Everything You Need To Know About Income Tax in Singapore

This was originally posted on Planner Bee.

What types of income are taxable? When is the income tax submission deadline? These are some common questions you might have if you are new to tax paying in Singapore.

Understanding Singapore’s tax will help you avoid getting into trouble with the law and take advantage of tax benefits.

Who needs to pay income tax?

First things first — remember that as long as you are working in Singapore, you likely have to pay income tax.

Income tax rates depend on the individual’s tax residency status and how much they earned in the previous calendar year. Tax residents are individuals who are:

• Singapore Citizens
• Singapore Permanent Residents
• Any foreigner who has worked or stayed in Singapore for 183 days or more

There are two groups of taxpayers:

• The first group is required to file an Income Tax Return. This group of people must file regardless of how much they earned the previous year, or whether their employer is participating in the Employment Income Auto-Inclusion Scheme.
• The second group is placed under the No-Filing Service. They do not have to file an Income Tax Return. The tax bill is computed based on the auto-included income and the previous year’s relief claims.

What is taxable?

Every income earned in or derived from Singapore qualifies for income tax. On the other hand, income earned from employment outside of Singapore is generally not taxable with a few exceptions.

Here are some examples of taxable and non-taxable income:

Tax Rates

Singapore adopts a progressive tax system where higher income earners are taxed a higher percentage of their income. Individuals who earn less than S$22,000 do not have to pay taxes in Singapore. However, they are still required to file taxes with the Inland Revenue Authority of Singapore (IRAS), the country’s tax agency.

You can use the IRAS income tax calculator to determine how much you need to pay.

Residents Tax Rates

*This is from the official IRAS website and is subject to future changes.

Non-Resident Tax Rates

Non-residents who have stayed or worked in the country for at least 183 days are taxed at a flat rate of 15% or the progressive resident tax rate listed above, whichever yields a higher tax.

Besides their employment income, non-residents also face a 22% tax on other types of income, including rental income from properties, pension, and director’s fees.

Read more: All You Need To Know About GST and 2023’s GST Hike

When to file your income tax?

You can start filing your income tax on March 1, and you have to file either the paper copy by 15 April or the electronic copy by 18 April.

Once you have filed your taxes, you will be issued a tax bill known as the Notice of Assessment between May and September. You have 30 days to pay it after receiving the notice.

If you don’t file your income tax by the deadline, there will be a penalty of 5% on your unpaid taxes. And if you default on your payment, there will be a 1% charge every month, up to 12%. So don’t forget to file or pay your taxes!

How do I file for income tax?

You can file either by paper or electronically. IRAS will send the relevant paper tax return between February and March to those who cannot file their taxes online.

Here is how you can file your income tax:

1. Prepare your Singpass/IRAS Unique Account, form IR8A (if necessary), details of your dependents and income, and business registration number/partnership tax reference number (if applicable).
2. Log into the myTax Portal using your Singpass/IRAS Unique Account.
3. Navigate to “File Income Tax Return” under “Individuals”
4. Key in or verify your details, including income, deductions, and reliefs.
5. Update existing tax reliefs and declare any other sources of income where applicable
6. Save or print a copy of the acknowledgment receipt after successful e-filing

Read more: Self-Employed Persons’ Guide to Filing Income Tax and Paying CPF

Tax Relief

To reduce the tax burden on individuals, Singapore offers tax deductions for six reasons:

1. Caring for parents/family members
2. Having children
3. Saving for retirement
4. Self-Improvement
5. Making donations
6. Disability

Here are some of the common tax reliefs that are applicable to most taxpayers:

You can look at the IRAS Personal Tax Relief Checker to see which rebate schemes you are eligible for. There is an annual personal tax relief cap of S$80,000.

Conclusion

Singaporeans often complain about paying taxes, but it is considerably lower than many other countries, and it is progressive as well.

Filing taxes seems daunting to those who are new to it, but once you understand which income bracket you fall in and the types of reliefs you are eligible for, it is easy, especially with Singapore’s e-filing system. Make sure to take advantage of tax benefits so that you can make the most out of your hard-earned salary.