Tax in Singapore-claiming rebates

[Jayne]

Hi

As a non-resident of Singapore, I understand we get taxed at a range between 2-24% (something like that!).

Does anyone know if we can claim for such things as telephone/internet expenses if we work from home some of the time?

[NBB]

I'd like to second that question. My guess is that yes, we can if they're truly used for biz purposes.

We're running an Web Consultancy outsourcing company here and will be working solely from home. Jayne, what's your angle? Running a biz as well?

Perhaps JP, you can enlighten us on this front. Pal? You guys seem to be in the know about this sort of stuff.

Looking forward to your feedback.

Cheers.

NBB

[Jayne]

NNB

Working in a marketing consultancy where its flexible enough to allow us to choose where to complete tasks.

When working from home I've got to pay the phone, internet, electricity bills myself, so I'm wondering if this is tax deductable in Singapore.

Back at home, I can normally write off all these expenses on my annual tax return thereby reducing my income tax, and I can also make deductions for computer and telecommunications equipment.

Just wondering if the Singapore tax system allows for that ?!

Jayne

[NBB]

Jayne,

Here in Europe the fiscal authorities are quite in tune with such requests to take these overheads into account as profession-related. As a result most of them are (for the large part - not always 100%) tax deductable.

I'll be finding out in the weeks to come if Singapore is equally hip to this sort of thing. My bet is that they are.

Let's just hang on a second for some of this forum's mainstays to get a whiff of this post; they'll be offering their nuggets of wisdom in no time, I reckon.

NBB

[Pal]

This page helps you to better understand your income tax position as a foreigner working in Singapore.

The amount of tax you have to pay depends on :
• whether you are regarded as a tax resident or non-resident in Singapore; and
• how much income you earn.

However, your employment income is exempt from tax if you are here on short-term employment.

Resident Individual

You will be regarded as a tax resident if
· you have been in Singapore for at least 183 days in a calendar year; or
· you have been physically present or working in Singapore for 3 consecutive years even though the number of days you are in Singapore is less than 183 days in the first and third year.

As a tax resident, you will be taxed on all income earned in Singapore and any overseas income that is brought into Singapore. You will also be given personal reliefs and your income will be taxed at graduated rates from 0% to 22% for the Year of Assessment 2003.

Tax Rates for Resident Individuals

Chargeable Income ($) Rates Tax Payable($)
On the first 20 000 0% 0.00
On the next 10 000 4% 400.00
On the first 30 000 400.00
On the next 10 000 6% 600.00
On the first 40 000 1 000.00
On the next 40 000 9% 3 600.00
On the first 80 000 4 600.00
On the next 80 000 15% 12 000.00
On the first 160 000 16 600.00
On the next 160 000 19% 30 400.00
On the first 320 000 47 000.00
Above 320 000 22%

Non-Resident Individual

You will be regarded as a non-resident if you have been in Singapore for less than 183 days in a calendar year.

As a non-resident, you will only be taxed on all income earned in Singapore. You will not be given personal reliefs and your employment income will be taxed at a flat rate of 15% or the resident rates for the Year of Assessment 2003, depending on which gives a higher tax. For director's fees and income other than employment, they will be taxed at a flat rate of 22% for the Year of Assessment 2003.

FAQ

Q1: If my Singapore income is being taxed in my own country, do I still need to pay tax in Singapore?
A: If your home country has a tax treaty with Singapore, it may protect you from being taxed twice on the same income. This depends on the provision of the tax treaty. You can get a list of Singapore's tax treaties with other countries, available at Tax Treaties.

Q2: When do I need to send in my Singapore Income Tax Form?
A: Usually, we will send an income tax form to you at your mailing address by 31 March of each year. You will then have to fill in and return the form to IRAS by 15 April of the same year.

Q3. If I were to make CPF contributions, will the contributions be tax deductible?
A: No. Foreigners (other than Singapore Permanent Residents) are no longer required to make CPF contributions under CPF rules. Hence, your voluntary CPF contributions will not be tax deductible and your employer's contributions to CPF (if any) will be taxed in your hands.

