Paying income tax is one of the things in life that you cannot avoid. For each Year of Assessment (YA), you must file your income tax by 15 April for paper filing and 18 April for E-Filing. There is no doubt that you want to pay as little tax as you can, and there are ways to do that. But first, let us go over the basics of personal income tax for Singapore tax residents as laid out by the Inland Revenue Authority of Singapore.
Singapore Tax Residents and its Tax Treatment
You are a tax resident for a particular YA if you are:
- A Singapore Citizen or Singapore Permanent Resident (PR) who normally resides in Singapore, except for temporary absences; or
- A foreigner who has stayed/worked in Singapore for at least 183 days in the previous calendar year; continuously for 3 consecutive years; or
- A foreigner who has worked in Singapore for a continuous period straddling 2 calendar years, and your total period of stay (including your physical presence immediately before and after your employment) is at least 183 days. This applies to foreign employees who entered Singapore but excludes directors of a company, public entertainers, or professionals.
Foreigners with a work pass that is valid for at least 1 year will also be treated as tax residents. Your tax residency status will be reviewed at the point of tax clearance when you cease your employment based on the tax residency rules. If your stay in Singapore is less than 183 days, you will be regarded as a non-resident.
As a tax resident:
- You will be taxed on all income earned in Singapore.
- Your foreign-sourced income (with the exception of those received through partnerships in Singapore) brought into Singapore is tax-exempt.
- You may claim deductions on expenses, donations and personal reliefs.
Generally, you will need to submit your Income Tax Return if in the preceding calendar year, your total income is more than $22,000 or you have self-employment income with a net profit of more than $6,000. The income of tax residents after deducting allowable expenses, donations and personal reliefs is subject to income tax at progressive rates ranging from 0% to 24%.
- A personal income tax relief cap of $80,000 applies to the total amount of all tax reliefs claimed for each YA.
- From YA2024 onwards, there will be changes in the tax brackets for higher income. If your income falls between $500,000 and $1 million, you will be taxed at 23%, while income in excess of $1 million will be taxed at 24%. This adjustment is an increase from 22% in YA 2017 to 2023 for income in excess of $500,000.
Tips to Reduce Your Personal Income Tax in Singapore
While it is too late to make any changes for tax reduction and relief for YA 2024, you can still take action this year to minimise your tax bill for YA 2025 onwards.
Tax Deduction on Donations
By making cash donations to Community Chest or any approved Institute of a Public Character (IPC) for the benefit of local community, or the Singapore Government before the year ends, you can enjoy a tax deduction of 2.5 times the qualifying donation amount during the next tax season. In addition to cash donations, the donation of public shares listed on the Singapore Exchange (SGX) or units in unit trusts traded in Singapore to approved IPCs is also tax deductible.
Besides, donations to museums by individuals are tax-deductible if the museum has obtained the Approved Museum Status with the National Heritage Board (NHB), and the artefact has been deemed worthy of collection by NHB. Furthermore, individuals who donate sculptures or works of art for public display to the NHB or any of its approved recipients (from 1 Apr 2006), donations of land or buildings to approved IPCs (from 1 Apr 2003), and naming donations (from 1 Jan 2005) are tax-deductible.
However, donations of goods that do not fall within the list of tax-deductible donations and donations made to charities that are not approved IPCs are non-tax-deductible donations.
Central Provident Fund (CPF) Cash Top-Up Relief
By making cash top-ups for yourself to Special Account
1. Spouse/Siblings must not have an annual income of more than $4,000 in the year preceding the year of top-up.
2. Annual income includes taxable income (e.g. trade, employment and rental), tax-exempt income (e.g. bank interest, dividends and pension) and foreign-sourced income regardless of whether it has been remitted to Singapore.
Course Fee Relief
If you have attended courses, seminars or conferences, here’s some great news for you! You may claim Course Fee Relief up to a maximum of $5,500 each year for the actual course fees incurred by yourself, regardless of the number of courses, seminars or conferences you have attended. The types of fees you may claim include aptitude test fees (for computer courses), examination fees, registration/enrolment fees and tuition fees. Amount paid or reimbursed by your employer, or any other organisations (including the use of SkillsFuture Credit) cannot be claimed as Course Fees Relief.
Courses that qualify for relief include:
- Any course of study, seminar or conference for the purpose of gaining an approved academic, professional or approved vocational qualification.
- Any course, seminar or conference that is relevant to your current or new employment, trade, business, profession or vocation.
However, the following courses are not eligible for relief:
- Courses, seminars and conferences for leisure or hobby (e.g. photography, sports courses) or for general knowledge or skills (e.g. social media skills, Microsoft Office).
- Polytechnic/University courses if graduates have never exercised any employment or carried on any trade, profession or vocation previously. Vacation jobs or internships are not considered employment for this relief.
Life Insurance Relief
Did you know that you may claim Life Insurance Relief if you qualify? Yes! From YA 2023 onwards, you may claim Life Insurance Relief if you satisfy all these conditions:
- The total CPF contribution for the following was less than $5,000 in the year preceding the YA:
- Compulsory employee’s CPF contribution
- Compulsory Medisave/voluntary CPF contribution as a self-employed individual
(The voluntary cash contribution to your Medisave account is not considered for the $5,000 limit for the total CPF contribution for YA 2023 onwards.)
2. You paid insurance premiums on your own life insurance policy. For married men: If you have paid for your wife’s life insurance policy, you can claim the insurance premiums paid.
3. The insurance company must have an office or branch in Singapore if your policies are taken on or after 10 August 1973.
(The office or branch of the insurance company in Singapore should perform the same activities as the overseas insurance company in which the life insurance policy was purchased)
Examples of insurance policies/ riders that do not qualify for Life Insurance Relief:
- Accident insurance policy
- Hospitalisation policy
- Health insurance policy such as MediShield, Integrated Shield Plans, etc.
- Disability insurance policies such as ElderShield, CareShield Life, etc.
- Riders under life insurance policy (e.g total and permanent disability riders, critical illness riders, premium waiver riders, etc.)
- Critical illness policy
- Endowment policy
From YA 2023 onwards, if you have met all the conditions stated above, you may claim the lower of:
- The difference between $5,000 and your CPF contribution; or
- Lower of 7% of the life insurance value; or the amount of insurance premium paid.
Conclusion
Tax season can be daunting for many individuals, especially if their tax bracket is on the higher side. However, there is no need to worry as there are several ways to lighten your tax burden. Remember these tips as you gear up for the upcoming income tax filing in Singapore for the upcoming YAs.
Please note that the accuracy of this information may vary over time, as tax laws are subject to change.
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