Worldwide Individual Taxes Summaries——Singapore（2001-2002）
Worldwide Individual Taxes Summaries——Singapore（2001-2002）
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An employee entitled to Qualified Stock Option Schemes can apply to defer payment of taxes for up to five years. Tax remission is available on gains on stock options exercised after January 1, 1999, to avoid double taxation.
This year, a new retirement scheme called Supplementary Retirement Scheme (SRS) will be implemented. This scheme is in addition to the CPF. It is based on voluntary contributions from participants (including foreigners), and employers are not required to contribute. Participants will be able to claim tax deduction on contributions, subject to a ceiling, but tax will be payable on withdrawals. Details of the scheme have not been finalized yet.
TERRITORIALITY AND RESIDENCE
Income is taxable when it accrues in or is derived from Singapore, whether or not the individual is resident in Singapore. Income derived from sources outside Singapore is taxable only if it is received in Singapore by a resident individual.
Individuals are resident in Singapore if they reside there, except for such temporary absence therefrom as may be reasonable and not inconsistent with a claim to be resident in Singapore. Individuals who are physically present or who exercise an employment (other than as a director of a company) in Singapore for 183 days or more during the year preceding the year of assessment are treated as resident for that year of assessment. As a concession, an expatriate who stays in Singapore for a consecutive period spanning three calendar years (not necessarily three complete calendar years) is considered a resident.
Resident individuals are entitled to certain personal allowances and are subject to graduated tax rates ranging from 2 to 28%. Nonresident individuals are not entitled to any personal allowances and are subject to tax at the corporate rate of 26%. As a concession, their employment income is taxed at the higher of 15% or the graduated resident rates. This
concession does not apply to nonresident directors.
Employee gross income/If the employment is exercised in Singapore, employment income is treated as earned as earned there and is, therefore, taxable in Singapore. The countries of the employer, of payment, and of the benefiCIAry of the services are irrelevant in determining the country of source of employment income.
Employment income includes salaries, bonuses, allowances, perquisites, and benefits-in-kind. Certain benefits-in-kind are accorded preferential rates, which are less than the actual cost to the employer. The benefit of rent-free housing is normally calculated as the lesser of 10% of the assessable
emoluments (including gains from stock options) and the annual (rental) value of the property. By concession, only 20% of the cost of home-leave passage is assessed on the expatriate employee. The amount of tax borne by the employer is treated as additional income of the employee. Short-term visiting employees are not subject to tax on income from an employment
exercised in Singapore if the employment does not exceed 60 days. This exemption, however, does not apply to a public entertainer or to a company director.
Area representatives of nonresident companies who reside in and use Singapore as a base for activities extending to other countries are assessed on the remuneration relating to the time actually spent in Singapore or on the remuneration received in Singapore, whichever is greater.
All retirement benefits other than Central Provident Fund (CPF) benefits, including gratuities and pensions, are taxable. CPF is the national pension scheme in Singapore. The scheme is only available to Singapore citizens and permanent residents, and it provides a lump sum at the normal retirement age, consisting of past contributions made at prescribed rates by the employee and the employer, as well as interest thereon. However, CPF contributions made under certain circumstances are deemed to be part of employment income, which is taxable.
Capital gains and investment income/There is no capital gains tax in Singapore. Where an individual enters into a series of capital transactions, however, the tax authorities may take the view that the individual is carrying on a business and assess that person to income tax accordingly.
Although there is no tax on capital gains, profits from properties sold within three years of their purchase are taxable as income. The taxable proportion decreases by one-third with each year added to the holding period.
Besides real property, the tax also applies to short-term gains from the sale of shares in a private company holding 75% or more of its assets in the form of real property or shares in property companies. These speCIAl rules apply only to properties located in Singapore.
Income from interest, dividends, rents, royalties, and so on, derived from Singapore is taxable, whether or not the individual is resident in Singapore.
However, certain types of interest received by a nonresident individual are exempt from income tax, such as interest on deposits with banks and on qualifying debt securities. Investment income derived from sources outside Singapore is taxable in the hands of resident individuals only if it is
received in Singapore. Statutory provisions govern the basis of treating foreign income as received in Singapore.
Business deductions/Where an individual carries on a trade, business, profession, or vocation, deductions are allowed for all outgoings and expenses incurred wholly and exclusively in the production of the income being assessed, including capital allowances (fiscal depreCIAtion) on most fixed assets, except for land and nonindustrial buildings.
Nonbusiness expenses/An individual can deduct annual subscriptions paid to professional institutes or societies in which membership is generally required as a condition of employment. A deduction may also be claimed for donations to approved charities. Interest expense may be deductible, provided it is incurred wholly and exclusively in the production of income.
Mortgage interest is, therefore, deductible only where the property concerned yields income.
No deductions are allowed for medical expenses or for any other personal or household expenditure.
Singapore citizens and permanent residents are allowed deductions against their taxable income for contributions made to the CPF or an approved pension/provident fund but subject to the following limits.
1. Contributions made up to the limit prescribed in the CPF Act.
2. For self-employed individuals, the deduction for contributions made is restricted to the lesser of S$14,400 or 20% of assessable business income.
