Knowing the Wage Credit Scheme Updates 2019 in Singapore
Singapore is known around the world for its efficiency and excellent employment system that lets employers take advantage of the Wage Credit Scheme (WCS). The Ministry of Finance and IRAS said that employers will receive over S$600 million in payouts.
The Inland Revenue Authority of Singapore (IRAS) is a government body that does the tax levy and collection. It also enforces the regulation of taxes in Singapore. The primary goal of IRAS is to have a simple and reasonable tax system that lessens the regulatory burdens and supports economic growth.
Over 90,000 of employers are entitled to the payouts, from small to medium scale enterprises (SMEs) that receive payouts, approximately 70% of the total sum is disbursed.
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The employers who are eligible had to make a full contribution to the CPF before January 2019 so they can receive the sixth tranche of the WCS payouts by March 2019. Of course, this is one of the wage credit scheme updates that you should know.
If they want to qualify for the WCS payouts, employers must fulfil these conditions:
- Have given the Singaporean employees an increase in their monthly wage of at least $50 in2 2018. If they sustained the monthly gross wage increase of at least $50 in 2017, they are also qualified.
- Paid the mandatory CPF contributions of employees in 2018 to the CPF board on or before January 14, 2019.
Employers are not required to apply in order to receive payouts from the WCS. The eligible employers received a letter from the IRAS in March 2019 telling them that they will receive a WCS payout. Then, the credited payouts go directly into the GIRO bank account of the company, which will be used for income tax and GST, or their bank account that has a PayNow Corporate registration. Employers that do not have these crediting modes were encouraged to sign up for PayNow Corporate before January 2019.
Who Cannot Receive the Wage Credit Scheme?
The government-related organizations and those without a Singapore registration are not part of the WCS scheme. Here is a list of the ones that do not qualify:
- Consulates, High Commissions, Embassies, and Trade Offices
- Foreign Chambers and those that practice law
- Financial Representatives that are registered under the Money Authority of Singapore which includes Insurance and Bank offices
- Foreign Government Agencies and Trade Associations
- The Foreign Non-profit Organizations
- Foreign Military Units
- Unregistered foreign or local entities
- Government schools and those aided by the government
- International organizations
- Grassroots Units
- People’s Association Services
- Local Government Agencies that include Ministries and Department and Statutory Boards
- Representative offices of the new bureaus
- Foreign companies representative offices
How to Calculate the Gross Monthly Wage
If you want to compute the monthly gross wage, take the total of the wages including their salary, overtime, and bonuses that you pay your employee per calendar year. Divide that number by how many months you contributed to the CPF. It is also worth noting that WCS applies a salary threshold of S$4,000.
The Wage Credit Scheme Payout is Taxable
The payout from the wage credit scheme is a government grant, which means it is taxable. Therefore, any payout you receive from the WCS will incur taxes during the year of assessment when you received the payout.
If you are a partnership or individual, there is no need to worry about declaring your income tax return payout because it will automatically be part of the IRAS tax assessment. However, if you have a limited company, you must declare the wage credit you received in your income tax return in every year of assessment.
Let us talk more about the wage credit scheme updates.
Ever since the WCS was introduced in 2013, and the support it has given until 2015, it was extended for two more years from 2016 to 2017. In the budget, it was extended in 2018 for an additional three years. The WCS is supportive of businesses that embark on efforts of transformation and encourage sharing the productivity of the gains with workers. The government still funded the 20% wage increase in 2018. The ratio of co-funding was decreased to 15% in 2019 and 10% in 2020.
Receiving the Wage Credit Payout
The wage credit payout is given every year, in March. The paid out amount you made is computed based on the wage increases you gave employees during the previous year.
Even if the cheques were issued during the past, the IRAS already adopted digital payment methods. In March 2020, all of the WCS payouts were directly credited to the bank account you registered through PayNow Corporate or the GIRO bank account of your company. If you have not set up a PayNow Corporate or GIRO account bank account, you must do it as soon as possible to avoid any delays in payouts and complications.
How the Tax System is Beneficial to Businesses
Companies can easily set up in Singapore and start to take advantage of the low corporate tax rates including the tax schemes that reduce taxes for new businesses and startups. In addition, the corporate tax structure of Singapore gives rewards to enterprising companies by giving grants and tax incentives.
Since they follow a single-tier tax system, Singapore will only tax company profits, but the dividends being issued to shareholders are not taxed. In addition, Singapore does not put taxes on capital gains and most of the foreign-sourced income types. For instance, if you have a startup to launch and sell it, you are not going to pay sales tax on shares in Singapore.
The Avoidance of Double Taxation Agreements (DTAs) and Unilateral Tax Credit is allowing Singapore companies to remove or limit taxes on their foreign-sourced income.
How the Tax System is Beneficial to Individuals
Singapore draws in top talent from different parts of the world because they offer personal low tax rates. Individuals can lessen their tax rate by utilizing generous tax deductions that are offered by the government of Singapore.
Generally, individual income that comes from a foreign source has no tax. This is including the income received in a Singapore bank account. Also, individuals are not required to pay dividend, inheritance or capital gains tax.
Non-residents who work in Singapore can look for tax relief through the Singapore DTAs network.
Authorities that Grant Business Incentives
1. International Enterprise Singapore (IE Singapore)
This is under the Ministry of Trade and Industry, and it helps the country create a global presence and supports Singapore’s growth as a business hub for start-ups and trading.
2. Singapore Economic Development Board (EDB)
A government agency that is also run by the Ministry of Trade and Industry. It promotes Singapore as a central hub for starting a business and innovations on an international level.
3. Inland Revenue Authority of Singapore (IRAS)
A government body under the Ministry of Finance that handles tax collection and acts as the main tax advisor to the government.
4. Monetary Authority of Singapore (MAS)
It is Singapore’s central bank and the primary financial regulatory authority. It creates a monetary policy, which includes the issuance of currencies and overseeing the payment systems.
If you need help understanding the wage credit scheme updates or your taxes, especially if you want to maximize the benefits and deductions, contact 3E Accounting. You can avail of their accounting and bookkeeping services that you can benefit from. Furthermore, they can assist you in setting up a business in Singapore. They also help with Singapore payroll services.