An individual's tax residency status will influence their income tax rates.
You are deemed to be a tax resident for a specific Year of Assessment (YA) in the following situations:
1) A Singapore Permanent Resident (SPR) or Singapore Citizen (SC) who is a resident in Singapore with the exception of short-term absences; or
2) A foreign national that has worked or stayed in Singapore (excluding company directors) for a period up to 183 days in the previous year.
In any other situations, for Singapore income tax purposes, you are considered as a non-resident of Singapore.
The personal income tax rates for Singapore's resident taxpayers are based on a progressive formula and the highest earners will pay the highest personal tax rate at 22%.
In general, any income from overseas work received on or after 1 January 2004 in Singapore is not deemed to be taxable and there is no requirement to declare this income in the annual personal tax return. This even applies to income from overseas that is paid into a Singapore bank account.
Income from overseas is taxable in Singapore for these reasons:
1) Income is received from a Singapore partnership
2) Any overseas work that is incidental to your Singapore work (meaning your employment overseas is specifically connected to your work in Singapore)
3) Any work performed overseas is performed for the Singapore Government
4) You operate a business/trade in Singapore and continue to have a business/trade overseas, which is incidental to any trade taking place in Singapore
5) Service income received for overseas operations (unless this qualifies for tax exemption)
6) In the event of being taxed for gains in a foreign country, there is an option to submit an application for double taxation relief to avoid being taxed twice on a single income.
An individual may be subject to tax for any foreign income earned in a treaty country, and taxed in that particular country.
However, there is the option to apply for DTA benefits that grant tax residents in Singapore a tax exemption or reduced tax rate in that foreign country.
A Certificate of Residency (COR) must be submitted to enjoy this benefit, which is sent to the foreign tax authority to provide evidence of a Singapore tax resident. This letter is to certify your tax residence in Singapore in order to claim the applicable DTA benefits.
For any foreign national resident in a country that holds a tax treaty with Singapore, there is likely to be protection in place to avoid getting double taxed on the same earnings in Singapore. It is not necessary to declare the non-taxable overseas income.
Any taxable overseas income must be declared on your tax return as other income, trade income or employment income (choose whichever one is most relevant). Also, if applicable, any Singapore income should be declared.
For more information, please feel free to contact our Personal Tax Service Team.