Any life insurance premium is deductible, but the total deduction (i.e., contributions to the CPF and life insurance premium) is restricted to S$5,000. For Singapore citizens and permanent residents, their CPF contributions must be less than S$5,000 before they can claim this deduction.
Personal allowances/For year of assessment 2000 (income year 1999), the following amounts are deductible from the assessable income of a resident individual to arrive at the income subject to tax.
1. Personal allowance: S$3,000.
2. Wife allowance: S$2,000.
3. Handicapped spouse allowance: S$3,500 for the maintenance of a handicapped spouse whose income does not exceed S$2,000 for the year.
4. Earned-income allowance: Lesser of actual earned income or S$1,000 if age is under 55; increased for individuals who are 55 and older or are handicapped.
5. Child allowance:
a. Individuals having fewer than four children on or before August 1, 1973: First, second, and third child-S$2,000 each; fourth child-S$2,000 only if born after 1987;
b. Handicapped child: S$3,500;
c. Where a child is undergoing university or similar education abroad:
Allowance up to twice the amount of the normal deduction for that child may be allowed, subject to certain conditions;
d. Increased child allowances for better-educated working mothers: The child relief for each of the first four children is equal to the normal child relief plus a percentage of the mother’s earned income, subject to a maximum. For a child 12 years of age and older on January 1, 1999, the percentages applicable for the first, second, third, and fourth child are
5%, 10%, 15%, and 15%, respectively, with a maximum for each child of S$10,000. For a child under 12 years of age on January 1, 1999, the respective percentages for the first, second, third, and fourth child are 5%, 15%, 20%, and 25%, with a maximum for each child of S$15,000. Relief is available for a fourth child only if born after 1986. As a fourth child born in 1987 does not qualify for normal child relief, the increased or
enhanced child relief is given at S$1,500 plus the applicable percentage of the mother’s earned income.
A working mother has the option to claim the enhanced child relief in full or to claim the relief on the basis of the applicable percentage of her earned income, with the husband claiming the normal child relief. The total relief claimed by husband and wife must not exceed the maximum claim available for each child. This option of a split claim is not available
for the fourth child if born in 1987;
e. An S$20,000 one-time tax rebate against either or both parents’ tax liability plus a tax rebate at 15% of the mother’s earned income against her tax liability is available for a third child born after 1986 and a fourth child born after 1987 if the child and the elder siblings are all Singapore citizens;
For a second Singaporean child born after 1989 to a mother under 31 years of age, a one-time speCIAl rebate against either or both parents’ tax liability, depending on the mother’s age, is available as follows.
Age of mother rebate
Below 28 years……………………………………………… 20,000
28 years……………………………………………………… 15,000
29 years……………………………………………………… 10,000
30 years……………………………………………………… 5,000
The speCIAl tax rebates must generally be used up within seven or nine years.
6. Dependent relief:
Aged parent or grandparent maintained by taxpayer:$3,500.
Aged parent or grandparent living with taxpayer: $5,000.
Dependent’s income must not exceed $2,000 per annum.
Delivery and hospitalization expenses: The amount not exceeding S$3,000 for a fourth child born after 1987.
7. Educational expenses: Tuition and examination fees not exceeding S$2,500 relating to approved academic, professional, or vocational qualifications.
8. Foreign maid levy: Twice the amount of levy imposed on one maid is deductible against the earned income of a married woman or of a divorced or separated woman with dependent children living with her in the same household.
9. Reservists: S$1,000 or S$2,000 for those who have completed or performed national service; a relief of S$500 each will also be given to Singaporean parents and wives of reservists against their own income.
Additional allowances are granted for dependent parents, grandparents, great-grandparents, and handicapped siblings, as well as for topping up parents’ CPF accounts.
For treaty countries, credit for all or part of the foreign tax against the tax assessed on the foreign income in Singapore may be granted. For nontreaty countries, unilateral tax credits are given for foreign tax paid on dividend income, employment income and directors’ fees derived therefrom, and prescribed service fees received from certain countries. The tax deducted at source from a Singapore dividend is available as a credit
against any Singapore tax payable or, if no tax is payable, as a refund.
SoCIAl security taxes/Central Provident Fund (CPF) contributions are payable.
The employer contributes 10% (this rate increased to 12% in 2000). The employee contributes 20% of ordinary wages paid in cash, up to a maximum contribution of S$1,200 per month, and 20% of additional wages (e.g., year-end bonus), up to a maximum contribution of 40% of annual ordinary wages if total wages exceed S$100,000 and annual ordinary wages exceed S$72,000.
If total wages exceed S$100,000 but annual ordinary wages do not exceed S$72,000, the maximum contribution on additional wages will be limited to the amount payable on the difference between S$100,000 and annual ordinary wages. A foreign national is exempted from contributing to CPF. See also “Employee gross income” and “Nonbusiness expenses” above.
Local taxes on income/There are no other taxes on income in Singapore.
Returns/Each taxpayer is required to make an annual return of income and of such particulars as may be required to determine the personal reliefs due. A wife can elect to be separately assessed on her income. In such a case, she can choose to file a return separate from her husband’s. The tax return must b