Tax Laws in Singapore All Expats Should Know About
Singapore is one of the economic and financial hubs of the world and understandably a popular destination for expatriates. There’s definitely a lot to enjoy living in Singapore, from the modern lifestyle, numerous attractions, low crime rate and warm weather. However, there is a complex system of taxes (Also see FRS 12 Income Taxes) that you should be aware of.
New residents should immediately familiarize themselves with the basics of the tax system. The tax runs annually from the 1st of January to the 31st of December. You have to file returns by the 15th of April for the previous year or the 18th if you choose to do it online. Income tax is applicable to salaries, business profits, and interest on pensions, rent, and dividends on company shares.
Tax rates are applied according to your residency status. Expats fall under the categories of ‘resident’ or ‘non-resident’ for this purpose. Living or working or Singapore for over 183 days in a year will make you a resident to be taxed on all domestic and foreign sourced income in Singapore. The tax rate for residents is between 2-20%. However, if you spend less than 183 days working or living in Singapore then you will be taxed as a ‘non-resident’. This means you’ll only have to pay tax on income earned from Singaporean sources. The tax rate for non-residents has been 22% since 2016.
Tax Relief for Residents
There are a variety of tax relief options available for residents. These are mostly provided through social schemes and programs funded by the government. It takes the form of donations, education or job training etc. In addition, you can also seek relief for dependents such parents, children, spouses among others. The type or amount of tax relief is determined by the need status of the dependent parties and their specific situation.
DTAs (Double Taxation Agreements)
There are laws that protect residents from paying taxes in both Singapore and their native countries. There are 34 DTAs in Singapore that prevent this from happening. Double Taxation Agreements include exemptions, tax credits and are only applicable to residents.
Tax Relief for Non-Residents
The Not Ordinarily Resident Scheme (NOR) is a form of tax relief for non-residents. It is only applicable to non-residents for 3 consecutive years and are in their first year of being a resident. It applies for up to five consecutive years and is beneficial for expats frequently travelling abroad. It allows non-residents to only pay tax on income earned and sourced within Singapore.
Singapore has a complicated and intricate network of tax laws. It’s important for expats to properly understand taxes applicable to financial gains made within the country. Although there is not an official law that taxes capital gains, company stocks are still taxable income. Therefore, taxes are applicable to investments even if it doesn’t seem like it would be.
These are some of the basic tax laws of Singapore. It is important for expats to have a good understanding of them to properly navigate their finances. Expatriates might want to consider accounting services in Singapore if they are unable to manage their finances or are extremely confused about taxation laws.