When you think of personal income tax in Singapore, the first thing that probably comes to mind is its low personal income tax rates compared to many other developed countries. Personal income tax in Singapore is designed to be simple and easy to understand. In this article, we will explore the key aspects of personal income tax in Singapore.
Tax Resident vs Non-Resident
In Singapore, individual persons are classified into two categories for personal income tax filing purpose:
– tax residents
– non-residents
As a rule of thumb, tax residents are individual persons (both Singaporeans or foreigners) who worked in Singapore for at least 183 days in a previous calendar year.
Non-residents are individual persons who worked in Singapore for less than 183 days in a previous calendar year. For more details, you can refer to the IRAS website.
Tax residents are taxed on their Singapore-sourced income. Non-residents, on the other hand, are only taxed on their Singapore-sourced income.
Foreign sourced income
Foreign-sourced income, for both Singaporeans and foreigners, received in Singapore is generally exempted from Singapore income tax unless
1) It is received through partnerships in Singapore.
2) Your overseas work, for which you receive your foreign income, is incidental to your Singapore employment (i.e. you are required to travel overseas as part of your Singapore employment requirements).
3) You have a trade/business in Singapore and you are carrying on a trade/business overseas which is incidental to your trade carried out in Singapore.
4) You are employed overseas on behalf of the Singapore Government.
Year of Assessment (YA) and Basis Period
When considering personal income tax in Singapore, it is important to know that your Singapore-sourced income is assessed for tax on a preceding year basis. Year of Assessment (YA) refers to the year in which income tax is charged and Basis Period refers to the period of income used as the basis for charging income tax. So, in YA 2023, you will have to file tax on income earned in 2022.
Personal Income Tax Rates
The personal income tax rates for individuals in Singapore are progressive, meaning that the more you earn, the higher the personal income tax rate you pay. For the financial year ending 31 December 2022, the personal income tax rates for tax residents are as follows (see IRAS for details):
| Taxable Personal Income in Singapore Dollars | Tax Rate |
|---|---|
| First $20,000 | 0% |
| Next $10,000 | 2% |
| Next $10,000 | 3.5% |
| Next $40,000 | 7% |
| Next $40,000 | 11.5% |
| Next $40,000 | 15% |
| Next $40,000 | 18% |
| Next $40,000 | 19% |
| Next $40,000 | 19.5% |
| Next $40,000 | 20% |
| Above $320,000 | 22% |
For the year 2023, the personal income tax rates below will apply (see IRAS for details):
| Taxable Personal Income in Singapore Dollars | Tax Rate |
|---|---|
| First $20,000 | 0% |
| Next $10,000 | 2% |
| Next $10,000 | 3.5% |
| Next $40,000 | 7% |
| Next $40,000 | 11.5% |
| Next $40,000 | 15% |
| Next $40,000 | 18% |
| Next $40,000 | 19% |
| Next $40,000 | 19.5% |
| Next $40,000 | 20% |
| Next $180,000 | 22% |
| Next $500,000 | 23% |
| Above $1,000,000 | 24% |
Non-residents’ Singapore-sourced income are taxed at the higher of the flat rate of 15% or the progressive personal income tax rates.
Personal Reliefs
In addition to the progressive personal income tax rates, individuals in Singapore are also entitled to personal reliefs, which help to reduce the amount of tax payable. Some examples of common personal reliefs include the personal reliefs for earned income, spouse, children, parents, etc.
Conclusion
In conclusion, personal income tax in Singapore is designed to be simple and easy to understand, with low tax rates and personal reliefs to help individuals reduce their tax liabilities. As a tax resident in Singapore, it is important to understand the tax rates and personal reliefs that are applicable to you, and to ensure that you file your tax returns accurately and on time. By doing so, you can avoid penalties and ensure that you are paying the right amount of tax. If you need any help with your personal income tax filing, please reach out to us for a no obligations discussion on how we can help you.
