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Tax Filing and Tax Residency Status in Singapore

When you employee overseas in Singapore you’re subject to Singapore’s tax laws. Personal income tax rates for your employees will depend on the whether they are residents or non-residents.  If you are new to hiring in Singapore, some of the rules may be very different from your home country and it is best to be prepared with the help of local resources.

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Defining Tax Residency Status in Singapore

The Singapore tax residency test is based on the length of stay in either a calendar year or a rolling year.  The rule is that any stay exceeding 183 days in a year will result in tax residency.  If it is a rolling year (straddling two calendar years) then the employee will be defined as a tax resident for both years.

Personal Income Tax Rates in Singapore

The residency test is important because there are two different tax rate structures for residents and non-residents:

Personal Tax for Singapore Residents

Residents pay a progressive tax of 0-22% based on personal gross income after deductions.

Personal Tax for Singapore Non-Residents

Non-residents are taxed at either a 15% flat rate on gross income or the progressive resident rate, whichever results in the higher tax (employment less than 60 days is tax free).

Filing personal income tax returns in Singapore

There is no PAYE system in Singapore for monthly withholding and payment of tax to the government, and employees are responsible for filing their own personal income tax return by April 15th.  However, it is the employer who actually pays the tax bill out of amounts retained internally each month in payroll.

Client Case: Tax Retention in Singapore

One of our clients with an employee in Singapore had questions about the tax retention rules for employers.  This a unique system that places the burden on the employer to both withhold and retain the expected income tax each month.  Then the employer pays the annual tax bill.

  1. 1. The first thing they wanted to know is if tax retention is mandatory.  We let them know that it was mandatory for the employer to retain tax monthly to be able to settle the tax bill at year end as required by law. 
  2. 2. The employee also wanted to know if there were any costs that they would have to bear as part of the tax retention rules.  We assured them that the employee only needed to bear the tax amount, and if there were any balance remaining it would be returned to them.

Another feature of employer tax responsibility is the requirement to file a tax clearance for any employees completing their contract.  This ensures that the taxes will be paid prior to the employee’s departure.

Do you need more information about Singapore?

The unique tax residency and retention laws in Singapore may be new to you, and you might have more questions such as:

Is the non-resident flat tax rate calculated with or without deductions and exclusions?

If too much tax is retained by the employer, how is the refund processed internally?

If the employee’s tax return reflects a different tax rate or amount, how is that reconciled?

These are the types of complex issues that we handle for our clients with our in-country experts and local employer of record, including payroll, contributions, immigration and employee benefits.  We make international employment simple.

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