Q4 : If I choose to make CPF contributions voluntarily and withdraw the amount subsequently upon cessation of employment or departure from Singapore, will I be taxed on the amount withdrawn?
A: You will not be taxed on the amount withdrawn as you are not required to make CPF contributions under CPF rules (see Q3).

Q5. Does my employer need to inform IRAS if I cease employment with the company?
A: Yes, your employer needs to seek tax clearance by:
• informing IRAS at least one month before you cease employment or leave Singapore; and
• withholding any monies due to you until tax clearance is given or 30 days after we have received your employer's notification, whichever is earlier.

However if you are a Singapore Permanent Resident and you are merely changing jobs in Singapore, your employer does not have to seek tax clearance unless you are leaving Singapore permanently.

Q6. What if the amount of money withheld by my employer is not enough to pay the tax that I owed?
A: You should arrange to pay the remaining amount that you owe. Otherwise, IRAS may appoint your bank or CPF Board as agent, under Section 57 of the Income Tax Act, to recover the tax from you. We may also prevent you from leaving Singapore by issuing you a stop order certificate. In such a case, you will need a release letter from IRAS before you can leave Singapore.

For more indepth information on tax please goto this page:
http://www.iras.gov.sg/employees/what_foreignspore.htm

[Pal]

Section 45 Withholding Tax

When a local payer makes a payment to a non-resident# for income specified below, he is required to inform IRAS and withhold a percentage of the income as tax. The form, stated in paragraph B, has to be submitted by the local payer together with the withholding tax payment to IRAS by the 15th of the month following the date of payment to a non-resident.

For e.g.: If the date of payment to a non-resident falls on any date in the month of Apr 03, the local payer has to file in the relevant Form IR37/A/B/C and remit the withholding tax by 15 May 03.

For payment to non-resident with date of payment prior to 1 Apr 03, local payers are required to file and pay the withholding tax within 10 days from the date of payment to the non-resident.

1. Types Of Income Under Section 45A

a) interest, commission or fee in connection with any loan or indebtedness;
b) royalty or payments for the use of or the right to use any movable property;
c) fee for the use of or the right to use scientific, industrial or commercial knowledge or information, or for the rendering of assistance or service in connection with the application or use of such knowledge or information;
d) management fee; and
e) rent or other payments under any arrangement or arrangement for the use of any movable property.

2. Types of Income Under Section 45B

a) payment of any remuneration to any non-resident director.

3. Types Of Income Under Section 45C

a) payment of any distribution made by a Unit Trust.

With effect from 28 Feb 98, withholding tax shall not apply to any distribution made by a designated Unit Trust/ and approved CPF Unit Trust.


4. Types Of Income Under Section 45D

a) gains from disposal of real property; and
b) gains from disposal of shares in private companies:

which are chargeable to tax under Section 10(1)(a) by a non-resident#.

With effect from 13 Oct 01, all gains (other than trading gains chargeable to tax under Section 10(1)(a)) from sale of real property and shares in private real property companies will no longer be subject to tax even though the sale occurs within 3 years of acquisition.


5. Types Of Income Under Section 45E

a) any withdrawal made by Supplementary Retirement Scheme (SRS) members who are not Singapore citizens (i.e. foreigners and Singapore Permanent Residents); and

b) any payment of penalty on premature withdrawal, which is imposed on the SRS member and paid by an SRS operator.

6. Types Of Income Under Section 45F

a) payment of income due and payable on or after 3 May 02 derived by a non-resident professional## from services performed in Singapore; and

b) payment of income made to a non-resident professional## who operates through foreign firms.

Foreign firm is defined as an unincorporated body of 2 or more persons who have entered into a partnership with one another with a view to carry on business for profit and whose principal place of business is outside Singapore. It does not include foreign universities, foreign clubs & associations, foreign government and government bodies.

# Non-resident :-


an individual who has physical presence or exercises employment in Singapore for less than 183 days in a calendar year, or


a company or body of persons whose control & management of the business is outside Singapore.



