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Taxation of International Executives in Singapore

Tax Year

The general rule in Singapore is that the government assesses tax for the preceding calendar year on income of an individual, and does so in the following calendar year (Year of Assessment).

Tax Returns

The Inland Revenue Authority of Singapore (IRAS) normally issues tax returns between February and March of the subsequent year. Unless you receive an extension, you must file with the IRAS by 18 April electronically.

Unless you opt for interest-free monthly GIRO deduction instalments, you must pay tax within one month of receiving your Notice of Assessment.

Tax Rates

This progressive rate tax schedule applies to chargeable income earned by resident individuals:

 

Chargeable Income	Rate (%)	Gross Tax Payable (S$)
First S$20,000 Next S$10,000	0 2	0 200
First S$30,000 Next S$10,000	– 3.5	200 350
First S$40,000 Next S$40,000	– 7	550 2,800
First S$80,000 Next S$40,000	– 11.5	3,350 4,600
First S$120,000 Next S$40,000	– 15	7,950 6,000
First S$160,000 Next S$40,000	– 18	13,950 6,800
First S$200,000 Next S$40,000	– 19	21,150 21,600
First S$240,000 Above S$40,000	– 19.5	28,750 7,800
First S$280,000 Next S$40,000	– 20	36,550 8,000
First S$320,000 Next S$180,000	– 22	44,550 39,600
First S$500,000 Next S$500,000	– 23	84,150 115,000
First S$1,000,000 Above S$1,000,000	– 24	199,150

You’ll pay the higher of resident rates or 15 percent if you’re a non-resident. The tax rate for other income is 24 percent.

Residence Rules

In Singapore, qualitative and quantitative tests determine whether you are a resident.
Citizens are normally residents, according to the qualitative tests, but permanent residents must convince the IRAS that they do indeed have permanent residence status in Singapore.

If you live, work or are physically present in Singapore for at least 183 years of the tax year, then you are tax resident for the year of assessment, according to the quantitative test. But this doesn’t apply to company directors.

Three-Year Administrative Concession

Your are a tax resident if you work or stay in Singapore without interruption for three years, even if the number of days in the first and third year is less than 183, according to the three-year administrative concession.

Two-Year Administrative Concession

You are a tax resident for the two years if you work or stay in Singapore without interruption for no less than 183 days, including public holidays and weekends, according to the two-year administrative concession. If you are a foreign employee who came to Singapore on or after the first day of 2007, you get this concession, unless you are a professional, public entertainer or a company director.

Cessation of Employment

The IRAS must receive from employers a notification, via Form IR21, of the cessation of employment of a non-citizen, and that includes someone who is permanently leaving Singapore after being a permanent resident. You have to file the form by the earlier of one month before the employee leaves the job or leaves the country.

If the employee is a permanent resident not leaving the country forever, tax clearance is not needed. The employer gets the concession as long as the employee confirms that he/she is coming back via a Letter of Undertaking. Overseas postings do not qualify for this concession.

For clearing any tax money owed by the employee, withholding must be applied by the employer. The employer can release the withholdings at the earlier of getting IRAS permission or30 days after filing the notification.
You’ll have to explain yourself on Form IR21 if you mysteriously fail to withhold the employee’s money. However, you are off the hook if the employee quits or absconds without notice. Otherwise, you just might have to pay the tax that the employee owes.

When a non-citizen employee ends a job in Singapore, he/she derives the final gain on any unvested share awards and unexercised stock options, according to the deemed exercise rule. That is true unless the employer opts to track share award vesting and stock option exercise and then report to the IRAS any profits or losses.

After repatriation, a non-citizen doesn’t normally have to file taxes in Singapore if the tax clearance process has been completed. Additional tax clearance is needed if the employee receives a bonus or other employment-related income after leaving Singapore and the money was not already reported to the IRAS.

Should the non-citizen employee come back to Singapore to do business, then any income generated by that business activity could be taxed by the IRAS, but it depends on the exercised period of employments and tax residency. The IRAS looks carefully at the time the employee spends in Singapore during the calendar year to determine the period of employment exercised and the tax residency.

