Taxation Of Employment Income In Singapore
Taxation Of Expatriates Working In Singapore
The tax year for individuals runs from 1 January to 31 December on a calendar year basis. Tax is assessed on a preceding calendar year basis. Singapore does not impose a Pay-As-You-Earn (PAYE) monthly deduction for personal tax payments.
Foreigners may have left Singapore by the time tax is assessed on their income and payment is due. For this reason, employers have a legal obligation to inform the Comptroller of Income Tax (“CIT”) using Form IR 21 (notification by employer of an employee’s cessation of employment or departure from Singapore) at least one month in advance before the non-citizen employee leaves Singapore. The employer will have to withhold payment of monies due to the employee until the employer has received the “tax clearance” from the CIT.
The CIT may require a banker’s guarantee on the estimated tax likely to be payable. The CIT has powers to prevent the departure of a foreigner, at all exit checkpoints, where there are outstanding tax liabilities not paid.
WHEN IS EMPLOYMENT INCOME TAXABLE?
REGIONAL DUTIES OUTSIDE SINGAPORE
It is recognised that very often employees in Singapore, both Singaporeans and foreigners, have to perform duties that are regional in nature and require frequent and extended periods outside Singapore. This fact is recognised by the Comptroller of Income Tax and there are currently two tax status that specifically address this issue.
The first is the Area Representative tax status. The Area Representative is a Regional Manager of the Singapore Representative Office (SRO). The SRO is registered with the government agency, International Enterprises Singapore. It normally performs all marketing and technical support services in and outside Singapore. It is not allowed to trade or make any sales in Singapore.
The Area Representative is directly employed by his Head Office outside Singapore. Although he is exercising an employment in Singapore, the Comptroller of Income Tax recognises that his duties are largely regional and outside Singapore. As an administrative concession, the Area Representative is given tax exemption on his employment income for the number of business days he is out of Singapore.
The second is the Not Ordinarily Resident (NOR) tax status. The NOR status is available to both Singaporeans and foreigners. Once the NOR status is granted, the employee is able to obtain the same tax exemption as that of an Area Representative.
This is a significant tax concession as, unlike the Area Representative, the NOR employee is employed by a Singapore employer and he has duties largely based in Singapore. The NOR status recognises that nowadays most senior managers employed in Singapore have to attend to business matters outside Singapore.
Terms and conditions apply to the NOR status including a minimum floor rate of tax of 10% on the employment income, and a minimum of 90 business days out of Singapore, in order to qualify.
It is possible to achieve tax savings in some circumstances :
OTHER SIGNIFICANT TAX ISSUES
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24 February 2003 : Information is not advice. The information provided in this paper should not be acted upon without professional advice. As this is an Executive Summary, important conditions and other details may be or are omitted. We accept no liability for persons who act on this publication without consulting us or their professional advisers.
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