Singapore Tax for foreigners and expats

What Tax Do I Pay in Singapore

Singapore Tax for Foreigners and Expats

Paying Your Taxes (Foreigners/Expats)
Understand the key tax issues relevant to start-ups.

Any income derived or received in Singapore is subject to tax. How much tax you have to pay will depend on your business structure, the income you make and the amount of expenses you can deduct.

The taxation system in Singapore is relatively simple in comparison with most developed countries. Once you understand the key concepts and what needs to be done, it will be easy to comply with any tax obligations you have.

What Do I Need To Do First?
One of the key decisions to make after starting your business is to decide on the accounting period. When you choose to end your accounting period will determine your Year of Assessment when it comes to filing and paying your taxes.

You will also need to keep your accounts in order, and keep a copy of all relevant records for at least 5 years.

Key Tax Dates In Singapore

Individual Income Tax Return for sole-proprietors, partnerships (Form B)
Partnership Income Tax Return (Form P)

Before 15 April

Companies Tax Return (Form C or Form C-S)

Before 30 November

Notification of Companies Estimated Chargeable Income (ECI)

3 months after end of accounting period

What Taxes Do I Have To Pay?
The income tax you have to pay depends on your business structure. Singapore has excellent tax benefits for small to midsize companies.

For the first 3 years from company formation, you pay

0% tax on first S$100,000 annual profits, and about
50% tax on the next S$200,000 annual profits.
For profits around S$300,000, the overall tax rate is still a low 17% (Please refer to IRAs for latest rates).

If you make payment to non-residents of Singapore, you will need to pay withholding tax.
You also pay Goods and Services Tax (GST) when you buy goods and services from GST-registered traders.

Overview of Taxes in Singapore

Get an overview of income tax, withholding tax for non-residents, and Goods and Servivces Tax (GST). Income TaxThe income tax you have to pay depends on your business structure.

Sole-proprietorship Tax

Chargeable income is your business/trade income plus any other personal income, minus all deductions, reliefs and rebates.
Taxes are charged progressively: 0% - 20% on your chargeable income.
Deductible expenses like rent, wages, accounting fees, director’s fees & salaries.
Capital Allowances - fixed assets like furniture, fittings or machinery.
Unutilised losses & capital allowances – Losses and capital allowance can be used to offset against adjusted profit. Any part of the losses or capital allowance not fully used to offset income in the financial year is termed as "unutilised" or "unabsorbed".
Personal Donations, Reliefs & Rebates – donations to certain charitable organisations; tax reliefs like course fees, child/wife relief; tax rebates like Parenthood Tax Rebate

Partnerships Tax

Partners in a partnership are considered "self-employed" – i.e. you do not pay yourself any wages. The business income is treated as part of your total personal income and taxed at personal income tax rates.
Taxes are charged progressively: 0% - 20% on your chargeable income.
Deductible expenses like rent, wages, accounting fees, director’s fees & salaries.
Capital Allowances - fixed assets like furniture, fittings or machinery.
Unutilised losses & capital allowances – Losses and capital allowance can be used to offset against adjusted profit. Any part of the losses or capital allowance not fully used to offset income in the financial year is termed as "unutilised" or "unabsorbed".
Personal Donations, Reliefs & Rebates – donations to certain charitable organisations; tax reliefs like course fees, child/wife relief; tax rebates like Parenthood Tax Rebate

Companies Tax
The Basics Taxable Income

Any income that is "accrued" or received in Singapore by a company is liable to tax.
The company may be incorporated or registered in Singapore or elsewhere.

Capital Gains

Capital gains are not subject to tax. For instance, if a manufacturing company sells the factory that it has been using to manufacture its goods, the profit on sale of the factory is not subject to tax.

One-Tier Corporate Tax System

The one-tier corporate tax system, which took effect from 1 January 2003, was introduced to replace the old imputation system.
Under the one-tier corporate tax system, Singapore resident companies can issue one-tier exempt dividends, i.e. shareholders will not be taxed on such dividend income.

YA 2010 onwards: 17% on chargeable income.
Tax exemption on the first S$100,000 of chargeable income (excluding Singapore franked dividends) for any of the first 3 consecutive years of tax assessment from YA2005.
From YA 2008, a further 50% exemption is given on the next S$200,000 of the normal chargeable income (excluding Singapore franked dividends) for each of the first 3 consecutive YAs.
Deductible expenses like rent, wages, accounting fees, director’s fees & salaries.
Capital Allowances - fixed assets like furniture, fittings or machinery.
Unutilised losses, capital allowances and donations – Losses, capital allowance and donations can be used to offset against adjusted profit. Any part of the losses or capital allowance not fully used to offset income in the financial year is termed as "unutilised" or "unabsorbed".
Group relief – a company may transfer its loss items to another company belonging to the same group.

