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IRAS wants me to prepay tax for 2015 and I'm a PR! WTF?

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PNGMK
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IRAS wants me to prepay tax for 2015 and I'm a PR! WTF?

Postby PNGMK » Tue, 08 Jul 2014 7:28 pm

Well this is new. I've been levied an estimated tax bill for the 2015 tax (which is actually Jan 2014 to Dec 2014) on my estimated earnings for Jan to June 2014. What triggered this was changing jobs it seems.

This is a new one to me, as a PR I've never had this happen when changing jobs.

I've written to IRAS and received a bizarre response that they will waive this if I can show "my remuneration is fully met by my new employer or that my new employer will assume my tax liability". HR at my new company (a very large MNC) are completely dumbfounded as I'm a PR and they've never seen this one before.

Has anyone else seen this? I know for EP etc this applies but I believe I'm the first PR I've heard of this happening to.

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Postby Wd40 » Tue, 08 Jul 2014 8:30 pm

This is what IRAS site says:

http://www.iras.gov.sg/irashome/page04.aspx?id=544

Tax Clearance is a process of ensuring that your non-citizen foreign employee pays all his taxes when he ceases employment with you in Singapore or plans to leave Singapore for more than three months. Tax clearance obligations apply to all work pass holders including PEP holders.

As an employer, it is your responsibility to notify IRAS and seek tax clearance for the affected foreign employees.


But theres an exception for PRs:

Tax Clearance is not required for:

Singapore Permanent Residents (SPR) who are not leaving Singapore permanently after they have ceased employment with you. This administrative concession does not apply to overseas postings. You may obtain a Letter of Undertaking (28KB) from the SPR employee if he has no intention to leave Singapore permanently at the point of cessation of employment with your company.


But then tax clearance is based on your Actual income earned in your previous job and not based on estimated income for the whole year. What you are saying is indeed very strange and I haven't heard about.

This definitely cannot apply for EP holders because the base for tax clearance is that you are going to disappear without paying tax, after quitting the job, so there is no basis for estimating income for the rest of the year. You case seems to something totally different and not related to tax clearance.

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Postby sundaymorningstaple » Tue, 08 Jul 2014 10:13 pm

They are doing the same thing they do for companies. Estimated taxes. This is normal in the US as well. Especially for high income earners. It allows to to base your current years taxes on the previous years tax liability so as to easy the tax bite all at one time in August or September. It can be paid via GIRO setup as well.

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Postby PNGMK » Wed, 09 Jul 2014 8:53 am

sundaymorningstaple wrote:They are doing the same thing they do for companies. Estimated taxes. This is normal in the US as well. Especially for high income earners. It allows to to base your current years taxes on the previous years tax liability so as to easy the tax bite all at one time in August or September. It can be paid via GIRO setup as well.


Seriously WD40's post made more sense than this above.

Why would I be hit with estimated taxes when the tax year is not done?

What on earth does the second last sentence mean?

Why would I care about GIRO when I normally pay my tax in a single payment?

Why would I need to prepay taxes as though I'm leaving the country when I'm a PR with millions of $ of assets in the country?

What I don't understand is why after 20 years of PR and multiple jobs I suddenly need tax clearance when changing jobs. Maybe I crossed a salary threshold (around 20k per month) but it's still the first time I've heard of a PR needing this.

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Postby GSM8 » Wed, 09 Jul 2014 10:20 am

PNGMK wrote:
sundaymorningstaple wrote:They are doing the same thing they do for companies. Estimated taxes. This is normal in the US as well. Especially for high income earners. It allows to to base your current years taxes on the previous years tax liability so as to easy the tax bite all at one time in August or September. It can be paid via GIRO setup as well.


Seriously WD40's post made more sense than this above.

Why would I be hit with estimated taxes when the tax year is not done?

What on earth does the second last sentence mean?

Why would I care about GIRO when I normally pay my tax in a single payment?

Why would I need to prepay taxes as though I'm leaving the country when I'm a PR with millions of $ of assets in the country?

What I don't understand is why after 20 years of PR and multiple jobs I suddenly need tax clearance when changing jobs. Maybe I crossed a salary threshold (around 20k per month) but it's still the first time I've heard of a PR needing this.

SMS has a point. In States (and many other countries including Singapore) independent contractors and businesses must pay a quarterly estimated tax based on the previous year's income. In US (and many other countries, but not including Singapore) the employer is required to withhold payroll taxes on each paycheck which are offset against tax due at the end of the year. In Singapore the employer has no obligation to withhold payroll taxes and IRAS normally sends a bill at the end of the year. Withholding payroll taxes serves 2 purposes, one so the payer is not hit with a one time high tax bill (particularly important in US with its lower saving rate) and secondly (probably more importantly) so the government budget gets its spending money sooner without having to pay a few months of interest. Singapore may be changing rules for certain higher income earners in that respect.

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Postby earthfriendly » Wed, 09 Jul 2014 10:35 am

This is not specific to any govt but generally, taxes are due when you make the money. Another example would be sales tax where you pay the tax each time you make a purchase. It is impractical to collect the exact amount of payroll tax due for each month and that is why it calculated and collected annually. Can you imagine the interest that could accrue if the govt gets their hand on these taxes earlier rather than wait for a year to pass? That is why quarterly estimated payment comes in, especially if they have reason to belief there will be huge increase in your payroll for the upcoming year, usually by comparing your tax reported within last two years.

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Postby earthfriendly » Wed, 09 Jul 2014 11:06 am

I am surprise payroll tax is not deducted from each paycheck in SG. How do they make projection for how much tax they will collect for the year? In US, you make an estimated payment from each paycheck. When year end comes around, you calculate your tax liability for the year. And you will either end up with a refund (from overpayment) or pay any balance that is due.

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Postby zzm9980 » Wed, 09 Jul 2014 1:02 pm

earthfriendly wrote:I am surprise payroll tax is not deducted from each paycheck in SG. How do they make projection for how much tax they will collect for the year?


Surprised? Have you never lived in Singapore?

MOM knows how much every foreigner makes, and they have realtime wage information from CPF for everyone else. You can make some reasonable accurate predictions with that data.

Even if they're off a bit, it won't hurt much. It is only ~15% of their revenue:
http://www.singaporebudget.gov.sg/budge ... iture.aspx

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Postby PNGMK » Thu, 10 Jul 2014 8:49 am

earthfriendly wrote:I am surprise payroll tax is not deducted from each paycheck in SG. How do they make projection for how much tax they will collect for the year? In US, you make an estimated payment from each paycheck. When year end comes around, you calculate your tax liability for the year. And you will either end up with a refund (from overpayment) or pay any balance that is due.


Most countries USED to be that way until they got on the PAYE/PAYG drug and can't wean themselves off it.

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Postby earthfriendly » Thu, 10 Jul 2014 9:01 am

That's right, CPF can provide a guage. I lived in SG thru teenage years so I am not too attuned to such things.


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