Earning Income in Singapore, so what are the tax rates?
As a business owner or employee there is always personal income tax to pay. Singapore benchmarks with Hong Kong. Both countries want to have the most attractive pro-business environments. This means company tax and your personal tax are among the most attractive in the world. Neat, right!
Like most countries, Singapore requires foreigners employed to have a work permit. The Ministry of Manpower issues the work permit. Yet the critical associated multiply entry visa is issued by the Singapore Immigration and Checkpoints Authority Service.
After a period of 1 to 2 years on a work permit, the holder can apply for a permanent resident permit – yet this is increasingly difficult to get as Singapore is one of the most attractive countries in the world to work and live in. A permanent residency permit is aimed for those people whom can contribute to Singapore in terms of specialist know-how and also skill transfer. This means permanent residents generally have post graduate degrees and many years of relevant work experience, be honest do you make the grade?
Singapore is a developed country and so all employers must have a written employment contract with employees stipulating terms and conditions including salary, holidays, sick leave, maternity leave and benefits. If the employee is a permanent resident or citizen then the employer and the employee must contribute to the Central Provident Fund – essentially a co-funded pension fund scheme. The Government under the Central Provident Fund administers the system, yet it is fully funded by the employer and employee. This is a special privilege and right for permanent residents and citizens. People employed under a work permit are not allowed to be members.
Salary is paid by direct bank transfer, no longer by cash or cheque, so an employee will need a bank account. Opening a bank account is simple when you have a work permit of permanent resident permit, otherwise much more complicated. Likewise renting an apartment, getting utilities connected, getting a mobile SIM card service all revolves around the permit.
Oh! and now to income tax. A nice aspect of Singapore is that your salary is paid gross and then at the end of each tax year, the individual makes a tax return and the tax is paid in the following year. Also remarkable to many foreigners, the Singapore tax office, Inland Revenue Authority of SIngapore (IRAS) is very customer friendly and helps with tax returns.
At the end of each personal income tax year, 31st December, the Employer issues each employee with a group certificate for salary and bonuses paid. Each employee then has until April of the following year to complete the personal income tax return. Everyone is encouraged to do this on line. Income tax returns in Singapore are very easy and straightforward to do online or in person at the Inland Revenue Authority of Singapore (IRAS). The staff are very friendly and helpful. It is an extreme exception, for an individual to use a tax advisor to submit personal income tax returns in Singapore.
The Singapore Income Tax Rates for December 31st 2014
- Individuals who earn less than S$20,000 per year will pay no income taxes.
- Those earning between $20,000 and $30,000 are taxed at a 2% tax rate; and
- On a sliding scale, until those earning above S$320,000 or more are taxed at a the maximum 20% rate.
There are also deductions for dependents such as parents and children. The tax rates in Singapore are lower than in other countries such as USA, EEC and even Panama City.
Non-Resident Taxation also applies to Singapore Citizens and permanent residents. Employers are required to withhold income taxes from non-residents who earn Singapore source income and Directors fees. The employer is collect and to pay the 15% of income or 20% on Directors fees as withholding tax. Like all countries the Singapore tax regime changes from year to year and each individuals situation is different. Please get expect advice before making critical decisions and refer to the very helpful Singapore Government web portals.
For once, you may enjoy your income tax experience and so fast, you have spare time to enjoy a cafe latte.