With the presentation of the 2019 Budget by Treasurer Heng, now is the time to start planning for the preparation of your personal tax return. With that in mind, this article outlines points for expats to consider when it comes time for preparation of your Singaporean income tax return.
The good news is that your Singapore tax return is not going to be hard to do. For many, the process takes 5 minutes and is done online.
Your return is due for lodgement each year by 15th of April. As there is no withholding tax, you will be required to make a payment of your tax liability upon receipt of your Notice of Assessment from Inland Revenue Authority of Singapore (“IRAS”). Alternatively, IRAS does provided for you to pay your tax liability in monthly instalments (interest free) via direct debits from your Singaporean bank account.
The key to the simplicity is the nature of the Singaporean tax system which is a territorial based system.
Singapore only levies tax on income sourced here.
The term “sourced” means income that is generated in Singapore – e.g., employment income, interest paid by a local bank. Foreign income, such as rental income from your principal residence or investment property in your home country, is not taxed in Singapore – even if you bring the funds to Singapore.
Other income generated from interest, dividends, and capital gains on the disposal of assets anywhere in the world is all exempt from tax in Singapore. Besides, there are limited deductions that one can claim as an individual.
Notwithstanding this, here are some of the key concessions that you may be eligible to claim.
A key concession for expats to consider claiming as an employee based in Singapore is the NOR Scheme.
The NOR Scheme was introduced as an incentive to global firms to use Singapore as a regional base, and to bring talented individuals to the country. Under the NOR Scheme, you can pro-rata your taxable income based on the number of days you have worked outside of Singapore during the year – meaning that your effective tax rate can be reduced to a rate as low as 10%.
You can apply the NOR Scheme to reduce your tax rate by exempting part of your income, which in turn, will reduce the marginal tax bracket you fall into. Note that this is a concession under Singaporean taxation and does not mean that the untaxed income in Singapore is therefore taxable in the country you worked.
To qualify for the NOR Scheme, you must meet all the following criteria:
You can claim NOR for the first five years that you are a tax resident of Singapore. If you do not qualify for the Scheme for one year during this period because you did not travel at least 90 days, you will lose one year of eligibility.
To apply for the NOR Scheme, you must lodge a claim each year at the time you file your tax return. Your claim must list the number of days and where you have worked outside of Singapore and must be certified by your employer as being correct.
In years that you qualify but fail to make a claim for the NOR Scheme when you lodge your return, you cannot go back and amend the return to claim the concession.
In the 2019 Budget, it was announced that the NOR Scheme would be stopped as of 31 December 2019. Therefore, the last claims to enter the NOR Scheme will be due with the lodgement of the YA2020 income tax return. Individuals who are already in the midst of their 5-year NOR eligibility period can continue to make the claim post the end of this year.
Singapore’s tax system provides tax residents with tax reliefs which reduce your taxable income. You can claim and apply as many reliefs that you are eligible for each year.
Five common tax reliefs that can be applied when preparing your tax return include:
If you have made donations during the year to a local cause, you are able to claim a deduction of 2.5 times the amount you donated. To be able to make a claim, donations must be made in cash to the Government or any institution of public character which allows for their donations to be claimed at the 2.5 times rate.
While the Singaporean tax system is a lot simpler than others around the world, you should speak with a qualified advisor ahead of lodging your personal return and ensure that you claim all the concessions you are entitled to.
Boon Tan is a Chartered Accountant and has been working in the international tax advisory sector for over ten years. Born in Australia with Singaporean roots, Boon relocated to Singapore at the end of 2015.
As an expat living in Singapore, he has first-hand knowledge and experience of what expat families go through to establish themselves in a new city. He regularly draws on his in-depth understanding of the local Singaporean tax system and a network of in-country specialists in expat hot-spots around the world including USA, UK, Asia Pacific, and Australia to provide bespoke tax advice to clients.