An Overview of the Singapore Tax System

Singapore is a rich nation.

Along with other revenue-generating streams such as exports, fees and charges and other receipts, taxes collected every year are used in developing Singapore into a more vibrant economy – a place where every foreign entrepreneur and company wants to be.

In 2017, the government spends almost 27.8% on security and external relations, 49.6% percent on social development, 18.9% on economic development, and the rest on administration.

Singapore Taxation

This expenditure is supported by, but not limited to, the following tax revenues:

• personal income tax
• corporate tax
• goods & services tax
• property tax
• tax on rental income
• stamp duty
• customs & excise duties
• motor vehicle taxes
• betting taxes
• casino tax-resident
• foreign workers levy
• airport passenger service charge

Of these, the Inland Revenue Authority of Singapore (IRAS) is responsible for collecting personal income tax, corporate tax, property tax, goods & services tax, betting taxes and stamp duty. Various other government agencies collect the rest.

We discuss some of these taxes in detail below:

Singapore Personal Income Tax

In Singapore, different tax rates apply to tax resident and non-resident individuals.

The eligibility for being treated as a tax resident includes:

• a citizen or a permanent resident residing in Singapore except for temporary absences; or
• a foreigner who has stayed / worked in Singapore (excludes director of a company) for 183 days or more in the year before the year-of-assessment

The prevailing rates for Year of Assessment 2020 are as follows:

INDIVIDUAL TAX RATES OF TAX FOR YEAR 2022 (YEAR OF ASSESSMENT 2023)
	Chargeable Income	Income Tax Rate (%)	Gross Tax Payable ($)
On the first On the next	20,000 10,000	0 2	0 200
On the first On the next	30,000 10,000	– 3.5	200 350
On the first On the next	40,000 40,000	– 7	550 2,800
On the first On the next	80,000 40,000	– 11.5	3,350 4,600
On the first On the next	120,000 40,000	– 15	7,950 6,000
On the first On the next	160,000 40,000	– 18	13,950 7,200
On the first On the next	200,000 40,000	– 19	21,150 7,600
On the first On the next	240,000 40,000	– 19.5	28,750 7,800
On the first On the next	280,000 40,000	– 20	36,550 8,000
On the first In excess of	320,000 320,000	– 22	44,550

In case of non-resident individuals:

• for up to 60 days – the employment income is tax exempt if the individual is in Singapore on short-term employment for 60 days or less in a year; the exemption does not apply to a director of a company, a public entertainer or exercising a profession in Singapore
• 61 – 182 days – the individual is taxed on all income earned in Singapore (no personal relief apply) at 15 percent or the resident rate, whichever gives rise to a higher tax amount
• director fees, consultant fees and all other incomes are taxed at 22 percent

Not Ordinarily Resident Scheme

The NOR Scheme has expired. However, the last NOR status granted will be valid from YA 2020 to 2024. A special category called the Not Ordinarily Residents (NOR) are given favourable tax treatment for a period of 5 years of assessment.

To retain your status as a NOR taxpayer, you are only required to be a tax resident in the first year of assessment. You are not required to be tax resident throughout the 5-year qualifying period.

Benefits of the Not Ordinarily Resident scheme

• a NOR taxpayer pays income tax on only that part of his employment income that corresponds with the number of days he spends in Singapore
• a NOR taxpayer gets to enjoy tax exemption on contributions made by the employer to an overseas pension fund which would otherwise be taxable in his hands

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Singapore Corporate Tax Rate

The system prevalent in Singapore is called a one-tier corporate tax system, under which tax paid by a company on its chargeable income is the final tax. All dividends paid by a company are exempt from tax in the hands of the shareholders.

The corporate income tax rate since 2010 has been fixed at 17%. It is calculated on the basis of the company’s chargeable income i.e. taxable revenues less allowable expenses and other allowances. But the effective tax payable comes out to even lower if one takes advantage of all the government incentives, subsidies and schemes.

Corporate Tax Exemptions

Start-up Tax Exemption (SUTE) scheme for Singapore Companies

The eligibility conditions include:

• no more than 20 individual shareholders
• in case of corporate shareholders, one individual must hold at least 10% of the issued shares
• Property and investment holding companies are not eligible

All other companies that do not qualify for the SUTE Scheme will be eligible for partial tax exemption.

