Worldwide Tax Summaries--SINGAPORE（1999-2000）(part2)
Worldwide Tax Summaries--SINGAPORE（1999-2000）(part2)
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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.
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.
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.
All contributions made under the contract of employment to the CPF or an approved pension/provident fund, up to the limit prescribed in the CPF Act, are allowed as a deduction against the individual employee's taxable income. However, CPF contributions made by a foreign employee are not tax deductible, even if the contributions are obligatory under the employment contract. In the case of a self-employed individual, the deduction for contributions made is restricted to the lesser of S$14,400 or 20% of assessable business income. Only where contributions to the CPF are less than S$5,000 can an individual claim any life insurance premium as a deduction. In these circumstances, the total deduction (i.e., contributions to the CPF and life insurance premium) should not exceed
Personal allowances/For year of assessment 1999 (income year 1998) 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 over or are handicapped.
5. Child allowance:
a. Individuals having more than three children before August 1,1973-First, second and third child S$2,000 each; fourth and fifth S$300 each;
b. 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;
c. Handicapped child-S$3,500;
d. 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;
e. 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 year and above on January 1,1997, 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 1,1997, 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;
f. A 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. 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 director's 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 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$7200, 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 be filed on a calendar-year basis and must be submitted by April 15.
Payment of tax/The tax assessed is payable within one month of the date of the assessment whether or not a notice of objection to the assessment has been lodged with the tax authorities. The notice of objection must be lodged within 30 days of the date of the notice of assessment, failing which the assessment will be treated as final.
In the case of an employee, the tax authorities will upon application generally allow the payment of