Personal Income Tax Guide in Singapore 2023

We’re off to start tax season in year 2023. Needless to say, Singapore’s personal income tax is considered relatively low compared to other countries yet some might still unsure of what to expect.

Fret not, we are here to show you the basics and also rebates to take note of while you are doing your calculations! Alternatively, if you are looking for someone to deal with business taxes, we got that covered too (just saying).

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Personal Income Tax Rates in Singapore

Singapore adopts a progressive taxation framework wherein personal income tax rates start at 0% and are capped at 22% for Singapore residents. For non residents, a flat rate of 15% will be imposed on employment income whereas other personal income such as rental properties, pension and director's fees will be subjected to 22%.

However, starting from 2024, the government has announced an increase of 2% tax rate on top marginal individual income. This means that both top marginal Singapore tax-resident and non-residents (except under employment) will be accounted for a 24% tax.

Singapore Resident Rate

As a resident of Singapore, your tax rates start at 0% and are capped at 22%. Filing of personal tax return for tax resident is mandatory if your annual income is S$20,000 or more. Tax residents do not need to pay tax if your annual income is less than S$20,000. Additionally, earned income relief is also given to further reduce the tax payable depending on age.

Non-Resident Rates

In Singapore, you will not be considered a resident if you are a foreigner who stayed or worked in Singapore for less than 183 days in the tax year. Therefore, you will be taxed on all income earned in Singapore under an income tax rate of 15% to 22% depending on your income. You may claim expenses and donations to save tax. However, you are not eligible to claim personal reliefs.

On the other hand, non-residents that reside in Singapore for under 60 days or less in a tax year will not be exempted from tax if you are a director of a company, a public entertainer or exercising a profession in Singapore. Professionals include foreign experts, foreign speakers, queen’s counsels, consultants, trainers, coaches, etc.

Thinking to register as a resident? Here are the benefits of becoming a PR in Singapore.

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Difference between Tax Residents and Non-Tax Residents

If you are on a low-to-medium income and spend most of your time in Singapore, becoming a tax resident can help save you money. If your annual income is below S$320,000 to S$400,000, the tax residence status will lower the amount of taxes you have to pay. Additionally, if you frequently travel outside Singapore, it is crucial to keep track of how many days you spend in the country.

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How To Calculate Personal Income Tax?

Income is taxable when it accrues in or is derived from Singapore, whether or not the individual is resident in Singapore. Income derived from sources outside Singapore is only taxable if it is received in Singapore by a resident individual through a partnership in Singapore.

Taxes are calculated based on your chargeable income, which is the sum of your total income, minus deductible expenses, donations and personal reliefs.

• Total income includes any profits made as a sole proprietor, partner in a partnership or employed professional, dividends, interest, investments and rental income (not including qualified overseas earnings).
• Deductions may include employment or rental associated expenses. Donations to qualifying charities can also be deducted from your total income. You can take note of personal reliefs such as certain course fees and parent relief for tax calculation too.

To ease your headache, IRAS has prepared a tax calculator for you to crunch the numbers  easily. Hate do the math? You can always get expert’s advice on how to do it timely and accurately.

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Personal Income Tax Reliefs and Deductions

Wondering why you have to pay so much taxes? Maybe you have just overlooked the
tax reliefs and deductions that are available in Singapore.

For Singapore Residents, some common forms of tax relief include:

• Personal Relief ( parent/grandparent, spouse/child, handicapped relative, etc)
• Charitable donations
• Pursuing education ( course fee relief )
• Business expense deductibles
• Employment expense deductibles

Singapore tax laws provided plenty of schemes to encourage specific social and business activities as well as helping out needy communities. Hence, it is important to keep the financial records for claim so you don’t let a single penny slip through the cracks!

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How To File Taxes As a Self-Employed?

After covering the basics of individual income tax, how about being your own boss? Well, compared to employees, self-employed individuals encounter more issues in doing their own taxes, according to the Inland Revenue Authority of Singapore (IRAS).  Thus, it is imperative to comprehend the structure of your business prior to filing taxes in order to ascertain obligations in a timely manner.

1. Know your tax obligations
   Report the income earned from business operations as part of the total personal income
2. Know when to file your taxes
   Start filing your tax income if your total annual net trade income is over $6,000 or taxable yearly revenue exceeds $22,000. Filing dates begins from March 1 to April 18 annually.
3. Keep proper business records
   You need to make sure you keep track of all your business transactions from the beginning for seamless tax filing.
4. Prepare statement of accounts
   You must prepare profit and loss accounts as well as balance sheet for every accounting period.
5. Prepare 2/4-line statement
   The table below derived from IRAS explained the different statements to prepare based on your revenue.
6. IRAS E-filing
   File your taxes to IRAS at myTaxPortal online

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As you can see documentation plays the big role while doing taxes, but with TaxBuddy’s spreadsheet, you can easily organise your records and categorise your expenses effortlessly. Sounds complicated? Just leave your bank statements to us and our experts will handle it for you.

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The Bottom Line

Sprout Asia wants you to focus on what you do best while we take care of the rest, for business taxes and bookkeeping related matters we offer budget-friendly accounting services to ensure your finances stay well managed and organised. Feel free to contact us for more information regarding our services, we’ll respond within 24 hours.