to have more children this tax rebate is offered to the married Singaporean couples.

Couples qualified for this tax rebate can claim S$5000 for the first child if the child is born after 2008, S$ 10,000 for the second child and S$ 20,000 for third and every child born thereafter.

As per the apportionment agreed by both husband and wife, both of them can share PTR if they both happen to be taxpaying citizens of Singapore.

Qualifying/Handicapped Child Relief

Qualifying and Handicapped Child Relief is a type of tax relief offered to the individuals as a token of appreciation and recognition towards their commitment to support their children.

You are qualified to claim QCR/HCR for the YA 2015 if you happen to be married, divorced or widowed taxpaying citizen taking care of an unmarried child meeting prescribed conditions in the year 2014.

In certain cases, a child is not attending SPED school, but it seems he/she is in need of Special Education due to severe functional impairments, in such cases, the parent of the child can claim for the HCR. It is up to IRAS to review and sanction the tax rebate.

Remember, for tax rebate you can claim either HCR or QCR for the same child.

On the contrary, a working mother is entitled to claim Working Mothers Child Relief (WMCR) along with HCR/QCR for the same child.

From the Year of Assessment 2010 to 2014, S$4000 QCR is provided per child, whereas S$5000 is provided as HCR per child. For a working mother, total tax rebate under QCR/HCR and WMCR is capped at S$50,000 per child.

Starting from YA 2015 the limit of HCR per child is increased to S$7500.

Based on agreed apportionment it is allowed to share the QCR/HCR with spouse or ex-spouse.

Working Mothers Child Relief

For rewarding Singaporean families with children who also happen to be Singapore citizens, IRAS offers WMCR.

Amidst, it also serves a secondary purpose by encouraging parents to apply voluntarily for Singapore citizenship, at least for their children.

In addition to that, such type of rebates motivates married women to dwell again in the workforce even after having children.

Since this rebate is only for Working mothers, men are not eligible for this rebate and it cannot be shared.

The amount of WMCR that can be claimed by a working woman for each child depends on the order of children against the corresponding percentage of earned income.

For the first child, the allowable WMCR claim is 15% of mothers earned income, for second child it is 20% and for the third and any child thereafter 25% of mothers earned income can be claimed.

Grandparent Caregiver Relief

Working mothers engaging help from their parents, grandparents, parents in-laws or grandparents in-laws are for taking care of and raising their children are eligible to apply for the Grandparent Caregiver Relief.

Again, no male Singapore taxpayer is eligible to apply for this rebate, which also cannot be shared with the husband.

A Working mother can only claim for the GCR if the grandparent taking care of 12 year or younger children who also happen to be a citizen of Singapore in the taxable year.

Maximum S$3000 is a claimable relief against one of the grandparents qualifying above-mentioned criteria.

Contributing Voluntarily To CPF and Medisave Account

If an individual is contributing voluntarily to his own Medisave Account along with his CPF contributions makes him eligible to apply for the tax relief.

All the funds accumulating in Medisave Account of an individual are entitled to enjoy about 4% interest rate.

Remember, the funds from Medisave Account cannot be used for investment or housing purposes.

TAX SAVING OPTIONS AVAILABLE FOR ALL THE SINGAPOREAN TAXPAYERS

Course Fees Relief

Course fees relief is provided to the taxpaying individuals attempting to upgrade and enhance his/her skills and educational qualification for increasing his/her lifelong employability. Individuals who are or have been gainfully employed are eligible for this tax relief.

The scheme is not applicable to the new graduates or outgoing university/polytechnic students who have never exercised gainful employment or have never been involved in trade profession or vocation. Please understand the IRAS do not consider vocational jobs or internships as gainful employment.

Individuals who have studied courses; attended seminars and conferences as well as who satisfies all the requisites put forth by the IRAS is eligible to apply for the Course fees relief.

The proposed claim is should include registration or enrollment fees, examination fees, tuition fees, and fees for the aptitude test. The claim made is irrelevant to the number of courses, seminars or conferences attended by the qualified individual.

As per the changes in the amendment from YA 2011, qualified individuals can claim the actual course fees paid, capped at S$5,500 per year.

Foreign Maid Levy Relief

Foreign Maid Levy Relief or FML relief is offered to the married women who are active in the workforce. Single or male taxpayers are not eligible for this relief. Remember, this relief is used for offsetting your earned income.

Qualified taxpaying women can claim for FML relief if they are staying with their husband and have employed a foreign domestic worker. Additionally, married women separated from their husband, divorced or widowed, living with their children for whom they are claiming Child Relief are also eligible for this scheme.

Twice the total foreign domestic worker levies paid in the previous year for a single foreign domestic worker can be claimed under this scheme. This claim is irrespective of whether you or your husband has paid the levy.

In any instances, if the Ministry of Manpower has approved your Foreign Domestic Worker Levy Concession, then the FML relief will be counted based on the lower levy amount.

Effective from May 2015, a lower monthly concessionary FDW levy of S$60 instead of previous S$265 is applicable to eligible individuals.

