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Personal Tax

    28 May

    Personal Tax

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    What is tax?

    Tax is a compulsory contribution to the state revenue, imposed by the government. All income earned or received in Singapore are subject to tax. All sources of income are required to be declared.

    There are four types of tax in Singapore: personal tax, corporate, property tax and other taxes.

    Personal tax is a tax imposed on the income of a person. A person refers to an individual that received or earned income. Corporate tax is a tax imposed on the profits earned by businesses. A business refer to sole-proprietors / self-employed, partnership and company. Property tax is a wealth tax imposed on property ownership for both property owners and property buyers. Property refers to residential and non-residential property.

    Other taxes include:

    • Stamp duty
    • Casino tax
    • Trust (including income from estates)
    • Clubs, trade associations, MCs & town councils
    • Charities/IPCs
    • Private lotteries duty
    • Betting & sweepstake duties
    • Estate duty

    Who need to pay personal (income) tax?

    Any individual who received or earned income in Singapore (including income received in Singapore from outside Singapore) are subject to tax. Declaration of all sources of income is required too.

    Year of Assessment (YA)

    Income tax is assessed based on the previous year. The current year that we are assessing the previous year’s income tax is called Year of Assessment (YA). For example, for the Year of Assessment (YA) 2016, the individual will be taxed on the income that he had earned in the year 2015.

    Resident and non-resident individuals

    A resident and a non-resident individual will be taxed differently according to the different tax rates being applied to them.

    An individual is a tax resident for a particular Year of Assessment (YA) if:

    • An individual is a Singaporean who normally lives in Singapore
    • An individual is a Singapore Permanent Resident (PR) who has a permanent home in Singapore
    • An individual is a foreigner who has stayed or worked (not a director in a company) in Singapore for 183 days or more in the previous year

    An individual is a non-resident for a particular Year of Assessment (YA) if any of the condition above is not met.

    Tax rates for resident individuals

    Below are the tax rates for resident individuals (From YA 2012 to YA 2016). Please note that IRAS may change its income tax rates in the future.

    Chargeable IncomeRate (%)Gross Tax Payable ($)
    First $20,000

    Next $10,000

    0

    2

    0

    200

    First $30,000

    Next $10,000

    3.50

    200

    350

    First $40,000

    Next $40,000

    7

    550

    2,800

    First $80,000

    Next $40,000

    11.5

    3,350

    4,600

    First $120,000

    Next $40,000

    15

    7,950

    6,000

    First $160,000

    Next $40,000

    18

    20,750

    21,600

    First $320,000

    Above $320,000

    20

    42,350

     

     

     

    For example:

    Mr Ang, a tax resident, earned $60,000 for the year 2014, YA 2015. Calculation for personal tax payable as follow:

    For first $20,000, tax rate = 0% (Total: $20,000)

    $20,000 x 0% = $0

    For next $10,000, tax rate = 2% (Total: $30,000)

    $10,000 x 2% = $200

    For next $10,000, tax rate = 3.5% (Total: $40,000)

    $10,000 x 3.5% = $350

    For next $40,000, tax rate = 7% (Total: $60,000)

    $20,000 x 7% = $1,400

    Total tax payable: $1,950 ($0 + $200 + $350 + $1,400)

    Total income after tax: $58,050 ($60,000 – $1,950)

     

    Tax rates for non-resident individuals

    For non-resident individuals, employment income will be taxed at 15% or taxed using the resident rate, whichever is higher. Director’s fees, consultation fees and all other income will be taxed at 20% for non-resident individuals

    For example:

    Mr Parker, a non-resident, earned $30,000 for the year 2014, YA 2015. Calculation for tax payable as follow:

     

    Employment income taxed at 15%,

     

    $30,000 x 15% = $4,500

     

    Total tax payable: $4,500

     

    Total income after tax: $25,500 ($30,000 – $4,500)

     

     

    Alternatively using the resident rate,

    For first $20,000, tax rate = 0% (Total: $20,000)

    $20,000 x 0% = $0

    For next $10,000, tax rate = 2% (Total: $30,000)

    $10,000 x 2% = $200

    Total tax payable: $200

    Total income after tax = $28,000 ($30,000 – $28,000)

    Hence, Mr Alvin will be taxed $4,500 as it is a higher tax amount.

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