In Singapore, any income received from services provided or employment exercised within the country is taxable. This includes compensation received in the form of cash or non-cash benefits. Since the income is sourced in Singapore, it is subject to Singapore’s tax. Income tax is calculated on a preceding year basis.
The amount of tax and the applicable tax rates depends on the taxpayer’s tax residency status. Singapore has several tests in regard to whether a foreigner is a resident in Singapore. The key tests of relevance relating to a foreigner coming to Singapore are set out below.
You are a tax resident for a particular Year of Assessment if you are a:
- Foreigner who has stayed/worked in Singapore:
– for at least 183 days in the previous calendar year, or
– continuously for 3 consecutive years, or
- Foreigner who has worked in Singapore for a continuous period straddling 2 calendar years and the total period of stay is at least 183 days. This applies to foreign employees who entered Singapore.
To elaborate on the second point above, you will be regarded as a tax resident under the 2-year rule if you:
- work in Singapore for a period straddling 2 calendar years; and
- your employment period plus your physical presence immediately before/after your employment cover a continuous period of at least 183 days.
Note that the number of days of employment in Singapore includes weekends and public holidays. Any absences from Singapore that are temporary (e.g. overseas holiday leave) or incidental to your employment (e.g. business trips) are still counted in the total days of employment for the purpose of determining your tax residency status.
The income of tax residents after deducting allowable expenses, donations and personal reliefs is subject to income tax at progressive rates ranging from 0% to 22%.
At Sheltons Accountants Singapore we have extensive experience in providing Singaporean and international tax advice. This includes advice on tax treaty issues and cross-border tax efficient structuring.
If you need advice or assistance with your Singaporean tax obligations, or if you would like us to prepare your Singaporean tax returns, we’re here to help.
Simply send us an email at SG@SheltonsGroup.com.