Spouse/Handicapped Spouse Relief

To recognize the efforts of Singaporean taxpayers who are supporting their spouses Spouse or Handicapped Spouse Relief is offered by the IRAS.

Qualified individuals can claim this relief if they are living and supporting their non-earning spouse. Additionally, you can also claim for this relief, if your spouse is working; but does not have an annual income above S$4000 in the previous tax year.

Under this relief, you can claim S$2000 as innocent spouse relief and S$5,500 for Handicapped Spouse Relief with effect from YA 2015.

Individuals legally divorced and paying a maintenance amount to their ex-spouse as per the court order or deed of separation are also eligible to claim for Spouse relief. Such individuals can claim the lower amount of maintenance payment issued in previous years or S$2000 for innocent wife and S$5, 500 for the handicapped wife.

Voluntary Contributions to the Supplementary Retirement Scheme

Singapore government developed this program with a motive to offer an opportunity and motivate the young Singaporean workforce to save for their life after retirement.

As of now, SRS is one of the most efficient and highly pursued tax saving strategy, accepted by Singapore citizens, permanent citizens, and foreign taxpayers.

The employer as well employees are allowed to contribute to the proposed SRS account. The best thing is all the investment gains are tax-free before withdrawal. However, a nominal 50% of the withdrawal from SRS account is taxable after retirement.

Just make sure, that you are above 18 years, gainfully employed, in sound mental health and you must not be an undischarged bankrupt before claiming SRS relief.

The most important thing about SRS relief is, your claim is automatically calculated based on your bank information. There is no need to claim tax relief on your annual tax returns.

Suppose you are a tax resident for YA 2015, the actual SRS relief offered to you is based on the actual contribution made by you and your employer in the previous or in 2014.

The maximum SRS contribution for the permanent Singaporean tax resident is S$12,750 and for a foreigner is S$29,750 for the year 2014.

Life Insurance Relief

The annual insurance premiums you are paying for your own or for your wifes life insurance policies are liable to offer you a tax relief.

If your total compulsory employee CPF contribution or self-employed Medisave/Voluntary CPF Contribution or both for the previous year (2014) is less than S$5000.

If you are the policyholder of life insurance premiums, you are paying for policies on your own and your wifes name.

If the insurance company has a branch or office in the Singapore and if you have drawn the policies on or after10 August 1973.

If you are able to fulfill all these three conditions then you are free to claim for the Life Insurance Relief.

It is necessary to have total compulsory employee CPF Contribution above S$5000 to claim the life insurance relief for the YA 2015.

By any chance if your CPF contributions turn out to be lower than S$5000 you can claim either for the difference between S$5000 and your CPF contributions or up to 7% of the insured value of your own/wifes life. In the second option, whichever is lower, either insured value of the policy or the amount of insurance premiums you have paid is claimable under life insurance relief.

TAX SAVING OPTIONS FOR HIGH NET WORTH INDIVIDUALS

Donate and Save Tax

From Budget 2009 to Budget 2011 High Net Worth Individuals were offered tax relief against qualifying donations incurred from 1 January 2009 to 31 December 2015 will qualify for 2.5 times tax deductions.

Since 2017, the tax structure is going to change significantly for the high-income earners in Singapore. As per the Jubilee Budget 2015, the Singapore government will be providing increased tax deductions for all the qualifying donations made in the year 2015. The donations made from 1 January 2015 to 31 December 2015 are liable to receive a 300 % tax deduction (previously it was 250%).

However, motivating and enhancing the philanthropic activities of the individuals, companies, trusts, bodies of person and of joint Hindu families, the government has decided to extend the 250% tax relief on qualifying donations for other years, i.e., from 2016 to 2018.

Just make sure that the donations made to the charities should be and Institution of Public Character (IPC) status. If it is not, then any amount of donations will be rounded up as non-tax deductible.

Cash donations, land and building donations and share donations to approved IPC, computer donations to Infocomm Development Authority of Singapore (IDA), artifact donations to the museums approved by National Heritage Board (NHB) are all liable for tax deductions.

Public Art Tax Incentive Scheme (PATIS): Since 1 April 2006, all high net worth taxpayers if have donated sculptures or work of art for public display to the National Heritage Board or any of its approved entities, then such donation is liable for tax deduction. Donors have to ensure the net value of the donated sculpture or public art by applying to the NHB.

Starting from 1 January 2011, it is mandatory for all the individuals and businesses involved in philanthropic activities or donations to provide their identification number, which can be NRIC or FIN or UEN etc., before donating to the IPC. The identification number facilitates the automatic calculation of tax deductions and prevents IRAS from entertaining tax deductions claims made based on receipts and vouchers.

Donations made through GIRO or payrolls are also liable for automatic tax deductions if your employer is registered under the Auto-inclusion scheme. Otherwise, individuals have to make the claim in their own income tax form.

CONTACT US

Phone : +65-6536 0036

Email : info@sbsgroup.com.sg

Office Address :

SBS Consulting Pte Ltd

35-B Hongkong Street

Singapore 059674

Website : www.sbsgroup.com.sg

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