Essential Guide: How to Calculate Tax in Singapore
Are you unsure how much income tax you need to pay in Singapore? Understanding how to calculate your personal income tax can save you both time and money. Navigating the complexities of personal income taxation in Singapore can be a daunting task, but with the right guidance, you can maximise your tax efficiency and ensure compliance with the Inland Revenue Authority of Singapore (IRAS) regulations. In this comprehensive guide, we will delve into the intricacies of tax residency, taxable income sources, and the step-by-step process of calculating your personal income tax liability.
The first step in calculating your personal income tax in Singapore is to determine your tax residency status. This distinction is crucial, as it dictates the applicable tax rates and the treatment of your income sources. In Singapore, an individual is considered a tax resident if they meet one of the following criteria:
If you meet any of these criteria, you will be classified as a tax resident, and your income earned both within and outside of Singapore will be subject to taxation, with certain exceptions for foreign-sourced income.
Different types of taxes in Singapore include Personal Income Tax, Corporate Income Tax, Goods and Services Tax (GST), Property Tax, and Stamp Duty. Understanding how each tax is calculated and when they apply is crucial for individuals and businesses to ensure compliance with Singapore’s tax regulations.
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Once you’ve established your tax residency status, the next step is to identify the various sources of income that are subject to taxation in Singapore. The key taxable income categories include:
It’s important to note that not all income is subject to taxation. Items like gifts, inheritances, and winnings from betting or lottery are typically exempt from income tax in Singapore.
To determine your personal income tax liability, you’ll need to calculate your chargeable income, which is the amount of income that is subject to taxation. The formula for calculating chargeable income is as follows:
Chargeable Income = Assessable Income – Deductions
Assessable Income = Total Employment Income – Donations Deductions = Earned Income Relief + Qualifying Child Relief + Employee CPF Contribution Relief + Other Eligible Deductions
The deductions mentioned above are a subset of the various personal reliefs and allowances available to Singapore tax residents. These deductions can help reduce your overall taxable income and, consequently, your tax liability.
Singapore employs a progressive tax system, which means that the higher your chargeable income, the higher the applicable tax rate. The current personal income tax rates in Singapore are as follows:
Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
First $20,000
Next $10,000 |
0
2 |
0
2 |
First $30,000
Next $10,000 |
–
3.50 |
200
350 |
First $40,000
Next $40,000 |
–
7 |
550
2,800 |
First $80,000
Next $40,000 |
–
11.5 |
3,350
4,600 |
First $120,000
Next $40,000 |
–
15 |
7,950
Next $40,000 |
First $160,000
Next $40,000 |
–
18 |
13,950
7,200 |
First $200,000
Next $40,000 |
–
19 |
21,150
7,600 |
First $240,000
Next $40,000 |
–
19.5 |
28,750
7,800 |
First $280,000
Next $40,000 |
–
20 |
36,550
8,000 |
First $320,000
Next $180,000 |
–
22 |
44,550
39,600 |
First $500,000
Next $500,000 |
–
23 |
84,150
115,000 |
First $1,000,000
In excess of $1,000,000 |
–
24 |
199,150 |
The tax obligations for non-residents in Singapore differ from those of tax residents. Non-residents are subject to the following tax rates:
As a Singapore tax resident, you may be eligible for various personal reliefs and deductions that can help reduce your overall tax liability. Some of the common reliefs and deductions include:
It’s crucial to carefully review your eligibility for these reliefs and deductions to ensure that you maximize your tax savings.
Once you’ve determined your chargeable income and applied the relevant tax rates, you can calculate your total tax payable. This amount is due for payment within one month from the assessment date, regardless of whether you’ve filed a notice of objection.
Taxpayers in Singapore have the option to apply for a convenient monthly instalment payment plan through the Interbank GIRO system, which allows you to spread your tax payments over a perio d of time without incurring any interest.
In Singapore, individuals are required to submit an annual income tax return, which includes all necessary details for determining personal reliefs and deductions. The submission deadline for the income tax return is typically the 15th of April, with an extension to the 18th of April for electronic filings.
It’s important to ensure that you provide accurate and complete information in your tax return to avoid any discrepancies or potential penalties from the IRAS.
For non-resident individuals in Singapore, certain types of income are subject to withholding taxes. These include:
Remuneration including director’s fees received by non-resident directors
Income received by non-resident professionals (e.g., consultants, trainers, and coaches) for services performed in Singapore
Income received by non-resident public entertainers for services performed in Singapore
SRS withdrawals received by non-Singapore SRS account holders
Interest, commission, fee, or other payment in connection with any loan or indebtedness
Royalty or other lump sum payments for the use of movable properties
Navigating the personal income tax landscape in Singapore requires a thorough understanding of tax residency, taxable income sources, deductions, and the applicable tax rates. By familiarising yourself with these key concepts and utilising the available tax reliefs and deductions, you can effectively manage your tax obligations and maximise your financial well-being. Remember, staying informed and seeking professional assistance when needed can go a long way in ensuring a smooth and stress-free tax filing process.