## Non-resident Professionals are individuals exercising any profession or vocation (i.e. persons other than employees) in Singapore for less than 183 days in a calendar year. They would include :-


foreign experts who are either invited by government bodies, statutory boards, or private organisations to impart their technical know-how or expertise in Singapore


foreign speakers/academics conducting seminars or workshops


Queen's Counsel


consultants, trainers, coaches


arts exhibitors, etc.


non-resident professional who operates through a foreign firm whose principal place of business is outside Singapore.

B. TYPES OF FORM TO BE COMPLETED


FORM IR37 (IR37.xls & IR37notes.doc)
Please complete this form when accounting for tax deduction from types of income under Sections 45, 45A, 45B and 45C.

Where tax is deducted at a reduced rate or the income is exempted from tax under the Avoidance of the Double Taxation Agreement ('DTA'), Form IR585 (IR585.doc & IR585notes.doc)is to be completed. The relevant foreign tax authority has to confirm that the payee is resident in its country by endorsing the form.

FORM IR37A (IR37A.xls & IR37Anotes.doc)
Please complete this form when accounting for tax deduction from types of income under Section 45D.

FORM IR37B/B1/PMP/Form for Declaration of Release of SRS Fund by Product Provider
(IR37b.doc, IR37b(1).doc, Form PMP, Declaration of release.doc & SRSnotes.doc )
Please complete this form when accounting for tax deduction from types of income under Section 45E.

FORM IR37C(IR37C & IR37Cnotes.doc)
Please complete this form when accounting for tax deduction from income of non-resident professionals foreign firms under Section 45F.

An irrevocable option to elect for income to be taxed on a net income basis under Section 43(3B) is available to the non-resident professional/ foreign firm whose principal place of business is situated outside Singapore (refer to paragraph C, Section 45F). Such option is to be made on per engagement basis and can be exercised upfront by completing section IV - Option under Section 43(3B), in the Form IR37C. The upfront option must be exercised by the 15th day of the month following the date of payment of income.

Where conditions for exemption under the DTA are satisfied, Form IR586 (IR586.doc)is to be completed, endorsed by the non-resident professional/ foreign firm and submitted together with Form IR37C.

C. TAX RATE USED FOR TAX DEDUCTION

SECTION 45/45A/45B/45C

1. The tax rate used is the prevailing corporate tax rate. For the Years of Assessment 2003 – 2004, the tax rates was 22%. For the Year of Assessment 2005, the tax rate is 20%.

2. With effect from 28 Feb 96, any income from interests, royalties, rents for any removable property may be taxed at 15%, provided the non-resident does not carry out any operations in or from Singapore.

3. Where DTA is applicable, tax rate to be used would be based on the rate specified in the agreement of the respective country.

SECTION 45D
The tax rate for property trader is 15% of sales proceeds.

SECTION 45E
The tax rate is the prevailing corporate rate.


SECTION 45F
1. A final tax rate of 15% on gross income due and payable on or after 3 May 02.

2. Gross income refers to both monetary and non-monetary payments and includes all fees, allowances and benefits-in-kind provided (e.g. professional fees, consultation fees, Queen's Counsels' brief fees inclusive of preparation costs and daily refreshers or daily charges, per diem, honorarium, airfare, food and accommodation provided).

3. With the final withholding tax of 15% on gross income, the administrative concession for not taxing the cost of airfares and accommodation provided for 60 days in a calendar year will no longer be available from 3 May 02. No deduction will be allowed against the gross income for any expenses incurred.

4. With effect from 13 Dec 02, a non-resident professional may make an irrevocable option to be taxed on the net income i.e. Gross income less allowable expenses at non-resident rate (pegged to the prevailing corporate rate). From 1 Apr 03, non-resident professionals may exercise the option within 45 days from the date of payment of income to the individual or foreign firm. Otherwise the final tax of 15% on gross income will prevail. The irrevocable option is to be made on per engagement basis.

5. Under this option,

as an administrative concession, the cost of accommodation provided for 60 days or less in a calendar year and airfare provided are not taxable and not considered as part of gross income/fees in arriving at the net income.
Only expenses, which are wholly and exclusively incurred in the production of Singapore-sourced income, and not reimbursed by the local payer, are tax-deductible.
The value of food and ground transfers, to and from airport, are private expenses and are not deductible against the gross income/fees.
Transport expenses incurred from the hotel to the venue of service and back are also not deductible as they are incurred to put the non-resident professional in the position to earn the income.

