Income Tax Explained

Income TaxIncome tax is a tax that you pay directly to the government based on your income. In Singapore, you’ll find some of the lowest personal income tax rates, especially if you’re a tax resident here. The tax rate increases as your income increases, with a maximum rate of 22% for those earning an annual income above S$320,000.

 

What Counts as Taxable Income?

Your taxable income includes money earned in a number of ways:

  1. Employment: This includes salaries, commissions, bonuses, profit from selling stock options, and payments such as a salary given in place of notice, gratuity, and ex-gratia payments.
  2. Self-Employment & Business: If you’re a freelancer, sole proprietor, or part of a partnership, your income counts too. Earnings from virtual currency also fall into this category.
  3. Property & Investments: Rental income, profit from property trades, and interest from non-approved banks in Singapore or non-licensed local finance companies are considered taxable.
  4. Other Sources: This includes royalties, income from an estate or trust, and withdrawals from the Supplementary Retirement Scheme (SRS).

Your total taxable income is the balance after deducting any allowed expenses, charitable donations, rebates, and tax reliefs from your total earnings.

 

Who Must Pay Income Tax?

Who pays income tax largely depends on their tax residency status. You qualify as a tax resident for a given assessment year if:

  • You are a Singapore Citizen or Permanent Resident living in Singapore, with exceptions for temporary absences, or
  • You are a foreigner and have lived or worked in Singapore (excluding company directors) for 183 days or more in the year before the assessment year, and
  • You have earned a gross annual income of $22,000 or more.

As a resident, you can use the Resident Individuals Tax Calculator to get an estimate of your tax due. If you’re not a tax resident, your employment income gets taxed at either a flat rate of 15% or at the resident progressive tax rates – you’ll pay at whichever rate is higher. The Non-Resident Individuals Tax Calculator will help you estimate this payment.