Expats: Understanding the Singaporean Taxes

Singapore has been in the headlines for all the wrong reasons of late, primarily because of its proximity and business links to China and the fall-out from the devastating Coronavirus (which has now claimed the lives of more than 2,500 residents in China).

However, Singapore leaders recently came out in solidarity with the Chinese people during the outbreak, while also taking steps to safeguard its own people and the country’s reputation as one of the top five financial centres in the whole world.

Singapore also remains popular amongst UK expats, whether they’re travelling there on behalf of an employer or looking to establish their own commercial venture on the island. But what do expats need to know about taxation when living and working in Singapore? Let’s find out!

Tax in Singapore — A Brief Guide 

Before we start, it’s important to note that the UK and Singapore have previously signed an ‘Avoidance of Double Taxation Agreement’ (DTA) back in 1998.

Initially focused on income and corporation tax, this was expanded in 1999 to include capital gains taxes. While independent service providers such as RSM can help you to understand the precise details of this agreement further, this was struck to ensure that British expats wouldn’t see their global income streams taxed in both Singapore and their country of origin.

However, it stands to reason that any income earned from services performed in Singapore should be subject to taxation, whether this relates to a trade, profession, business or profit-generating vocation.

You’re eligible to pay income tax (and, where necessary, corporation tax) in instances where you reside permanently on the island, or are a Singapore resident with an established home.

From an expat perspective, you’ll also become eligible for taxation after working and residing in Singapore for 183 days or more, although the director of a particular company is excluded from this definition and may be considered a non-resident purely for tax purposes.

Singapore also offers competitive tax rates, with income tax levies divided into multiple tiers to safeguard low earners. You won’t pay any tax on the first 20,000 SGD that you earn, for example, and only 3.5% on earnings of 40,000 SGD or above.

The tax rate then increases in tiers of 40,000 SGD, with the highest levy of 22% only applied to those who earn 322,000 SGD or above.

As for corporation tax, businesses that record profits of less than 300,000 SGD will only face a levy of 8.5%, while margins in excess of this number will pay tax at a rate of 17%.

What Else Do You Need to Know?

This represents a relatively simple tax structure, and when combined with the lack of capital gains tax is designed to encourage capital investment and incentivise tax return filing.

If you’re a temporary worker who operates in Singapore for between 61 and 183 days, you should note that you’ll be charged at the higher tax rate of 15%. Beyond this point you’ll move offer to the permanent tax rate, while those who work in the country for less than 60 days will be exempt from paying levies on their personal income.

For business-owners or exporters, it’s also important to recognise that Singapore applies a 7% consumption or value added tax (VAT) tax on all goods and services.

When it comes to filing, the Year of Assessment (YA) typically runs from January 1st to December 31st, and it’s important to collate information and file your returns within these dates.