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Tax Withholding and Retention in Singapore: A Guide for Overseas Employers

Companies that are hiring employees in Singapore will need to know the system of withholding and taxes for both expats and local residents.  If you are just entering Singapore as an employer, you will need to familiarize yourself with the country’s tax and withholding rules.

Here is a quick guide to understanding the basics to get you started.

Tax Authority in Singapore: The IRAS

The Inland Revenue Authority of Singapore (IRAS) is the sole tax authority where all payments and filing are made.

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Tax Retention

Because taxes are paid at year-end in Singapore, all employees are subject to what is called tax retention on their income.  The employer will deduct taxes each month from the salary, and hold it for year-end settlement.  Once the final year income is known, the employer-company makes the payment to IRAS, and then returns any unused portion to the employee.

This is different to many other countries where taxes are withheld by the employer and forwarded monthly to tax authorities.

Case Example: Tax Retention Rates in Singapore

Tax rates in Singapore on personal income from a local source range from 0-22% depending on income level.  But those calculations don’t occur until year-end when the tax payment is settled.  For that reason, there is a fixed tax retention rate to cover that final payment.

An employee of one of our clients wanted to know the tax retention rate from her salary, and if it was mandatory.  We replied that yes, it is mandatory, similar to tax withholding.  The tax retention rate is 15% deducted monthly, and then held by our local employer of record in Singapore.

The easiest way to think about it is that instead of the tax being held by the government agency, it is held by the Singapore employer.

Shield GEO Solution

This example illustrates just how different the payroll, tax, and withholding systems can be in foreign countries.  If you were setting up payroll in Singapore, how would you go about learning the rules and making the right withholdings for your employees?

Shield GEO offers you a solution to this dilemma, through our local employer of record and in country experts, we fully support the hiring and on-boarding of your employees.  We can make international employment simple for your company when expanding and hiring overseas.

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Looking to hire an employee in Singapore? Get in touch.

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