11 Things to Know About Tax if You're Moving to Singapore

Moving to another country can be daunting. Don’t get us wrong, it’s an exciting, once-in-a-lifetime experience, but there’s a lot to learn – including how the tax system works.

This is certainly the case for any expats moving to Singapore. Most people moving here will have to adapt to new tax rules. Luckily for you, to make the whole transition smoother, we’ve assembled nine key things you need to know about tax in Singapore below.

1. You have to live in Singapore for 183 days to become a tax resident

Before we jump into things, let’s get one thing straight: are you – or will you be – a tax resident in Singapore?

The Inland Revenue Authority of Singapore (IRAS) states that you are a tax resident if you fall under one of the following categories:

• Staying in Singapore for at least 183 days over a year – you will be a tax resident for that year only
• Staying in Singapore for at least 183 days for a continuous period over two years (the employment period must cover two calendar years) – you will be a tax resident for both years
• Three consecutive years – you will be a tax resident for all three years

If you are staying in Singapore for 61–182 days, or if you are employed for 60 days or less, you will be regarded as a non-tax resident.

So basically, if you stay in Singapore for 183 consecutive days or longer, you won’t get taxed so much.

Now that’s out of the way, what can you expect from the tax system in Singapore?

2. Tax residents can look forward to progressive rates

Tax residents are taxed at progressive rates, whereas non-residents are taxed at either the flat rate of 15%, or resident rates – whichever results in a higher tax on your employment income.

Overall, Singapore is considered something of a tax haven compared to some other countries. As a tax resident, you will pay the following income tax rates.

Singapore Income Tax Rates for Year of Assessment 2019

3. The VAT on goods and services is reasonable

The standard tax rate on goods and services is currently 7% – although this is expected to increase to 9% by 2025. Despite the potential increase, this tax rate is still below that of most other countries. The UK’s VAT, for example, is far more expensive at 20%.

In Singapore, the standard goods and services tax (GST) rate applies to most local retail sales, as well as commercial activities. According to the IRAS, GST isn’t applicable to:

• Sale and rental of unfurnished residential property
• Importation and local supply of precious metals
• Financial services, e.g. issue of a debt security
• Digital payment tokens, e.g. exchange of Bitcoin for fiat currency
• Sale where goods are delivered from overseas to another place overseas
• Private transactions

Businesses that have a taxable turnover of over S$1 million at the end of a calendar year must apply for GST registration.

4. Filing taxes is very simple, even for expats

In some countries, expats might need to fill in more forms and have more checks carried out before filing their taxes. In Singapore, however, it’s pretty straightforward.

Your income is assessed on the preceding year, ending 31 December, and you can usually expect to receive your income tax bills by September. All you have to do is make sure you file your income tax return by 15 April each year.

A popular way to do this is to sign up for the General Interbank Recurring Order (GIRO) – this way, you can arrange up to 12 monthly interest-free instalments to pay your income tax.

5. Singapore is hot on tax evaders’ tails

In Singapore, tax evasion is a criminal offence and is punishable under law. The punishments for tax evasion vary, depending on how severe the case is. You could be let off with a warning, or you could face one or more of the following harsher punishments:

• Penalisation of 300% of the tax undercharged
• A fine of S$10,000, three years of imprisonment, or both
• Penalised with 300% of the GST undercharged
• If documents were falsified, you will be made to pay up to 400% of the tax undercharged. If found guilty, you could face a fine of up to S$50,000, five years of imprisonment, or both
• A fine of up to S$10,000 for the company involved and up to seven years of imprisonment.

These strict punishments made headline news in 2019 when a couple both faced jail time, along with a fine of S$1 million between them.

6. Singapore is a tax haven for startups 

Startup companies can take advantage of a tax exemption of up to S$125,000 on the first S$200,000 of income for their first three consecutive years of business.

To qualify, companies must be incorporated in Singapore and have a maximum of 20 shareholders. One shareholder will also need to hold a minimum of 10% of shares.

Companies who have not previously claimed the ‘Tax Exemption for New Startup Companies’ can claim the ‘Partial Tax Exemption for Companies’, which allows an exemption of up to S$102,500 on the first S$200,000 of chargeable income.