Tax Equalisation or Tax Protection Plans

An employer can get a tax reimbursement for any additional tax arising from an assignment overseas. It can be via either a “tax protection plan” or a “tax equalization plan.”

The company reimburses the employee, under a tax protection plan, for any extra taxes the employee would have to pay to the home country had the overseas posting not occurred. The employee keeps the tax windfall if the employee’s actual taxes are less than the hypothetical tax of the home country.

Tax equalization plans are different, because they ensure the employee pays the same taxes as the hypothetical taxes of the home country. The employer must reimburse the excess if the actual taxes exceed the hypothetical taxes. However, if the reverse is true, the employer pockets the excess.

In either plan, you have to figure out the hypothetical tax of the home county by looking at the employee’s base salary and other income just as if the employee had stayed home.

The employee has a taxable benefit in the year the reimbursement is received from the employer.
A company may reimburse the excess tax stemming from all income, including that from investment. It might instead reimburse an excess arising only from employment income. The company’s tax-equalization policy determines the employer’s and employee’s liability.

Employment Income

Tax is due on employment income. It doesn’t matter who the employer is or where it resides or where the money is paid.

Tax exemption for short-term visiting employees
If you are a short-term visiting employee who works in Singapore for no more than 60 days of the calendar year, you are exempt from paying income tax. This doesn’t apply to company directors, public entertainers and professionals.
Here’s how you commonly get paid:

• Salary
  When the employee renders service to the employer and receives money or some other compensation, this is called salary.

• Allowances
  Allowances such as employer payments for transportation, meals, etc. are taxable.

• Director’s Fees
  The year in which you become entitled to these fees is the year you’ll be assessed.You are entitled on the approval date to fees in arrears voted or approved at the company’s general meeting (annual or extraordinary). If you are approved in advance for director’s fees, you can’t obtain them on the date of the general meeting, but only after you render your services for the accounting year.

• Bonus
  An employer may give a contractual or non-contractual bonus to an employee.Normally, the tax on a contractual bonus applies in the year in which the employee becomes entitled to it as specified in a bonus plan or contract. Bonuses paid on a non-contractual basis are taxable when paid.
• Benefits-in-kind
  These are taxable non-cash benefits such as insurance, vehicle, passage for home leave and accommodations.
  a) Accommodation Provided by the Employer
  If the property is rented by the employer, it is the total annual rent (including the rent for furniture and fittings) paid by the employer less total annual rent paid by employee.
  b) Home Leave Passage
  Home leave passages provided to employees and their family members are taxable in full.

  c) Vehicle
  The IRAS has a standard formula for determining the taxable value of a vehicle provided by the employer to the employee for private purposes.

  d) Insurance Premiums
  The premiums paid by the employer for an employee’s own personal insurance policy are a taxable benefit.
  The premiums paid by the employer for an employee’s group insurance that pays claims to the employee are a taxable benefit, but claim payouts are not taxable.

  Employers, except ones that are service companies, tax-exempt bodies or investment holding companies, that adopts a cost-plus markup calculation for tax assessment doesn’t have to claim a tax deduction in the corporate/business tax return for the premiums on the group insurance for the relevant year. This means the premiums will be tax-exempt for employees.

  The premiums paid by the employer for an employee’s group insurance that pays claims to someone other than the employee are not a taxable benefit, but claim payouts disbursed to the employee after the fact is taxable unless the employee dies or is injured — that gratuity is tax-exempt.

  e) Tax Paid by the Employer
  It is considered a taxable benefit when the employer pays the cost of tax on behalf of the employee.

  f) Equity-Based Remuneration
  Employees can buy company shares at a predetermined price and timeframe via an Employee Share Option Plan (ESOP). Employees are taxed for any gains resulting from exercising their share options.

  Plans that provide share awards or employee share purchases are Employee Share Ownership (ESOW) plans. In this plan, the employee gets to own shares of the employer company or those of its parent company. When the ESOW plan vests, the employee is liable for taxes on profits, although a moratorium can defer these taxes.

  Taxable profit is the difference between the shares’ open market value and the shares’ acquisition price as of the exercise date or vesting date, for both ESOP and EWOW plans.