6. With effect from 1 Apr 03, where a local payer makes multiple payments to the same non-resident professional in respect of the same engagement, the local payer is allowed to consolidate the payments and remit the tax to IRAS.

This must be done by the 15th of the following month from the last date of payment, provided that the interval between the first and the last date of payment to the non-resident professional does not exceed 60 days.
All payments made within 60 days from the date of the first payment to the same non-resident professional for the same engagement will be consolidated.
The withholding tax on the consolidated amount will have to be remitted by the 15th of the following month from the last date of payment.
For payments made subsequent to the 60-days period from the date of first payment, withholding tax will be accounted for separately.

7. The withholding tax at 15% on gross income has to be remitted to IRAS by 15th of the month following the date of payment to the non-resident, together with the Form IR37C.

If the non-resident professional opts to be taxed at the non-resident rate subsequently (tax rate for Year of Assessment 2003 – 2004 : 22% and tax rate for Year of Assessment 2005 : 20%) i.e. after 15% of tax has been withheld and remitted to IRAS and the option is made, within 45 days from the date of payment of income, the local payer is required to submit a revised Form IR37C.
If the non-resident professional exercises the option upfront, the local payer may withhold tax of the net income at the prevailing non-resident rate and remit the tax withheld together with Form IR37C by the 15th of the following month from date of payment of income.

8. For ease of administration, the local payer may exercise the option on behalf of the non-resident by endorsing Section IV of the Form IR37C.

9. Notice of Assessment will no longer be issued to the non-resident professional as the local payer has accounted for the withholding tax.

10. The tax exemption for short-term employment of 60 days or less in a calendar year does not apply to non-resident professionals.

11. Where DTA is applicable, tax rate to be used would be based on the rate specified in the agreement of the respective country.

D. METHODS OF PAYMENT

1. ELECTRONIC FUND TRANSFERS
Telegraphic Transfers(TT)
By instructing your bank to transfer your tax payments (with full particulars) to the bank account directly as follows:

Commissioner of Inland Revenue
Development Bank of Singapore
Shenton Way Branch
Singapore 068809
DBS swiftcode: DBSSSGSG
Account Number : 001-046866-9


Please write your name, Tax Reference Number, the period of payment and payment instructions on the remittance advice. To ensure accurate and prompt updating of your payment, please complete the form "Notification of Funds Transfer" and fax it to:

Inland Revenue Authority of Singapore
Attn: Revenue Accounting Br - Receipting Team
Fax Number: (65) 6351 4363


To avoid exchange differences, please remit in Singapore dollars and instruct your bank that “TT/OTHER AGENT BANK CHARGES TO BE BORNE BY THE APPLICANT”

[Pal]

For Income Tax FAQ for salaried employees, including tax rebates, submission of tax returns, etc. goto this page:

http://www.iras.gov.sg/employees/emp_faqs.htm

[Bafana]

Roughly speaking it works out as 10% per year 8)

Not bad but make sure you save your dough as they hit you with it all at once and if you decide to leave or change jobs they hold your final pay check until your tax is cleared... Ouch - Got stung myslef this year changing jobs

[NBB]

Thanks Pal.... (I think )

But Bafana, what works out to 10% per year? The eventual tax amount paid? That is roughly 10% of the total sum earned?

Cheers both.

NBB

[Bafana]

Thanks Pal.... (I think )

But Bafana, what works out to 10% per year? The eventual tax amount paid? That is roughly 10% of the total sum earned?

Cheers both.

NBB

NBB

Works out at around 10% of what you earn in total for the year (Including all bonuses, and allowances(If paid directly to you)).

[Chris]

Hi,
I know a tax resident is taxed on money eanered overseas but transferred into Singapore.

Is a non tax resdient also taxed on money eanered overseas but transferred into Singapore ?

Thanks
Chris

[SiLenT.]

Hi,
I am a Malaysian that work in Singapore for 11 months till now, if i want to resign now, where should i clear my income tax to get back the money withhold as soon as possible??

Thanks.