7. Singapore does not tax income earned outside its territory

Generally, if you receive income from overseas whilst in Singapore, you won’t be taxed on it. It also won’t need to be declared in your tax return.

This isn’t always the case, though. Overseas income is taxable in Singapore if:

• It is received through partnerships in Singapore
• Your overseas employment is secondary to your Singapore employment (i.e. you are required to travel overseas for your work)
• You are employed overseas on behalf of the Singapore government
• You have a business in Singapore and you are continuing a trade/business overseas which is secondary to your trade in Singapore

This is one of the reasons why some tech giants, such as Dyson, have recently relocated overseas to Singapore.

8. There are a number of tax relief options available

If you’re a tax resident and you meet certain conditions, you might qualify for different tax relief options.

Some rebates are only targeted at certain groups of taxpayers. There are some forms of relief, however, that are available to all tax residents, including:

• Course fees (this is not for the education system – see point 9 for more information)
• CPF cash top-up (applicable to Singapore citizens and Singapore permanent residents only)
• CPF (applicable to Singapore citizens and Singapore permanent residents only)
• Earned income
• Handicapped brother/sister
• Life insurance
• Parent/handicapped parent
• Supplementary retirement scheme (SRS)

There are also additional reliefs that are only available to married, divorced, or widowed taxpayers. If you fall under this category, it’s worth checking out the options on offer.

9. Course fees are tax deductible in Singapore

Course Fees Relief is provided to individuals in Singapore to encourage them to enhance their skills and make them more employable. This option is targeted solely at people who are currently employed, or who have been employed previously but is now out of work.

You can claim relief for any course, seminar, or conference you attended, as long as it’s relevant to your current employment or vocation, or is leading to a qualification.

Courses, seminars, and conferences are not eligible for relief if they are:

1. For recreational or leisure purposes
2. For general skills or knowledge, such as social media skills, basic website building skills, and Microsoft Office skills
3. To acquire skills or knowledge for a hobby, rather than your profession
4. Polytechnic/University courses, if graduates have never been employed previously

If you meet the requirements, you’ll be able to claim up to S$5,500 each year.

10. Self-employed people will need to get organised

If you’re planning to be self-employed in Singapore, the IRAS states that there are seven key things you need to do to stay on top of your taxes:

1. Know your tax obligations – Self-employed people need to report any income earned from their company operations as business income, not as salary. This business income forms part of your total personal income, which is taxed at individual income tax rates
2. Decide on the accounting period – Every year, you need to declare your business income for a specific accounting period. You can choose any accounting period, but most choose one that ends on 31 December each year (the end of Singapore’s financial year)
3. Keep proper records and accounts – You’ll need to keep accurate records and accounts of all business transactions. These will need to be supported with invoices, receipts, vouchers, and other documents
4. Prepare your statement of accounts – At the end of every accounting period, you must prepare the statement of accounts, which includes accounts of your profits and losses, along with a balance sheet
5. Prepare a 4-line statement – From your statement of accounts, you’ll need to extract the relevant figures and prepare a 4-line statement to file your income tax return
6. File income tax – At the beginning of the year, the IRAS will send you a notification or an individual income tax return form to report your income from business
7. Pay withholding tax – Withholding tax applies to services that are carried out in Singapore, and will incur the corporate tax rate of 17% on the gross payment. If you need more help with this, check out IRAS’s dedicated page

11. Capital gains in Singapore are generally not taxable

Gains from the sale of a property, shares, and financial things in Singapore are generally not taxable. However, gains from trading in properties might be taxable.

If you’re thinking of buying and selling property with a profit-seeking motive, the gains might be taxable.

Of course, this can be difficult to suss out.

Some criteria used to assess if you are trading in properties include:

• Frequency of transactions (buying and selling of properties)
• Reasons for acquiring and selling of property
• Financial means to hold the property long term
• Holding period

Summary

If you’re thinking of moving to Singapore, you’re well and truly in for a treat. And now that you’re more familiar with the tax system, hopefully, it’ll be even less intimidating.