  Unless the tracking option alternative is in effect, departing expatriates with unvested share awards or unexercised stock options are subject to a deemed exercise rule.

  g) Contributions made by the Employer to Overseas Pension / Provident Fund
  Employer’s contributions made on or after 1 January 2024 to an overseas pension or provident fund are taxable in the hands of employees upon contribution and deductible to employers as per the normal tax rules.

  h) Loans
  The employee has a taxable benefit if the employer gives a reduced-rate or zero-interest loan. The benefit amount is the value of the interest reductions. If the employee has little influence on, control of or holdings in the company, the loan scheme gets an administrative concession — the benefit is not taxable, but only on condition that the loans are available to all employees.

  i) Gifts
  Cash or non-cash employer gifts are taxable benefits-in-kind. However, there is an IRAS administrative concession: cheap gifts ($2,000 or less per incident) that the employer hands out at festivals and special occasions and are available to all staff members are not subject to taxes.

Area Representatives of Non-Resident Companies

Area representatives of non-resident companies who live in and use Singapore as a nexus for activities that extend to other countries are assessed taxes on the income relating to the time actually spent in Singapore. You must meet certain qualifying conditions and file a claim that the IRAS approves in order to qualify for the area representative basis of taxation.

Salary Earned from Working Abroad

Wherever the contact is made or the money is paid, the IRAS taxes remuneration received from working at a job in Singapore. This also includes non-Singaporean employment in which the service rendered is an extension of the individual employee’s Singapore employment.

Out of fairness, some employees working entirely out of Singapore, for example on an overseas assignment, are not subject to Singapore income tax.

Interest Income

An individual’s interest income is tax-exempt if it comes from money deposited with a licensed finance company or approved bank. This also applies to interest from debt securities.

But you must pay the tax if the interest comes through a Singapore partnership or from a profession, business or trade.

Dividend Income

Shareholders don’t pay taxes when receiving dividends paid by Singapore-resident companies, because these dividends fall under the one-tier corporate tax system.

Rental Income

If you collect rent for a Singapore property, you have to pay tax on it. You must declare each property’s gross rental income, including the money you get for furniture and fittings, as well as any service charges that the tenant has to pay. You can claim expenses incurred during the rental period, such as repairs and maintenance, fire insurance, mortgage interest, property tax — you get the idea.

Remittances of Offshore Funds

Singapore doesn’t tax any overseas income remitted by resident individuals. However, the tax break doesn’t apply to partnerships.

Capital Gains Tax

Singapore doesn’t tax capital gains and doesn’t grant deductions for capital losses.

Foreign Exchange Gains and Losses

Singapore doesn’t tax foreign exchange gains and doesn’t grant deductions for foreign exchange losses.

Deductions from Income

You can deduct expenses only if you incur 100 percent of them from income-producing activities, not from capital and not if statutes prohibit the deduction. Only a handful of deductions qualify.

Residents with particular personal circumstances in the year preceding the tax assessment may qualify for tax relief in the form of deductions from income. No relief is available for non-residents.

Here are some typical reliefs:

	S$
Earned income relief • below 55 years old • 55 – 59 years old • 60 years old and above	1,000 6,000 8,000
Spouse relief Spouse living with or maintained by taxpayer and income is not more than S$4,000.	2,000
Qualifying child relief Unmarried child and income is not more than S$4,000.	4,000
Parent relief • living with taxpayer in the same household • not living with taxpayer in the same household	9,000 5,500
Supplementary Retirement Scheme (SRS) relief • Singapore citizen / Singapore permanent resident • non-citizen	capped at 12,750 capped at 29,750

Double Taxation Agreement

When Singapore signs an Avoidance of Double Taxation Agreement with another county, double taxation of the income earned by one country’s resident in the other country is prevented.

Countries that have the double taxation agreement with Singapore may grant credit on all or some of the foreign tax against the tax that Singapore assesses on foreign income. Dual residents have to go to a tiebreaker to figure out which is the country of residence under the treaty. If the individual is present in the country for less than 183 days in the tax year, most treaties provide for tax exemption of non-resident individuals from tax on employment income. However, certain conditions apply. Unilateral tax credits may be granted in the absence of a tax treaty.