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Singapore Individual - Income determination

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Employment income

If the employment is exercised in Singapore, employment income is treated as earned in Singapore and is therefore taxable in Singapore. It generally does not matter where the employer is situated, where the remuneration is paid or which entities benefit from the services in determining the country of source of employment income.

Employment income includes salaries, bonuses, allowances, perquisites, and benefits in kind. Certain benefits in kind are accorded preferential rates, which are less than the actual cost to the employer.

The benefit of housing accommodation is normally calculated as the annual (rental) value (AV) of the property, less the rent paid by the employee. The taxable benefit of furniture and fittings provided will be computed as a fixed percentage (40% or 50%, depending on whether the property is partially or fully furnished) of the AV of the property. Where the AV is not available and it is more administratively convenient, the Inland Revenue Authority of Singapore (IRAS) has clarified that employers may use the actual market rent paid for the housing to report the housing benefits instead. Furthermore, with effect from year of assessment 2020 (calendar year 2019), there has been an update to the Singapore Income Tax Act that the actual rent paid by the employer will be treated as the default basis for the taxable value of the accommodation. In limited circumstances where there is no rent paid by the employer (e.g. employer-owned property), the IRAS may apply AV or other value deemed reasonable by the IRAS. If hotel accommodation is provided, the taxable benefit will be the amount paid by the employer, less any amount paid by the employee.

Home leave passage provided is fully assessable on the expatriate.

Where the employee is provided with a car benefit by the employer, the taxable benefit is calculated based on the prescribed formula which varies depending on whether the car provided is company-owned or leased, and whether the petrol cost is reimbursed by the employer. The taxability of other car-related items depends on the nature of the benefit.

The amount of tax borne by the employer is treated as additional income of the employee.

There are also concessions for certain benefits in kind (e.g. medical benefits [basic and non-basic], group medical, free/subsidised food and transport, transport and meal allowances/reimbursements, per diems), subject to certain conditions. For group insurance policies (e.g. group term life insurance, group personal accident insurance) where employees are contractually entitled to the payout, the premiums paid by the employer will be taxable to the employee unless the employer elects not to claim a tax deduction for the premiums, in which case the premiums will be exempt to its employees. This concession does not apply to investment holding companies, tax exempt bodies, and service companies assessed on the 'cost-plus mark-up' basis. Contributions made by an employer to a pension plan constituted outside Singapore are taxable at the time the contributions are made. Mandatory contributions made to a pension/social security scheme operated by a foreign government may not be taxable, subject to certain conditions.

Short-term visiting employees are not subject to tax on income from an employment exercised in Singapore if the employment does not exceed 60 days in a calendar year. This exemption, however, does not apply to a public entertainer or to a company director.

Area representatives of non-resident companies who reside in and use Singapore as a base for activities extending to other countries are assessed on the remuneration relating to the time actually spent in Singapore.

Individuals classified as Not Ordinarily Resident (NOR) will be accorded the following favourable tax treatment during the qualifying period subject to the fulfilment of certain conditions.

  • Exemption on employer’s contribution to non-mandatory overseas pension/social security schemes, subject to limitations, and
  • Time apportionment of Singapore employment income, subject to a minimum of 90 business days outside of Singapore and other conditions.

All retirement benefits other than CPF benefits, including gratuities and pensions, are generally taxable. Partial exemption may be possible in specified cases. The CPF scheme is only available to Singapore citizens and permanent residents, and provides a lump sum at the normal retirement age, consisting of past contributions made at prescribed rates by the employee and the employer, as well as interest and other investment returns thereon. However, CPF contributions made under certain circumstances are deemed to be part of employment income, which is taxable.

Another retirement scheme is the SRS. Withdrawals from this scheme however may be fully taxable or 50% taxable, depending on whether certain specified conditions have been fulfilled. Penalties are levied for early withdrawals.

Equity compensation

Gains derived from the exercise/vesting of stock options/awards granted during Singapore employment are taxable at exercise/vest unless a sale restriction is imposed. Non-Singapore citizens who cease employment in Singapore or leave Singapore for a period exceeding three months or on overseas posting will have to pay tax on any unexercised/unvested stock option/award on a deemed basis unless the tracking option is approved by the Singapore tax authorities for that individual. A refund may be claimed if the actual gain is less than the deemed gain that has been assessed. The claim must be filed within a prescribed period.

Business income

Business income is income derived from carrying on a trade, business, profession, or vocation. It is taxable in the hands of the sole-proprietor or self-employed person. Deductions are allowed for all outgoings and expenses incurred wholly and exclusively in the production of the income being assessed (except expenses that are specifically prohibited under the Income Tax Act), including capital allowances (fiscal depreciation) on most fixed assets except for land and non-industrial buildings.

Dividend income

Dividends received from a Singapore company are exempt from tax in the hands of its shareholders.

All foreign-sourced income received by individuals is exempt from tax unless received by a resident individual through a partnership in Singapore.

Interest income

Generally, interest income derived from Singapore approved banks or licensed finance companies is not taxable However, certain types of interest received by an individual are taxable, such as interest on deposits with non-approved banks, etc.

All foreign-sourced income received by individuals is exempt from tax unless received by a resident individual through a partnership in Singapore.

Rental income

Rental income derived from Singapore is taxable whether or not the individual is resident in Singapore. Individuals deriving passive rental income can opt to deduct 15% of gross rental income in lieu of the actual amount of deductible expenses incurred (excluding interest expenses, which can continue to be claimed based on the actual amounts incurred).

Exempt income

  • Retrenchment benefits: Retrenchment benefits given by employers to compensate employees for the loss of employment and payments for restrictive covenants are not taxable as they are capital in nature.
  • Foreign-sourced income: Generally, foreign-sourced income received in Singapore is not taxable unless received by a resident individual through a partnership in Singapore.
  • Annuities: An annuity is a continuous yearly payment arising from an annuity policy bought from an insurance company, a gift or inheritance, or the sale of an asset or surrender of a right. Annuities received in Singapore are not taxable unless they are received from a partnership, SRS, or annuity policy bought by an employer in place of a pension or other employment benefits.
  • Alimony/maintenance payments: Income from alimony and maintenance payments is exempt.
  • Windfalls: Winnings from betting and other games of chance are not taxable as they are windfalls and not of income nature.

Last Reviewed - 16 January 2019

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