Singapore - Income Tax

Singapore - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

15 April.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Singapore?

Forms for the return of income are usually issued during February through March of the following year and are required to be completed and filed to the Inland Revenue Authority of Singapore (IRAS) by 15 April unless an extended deadline has been granted by the IRAS. Assessments are made by way of notices of assessment. The tax is normally due for payment within one month from the date of issue of the notice of assessment.

Tax rates

What are the current income tax rates for residents and non-residents in Singapore?

Residents

Income tax is calculated by applying a progressive tax rate schedule to chargeable income as follows.

Income tax table from the Year of Assessment 2012

Taxable income bracket Total tax on income below bracket Tax rate on income in bracket
From SGD To SGD SGD Percent
0 20,000 0 0
20,001 30,000 0 2
30,001 40,000 200 3.5
40,001 80,000 550 7
80,001 120,000 3,350 11.5
120,001 160,000 7,950 15
160,001 200,000 13,950 17
200,001 320,000 20,750 18
320,001 No limit 42,350 20

Non-residents

A non-resident individual is generally subject to tax at flat rates, depending on the type of income. For employment income, tax is charged at a flat rate of 15 percent or at the resident rates, whichever is higher. Other income of a non-resident individual is generally taxed at 20 percent unless specifically exempt or subject to a reduced rate (such as, tax treaty).

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Singapore?

An individual is regarded as resident in Singapore for a year of assessment if, in the year preceding that year of assessment, he/she resides in Singapore or is physically present or exercises an employment (other than as a director of a company) in Singapore for 183 days or more.

Under the three-year administrative concession, an individual will be considered a resident from the date of arrival in Singapore if his/her stay covers three consecutive years of assessment or more, notwithstanding that the183 days test may not have been met either in the first or final year of employment.

Under the two-year administrative concession, a foreign employee who exercises employment in Singapore for a continuous period of at least 183 days straddling two years would be treated as a resident of Singapore for both years. This concession applies to foreign employees who have entered Singapore from 1 January 2007.

Is there, a de minimus number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country for more than 10 days after their assignment is over and they repatriate.

No. Whether an individual is a resident of Singapore will generally depend on the number of days he/she is physically present or exercises employment in Singapore. If the individual becomes a resident, he/she would be regarded as a resident for the entire year.

What if the assignee enters the country before their assignment begins?

An assignee may arrive in Singapore before the start of his/her assignment for several reasons such as searching for accommodation, making personal arrangements, and so on.

However, it is important to note that he/she is not permitted to engage in any form of business, profession, occupation or paid employment during this interim period, if he/she has not obtained a valid employment pass.

Termination of residence

Are there any tax compliance requirements when leaving Singapore?

An employer is required to notify the IRAS if a non-citizen employee (including a Singapore Permanent Resident who is leaving Singapore permanently) ceases or is about to cease employment in Singapore. In addition, the employer is required to withhold all monies due to the employee for clearance of the employee’s outstanding tax liability. The notification must be lodged no later than one month before the employee’s cessation of the employment or date of departure from Singapore, whichever is earlier. The employer can only release the monies withheld to the employee upon receiving permission from the IRAS or until 30 days after notification of the employment cessation was made, whichever is earlier.

Under the deemed exercise rule, the non-citizen employee is deemed to have derived a final gain in respect of unexercised stock options and/or unvested/restricted employee stock ownership plan shares when the employee ceases employment in Singapore. An exception would be if the employer is on tracking option, where the employer will track the income realization event to report to the IRAS.

What if the assignee comes back for a trip after residency has terminated?

If the assignee comes back for business purposes, any income attributable to his/her business presence may be subject to tax in Singapore, depending on his/her tax residency and the period of employment exercised. In determining the tax residency and period of employment exercised, the time spent in Singapore throughout the calendar year would be considered.

Communication between immigration and taxation authorities

Do the immigration authorities in Singapore provide information to the local taxation authorities regarding when a person enters or leaves Singapore?

In general, the IRAS have the power to authorize any person to assist in the performance of any specific duty imposed by the Income Tax Act.

Will an assignee have a filing requirement in the host country after they leave the country and repatriate?

Generally, an expatriate employee who has completed his/her tax clearance process will not have a filing requirement in Singapore after he/she repatriates. However, if he/she subsequently receives income that is related to his/her Singapore assignment (such as, bonus that is paid after his/her departure) and not previously reported to the tax authorities, additional tax clearance is required.

Economic employer approach

Do the taxation authorities in Singapore adopt the economic employer approach1 to interpreting Article 15 of the OECD treaty? If no, are the taxation authorities in Singapore considering the adoption of this interpretation of economic employer in the future?

Based on the Inland Revenue Authority of Singapore’s (IRAS) current practice, the economic employer approach has not been adopted as of yet. There is no indication as to whether the IRAS would adopt this approach in the future.

Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Not applicable. The IRAS has not adopted the economic employer approach as of yet.

Types of taxable compensation

What categories are subject to income tax in general situations?

Employment income or profits for employment services rendered in Singapore are taxable regardless of whom or where the employer may be or, to whom (or where) the employment income may be paid.

Typical items of an expatriate compensation package, such as the following, are taxable unless otherwise indicated.

  • Salary, wages, bonuses, and allowances.
  • Accommodation provided by the employer is a taxable benefit-in-kind and the taxable value is derived as follows:

    Prior to Year of Assessment 2015

    • Place of Residence or Serviced Apartment not within hotel building

    The taxable value is the lesser of the annual value (AV) of the property (basically the yearly rental obtainable for the unfurnished property), or 10 percent of the employee’s taxable employment income. In either case, the taxable benefit is reduced by any payment made by the employee towards the accommodation. However, the 10 percent rule does not apply to a company director where his/her income from the company is less than the annual value of the property provided for his/her use. If the employer provides the employee with household furniture and assets, the employee is regarded as having derived a taxable benefit. The taxable value of such benefit is computed at standard rates prescribed by the IRAS.

    • Hotel Accommodation

    Hotel accommodation provided by the employer is calculated based on the IRAS prescribed rates per occupant (for employee and his immediate family members only) based on the period of stay, plus a 2% of basic salary.

    From Year of Assessment 2015

    Commencing 1 January 2014, the tax treatment for accommodation mentioned above would cease to apply. The taxable values for accommodation provided by the employer will bederived as follows:

    • Place of Residence or Serviced Apartment not within hotel building

    For housing accommodation, the taxable benefit will be the annual value of the premises, less any rent paid by the employee.

    The taxable value of the Furniture and Fittings is assessed based on whether the premises is fully furnished or partially furnished. The applied rate is at:

    • 40% of AV if the premises is partially furnished; or
    • 50% of AV if the premises is fully furnished

    Partially furnished refers to only fittings (eg. lightings, air-conditioner/ ceiling fan, water-heater) provided whereas fully furnished refers to both fittings and furniture/household appliances provided.

    • Hotel Accommodation

    Value of Hotel Accommodation is assessed based on the actual costs incurred by the employer for the hotel stay, less the amount paid by the employee.

  • Taxable benefits include home leave passage for the expatriate and his/her immediate family members. The taxable value is restricted to 20 percent of one return fare each for the expatriate and his/her spouse, and 20 percent of two return fares for each child, for trips to the expatriate’s or his/her spouse’s home country. Remission of leave passage may be available to expatriate employees of company that is awarded or granted extension, prior to 1 January 2004, of certain incentive status such as pioneer, operational headquarters, and so on. Any fares other than the above are taxable in full.
  • If an employee is provided with the use of a car by his/her employer, and he/she uses the car for private purposes, the taxable value of the benefit provided to him/her is ascertained based on standard formulae prescribed by the IRAS.
  • If an employer pays for the insurance premiums for a personal insurance policy where the employee is the policyholder, the premium paid by the employer would be taxable in the hands of the employee.
  • For group insurance in which the employee is contractually entitled to the payout in the event of a claim, the insurance premium paid by the employer would constitute a taxable benefit to the employee. An administrative concession applies to certain employers who are not investment holding companies, tax exempt bodies or service companies if certain conditions are met.
  • For group insurance in which the employee is not contractually entitled to the payout in the event of a claim, the premiums paid by the employer would not be taxable. However, if the employer subsequently disburses the payout to the employee, the payout is taxable as additional remuneration, unless it is received by way of death gratuity or as compensation for death or injuries (which is tax-exempt under the law).
  • If the employer bears the cost of tax for the employee, this is regarded as a taxable benefit and is computed on a tax-on-tax basis.
  • Any gain or profit derived (directly or indirectly) by any person by the exercise, assignment, release, or acquisition of a right or benefit to acquire shares in a company is income if the right or benefit is obtained by him/her by reason of his/her office or employment. The employee will be taxed on the full amount of the gain or the profit derived from the exercise, assignment, or release of the right or benefit to acquire shares. The taxable gain is the difference between the open market value of the shares and the price paid to acquire the shares on the exercise date. The law connects the taxability of the gains to the employment source. In addition, the deferral on the taxation of gains is allowed where shares are subject to a moratorium and a deemed exercise rule applies to certain unexercised stock options, or unvested share awards for departing expatriates, unless the tracking option alternative applies.

There are a number of tax incentives given to employee equity-based remuneration plans provided certain conditions are met. The incentives are as follows:

a. Qualified Employee Equity-Based Remuneration (QEEBR) Scheme;

b. Equity Remuneration Incentive Scheme (Small and Medium Enterprises) (ERIS (SMEs))2;

c. Equity Remuneration Incentive Scheme (All Corporations) (ERIS (All Corporations))3; and

d. Equity Remuneration Incentive Scheme (Start-Ups) (ERIS (Start-Ups)).

