+65 6221 1768
Accounting for Foreigners: How Non-Residents Are Taxed in Singapore
Singapore is a global economic hub, which draws talent and businesspeople from all over the world. If you don’t live in the country, you need to know how the tax…
Singapore is a global economic hub, which draws talent and businesspeople from all over the world. If you don’t live in the country, you need to know how the tax system works so you can follow the rules and make the most of your money. This guide has the most accurate and up-to-date information on income tax, business structures, and payroll for people who live abroad and start businesses.
Part 1: Foreigners in Singapore who have to pay personal income tax
Singaporean personal income tax is determined by an individual’s tax residency status rather than their citizenship.
Who is a Tax Resident?
If you meet one of the following conditions, you are a tax resident for a Year of Assessment (YA):
- You have lived or worked in Singapore (not as a company director) for at least 183 days in the last calendar year.
- You have lived or worked in Singapore for three years in a row.
Note: Most of the time, Singapore Citizens and Permanent Residents are considered tax residents. This status doesn’t change if you are gone for a short time.
Tax Rates for People Who Live Here vs. People Who Don’t
The way taxes are handled is very different.
- Tax Residents: Pay taxes at rates that go up from 0% to 24% (for income over S$320,000). They can also get a number of tax breaks.
- Non-residents: Pay a flat 24% tax on their employment income, or the resident progressive rates, whichever is higher. Directors’ pay and other income are taxed at a flat 24%.
The most important thing is that you are physically there. If you stay for 183 days or more, you can get resident progressive rates, which are usually lower than the 24% flat rate. People who work in Singapore for 60 days or less usually don’t have to pay taxes on their income.
Part 2: Taxes on businesses owned by foreigners
Choosing the right legal structure is very important for taxes and liability.
Branch Office vs. Subsidiary Company
| Feature | Branch Office | Subsidiary Company |
|---|---|---|
| Legal Status | Not a separate legal entity from the parent. | A separate legal entity from its shareholders. |
| Liability | The parent company is fully responsible. | Shareholders are only responsible for the money they put into the company. |
| Corporate Tax Rate | Standard 17% on income from Singapore. | Standard rate of 17% on taxable income. |
| Tax Residency | They are not a resident of Singapore. | If it is controlled and managed in Singapore, it can be a tax resident. |
| Main Point | Can’t get to Singapore’s network of Double Taxation Agreements (DTAs). | Can get to DTAs, which could lower the amount of taxes withheld on income from abroad. |
Why it matters where a company pays its taxes: A branch office can’t get the Start-Up Tax Exemption (SUTE) or Partial Tax Exemption (PTE), but a Singapore tax resident company (like a locally managed subsidiary) can. For most serious foreign businesses, this makes a subsidiary the best structure.
Part 3: Paying and reporting for expatriate workers
If you hire foreign workers, you have certain responsibilities as an employer.
Understanding the “Employer’s Role”
- Tax Clearance (Form IR21): If a foreign worker is leaving Singapore and making S$22,000 or more in a calendar year, this is required. You need to tell IRAS, figure out how much tax the employee will owe, and then withhold that amount from their last paycheck.
- Central Provident Fund (CPF): Foreign workers with Employment Passes, S-Passes, or Work Permits don’t usually have to pay CPF contributions. They are required for people who live in Singapore permanently or are citizens.
- Keeping Accurate Records: Employers must keep detailed payroll records for all employees for at least 5 years.
Tip for compliance: Start the tax clearance process as soon as possible. You have to tell IRAS at least a month before the employee’s last day. If you don’t follow the rules, you will be punished.
Part 4: Reporting and Following the Rules for IRAS
To stay compliant, you need to know when to file.
- Individuals (Employees): If IRAS tells you to, you have to file an annual Income Tax Return (Form B/B1) between March and April.
- Companies: Have to file an Estimated Chargeable Income (ECI) within three months of the end of their financial year and a Corporate Income Tax Return (Form C-S/C) by November 30 of each year.
Professional tax services in Singapore are very helpful when it comes to meeting these requirements, especially when there are cross-border issues.
Conclusion: Making your Singapore tax journey easier
The tax system in Singapore works well, but the rules for people who don’t live there are strict. To save time, money, and make sure you are fully compliant, you need to know exactly how much tax you owe, how your business is set up, and what your employer’s responsibilities are.
Aura Partners Can Be Your Trusted Guide
It takes a lot of knowledge to understand the details of Singapore’s income tax for foreigners and how businesses must follow the rules. Aura Partners (Singapore) Pte Ltd gives clear advice to expats and international founders.
Our services work together to include:
- Company Incorporation Services: We help you choose the best structure for your business, which is usually a tax-resident subsidiary company.
- Tax Advisory & Compliance: We provide strategic tax advice in Singapore for both businesses and individuals, making sure that all IRAS rules are followed.
- Outsourcing payroll and accounting: We take care of payroll, including tax clearance for expats, and keep up with ongoing accounting.
Make sure that the information you use to plan your taxes is correct. Talk to one of our experts today.
Get a clear plan of action by downloading our FREE, updated “Non-Resident Tax Compliance Checklist.”