Withholding Tax
Withholding tax is a tax on payments made to non-residents including employees, business partners and overseas agents. If you make payment to non-residents, you must withhold a certain percentage of that payment and pay that to IRAS.

How much you have to pay depends on the type of payment and who you are paying. Types of payment include:

payment of commission fees to overseas agents.
payment of director’s fees to non-resident directors.
payment of professional fees to offshore accountants.

Goods and Services Tax (GST)

GST is a tax on goods and services purchased or consumed locally. The rate is currently 7%.
You have to pay GST when you buy goods or services from GST-registered businesses and when you import goods into Singapore. For imports, GST is paid to Singapore Customs.
You can collect GST if you register with the Comptroller of GST to collect GST. Your business must be registered to collect GST if your annual turnover exceeds or is likely to exceed S$1 million from the sale of taxable goods and services.
You may also apply to the Comptroller of GST to collect GST voluntarily. Approval for voluntary registration is at the discretion of the Comptroller. Most businesses register for GST to claim back the GST incurred on their business

Are There Any Tax Reliefs For Foreign Income Or Foreign Businesses?
You will be able to claim Double Tax Relief for taxes already paid overseas as long as Singapore has a double tax agreement with that country and you are considered a Singapore-resident company.

A company is resident in Singapore if the control and management of its business are exercised in Singapore. You can also avoid paying tax for income derived in Singapore if you can prove you are a tax resident in your home country.

Other Information

Guide To Filing Taxes

Key items to remember when filing your taxes, including deciding on your accounting period, Medisave obligations, forms required, etc.

Decide on the Accounting Period

You pay taxes every year on income earned during the last accounting period. The Accounting period is not necessarily the same as the calendar year (1 January – 31 December).

For simplicity, most businesses choose to end their accounting period on 31 December. For example, if your accounting period is 1 April 2009 to 31 Dec 2009, then the Year of Assessment (YA) for this accounting period is 2010.

For those who do not wish to follow the calendar year, it is usually done so they have more time to settle their taxes. For example, if your accounting period is 1 April 2009 to 31 March 2010, then the Year of Assessment (YA) for this accounting period is 2011

Keep Your Records and Accounts In Order

You need to be able to verify your income with sales invoices etc, and deduction claims with receipts etc, so be sure to keep a copy of all relevant records for at least 5 years.

Medisave Obligations

If you start a sole-proprietorship or partnership, you are considered a self-employed person. All self-employed persons who are Singapore Citizens or Permanent Residents must contribute to their Medisave as long as their net trade income exceeds S$6,000 per year.

Net trade income is your business income minus all allowable business expenses, capital allowances and trade losses.

Prepare Statement of Accounts & 4-line Statement

The statement of accounts has to be prepared at the end of every accounting period. This consists of the Profit and Loss, and Balance Sheet. The 4-line statement summary consists of:

turnover
gross profit
allowable business expenses
adjusted profit

File Tax Return On-Time

Sole-proprietors

You need to file your tax return (Form B or B1) by 15 April every year. You should be filing your trade income for the previous year. For example: In 2010, you should be filing a return on business income for year 2009.

Partnerships

As the precedent partner, you need to file a tax return (Form P) on behalf of the entire partnership. All partners, including the precedent partner, must report their share of profit/loss from the partnership business in their Individual Income Tax Return (Form B or B1).

You need to file your Form B, B1 or Form P by 15 April every year. You should be filing your trade income for the previous year. For example: In 2010, you should be filling a return on business income for year 2009.

Companies

All companies carrying on a trade or business are required to file an estimate of their chargeable income (ECI) within 3 months after the end of its accounting period. You have to file ECI even if you estimate the income to be "zero".

You need to file your tax return (Form C) by 30 November each year. You should be filing your company's income for the previous year. For example: In 2010, you should be filing a return on business income for year 2009.

If your company is newly-incorporated, IRAS will send your first Form C to you in your second year of operation (after 1 year of incorporation). The year you start filing taxes will depend on when you close your accounts.

Pay Your Taxes

You have to pay your taxes within 1 month of receiving the Notice of Assessment and Statement of Account.
You can pay off all your taxes at one go or by monthly installments using GIRO. You should pay your taxes promptly or you may have to pay penalty fees.

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