The ERIS schemes that currently provide for a partial tax exemption on gains arising from Employee Share Option Plans or Employee Share Ownership Plans will be phased out upon the expiration of the respective schemes:

  • ERIS (Start-ups) Expiry date: 15 February 2013
  • ERIS (All Corporations) Expiry date: 1 January 2014
  • ERIS (SME’s) Expiry date: 1 January 2014

For stock options or share awards granted to employees on or before the respective expiration dates, the partial tax exemption accorded under the relevant schemes will still be applicable, as long as the gains are derived on or before 31 December 2023.

  • Contributions made by the employer to overseas pension and provident funds in connection with the employee’s employment in Singapore are generally deemed taxable income of the employee, unless certain conditions are satisfied. The concessionary tax treatment will cease to apply with effect from Year of Assessment 2015 if the employer is a tax exempt body or an investment holding company. If the employer is a service company adopting a cost plus mark up basis of assessment, the concessionary tax treatment will cease to apply from Year of Assessment 2016.
  • As a concession, medical expenses paid on behalf of an employee, his/her spouse, and children are generally not taxable if the benefit is available to all staff.
  • If the employer makes a loan to the employee at a zero or reduced interest rate, the value of the interest reduction is taxable income to the employee. However, as an administrative concession, such benefit would not be taxable if the loan scheme is available to all employees and the employee does not have substantial shareholdings, control, or influence over the company.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Singapore? If so, please provide a general definition of these areas.

Exemption of interest income

Interest income derived on or after 1 January 2005 by any individual from deposits with an approved bank or a finance company licensed under the Finance Companies Act in Singapore, is exempt from tax.

Interest from debt securities and income from certain annuities, life insurance policies, distributions from certain collective investment schemes, fee or compensatory payments from securities lending or repurchase arrangements, derived from Singapore on or after 1 January 2004 by an individual may be exempt from tax.

However, if the interest income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession, such income is taxable.

Remittances of offshore funds

With effect from 1 January 2004, all overseas income remitted by individuals resident in Singapore is not taxable However, this exemption does not apply if the foreign-sourced income was received through a partnership in Singapore.

Double taxation agreement

An Avoidance of Double Taxation Agreement between Singapore and another country serves to prevent double taxation of income earned in one country by a resident of the other country.

Capital gains tax

There is no capital gains tax in Singapore.

Expatriate concessions

Are there any concessions made for expatriates in Singapore?

No expatriate concessions are specifically given except for home leave benefit taxation and the concession for employer’s contribution to overseas pension fund under the Not Ordinarily Resident (NOR) Taxpayer Scheme.

Salary earned from working abroad

Is salary earned from working abroad taxed in Singapore? If so, how?

In Singapore, tax is payable on an individual’s remuneration that is derived from Singapore employment irrespective of where the contract is made or the remuneration is paid. The term Singapore employment includes not only the exercise of employment in Singapore but also the exercise of employment outside Singapore where the services performed outside Singapore is considered an extension of the duties and responsibilities of his/her employment in Singapore.

On the other hand, where the individual is employed to perform services entirely outside Singapore (e.g. he/she is sent on an overseas assignment), the remuneration is not subject to Singapore income tax.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Singapore? If so, how?

From the year of assessment 2006, any interest income derived by any individual from the deposit of monies with an approved bank or a licensed finance company would be tax exempt. Any interest by any individual from debt securities derived on or after 1 January 2004 is also exempt from tax.

With effect from 1 January 2008, all dividends paid by Singapore-resident companies would be dividends under the one-tier corporate taxation system and are exempt from tax in the hands of the shareholders.

Dividends, interest, and rental income

Rental income derived in respect of property located in Singapore is taxable.

An individual is required to declare the gross rental income for each property. This includes the rental of furniture and fittings, and service charges received from the tenant. The individual can only claim expenses incurred during the period of tenancy, including property tax, mortgage interest, fire insurance, repairs, and maintenance, and so on.

Foreign exchange gains and losses

Foreign exchange gains and losses are neither taxable nor deductible.

Principal residence gains and losses

Principal residence gains and losses are generally capital in nature and are neither taxable nor deductible respectively.

Capital losses

Capital losses are generally not tax-deductible.

Personal use items

Any capital gains or losses from the sale of personal use items are not taxable/deductible.

Gifts

Gifts (cash and non-cash) from employers are taxable benefits-in-kind. However, under the administrative concession granted by the IRAS, gifts given on festive and special occasions which are not substantial in value (SGD200 or less per occasion) and generally available to all staff are not taxable.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Singapore? If so, please discuss?

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Are there capital gains tax exceptions in Singapore? If so, please discuss?

