Singapore

Singapore

Thinking beyond borders

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Foreign-sourced income of resident individuals is generally exempt from tax. Non-residents are taxed only on Singapore-sourced income. Singapore income tax is imposed on a territorial basis whereby the individual is generally taxed on all income accruing in or derived from Singapore. Since the year of assessment 2005, foreign-sourced income received in Singapore by resident individuals is exempt from tax unless the income is received through a partnership in Singapore.

Key message

A frequent business traveler whose stay in Singapore exceeds 60 days in a calendar year will be subject to tax in Singapore on the income derived from the individual’s services performed in Singapore.

Income tax

Liability income tax

A person’s liability for Singapore tax is determined by residence status. A person can be a resident or non-resident for Singapore tax purposes. A tax resident of Singapore generally refers to an individual who resides in Singapore and includes a person who is physically present in Singapore or exercises employment (other than a director of a company) for 183 days or more during the year preceding the year of assessment. A non-resident of Singapore is generally someone who spends less than 183 days in Singapore during the year preceding the year of assessment.

If a foreign individual (excluding a director of a company and a public entertainer) commences work in Singapore from 1 January 2007 and stays or works in Singapore for a continuous period of at least 183 days straddling 2 years, the individual may be regarded as a tax resident for both years.

A resident is taxed on all income accrued in, or derived from, Singapore or received in Singapore from outside Singapore. Non-residents are taxed only on income accrued in, or derived from Singapore. Effective from the year of assessment 2005, all foreign-sourced income received in, or remitted into Singapore by a resident individual (except through a partnership in Singapore) is exempt from tax.

Definition of source

Employment income is generally treated as Singapore-sourced if the services are performed in Singapore, regardless of where the payment is made or the contract of employment is concluded.

Tax trigger points

A short-term visiting employee who exercises employment in Singapore for not more than 60 days in a calendar year (other than as a director or a public entertainer) is exempt from tax.

A frequent business traveler whose stay in Singapore exceeds 60 days in a calendar year would be subject to tax in Singapore on the income derived from the individual’s work performed in Singapore. To the extent that the individual qualifies for exemption under the conditions of the dependent personal services article of the applicable double tax treaty, there will be no tax liability.

Notwithstanding that tax-exemption may apply in accordance to the local tax laws or the double - taxation agreement, there may be filling requirements.

Based on the above, a frequent business traveler whose stay in Singapore exceeds 60 days in a calendar year would be subject to tax in Singapore on the income derived from the individual’s work performed in Singapore. To the extent that the individual qualifies for exemption under the conditions of the dependent personal services article of the applicable double tax treaty, there will be no tax liability.

 

A short-term visiting employee who exercises employment in Singapore for not more than 60 days in a calendar year (other than as a director or a public entertainer) is exempt from tax.


Based on the above, a frequent business traveler whose stay in Singapore exceeds 60 days in a calendar year would be subject to tax in Singapore on the income derived from the individual’s work performed in Singapore. To the extent that the individual qualifies for exemption under the conditions of the dependent personal services article of the applicable double tax treaty, there will be no tax liability.

 

Types of taxable income

As a general rule, all payments (whether in the form of cash or benefits-in-kind) made by an employer to an employee for employment in Singapore are taxable in the hands of the employee, unless specifically exempted under the Income Tax Act or by concession.

With effect from 1 January 2016, the following payments made by the employer for employees travelling into Singapore for business purposes are not taxable.

  • Accommodation
  • Travelling and entertainment (which have been expended for business purpose).
  • Per diem allowance not exceeding the yearly acceptable rate determined by the IRAS.

 

Tax rates

A resident is taxed on the resident’s chargeable income (after deducting applicable personal reliefs) at graduated rates ranging from 0 percent to 22 percent. Non-residents are subject to tax on employment income at a flat rate of 15 percent or at the resident tax rates, whichever is higher.

Other income of a non-resident individual is generally taxed at 22 percent unless specifically exempt or subject to a reduced treaty rate.

Social security

Liability for social security

All foreign individuals are currently exempted from participation in Singapore’s national pension scheme, the Central Provident Fund (CPF). Upon becoming a permanent resident of Singapore, however, participation in the CPF is statutory.

Compliance obligations

Employee compliance obligations

Income tax returns (Form B1/B/M) are issued by the Inland Revenue Authority of Singapore (IRAS) in January each year. Individuals are required to complete and submit the form to the IRAS by 15 April. The IRAS may grant an extension beyond the 15 April deadline if there are valid reasons.

Employer reporting and withholding requirements

There is no requirement for the employer to withhold monthly taxes from the employee. Employers, however, are required to complete a return of remuneration form (Form IR8A) setting out the various payments under the employment for the year. The form is to be completed and given to employees by 1 March of the following year. For the year of assessment 2016, employers who have 11 or more employees (in total) for the entire year ended 31 December 2015 are required to submit their employees’ income information to IRAS electronically.

