Wednesday, July 18, 2007

Individual Income Tax - Salaried Employee

Tax is the most important aspect of one's salary package for any individual who is moving to another country for Job. I thought of sharing this information for providing help to someone who is coming for the first time into Singapore and for someone who is on employment pass. I hope this will be helpful to get a clear idea of the tax structure followed in Singapore. Although all this information is available on the official website of the IRAS (Inland Revenue Authority of Singapore), I just wanted to give a salient and consolidated information as a snapshot. One can also visit the website : http://www.iras.gov.sg/ for details of taxation for various other categories like corporate tax, GST related information, Property tax, Stamp duty, etc.Tax laws are pretty simple for an individual working in Singapore. The tax is based on primarily two criteria : Resident & Non-resident
Resident : Someone who is completing 183 days of stay in Singapore from the day he starts working in Singapore on an employment pass, in a calender year (Jan - Dec), comes under the status of Resident Singapore. There is a computation table available for such individuals meeting this criteria. The excel sheet is available on the IRAS website and it can be downloaded. (http://www.iras.gov.sg/ESVPortal/iit/iit-se-a1.1.15+tax+rates+for+resident+individuals.asp) Non-Resident : Person who does not complete 183 days within one calendar year from the day he starts working in singapore on an employment pass will be considered as a Non-Resident Singapore. The tax rate for such an individual will be flat 15% for the income earned in that calendar year. For eg. Person has earned about 21000 during his stay which is below 183 days will be liable for a tax amount of S$ 3150 for this calendar year.
But the good news is that if the same person continues to stay in Singapore for consecutive 3 years he can get this tax paid refunded upon request to IRAS in which case the tax is recalculated based on the table of calculation for a resident Singapore. For Eg. A person comes into Singapore after June 2006 anytime, he will be considered non-resident for tax computation and he will pay flat 15% on his income for 2006. Then he stays till jan 2008 when he will be eligible for refund which will be calculated based on what is mentioned in the first few lines of this paragraph. Apart from the tax calculation table there are certain rebates available for individuals. Some of them are :

Dependent : Spouse - S$ 2000

Child - S$ 2000

Earned income relief: S$ 1000 which is applicable for all working individuals below 55 years age while working in Singapore.

For eg. for an income earned of S$ 40,000 the taxable income for the individual will be S4 35000 ( 40,000-2000-2000-1000)

There are other reliefs available like: (http://www.iras.gov.sg/ESVPortal/iit/iit-se-a1.1.6+tax+reliefs.asp)

Relief for delivery & hospitalisation expenses for 4th child
Parents/handicapped parents relief
Grandparent caregiver relief
Handicapped brothers or sisters relief
Provident fund/life insurance relief
Course fees relief
Relief for foreign maid levy
NSmen (self/wife/parent) relief
Relief for CPF cash top-up

The tax filing is usually expected to be submitted by end of April or sometimes extended till May. The tax department will publish these dates on their websites and other media. The tax assessment will be sent to the individuals or company where the individual is working starting from June or July onwards and will be completed by October unless there are certain discrepancies.

There is facility for filing tax online as well & it is very convenient to get this done. The tax payment can be made by using Nets(cash-direct debit), credit cards & GIRO arrangement as well.

Once again, one can always check the Tax policies on the website mentioned above if one needs to check some more details regarding any other issues. Pay your tax on time and be a good citizen.

1 comment:

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