How to Calculate Tax in Singapore: A Complete Guide

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.

Understanding Tax Residency in Singapore

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:

Singapore Citizens or Permanent Residents: Individuals with Singaporean citizenship or permanent residency status who reside in the country, with the exception of temporary absences.

Foreigners with Prolonged Stay: Foreigners who have been in Singapore for at least 183 days in the preceding calendar year or have continuously resided in the country for three consecutive years, even if their stay was less than 183 days in the initial or third year.

Employees with Continuous Employment: Foreigners who have been employed in Singapore for a continuous period spanning two calendar years, with a total stay of at least 183 days (including the period preceding and following the employment).

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.

What Are the Different Types of Taxes in Singapore?

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.

Are you struggling with tax filing, compliance, or GST requirements in Singapore? Navigating the complexities of tax regulations can be overwhelming, but Grof Singapore is here to make it easier for you. Our team of experienced professionals is dedicated to providing comprehensive support for all your company tax-related needs. We offer tailored solutions to ensure you meet all compliance obligations seamlessly. Let us handle the complexities while you focus on what matters most—growing your business. Get in touch with Grof Singapore today, and let us guide you through the intricacies of tax filing and GST compliance with confidence.

Identifying Taxable Income Sources

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:

Employment Income: This encompasses salaries, wages, bonuses, allowances, and benefits-in-kind received from your employer.

Gains from Stock Options: Any gains you realise from the exercise of stock options or the vesting of stock awards provided by your employer.

Rental Income: The rental income you generate from leasing out your property.

Taxable Benefits: Certain perks and benefits provided by your employer, such as housing allowances and car benefits.

Director’s Fees: Fees received for your services as a director of a company.

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.

Calculating Chargeable Income

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.

Navigating the Singapore Tax Rates

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

First $30,000

Next $10,000

–

3.50

200

350

First $40,000

Next $40,000

–

550

2,800

First $80,000

Next $40,000

–

11.5

3,350

4,600

First $120,000

Next $40,000

–

7,950

Next $40,000

First $160,000

Next $40,000

–

13,950

7,200

First $200,000

Next $40,000

–

21,150

7,600

First $240,000

Next $40,000

–

19.5

28,750

7,800

First $280,000

Next $40,000

–

36,550

8,000

First $320,000

Next $180,000

–

44,550

39,600

First $500,000

Next $500,000

–

84,150

115,000

First $1,000,000

In excess of $1,000,000

–

199,150

Navigating Taxes for Non-Residents

The tax obligations for non-residents in Singapore differ from those of tax residents. Non-residents are subject to the following tax rates:

Employment Income: Non-residents are taxed at a flat rate of 15% or the prevailing progressive resident tax rates, whichever results in a higher tax liability.

Director’s Fees, Consultation Fees, and Miscellaneous Income: A consistent tax rate of 24% applies to non-resident individuals.

Claiming Personal Reliefs and Deductions

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:

Earned Income Relief: This relief is available to individuals who have earned income, such as employment income or self-employment income.

Qualifying Child Relief: This relief can be claimed for each qualifying child you support.

Employee CPF Contribution Relief: You can claim a deduction for the mandatory contributions you make to your Central Provident Fund (CPF) account.

Parenthood Tax Rebate: Eligible parents can claim a tax rebate for their newborn children.

Donations: Donations made to approved institutions or causes can be deducted from your taxable income.

It’s crucial to carefully review your eligibility for these reliefs and deductions to ensure that you maximize your tax savings.

Calculating Tax Payable and Payment Deadlines

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.

Navigating the Annual Income Tax Return

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.

Understanding Withholding Taxes for Non-Residents

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

Withholding Tax Rate (From YA 2024 onwards): 24%

Income received by non-resident professionals (e.g., consultants, trainers, and coaches) for services performed in Singapore

Withholding Tax Rate (From YA 2024 onwards): 15% of gross income or 24% of net income

Income received by non-resident public entertainers for services performed in Singapore

Withholding Tax Rate (From YA 2024 onwards): 15% concessionary rate

SRS withdrawals received by non-Singapore SRS account holders

Withholding Tax Rate (From YA 2024 onwards): 24%

Interest, commission, fee, or other payment in connection with any loan or indebtedness

Withholding Tax Rate (From YA 2024 onwards): 15% reduced final withholding tax rate (subject to conditions) or 24% if reduced withholding tax rate is not applicable

Royalty or other lump sum payments for the use of movable properties

Withholding Tax Rate (From YA 2024 onwards): 10% reduced final withholding tax rate (subject to conditions) or 24% if reduced withholding tax rate is not applicable

Conclusion

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.