Dealing with tax, payroll and employment regulations for your staff from overseas always poses complications that demand expert guidance for both personal and corporate taxes. This is no different when dealing with tax in Singapore.
Foreign companies can pay their staff working in Singapore, but to hire and pay employees there, they must establish a legal entity. Non-resident companies typically choose to open a limited liability subsidiary, often as a small to medium-sized enterprise, to gain a foothold in the Singapore market. The subsidiary can have 100% foreign ownership but is a separate legal entity from the parent company under Singapore’s Companies Act. Once incorporated, registering employees with the Central Provident Fund (CPF) and the Inland Revenue Authority of Singapore (IRAS) are the first of many steps in employing staff and regulations are strictly applied.
Bradford Jacobs has more than 20 years of experience in the front line of international payroll providers. We ensure our clients comply with every aspect of taxation legislation globally. Our local ‘know-how’ is vital for multinational companies expanding into Singapore’s commercial and financial hub and then further afield into Asia and the Pacific Rim.
Personal Income Tax (PIT):
The Resident’s income becomes liable at SGD 20,000 (€13,343, US$14,660) at 2% up to SGD 30,000 (€20,000, US$21,990). There are nine different tax bands from 3.5% to 22%, with the top rate attaching to excess income over SGD 320,000 (€213,376, US$234,630). Non-residents’ total income is taxed at a flat rate of 22%, within which employment income is taxed at 15% or at residents’ rates, including allowances, whichever produces the highest tax.
Social Insurance Taxes:
Employers contribute 17% of an employee’s regular monthly wages, with the employee contributing 20%, capped for each at SGD 6,000 (€4,010, US$4,394). Therefore, employers’ maximum contribution is SGD 1,020 (€682, US$747); employees’ maximum contribution is SGD 1,200 (€800, US$880).
Corporate Income Tax (CIT):
The flat rate is 17%. There are partial allowances. The first SGD 10,000 (€6,687, US$7,325) is 75% exempt, and the next SGD 190,000 (€127,064, US$139,333) is 50% exempt. For start-ups (excluding property development and investment holding companies), the first SGD 100,000 (€66,866, US$73,333) is 75% exempt, with the next SGD 100,000 50% exempt.
Withholding Tax (WHT): Income from loans and rentals to non-residents is liable for 15% WHT, with 10% applying to royalties unless tax treaties exist between Singapore and the country involved.
Value Added Tax: The standard rate of 7% applies to the supply of most goods and services in Singapore. The rate is expected to increase to 9% by 2025. Companies must register for GST if turnover exceeds SGD one million (€680,300, US$742,343) in the previous 12 months or if they expect turnover to exceed that level in the current tax year. Zero-rated categories include financial services sale and lease of residential properties.
The tax year runs from January 1 until December 31, with returns filed by April 15 of the following year (April 18 if filed electronically). Due taxes are paid within 30 days of the assessment. Spouses can file separate returns, but regulations apply to claiming deductions. Individuals can pay tax in monthly instalments, while employees’ tax is withheld by their employer and remitted to the Inland Revenue Authority of Singapore.
Tax residents live in Singapore or have employment (excluding company directors) for more than 183 days in the 12 months preceding the assessment year. After personal allowances, residents are taxed at progressive rates from 2% to 22%. Residents and non-residents are taxed on income sourced in Singapore.
Resident’s Personal Income Tax (PIT):
| From | Not Over | Tax % |
|---|---|---|
|
SGD 20,000 |
SGD 30,000 (EUR 20,016 - USD 21,994) |
2% |
|
SGD 30,001 |
SGD 40,000 (EUR 26,689 - USD 29,323) |
3.5% |
|
SGD 40,001 |
SGD 80,000 (EUR 53,400 - USD 58,632) |
7% |
|
SGD 80,001 |
SGD 120,000 (EUR 80,114 - USD 87,944) |
11.5% |
|
SGD 120,001 |
SGD 160,000 (EUR 106,812 - USD 117,259) |
15% |
|
SGD 160,001 |
SGD 200,000 (EUR 133,515 - USD 146,550) |
18% |
|
SGD 200,001 |
SGD 240,000 (EUR 160,320 - USD 175,860) |
19% |
|
SGD 240,001 |
SGD 280,000 (EUR 187,040 - USD 205,130) |
19.5% |
|
SGD 280,001 |
SGD 320,000 (EUR 213,712 - USD 234,445) |
20% |
|
SGD 320,001 |
- |
22% |
Non-Resident’s Personal Income Tax (PIT):
Non-resident’s total income is taxed at a flat rate of 22%.
Employment income is taxed at 15% or at residents’ rates, including allowances,
whichever produces the highest tax.
All employers in Singapore must contribute to the Central Provident Fund on behalf of their employees. Employers contribute the equivalent of 17% of their employees’ monthly payroll, capped at SGD 6,000 (€4,010, US$4,394). Employers’ maximum contribution is, therefore, SGD 1,020 (€682, US$747). The rates also apply to additional remuneration, such as year-end bonuses. Reduced rates (expected to be increased as of 2022) apply to those earning less than SGD 750 (€500, US$548) and over-55s.
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