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Pre-CGT assets

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

Deemed disposal and acquisition

Capital gains are not taxable in Singapore unless the individual is regarded as a dealer or trader.

General deductions from income

What are the general deductions from income allowed in Singapore?

Expenses are tax deductible only if they are wholly and exclusively incurred in the production of the income, are not capital in nature and their deduction is not prohibited by statute. In general, there are very few deductions that can be claimed against employment income.

Personal reliefs, given as deductions against income, are available to a resident individual depending on his/her personal circumstances in the year proceeding the year of assessment.

Some of the personal reliefs applicable for the Year of Assessment 2015 are summarized as follows.

  SGD
Earned income relief  
Under age 55 1,000
55 to age 59 6,000
Age 60 and above 8,000
Spouse relief  
Spouse living with or maintained by taxpayer and spouse's income is not more than SGD4,000 2,000
Child relief  
Unmarried child and does not have income of more than SGD4,000 4,000
Dependent parents relief  
Living with taxpayer in the same household (each parent) 9,000
Not living with taxpayer in the same household (each parent) 5,500
Supplementary Retirement Scheme (SRS) Capped at 29,750 for foreigners

A non-resident individual is not entitled to personal reliefs.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Singapore?

Tax equalization

In a tax equalization scheme, a hypothetical amount of home country tax is calculated on certain elements of compensation (that is, excluding assignment-related compensation). The employer withholds the hypothetical tax while paying the actual tax liabilities to the employee’s home and host countries. At the end of the year, the final hypothetical tax liability is calculated and any under, or over-payment of hypothetical tax is paid by, or reimbursed to, the employee. Consequently, the executive who has been transferred is no better or worse off than before the assignment.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Singapore? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.

An expatriate employee’s remuneration from Singapore employment is generally not subject to withholding tax.

Pay-as-you-go (PAYG) withholding

Not applicable.

PAYG installments

Not applicable.

When are estimates/prepayments/withholding of tax due in Singapore? For example: monthly, annually, both, and so on.

Not applicable.

Relief for foreign taxes

Is there any Relief for Foreign Taxes in Singapore? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?

Please refer to Double Taxation Treaties below for a list of countries with which Singapore has treaty agreements.

General tax credits

What are the general tax credits that may be claimed in Singapore? Please list below.

None.

Sample tax calculation

This calculation4 assumes a married taxpayer resident in Singapore with two children whose three-year assignment begins 1 January 2012 and ends 31 December 2014. The taxpayer’s base salary is USD100,000 and the calculation covers three years.

  2012

USD
2013

USD
2014

USD
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: USD1.00 = SGD1.4.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
  • The company car is used for business and private purposes and originally cost USD50,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation.

Calculation of taxable income

Year-ended 2012

SGD
2013

SGD
2014

SGD
Days in Singapore during year 366 365 365
Earned income subject to income tax      
Salary 140,000 140,000 140,000
Bonus 28,000 28,000 28,000
Cost-of-living allowance 14,000 14,000 14,000
Net housing allowance cash 16,800 16,800 16,800
Company car* 8,020 8,020 8,020
Moving expense reimbursement 0 0 0
Home leave (20 percent concession applies) 0 1,400 0
Education allowance 4,200 4,200 4,200
Total earned income 211,020 212,420 211,020
Other income 0 0 0
Total income 211,020 212,420 211,020
Deductions 11,000 11,000 11,000
Total taxable income 200,020 201,420 200,020



Calculation of tax liability

  2012

SGD
2013

SGD
2014

SGD
Taxable income as above 200,020 201,420 200,020
Singapore tax thereon 19,254** 21,006** 20,754

* Cost of company car (new car at point of purchase) = USD50,000; Assume: residual value = USD8,000; petrol/maintenance expenses paid by company; private mileage travelled = 10,000km. Taxable benefit = 3/7 x (50,000 - 8,000)/10 x 1.40 + (0.55 x 10,000) = SGD8,020.

** Inclusive of the 30% tax rebate (50% for those age 60 and older), up to a maximum of S$1,500, as announced by the Minister for Finance in the 2013 Budget Speech on 25 February 2013.

FOOT NOTES

1Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country for a period of less than 183 days in the fiscal year (or, a calendar year of a 12-month period), the employee remains employed by the home country employer but the employee’s salary and costs are recharged to the host entity, then the host country tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country.

2Previously known as Entrepreneurial Employee Equity-Based Remuneration (EEEBR) Scheme.

3Previously known as Company Employee Equity-Based Remuneration (CEEBR) Scheme.

4Sample calculation generated by KPMG Services Pte Ltd and based on the Singapore Income Tax Act (chapter 134) and the prevailing practices of the Inland Revenue Authority of Singapore.

© 2016 KPMG Services Pte Ltd (Registration No. 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative, KPMG International. All rights reserved.

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