Singapore is known to be one of the most expensive cities to live in according to Mentalfloss.com. From housing to food expenses, living in Singapore may seem quite daunting particularly to economic-conscious expatriates. However, this does not stop individuals from immigrating and settling for business purposes, vacations, or work deployment. This is because the Asian city-state is a popular low-tax destination especially where expats are involved.
The truth is that the cost of living and the tax may counterbalance, but it’s better to look at the brighter side. The amount of money you save on the reduced tax is the money you will be required to spend on bills. Based on how you live, you’re more likely to save up from consumption tax than income tax because, you can choose where to live, what to eat, and how to manage your expenses. If you intend to settle in Singapore as an expat, here’s what you’ll need to know.
The tax residency status
The quantity of tax fees payable solely rely on the“tax residency status.” That means that you can pay taxes like a typical citizen if you have been staying and working in Singapore for not less than 12 months or one year and that you are employed for more than two months. If you have stayed in Singapore between day 61 and day 182, you will then be taxed as a non-resident, but in a casewhere you’re employed for 60 days or less than that, and you’re not a director of any company, then you will be exempted from any income tax.
For instance, if you’ve stayed in for more than 183 days let’s say in 2013 and 2014 and in both years, you worked for no less than two months every time. In 2015, you only lived in there for 100 or less and was an employee for just one month. In this case, you would have been included in tax for the year 2013 and 2014, and you would have been required to pay tax as a resident of Singapore. However, you willbe acknowledged to be a nonresident during the 100 days stay in 2015, and you will have to pay taxes at non-resident rates.
It’s essential to understand that if you’re a director of a particular business or company, its critical that you speak to a tax agent for further assistance. You can check all the rates of a non-resident at the IRAS portal.
Check the resident Singapore tax rates
The Singapore residential tax rate is calculated based on individual’s yearly income. If you’ve worked and stayed in Singapore for at least 183 days in a year, your income should be taxed at a continuous residents’ rate, and you may also claim tax relief. These rates may not change even if you stay for more than two years. If you’ve only lived from 61 to 182 days, you’re charged as a non-resident, and your employment status income is taxable at15% or the progressive occupant rates based on which gives rise to the highest tax amount. The director’s income and other fees are taxed based on the prevailing rates of 22%. As a director, you’re not entitled to tax reliefs.
If you have been employed for 60 days or even less, you’re exempted from tax. However, there are fourconditions thatmust be fulfilled for one to be exempted from non-resident tax. Here are theterms.
- You must not be a director of any business or company,
- You must not be a professional in Singapore
- Your absence in Singapore is incidental to your employment in Singapore. In this case, your total income which will also include income obtained during services provided outside Singapore completely falls under taxable category.
- You must not be a public entertainer
The Singapore expat tax rate
Nonresident tax rates are pretty straightforward. If you’re working in Singapore, then you cannot evade tax—a flat rate of 15% of your yearly income or the sum that you’d reimburse through the resident rate, any amount that is higher. If you’re a director, however, you must pay a tax rate of 22%. If you’re not a director and have not worked for more than 60 days, you’re exempted from tax.
What is taxable and what is not
Besides salaries and bonuses, employment benefits such as the housing allowance medical allowance or car allowance will form part of what is known as “taxable income.”
Income, however, that has been derived from overseas or outside Singapore is taxable although bank interest and Singapore dividends are tax exempted.
When to file for taxes
The filing of your income return tax should be done before the 15 April of every year based on the paper tax form and by 18 of that April for e-filling. The income will be assessed for the preceding year ending on the 31st of December. You will receive a notice from IRAS about tax filing in advance. You do not have to file for your returns if you are already enrolled on the Auto Inclusion scheme by your employer.
How to save on taxes as an expat
There are various ways in which an expat can save on taxes. One of these ways is to obtain tax reliefs to offset against the assessable income including a child, parent or spouse support, life insurance policies, foreign maid levy, and course feesprovided you are a Singapore tax resident –you are working and living in Singapore.
Another way is to apply for the Not Ordinarily Resident (NOR) scheme, whereby you’re required to pay income tax only on the part of your employment income that corresponds to the numbers of days you have been in Singapore. If you have worked in the country for the past three years as non-resident , and as such you must also qualify for the NOR status—you must be a Singapore tax resident. Under the NOR scheme, the nonresident enjoys favorable tax treatment for five years of assessment.
If you’re a Singapore expat working for a foreign employer and you have traveled to Singapore for work, you can benefit from time apportionment of employment income as part of the Area Representative Scheme.
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(By Molly Joshi)