In the case of departing non-Singapore citizens, written notice (Form IR21 – Notice of Cessation of Employment of non-Singapore Citizens) must be given at least 1 month prior to the date on which the person ceases employment or leaves Singapore permanently, or for a period exceeding 3 months. In addition, the employer must retain any money that is due to the employee. The employer can release the money to the employee only when the IRAS grants the tax clearance, or upon the expiration of 30 days after receipt by the IRAS of the Form IR21, whichever is earlier.

In the past, the employer is not required to file the Form IR21 for a short term visiting employee who travels to Singapore for business purpose not more that 60 days within a calendar year. However, with effect from Year of Assessment 2016, the employer is required to file a Form IR8A (Annual Return of Employee’s Remuneration) with the IRAS by 1 March of the following year.

In the case of a short-term visiting employee who travels to Singapore for business purpose exceeding 60 days in a year, the IRAS has allowed extension of time to file the Form IR21 depending on the following situations, where applicable:

  • up to 2 months from the date of cancellation or expiry of the work pass, whichever is earlier;
  • up to 2 months from the date of the short-term visitor’s last business visit to Singapore for a non-work pass individual who is certain that he/she will not visit Singapore for the rest of the year; or
  • until 31 March of the following year, after the employer’s annual review of the business visits by 31 January of the following year, for a non-work pass individual who is not certain if he/she will visit Singapore for the rest of the year.

Immigration

Work permit/visa requirements

A work pass will be required for a foreign individual who would like to be engaged in some form of business, profession, occupation or paid employment while in Singapore.

Generally, if the foreign individual wishes to work in managerial, executive or specialized jobs in Singapore, the foreign individual must apply to the Work Pass Division, Ministry of Manpower (MOM) Singapore, for an Employment Pass (EP) regardless of the length of the assignment. A registered entity in Singapore will need to sponsor the EP for the foreign individual.

It is the sole discretion of the MOM to grant an employment pass to an individual typically taking into account an applicant's qualifications, work experience, salary and role to be performed in Singapore.

Other immigration consideration

Under the Fair Consideration Framework (FCF) rules, companies must advertise job vacancies on a new jobs bank administered by the Singapore Workforce Development Agency (WDA) for at least 14 calendar days before submitting new EP applications.

Exemption from advertising on the jobs bank is given subject to the employer meeting the following criteria:

  • Firms with 25 or fewer employees;
  • Jobs that pay a fixed monthly salary of S$12,000 and above;
  • Intra-Company Transferees (“ICT”) where the ICT must have worked for the Firm outside Singapore for a period of not less than one year before being posted to the branch, affiliate or subsidiary in Singapore. You may wish to note that the ICT’s entry is limited to a three-year period that may be extended for up to two additional years, for a total term not exceeding five years.  Under the World Trade Organisation’s General Agreement on Trade in Services (WTO GATS), ICTs would refer to Managers, Specialists and Executives holding senior positions in the organisation or have an advanced level of expertise;
  • Jobs that are necessary for short-term contingencies (i.e. period of employment in Singapore for not more than one month). An EP holder that is admitted under this category will not be allowed to renew his EP, nor apply for a new EP for at least three months after the previous EP expires

Other issues

Double taxation treaties

Singapore has entered into double taxation treaties with more than 60 countries to mitigate double taxation and allow cooperation between Singapore and overseas tax authorities in enforcing their respective tax laws.

Permanent establishment implications

There is the potential that a permanent establishment (PE) could be created as a result of frequent business travel, but this would generally be dependent on the type of services performed and the level of authority the employee has.

There is the potential that a permanent establishment (PE) could be created as a result of frequent business travel, but this would generally be dependent on the type of services performed and the level of authority the employee has.
There is the potential that a permanent establishment (PE) could be created as a result of frequent business travel, but this would generally be dependent on the type of services performed and the level of authority the employee has.

Indirect taxes

Goods and service tax (GST) is currently applicable at 7 percent on domestic consumption. GST is levied on the sale of goods and services in Singapore by GST-registered traders and on goods imported into Singapore. Businesses whose turnover exceeds SGD1 million are required to register for GST.

Transfer pricing

While there is no specific legislation covering transfer pricing in Singapore, the IRAS has issued transfer pricing guidelines that should be applied.

A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, a cross-border benefit is being provided.

This would also be dependent on the nature and complexity of the services performed.

Local data privacy requirements

Singapore has data privacy laws.

Exchange control

Singapore does not currently impose exchange controls.

Non-deductible costs for assignees

Non-deductible costs incurred by employers relating to assignees generally include private passenger car expenses and medical expenses exceeding a certain cap.

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As businesses become increasingly global, we have witnessed a dramatic rise in the number of business travelers now working in foreign jurisdictions.

 
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