Note: YA 2020 figures are subjected to 25% Corporate Income Tax Rebate capped at $ 15,000

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Goods & Services Tax

To increase the resilience of taxes as a source of government revenue, Goods & Services Tax (GST) was introduced in 1994. It is a broad-based consumption tax levied on the import of goods (collected by Singapore Customs), as well as nearly all supplies of goods and services in Singapore. However, some items are specifically exempt from GST include financial services and the sale or lease of residential properties. The current rate for GST is 7 percent.

A company must be registered to collect GST if its annual turnover exceeds or is likely to exceed S$1 million from the sale of taxable goods and services. This requirement may be waived if most of the goods or services are exported or supplied internationally (“zero-rated supplies”).

Do note that it is advantageous for companies to register for GST when they are having considerable amount of input GST paid on their purchases and expenses, as they will be able to claim these input GST while submitting GST returns.

A company may also apply to the Comptroller of GST to collect GST voluntarily. Approval for voluntary registration is at the discretion of the Comptroller. Once approval is given, the company must remain registered for at least two years.

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Property Tax

This is a kind of wealth tax imposed in Singapore on property ownership irrespective of whether the property is occupied or vacant. It is applicable to HDBs as well as private homes. The government imposes progressive property tax rates (different for owner-occupied and non-owner-occupied homes) in Singapore to encourage home-ownership in the country.

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Tax on Rental Income

Singapore also imposes income tax on investment homes, which can be understood as income tax on the rental income. Rental income is taxable when it is due and payable to the property owner, and not the date of actual receipt.

Rental income from the letting of property in Singapore is subject to income tax, while your property is subject to property tax: IRAS

If you are a tax resident in Singapore, your net rental income will be taxed at resident rates.

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Stamp Duty

Stamp Duty is a tax on documents relating to immovable properties, stocks or shares. Examples of such documents are lease/tenancy agreements, mortgages, and share transfer documents. Once the document is signed and dated, the duty needs to be paid, which can be done easily using IRAS’ e-Stamping system. Do note that it’s an offence in Singapore to use a document without paying the stamp duty and attracts a penalty of up to four times the original stamp duty.

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Motor Vehicle Taxes

These are taxes, other than import duties, that are imposed on motor vehicles. These taxes are imposed to curb car ownership and road congestion, and include the various registration fees, excise duty, road tax and special tax.

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Customs & Excise Duties

Singapore’s free port imposes duties on motor vehicles, tobacco, petroleum products and liquors.

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Casino Tax

In Singapore, casinos operated by the Marina Bay Sands and Resorts World Sentosa have to pay the casino tax levied on the casinos’ gross gaming revenue.

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Betting Taxes and Sweepstake Duties

These are duties on private lottery, betting & sweepstake. Generally, the following betting activities are subject to duty in Singapore:

• Totalisator or pari-mutuel betting (e.g. Toto, horse racing)
• Sports betting (e.g. football betting)
• Sweepstakes
• Any other system or method of cash or credit betting held, promoted, organised, administered or operated by an exempt organisation in the Betting and Sweepstake Duties Order

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Trust Income Tax (including income from estates)

The statutory income of a trustee is subject to income tax at 17 percent since 2010. Where as resident beneficiaries who are entitled to a share of the trust income by virtue of the trust deed, deceased’s will or the Law of Intestacy will be assessed on their share of entitlement of income at their personal income tax rates. Where there are non-resident beneficiaries, the trustee will have to pay tax on their shares of entitlement at the prevailing trustee rate for the year of assessment.

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Foreign Workers Levy

Singapore companies are required to pay foreign worker levy (FWL) for their work permit and S Pass holders, which is a price mechanism introduced by the Singapore Government to regulate the foreign manpower numbers in the country.

The amount of FWL to be paid for each worker is determined by the sector the employer/company belongs to, and the educational qualifications and skills of the workers. Employers can avail some concessions in the levy if they employ skilled workers with relevant qualifications. In case of S Pass, the monthly levy per worker ranges anything between S$330 and S$650.

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