INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
With effect from July 1,1999, all foreigners contributing to the Central Provident Fund (CPF) will be taxed on the employer's contributions and will not be granted tax relief on the employee's contributions made.
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 year (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.
GROSS INCOME
Employee gross income/If the employment is exercised in Singapore, employment income is treated 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 for the same year as the basic income.
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 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 form 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, etc., 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 incom as received in Singapore.
DEDUCTIONS
Business deductions/Where an individual carries on a trade, business, profession, or vocation, deduct
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